SINCE 1759

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Income Inequality, Cont’d
Bush’s Tax Scam

The storyline on the economy from the White House has been that rising incomes and lower taxes have benefited Americans in the last five years. In reality, the median wage in the United States has fallen every year of the Bush administration, stabilizing last year (but not quite rising again the way it was rising in the late 1990s). Incomes have risen in 2005, but that’s not the whole story. In typical cheerleading fashion, the Wall Street Journal notes that “job and wage growth still look good. The unemployment rate fell to a five-year low of 4.4% in October, and the average wage was up 3.9% from a year earlier.” And those are the numbers the White House is pointing to. But don’t be fooled. Take the long view. And the long view shows how the Bush tax cut has done nothing to improve most Americans’ standards of living. The ever-vigilant David Cay Johnston in The Times:

Despite significant gains in 2004, the total income Americans reported to the tax collector that year, adjusted for inflation, was still below its peak in 2000, new government data shows. […] Total reported income, in 2004 dollars, fell 1.4 percent, but because the population grew during that period average real incomes declined more than twice as much, falling $1,641, or 3 percent, to $53,974. Since 2004, the Census Department has found, the income of the typical American household has grown along with the rise in average incomes but at a slow pace that, until recent months, had barely kept ahead of inflation. […] The overall income declines of that extended era came despite a series of tax cuts that President Bush and Congressional Republicans promoted as the best way to stimulate both short- and long-term growth after the Internet bubble burst on Wall Street in 2000 and the economy fell into a brief recession in 2001.

The White House is blaming the decline on the stock market crash of 2000, when $7 trillion did evaporate. But that doesn’t take care of the fundamental difference between then and now: the tax cuts were designed as a boost to ordinary Americans. They have been anything but, even as incomes started rising again in 2004:

Incomes in 2004 did rise above those in 2003, with an overall average gain of 6.8 percent. The average year-over-year increases from 2003 to 2004 ranged from 1.8 percent for the poorest fifth of Americans to a 27.5 percent increase for the top tenth of 1 percent. But those gains were not enough to make up for the drop in 2001, the further drop in 2002 and the almost unchanged overall income total in 2003, when only the top 1 percent made any significant gains, primarily by selling assets at a profit to take advantage of lowered tax rates on capital gains that took effect that year.

And here’s the really long view, going back to 1979, the last year when income inequalities were heading in a more just (that is, narrowing) direction, ahead the reversal of the Reagan years:

Over all, average incomes rose 27 percent in real terms over the quarter-century from 1979 through 2004. But the gains were narrowly concentrated at the top and offset by losses for the bottom 60 percent of Americans, those making less than $38,761 in 2004. The bottom 60 percent of Americans, on average, made less than 95 cents in 2004 for each dollar they reported in 1979, analysis of the I.R.S. data shows. The next best-off group, the fifth of Americans on the 60 th to 80 th rungs of the income ladder, averaged 2 cents more income in 2004 for each dollar they earned in 1979. Only those in the top 5 percent had significant gains. The average income of those on the 95 th to 99 th rungs of the income ladder rose by 53 percent, almost twice the average rate. A third of the entire national increase in reported income went to the top 1 percent — and more than half of that went to the top tenth of 1 percent, whose average incomes soared so much that for each dollar, adjusted for inflation, that they had in 1979 they had $3.48 in 2004.

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