Important Economic Benchmarks - Except When They're Not

Ordinarily there are a certain few benchmarks that are looked at to decide if the government's economic policies - monetary, tax, budget priorities, inflation - are going in the right direction.  I'll give you a minute and let you conjure them up.  Now, let's all recite together.

• Unemployment Rate - check
• Job Growth - check
• Inflation Rate - check
• Interest Rates - check
• GDP Growth - check
• Federal Budget Deficit - check
• Income Growth - check

These are the standard benchmarks which the press uses to evaluate the performance of government.  By all of these measures, each and every one, the Bush economy has been doing just fine, thank you.  Yes there is a federal deficit, but each year it is less than the year before, and less even than it was predicted to be.  The Fed Chairman, first Greenspan and now Bernanke, has kept inflation in check with judicious, though not excessive interest rate manipulation.  The unemployment rate sits at a low by historical standards 4.5%, and jobs have been produced to the tune of roughly 160,000 per year for since the final Bush tax cuts in 2003 took effect.  And incomes have risen across the board.

But.  But George Will had the temerity to write a column in praise of this relative economic goodness and whaddayaknow, a few other economic benchmarks are suddenly deemed more important.  First, from  Mr. Will.

In 2002, when his tax cuts kicked in and the economy began 65 months -- so far -- of uninterrupted growth, critics said: But it is a "jobless recovery." When the unemployment rate steadily declined -- today it is 4.5 percent; time was, 6 percent was considered full employment -- critics said: Well, all right, the economy is growing and creating jobs and wealth, but the wealth is not being distributed in accordance with the laws of God or Nature or liberalism or something...

In the 102 quarters since Ronald Reagan's tax cuts went into effect more than 25 years ago, there have been 96 quarters of growth. Since the Bush tax cuts and the current expansion began, the economy's growth has averaged 3 percent per quarter, and more than 8 million jobs have been created. The deficit as a percentage of gross domestic product is below the post-World War II average.

Now, from Ezra Klein via the Center for Budget and Policy Priorities* comes a graph demonstrating an "extraordinary jump" in income concentration.  Income concentration?  That's the holding of a larger percentage of total income by a small percentage, the top 1%.  Here's the graph.

Mr. Klein doesn't do much more than publish the borrowed graph and say "Here, see!  But here's what the CBPP has to say about it:

• "This disparity produced an exceptional jump in income concentration in 2004.  The share of the pre-tax income in the nation that goes to the top one percent of households increased from 17.5 percent in 2003 to 19.8 percent in 2004.  Only five times since 1913 (the first year that this data set covers), and only twice since World War II has the top one percent’s share risen by as much in a single year (in percentage point terms).  Each percentage point of income is equivalent to $69 billion in 2004.
• The share of total U.S. income that the top one percent of households received in 2004 was greater than the share it received in any prior year since 1929, except for 1999 and 2000.

I've taken the liberty of highlighting the last few words.  For if you look at the graph with them in mind (and can read the very fine print for the years involved) it becomes quite clear that if anyone should stand accused of re-establishing a "robber baron society" it should be Mr. Bush's predecessor,  President Bill Clinton.  In 1994 it appears that the top 1% earned roughly 14.5% of pre-tax income, and in 2000 they earned roughly 21.5%. a steady upward climb if ever there was one.  Did we hear about the evils of "income concentration" then?  I think not.  No, then it was about job creation, debt reduction, GDP growth and low interest rates.  Ah, but now, when the top 1% earned 19.8% do we hear about this evil.

The greatest contributing factor to this is a rising stock market.  During the long flat part of the curve the market was just that, relatively flat.  After the Reagan tax cuts and with the stock market rise in the 80's those most invested in the market, the wealthy, saw their incomes rise.  No surprise.  With the tech boom in the 90's again those invested in the market, the wealthy, saw their incomes rise.  No surprise.  With the Bush tax cuts and renewed economic growth the market has once again risen, and investors have seen their incomes rise as a result.  Again, no surprise.

Unless you'd like to argue that a falling stock market is good for America then I think we'd best stick with the standard economic yardsticks and benchmarks and keep "income concentration," a socialist construct if ever there was one, in the closet.

*By the way, I found this quote on the CBPP's site that tells you really all you need to know about their economics and their politics.

"[The Center's] statistical work is absolutely impeccable; there is nothing at all like it on the right, or anywhere else. . . .  If you care about [fiscal issues], check CBPP's site regularly for updates."

Paul Krugman, New York Times columnist,
in a May 28, 2003 column on his website listing
websites that are "must reading for anyone interested in government policy."

(Linked to OTB's Traffic Jam for June 12)

Comments

[Assistant Village Idiot]

Apparently, if someone comes up with an idea so we all make another $100, if one person makes $200 for reasons we don't like, we should abandon the whole thing.

I cannot evaluate how good my car is by looking in my neighbor's driveway.