‘Income inequality is real’

February 1, 2007

If the president isn’t careful, Sean Hannity might accuse him of waging “class warfare.” After all, that’s the smear d’jour for anyone who mentions income inequality, right?

President Bush acknowledged Wednesday that there is growing income inequality in the United States, addressing for the first time a subject that has long concerned Democrats and liberal economists.

“The fact is that income inequality is real — it’s been rising for more than 25 years,” Bush said in an address on Wall Street. “The reason is clear: We have an economy that increasingly rewards education and skills because of that education.”

In some respects, Bush’s remarks were an unremarkable statement of what many economists accept as common wisdom. But they appeared to represent the first time Bush has personally addressed an issue on which his administration has found itself under fierce attack from Democrats. The official White House Web site offers no record of Bush uttering the phrase “income inequality” in a speech or remarks, and aides said they could not recollect such an instance.

I knew elections had consequences, but this is an unexpected acknowledgement of reality. I had assumed that Bush considered rising income inequality on par with global warming and modern biology — ideas embraced by eggheads, but rejected by “real” Americans.

Indeed, the president wasn’t done. Bush also touched on executive salaries, saying the “salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.” According to the AP, “Bush’s words on pay were met with complete silence from the business crowd he addressed.”

Well, Bush is a high-profile convert, isn’t it? The same president who appeared to be going out of his way to make income inequality worse, on purpose, is now offering a decidedly progressive vision on the issue. So, Mr. President, how do you propose we address the issue?

Bush cited income inequality in the part of his speech touting the No Child Left Behind Act. He described the bill as “one of the most important economic initiatives” of his presidency because of its role in closing what he terms the “achievement gap” between students.

“The question is whether we respond to the income inequality we see with policies that help lift people up, or tear others down,” Bush said. “The key to rising in this economy is skills — and the government’s job is to make sure we have an education system that delivers them.”

That’s it? The rich are getting richer, the gap between the top and the bottom is similar to the 1920s, and Bush wants to plug No Child Left Behind?

We could restructure the tax code, but Bush likes it the way it is. We could raise the minimum wage, but Bush has resisted an increase. We could have a real policy discussion about falling wages, but the president prefers not to. We could overhaul the nation’s health care system, but Bush already believes Americans have too much insurance.

Perhaps I shouldn’t complain. The president’s comments, taken at face value, are encouraging. Indeed, one hopes Democrats can use them in policy debates (“even the president has expressed concern about rising income inequality”) and make distribution of wealth a bi-partisan issue.

In the interim, however, how about a little follow-up? Maybe some enterprising reporters can ask Tony Snow for a list of initiatives the administration would be willing to take to address the issues the president raised in his speech. I’m sure congressional Dems would be happy to use Bush’s list as a starting point for substantive negotiations and crafting legislation.

Unless, of course, the president’s remarks were just lip service. That couldn’t be, could it?

“The reason is clear: We have an economy that increasingly rewards education and skills because of that education.” WTF! The reason is clear, and that’s not it. The reason is that his entire economic policy is tilted toward rewarding the very rich and screwing the rest of us. idiot!

  • Bush is the master of lip-service. He “understands” and “appreciates” all manner of things and then goes about doing what he wanted in the first place. I expect nothing from him but more of the same.

  • I have a great idea how Bush can address this issue. Just kick the top tax rate back to where it was under that notable socialist Dwight D. Eisenhower – 90%.

  • … and your solution is for the government (really the taxpaying public) to subsidise those who drop out of school, who don’t make an effort, who just want a handout?

    How is the war on poverty going so far? How much longer do we have to keep throwing money down the drain?

  • I don’t think he minds talking about it, as long as he isn’t expected to do anything about it. All hat, not cattle.

  • “The fact is that income inequality is real — it’s been rising for more than 25 years,” Bush said in an address on Wall Street. “The reason is clear: We have an economy that increasingly rewards education and skills because of that education.”

    I’m more cynical about this statement. Bush’s comment acknowledges income inequality, but it implies that the blame lies with the people on the short end of the stick for not having the right education or skills. We have income inequality, you see, not because the system is structually gamed to redistribute income to the very top, but because it’s too much of a meritocracy.

    Like Dubya, just to name one, is an example of merit. Feh.

  • Obviously the solution to our newly discovered income inequality problem is for us to provide less money to the public schools than we promised, give more money to religious schools without any oversight, require all our kids to pass a retarded standardized test, and permanently lower the taxes on the fat bastards eating all the pie.

    On a brighter note, there are only 719 days left of the Chimperor’s reign.

    Or less.

    IMPEACH.

  • Maybe some enterprising reporters can ask Tony Snow for a list of initiatives the administration would be willing to take to address the issues the president raised in his speech.

    Are we still going to Mars, by the way?

  • Sorry, but this has me so steamed up I’m going to repeat my gripes about this from yesterday.

