A Project of The Annenberg Public Policy Center

Rand Paul on Income Inequality

Sen. Rand Paul claimed during the recent Republican debate that “income inequality seems to be the worst” in the cities and states “run by Democrats.” Paul is right about the cities, but not states. More important, there is no evidence of a link between Democratic control and income inequality.

Adam Cobb, an assistant professor of management at the Wharton School of Business at the University of Pennsylvania whose research area includes income inequality, told us that “looking [at] a simple correlation between two variables is essentially meaningless in establishing a causal relationship.”

A Twitter follower asked us to research Paul’s claim, which the Kentucky senator made during the Nov. 10 debate in Milwaukee, Wisconsin.

Paul was responding to a question about whether the gap between the rich and poor matters. He said, “Absolutely,” and went on to question its “root causes.”

Paul, Nov. 10: And I think that we ought to look where income inequality seems to be the worst. It seems to be worst in cities run by Democrats, governors of states run by Democrats and countries currently run by Democrats. So the thing is, let’s look for root causes.

Let’s first look at Paul’s claim about inequality and Democratic control of cities.

The campaign cites a 2014 Brookings Institution analysis of inequality in major American cities. That analysis found that inequality in the 50 largest cities in 2012 was higher than the national average. This was based on Census income data, using what the author called a 95/20 ratio. That is, the gap between a household that “just cracks the top 5 percent by income, and one that just falls into the bottom 20 percent.”

Our fact-checking colleagues at PolitiFact reviewed the Brookings analysis when Paul made a similar claim in 2014, and found that nine of the 10 cities with the widest income inequality gap at the time were run by Democratic mayors.

In order, the top 10 are: Atlanta; San Francisco; Miami; Boston; Washington, D.C.; New York; Oakland; Chicago; Los Angeles; and Baltimore. Of those, only Miami had a Republican mayor.

But the Brookings study did not examine the causes of the income inequality.

“Large populations, diverse housing types, and generally progressive politics mean that most cities will always have higher shares of the rich and poor than smaller places,” wrote Alan Berube, deputy director of the Brookings Metropolitan Policy Program. “But the contemporary causes and consequences of inequality in cities vary greatly across the national map.”

As for states, the campaign cited a post-debate article in the Washington Post that was based on Census data — specifically each state’s “Gini Index,” a widely used measure of inequality, for 2014.

In that analysis, the top 10 states – excluding the District of Columbia – with the worst income inequality were, in order: New York, Connecticut, Louisiana, California, Massachusetts, Florida, Rhode Island, Texas, Tennessee and Georgia.

Democrats controlled both the governor’s office and the legislature in only five of the 10 states in 2014: Connecticut, California, New York, Massachusetts and Rhode Island, according to the National Conference of State Legislatures. Five of the states had Republican governors and legislatures in 2014 (Louisiana, Florida, Texas, Tennessee and Georgia), according to NCSL data.

So Paul is wrong to say “governors of states run by Democrats” seem to have “the worst” income inequality (although, we should note, the Post said he was right). Control of the 10 worst states is evenly split.

What does all this mean? That’s more complicated.

Cobb, at the Wharton School of Business, said income inequality studies consider “multiple variables.”

“Take New York and California — two typically blue states with a lot of income inequality. That has a lot to do with the types of industries that are prevalent in both (high tech and entertainment in California, finance in New York),” Cobb said. “What one has to try to do is figure out would income inequality be greater/lower were the other party in charge. That’s what studies attempt to show.”

Cobb referred us, for example, to a 2012 research paper titled “Federalism and American Inequality,” which was written by political science professors Nathan Kelly of the University of Tennessee and Christopher Witko of St. Louis University.

The authors found evidence that there are “lower levels of inequality” when “unions are stronger and left party governments are in power.” The peer-reviewed paper, which was published in the Journal of Politics, also concluded that more research is needed on city policies.

Kelly and Witko, April 2012: Our research indicates that both state and federal policies are likely important. As well, the role that local governments play in distributional outcomes is an important question. Though these governments are more highly constrained than states, scholars should study policies adopted at the city level, like living-wage laws, that may reduce inequality.

Emmanuel Saez, a University of California at Berkeley economics professor whose work on income inequality has been cited by presidential candidates in both parties, told us in an email that party control on the state and local level has relatively less impact on income inequality compared with the federal government.

“Big cities always have more inequality than small cities/rural areas because the very rich concentrate in cities and cities almost always have big pockets of poverty as well. This basic result has almost nothing to do with the party who controls the city,” he said. “Mayors or governors can do things to tackle inequality but not as much as the federal government.”

Correction, Nov. 14: This article has been changed to use the NCSL’s 2014 state partisan composition chart, instead of the 2015 chart. We made that change because the Post analysis of income inequality relied on 2014 Gini Index data, and the 2014 NCSL chart reflects the partisan composition at that time. As a result, we changed the number of states run by Democratic governors from four to five.