Worsening Income Inequality

There is more evidence today that the Bush administration’s economic policies are widening the gap between the rich and the poor.

University of California at Berkeley professor Emmanuel Saez and Thomas Picketty of the Paris School of Economics released two studies this week, one looking at income and another looking at tax policy. The bottom line: Under Bush, the rich aren’t just getting richer. They’re making a killing.

How much so? As The New York Times reported Thursday [1], the nation’s richest 300,000 Americans make as much money as the bottom 150 million. Calculations based on 2005 tax data, the latest available, average incomes for people among the bottom 90 percent of Americans that year declined 0.6 percent, while the incomes of those in the top 10 percent increased about 14 percent.

And that is not just a one-year blip. Since 1970, based on data posted on Saez’ website [2], while the annual average wage, adjusted for inflation, increased 15.2 percent between 1970 and 2005, the average wage for the nation’s top 100 CEOs in that period increased a whopping 2,193 percent.

Meanwhile, the Center for Budget and Policy Priorities released a study [3] based on the research of Saez and Picketty that shows the extent to which the wealthiest Americans benefited greatly from conservative tax policy while the pocketbooks of average Americans remain significantly unchanged. “Large reductions in tax progressivity since the 1960s took place primarily during two periods: the Reagan presidency in the 1980s and the Bush administration in the early 2000s,” Piketty and Saez say in the Center’s study.

In fact, the wealthier the individual, the greater the magnitude of the tax benefit: The average tax rate declined by a larger amount for households in the top one hundredth of 1 percent of the income scale (where incomes in 2004 averaged about $15 million) than for households in the top tenth of 1 percent (where incomes averaged above $3.7 million) or for households in the top 1 percent (where incomes averaged about $850,000).

“During a period in which economic forces have been generating increased pre-tax inequality, changes in the tax system have exacerbated rather than mitigated the widening of the income gap,” the Center concludes.

The Bush administration and congressional Republicans, not surprisingly, are trying to change the subject. As Democrats unveiled [4] their admittedly imperfect and incomplete plans to balance the budget by 2012—a vote on the budget resolution [5] is expected this afternoon—the Republicans have settled on a mantra [6]: that Democrats will enact “the largest tax increase in American history.” They will try to persuade working-class Americans that the Democrats will dip into their pockets.

Democrats and progressives do not have to fall into that rhetorical trap. The evidence is on their side. It is the Republicans who have been playing reverse Robin Hood, robbing lower- and middle-income Americans by rigging tax and economic policies to benefit the rich. In an honest moment, a few Republicans will acknowledge the truth. But as we see over and over again, honesty and economic fairness are not high on the agenda of the conservative ideologues still trying to call the shots.