Between 2001 and 2008 it was impossible to discuss economic issues with a liberal without getting a stentorious sermon about the evils of the “Bush tax cuts for the rich” and the resulting surge in income inequality. Now the Bush years are looking like the “good old days” because poverty and inequality have surged under Obama, even though we are in the sixth year of economic expansion and high earners were hit in 2013 with two big tax hikes that were supposed to reduce inequality:
- A tax rate of 39.6% (up from 35%) on incomes above $400,000 for single filers and $450,000 for joint filers.
- Obamacare imposed an extra 3.8% tax on capital gains and dividend income for filers who have above $200,000 (single) and $250,000 (joint filers) in adjusted gross income.
The Fed and Census Agree: Obamanomics Sucks
Two authoritative studies released earlier this month document the increase in poverty and inequality under Obama. The Federal Reserve’s Survey of Consumer Finances, which examines in minute detail changes in Americans’ finances from 2010 to 2013, discovered a big increase in income inequality. Specifically:
- “Between 2010 and 2013, mean (overall average) family income rose 4 percent in real terms, but median income fell 5 percent, consistent with increasing income concentration during this period.” (emphasis mine)
- “Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys.”
- “Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013, although mean and median incomes were still below 2007 levels.” Most of the gains were in the top 3% of the income distribution.
- As I detailed in a recent post, Main Street small businesses have suffered under Obama, with the exception of businesses owned by rich people.
Then we have the annual publication from the U.S. Census, Income and Poverty in the United States: 2013. A few highlights:
- During the Bush years 2001-2008 (which included a slow recovery from the 2001 recession and the start of the 2008 recession), median household income averaged $55,230. In 2013 it was just $51,939, or 6% less. For blacks it declined by 8%, from $37,621 to $34,775.
- The poverty rate, which averaged 12.45% under Bush, was much higher in 2013 at 14.5%. Six years into an economic expansion, the poverty rate is still at a recessionary level, equal to the recessions of 1980-83 and 1991-93 and above the level in 2001.
- Inequality has climbed. The ever popular Gini coefficient rose from an average of 467 in the Bush years to 476 in 2013.
- Another way to measure inequality is to ask “How much more does a rich guy in the 95th percentile of the income distribution earn, compared to the median or 50th percentile?” This metric has also climbed sharply. During the Bush years, it averaged 3.56; now it is 3.78x, meaning if the median guy earns $50,000 the rich guy earns $189,000, up from $178,000 in the Bush years.
Bottom line: Obamanomics has been a disaster for the poor and middle class. Tax increases, Obamacare, Dodd Frank, Obama’s anti-business rants, the war on fossil fuels, bank shake-downs, absence of tax reform or foreign trade deals—the litany of economic malpractice is too familiar to dwell on. With one exception: the shift to a part-time labor force was a major driver of the drop in median incomes. In the WSJ, William A. Galston notes “In 2007, 108.6 million Americans were working full time, year round; in 2013 only 105.9 million were doing so….[from 2007 to 2013] the number of Americans working part time who wanted a full-time job jumped to 7.2 million from 4.6 million.” (Note that the 2.7 million decline in the full-time workforce is virtually the same as the 2.6 million rise in the part-time workforce.)
Like other liberals, Galston ignores the obvious role of Obamacare in corrupting the U.S. job market, even though the Congressional Budget Office estimates the law will cut the equivalent of two million jobs as people elect not to work in order to get benefits. Obviously low-income people will remain poor and dependent if they are not working full time.
The Prosperity and Opportunity Party
The challenge for Republicans is obvious but, for them, daunting: Convince voters, in an optimistic, forward-looking, Reaganesque way, that the GOP’s pro-growth policies will dramatically improve economic conditions for poor and middle class voters, men and women alike. More and better jobs. Lower energy costs. Lower taxes. Less burdensome regulation. More opportunity for their kids. Republicans need to be articulate, specific, and persuasive, going beyond stock slogans like “free enterprise” and “job creators” and “where are the jobs?” and “crony capitalism” to a clear and compelling description of steps they will take to improve the economy for the middle class. The emphasis should be on helping workers who have been screwed by rich Democrats.
Copyright Thomas Doerflinger 2014. All Rights Reserved.