    For Bush to warn of income inequality is highly disingenuous given that Republican policies in general and Bush policies in particular have been deliberately directed toward producing this exact result. This is not just all the tax cuts for the wealthy, but the fed working hard to keep wages low, and to ensure a certain level of unemployment.

    For Bush to gripe about outrageous CEO pay is equally bad. He and Cheney have benefited personally from high CEO compensation (especially Cheney). High CEO compensation is desired by the republicans, as that becomes a pillar of political support, every bit as much as their having designed a tax system that allows massive tax relief for any group that can successfully lobby (i.e., bribe) the lying thieving Republican K Street project.

    Bush’s call for American businesses to be a model of transparency and good corporate governance is likewise stunning for its hypocrisy.

  • d’jour

    I think it’s du jour, dude, but I’m American, so, you know… Frenchies don’t hate my Francais, please. I’m not going to run and check my French book.

  • Bush also touched on executive salaries, saying the “salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders

    Hes one to talk….he has been an executive failure every step of his life and has been summarily rewarded everytime…

    His “record” as the CEO

    He single handedly destroyed Arbusto and was bailed out by daddies friends

    He Single handedly destroyed the Texas Rangers and was bailed out by daddies friends

    He singlehandedly destroyed the economy and security of the United States and is currently being bailed out by daddies friends

    Mr President responsibilty is not his strong suit

  • Unless, of course, the president’s remarks were just lip service.

    Indeed. That jug eared slut is so desperate for some sort of legacy beyond: Fucked It All Up, he’s willing to give the unwashed masses a half-hearted B.J. But we know he’s thinking of Haliburton the whole time.

    But since exec salaries are already tied to performance as measured by profit the silence may have been of the “Why is this idiot telling us the sky is blue?” variety. If he had said “CEO salaries should be tied to a reasonable standard of living”…Dick Cheney would be pResident because they would have flung Bush the Blasphemer out of the window.

  • “it’s been rising for more than 25 years,”

    Bush code for “Not my fault.”

    Maybe CEOs could struggle along on just 200 or 300 times what their base employees make instead of the 400 times it is now.

    Maybe we could put the war expenses into the country instead of into Iraq in the form of bombs. The cost of Iraq doesn’t figure in that after the war we’ll replace all those munitions we’re blowing up.

    Universal Health Care would help people AND businesses.

  • Bill and Gregory are right. It was pretty clear when he said that the disparity lies in education and skills what solution he would propose. The problem, as most middle class Americans (who often have college degrees) already know, is that having a good education isn’t worth nearly as much as having a rich daddy. Bush didn’t succeed because of his educational prowess, as we all know. Apply the lesson.

  • Kevin at Political Animal has done some very good policy blogging on income inequality.

    In this post, he documents the fact the income inequality, while growing over the past thirty years, tends to stabilize during democratic administration, with Carter being the exception. The post has a very nice graph which illustrates this. The conclusion he draws this that there is “something” in policy differences which between Democrats and Republicans which must account for this phenomena.

    In this post, he speculates on what he thinks may be the cause of the growing income inequality. He minimizes the education effect and argues that diminished union power may be more to blame. This latter post was in response to a Brad DeLong post, which in turn, was a response to a Krugman column (sorry no link). You can find both sides of the education versus policy arguments there.

  • There was a time when business leaders recognized that their employees were their customers. Thus, their riches were tied to the welfare of their workers. No more.

    Now it’s the stockholders that business executives are concerned about — and globalization differentiates customers and workers. So, what’s good for business is no longer related to what’s good for employees as it once was.

    (granted, I’m not an economist, but that’s how it seems)

  • There’s no reason for Bush to mention income equality since it isn’t a concern of the Republican base. I think Bush is somehow competing with Jim Webb. Webb mentioned income inequality in his speech after the State of the Union. Webb is the man Bush pretends to be.

  • It is lip service, and here’s how to prove it:
    Ask president Buh (he can say Democrat party, I can mis-state names, too) about….
    wait for it……

    The Estate Tax

    I guatantee that he will call it “The Death Tax.”

    Tell me how education is going to furnish me with super-rich parents form whom I will inherit millions, if not billions. Is that how Paris Hilton or Donald Trump got their start?

  • I’m all for strengthening education. What’s Bush’s plan? Vouchers, charter schools, cutting pell grants, hiking student loan interests, and standardized testing?

  • I get a little irritated when people (including Shrub) suggest that more education is the “answer” to income inequality. That’s a nice theory, but the fact is, half of everyone is below average. We need to have decent-paying jobs for normal people, Joe Working Class, the kind of people who did well after World War II and had the props kicked out from under them starting in the 70s inflation and going into high gear under Ronnie Raygun when jobs began flooding overseas.

    The answer is not just education – it’s not that simple.

  • Who the hell believes Bush these days? I let history be my guide; I hope all Americans do.

    Years ago, Bush make it clear: His constituencies are the “haves” and the “haves-mores.”

