As progressives, we must occasionally test our beliefs by venturing into the netherworld of the Heritage Foundation, Cato Institute, and American Enterprise Institute (AEI). This is a murky world, filled with half-truths and an emphasis on minor but conservative-friendly points. The issue of income and wealth distribution is a timely example.

The American Enterprise Institute dismisses us as "inequality alarmists."

The Heritage Foundation claims that the poor get a lot of hidden benefits like food stamps, public housing, and school lunches. They don't mention the numerous regressive taxes disproportionately paid by low-income people.

The Cato Institute argues that "consumption inequality" is low, as evidenced, for example, by the fact that "refrigerators are now all but universal in the United States...the IKEA model will keep your beer just as cold as the Sub-Zero model." They quote University of Chicago economist Christian Broda: "We may have won the war against poverty without even noticing it."

The most serious denial came from the Heritage Foundation, which uses actual data to make a point: while income inequality has grown for the top 1% in recent years, wealth inequality has remained remarkably steady. The claim is repeated by AEI. Both organizations cite a paper by Kopczuk and Saez, which shows that the share of wealth owned by the top 1% has decreased from the early 1900s to the early 2000s, possibly because the "democratization of stock ownership...now spreads stock market gains and losses much more widely than in the past."

Heritage makes the most of this claim, urging us to "remember that wealth concentration has declined among top earners, even according to the very economist the left generally cites to argue that income inequality has grown."

But we need to take a closer look. No one disputes that inequality was held in check by the Depression, World War 2, and the consumer-driven economy and progressive tax structures that lasted through the 1970s. It is the pattern of wealth inequality after 1980 that must be investigated to determine if indeed a "democratization of stock ownership" leveled the wealth accumulation percentages for everyone.

Data from Edward Wolff (Table 2 and here) confirms that from 1983 to 2007 the percentages of net worth and financial wealth for the top 1% barely budged.

But the percentages for the rest of the richest 5% increased by almost 20%.

And the percentages for the poorest 80% of the population DECREASED by almost 20%.

In other words, the share of wealth owned by the top 1% leveled off because the "democratization of stock ownership" spread the wealth among just 5% of the population, those earning an average of $500,000 per year. A few people -- 5 out of 100 -- got very rich, but everyone else lost ground.

These results are supported by Federal Reserve figures (Table 4), which show 1998-2007 wealth percentages steady for the richest 1%, but up about 15% for the remainder of the richest 5% of Americans.

One more note to conservatives in denial: if the wealth inequality shares finally do level off, it may be more of a saturation point than a sign of progress. With the richest 20% owning 93% of the country's non-home wealth, it can't get much worse.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

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