Jewish World Review August 25, 2004 / 8 Elul 5764
Bush's horrendous economic record
What to do about those numbers? That is the big discussion in the Republican Party in the days before its convention.
Republicans have long known they will have to make the case for their economic record in New York. What is upsetting them are two new sets of data that may provide ammunition for their enemies. The first numbers, not yet formally available, come from the Census Bureau. They show that in 2002 the top fifth of U.S. households earned just about half the income in the nation. The second, from the Congressional Budget Office, tell us that the Bush tax cuts benefited the wealthy more than the average man.
All this has John F. Kerry crowing that the benefits for the rich are "the straw that will break the back" of the middle class. What's more, Republicans fear, matters won't be helped by the fact that the convention will take place in the Capital of Cash, a place peopled by cartoon figures like Donald Trump.
Stepping around the homeless on their way past Trump Tower, observers might find that New York itself provides confirmation of America's troubles.
There are, of course, standard Republican replies in such situations. The data are being presented wrongly, they argue. In the case of the Census Bureau, the Republicans have a point. Population data are usually arrayed in quintiles, a standard method of dividing the population into fifths. But the Census Bureau has chosen to make up its quintiles with households, not individuals. As a result, its "top fifth" includes 25% of the population. Its "bottom fifth" counts only 14% of Americans. What's more, the data are pretax. They do not reflect America's still highly progressive rate structure, or its significant social insurance taxes.
Once you recalibrate the numbers to take all this into account, America's income distribution by quintile is the same as it was in 1997; thus, if the straw is breaking the national back now, it must also have been doing so in one of the very best years of the Clinton economy.
As for the Congressional Budget Office, here the matter is more one of outsiders' interpretation. It is a fact of life even political life that when you flatten a progressive tax schedule, the rich benefit more than the lower wage earners because they pay more taxes in the first place. Instead of proudly proclaiming one of their party's essential principles that a flatter tax-rate structure brings growth the Republicans are eating their young by attacking the CBO director, Doug Holtz-Eakin, whom they hired in the first place. And in the process, they are obscuring what should be the convention's message: that the party delivered on its philosophy by cutting taxes for everyone in 2002, and for many in later legislation.
All of which brings us to the larger question: Is unequal income distribution always bad? The answer is no. Historically, uneven income distributions tend to correlate to strong growth. In societies with the rule of law, that wealth tends to turn into opportunity. Societies where everyone earns closer to the same amount grow more slowly; they are also, often, broke (Western Europe).
Also, the focus on income can obscure other gains. The same Census Bureau just reported that the homeownership rate hit 69%, up from 67% in 2000 and 64% when Bill Clinton took office. Under Bush, African American homeownership may cross the 50% line for the first time. Surely, homeownership is a more decisive measure of social achievement than income-data snapshots.
In other words, the issue is not bad numbers. It is Republican timidity. The U.S. has serious economic problems: the price of oil, unwarranted litigation, the unfunded liabilities of the national pension program. Some of these economic problems are Bush's fault an untenably expensive new senior drug program, for example. Still, Bush's overall economic record merits pride. By cutting taxes, Bush helped ensure that the U.S. remains relatively competitive in a stressful period.
And Republicans take note there is even evidence that robust economic competition makes a fine theme for a New York-based show. Just after the convention, Manhattan will play host to a second event that will probably, at its peak, command a TV audience of 40 million, double the number the GOP expects. That event will unswervingly glorify the harshest aspects of competition and the nastiest corporate practices. And it will ceremoniously eliminate economic losers one by one, so the crowds can enjoy it. The event? The second season of Donald Trump's "The Apprentice."
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JWR contributor Amity Shlaes is a columnist for Financial Times
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