  • “Now it’s the stockholders that business executives are concerned about”

    God forbid managements’ care about their owners!

  • Just a quick thought:

    Doesn’t the Preznit have a brother who owns a company that sells “educational” software that is geared specifically towards “No Child Left Behind” programs?

  • CB Covered this one a few months ago surrounding the Krugman Cavuto debate, where a number of us called out his flawed data: http://www.thecarpetbaggerreport.com/archives/9255.html

    This site cited Krugman’s flawed arguement but also links to the BLS which has the raw income data. http://newsbusters.org/node/9493

    Needless to say, the ratio between the top fifth income earners and the bottom fifth has widened from 11.2x in 1967 to 15.1x in 2005. This trend has occured throughout this period, among Dem and GOP presidents.

    What one has to realize is that this probably correlates with the broader stock market’s rise. I haven’t done the correlation calcualtions, but common sense would tell you that the top fifth benfits from income derrived by savings and investments much more than the bottom fifth. What’s interesting, is in the years of bear markets, the ratio does not rise as quickly, or even shrinks from time to time.

    I’ve heard too many liberals argue this is a Bush phenomenon, and I suspect that is why conservatives go into denial mode. (I mean just look at Krugman’s arguement, it was flat out wrong! )

    By no means is this a Bush or GOP issue. Its more a fuction of math and compounding. Each dollar saved earns more for the individual over the long term and that’s happened over many decades. If you can’t/don’t save, then you can’t/don’t benefit from the law of compounding.

  • “God forbid managements’ care about their owners!” — JRS Jr @ 25

    I don’t recall anyone saying that management shouldn’t care about stockholders, but stockholders aren’t so much owners as temporary investors whose primary interests are return on investment. In recent decades, investors have become increasingly focused on short term profits — a focus that is often at odds with the long-term health of the company and welfare of employees. What’s missing is balance.

  • Now, be fair. He did suggest that there might be some kind of voluntary limiting of CEO incomes.

    Something like asking very nicely if they wouldn’t mind leaving a little bit of every fifth million on the table for the workers, perhaps.

  • “We have an economy that increasingly rewards education and skills because of that education.”

    Not really. We have an economy that rewards speculation not production, short term windfalls that beget long term destruction, connections and status over achievement, unscrupulousness over honesty, dishonest tax sheltering over responsible citizenship, good ol’ boy networks over meritocracy, paying off government officials for political favoritism over true democracy … the list goes on. Education is a component of success, but don’t blame schools for the increasing stratification of our society under Bush, blame Bush’s policies for that.

    According to the AP, “Bush’s words on pay were met with complete silence from the business crowd he addressed.”

    All those CEO’s, who know that getting to the top means piflering the corporate treasury, must have been looking at Bush and thinking “Yeah, let’s tie Bush’s salary to his performance as the “CEO president” and see how he likes working for minimum wage. Oh to have been a cricket chirping on the wall of that room when he said those words.

  • “We have an economy that rewards speculation not ptoduction”

    Just think if guys like Michael Dell and/or Bill Gates didn’t speculate that the computer would be a phenomenon…

  • “Bush also touched on executive salaries, saying the “salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.””

    So speaks our first CEO President! What’s the Iraq war cost up to today? 1.2 trillion total? Should we just garnish Bush’s wages till we get it all back? Or impeach him?

  • Great point, Glen!

    By his own speaking points, Bush should be fired! He’s worse than the corporate down-sizers who fire half the workers just to preserve their own grotesquely extravagant income. These narcissistic asshats always seem to forget who they answer to – us! In Bush’s case – what else can you expect from a guy with such a stellar record of company management. We’re well and truly screwed if we don’t fire this dimbulb ASAP.

  • The Bush “administration” will do everything in its power to address the very serious issue of economic inequality. Just like they did everything they could do to help the residents of New Orleans after Katrina. In fact, didn’t Bush actually fly to NOLA and make a televised speech to this effect?

    It’s funny how Republishits never utter a peep when income is being “redistributed” in their direction.

  • JRS Jr, if you are truly interested in the topic of income inequality perhaps you would enjoy reading Brad DeLong’s blog. In particular you might find this enlightening.

    This kind of inequality should be a source of concern. Bill Gates, Paul Allen, Steve Ballmer, and the other hundred-millionaires of Microsoft are brilliant, hard-working, entrepreneurial, and justly wealthy. But only the first 5% of their wealth can have any justification as part of an economic reward system to enourage entrepreneurship and enterprise. And the last 95% of their wealth? It would create much more happiness and opportunity if divided evenly among the citizens of the United States or the world than if they were to consume any portion of it.

  • Bush says that education is the key to income equality but the thing with that is, if everyone would get a better and higher education, there aren’t enough of those high paying jobs to support everyone. Someone has to work those current low paying jobs. And if they aren’t going to raise the wages now to help out the income growth, why would they do it then ? this would still leave us where we are except there would be a lot more educated people without good jobs or any job for that matter.

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