Bush’s New Found Concerns about Inequality Don’t Pass the Laugh Test

President Bush has never shown much understanding of the American economy or its global environment, but yesterday he at least acknowledged that all is not as it could be: Income inequality has been rising, he said, for more than 25 years.   Actually, that’s not true: The distribution of incomes and wealth is less equal today than it was 25 years ago; but the record is that those distributions deteriorated in the 1980s during the Reagan and first Bush administrations, improved significantly in the 1990s during the Clinton years, and then turned much less equal under this President’s watch.

The President is correct that the rising return on higher education and skills plays a role – but he apparently missed the point that the Clinton administration did something about it by expanding government assistance and tax benefits for higher education and skills training.  He cut back that assistance, and now he’s surprised that inequality in up?

Clinton and the Congress during his terms also used government to ameliorate inequality, by expanding the Earned Income Tax Credit and raising the minimum wage.  George W. Bush let the value of both decline with inflation, and now he’s surprised that inequality is up?

Clinton also recognized that American prosperity requires full engagement in the global economy, so he successfully completed negotiations on the most important trade-expansion agreement in 50 years – the Uruguay Round that gave rise to the World Trade Organization – and won its approval in Congress.  Bush offered piecemeal protectionism and let the next major round of global trade talks collapse.  Clinton also recognized that in a global economy, rising health insurance costs would erode the ability of American business to create jobs and raise wages.  He failed to pass his overall reforms but succeeded in a number of smaller ways, including extending health coverage for children and promoting the expansion of HMOs.  Bush ignored the problem entirely – and now he’s surprised that inequality is up?

Finally, President Clinton saw that globalization raises the returns on capital—he took the stock market boom seriously—and responded by making the tax code more progressive.  He raised rates on the wealthy while cutting tax burdens on everyone else.  Bush surveyed the same forces driving greater inequality and decided to accentuate them by cutting taxes much more sharply for the very wealthy then for anyone else.  So, no, he cannot be surprised that inequality is now up.

If President Bush expects his comments about inequality to pass the laugh test of the American people, he’ll have to take steps that could actually do something about it – which in his case would mean reversing most of his economic program.