The Pernicious ‘No Real Economic Progress’ Myth
It was the capital gains tax cut of 1997 that caused the big personal income gains. That cut actually began having its desired effect in the year it was passed because the Clinton administration telegraphed its desire for it shortly after the 1996 election. Investors assumed correctly that passage by the then-Republican-controlled Congress was assured. Thanks to that legislation, real per capita personal income skyrocketed over 12.5% during the administration’s final four years.
Second, real income during the Bush era didn’t take off until the 2003 investment-related tax cuts on capital gains and dividends took hold. Their positive impact on real income wasn’t visible until 2004. The 7.5% growth in real per capita income from 2004 to 2007 is also not as good as the best of the Clinton years, but, as noted earlier, you can lay a lot of the blame for that on Sox.
The third point is best made with a graph containing the chart’s final seven years, this time expressed in 2001 dollars:
As you can see, the claim that “incomes have never gotten back to where they were before the recession” hasn’t been true since 2004.
But wait, haven’t all of those income benefits gone to the rich, leaving nothing for the poor and middle class?
Hardly.
This data from the Census Bureau released last year (PDF can be retrieved by going to this webpage) shows that the upper income limit and the mean household income of every income group presented went up in real terms from 2003 to 2006:
As I said when I posted on this last year, “I’m not claiming these results are where I would want them to be, but they are all positive. In fact, the household results show more real improvement at the lower income levels than is found in the middle and upper-middle.”
I should also point out that the Bush rate reduction in the lowest taxable income bracket from 15% to 10% has increased spendable income for those in the lowest income quintiles disproportionately since 2001, while helping all but the very highest earners.
Since we’re about to enter presidential campaign silly season, it’s probably too much to expect politicians to challenge the CW claims noted at the beginning of this column. But one would hope that reality-based observers know better.
Since you live in Ohio Tom you can regale us with economic success stories in your wonderful state. Please concentrate on Cincinnati, Cleveland, Toledo, Columbus or any other city over 10,000 pop. please.
“Since you live in Ohio Tom you can regale us with economic success stories in your wonderful state.”
The citizens of Ohio are their own worst enemy. They have consistently supported socialist style economic measures. The same holds true for Michigan and California. This stupidity is not the fault of George W. Bush! They have nobody to blame but themselves.
PJ, if Ohio isn’t keeping up with overall results, do you suppose it might be something in Ohio that caused it?
I live in Indiana just outside of Cincinnati and from here it looks like Ohio will do anything to get their businesses to leave. Higher taxes, more regulation, higher workman’s compensation, smoke-nazis, etc. I think the Ohio Chamber of Commerce actually puts out a helpful pamphlet, “How to relocate your business to Texas.”
“How to relocate your business to Texas.”
I live in Texas—and our economy is booming. If nothing else, there is a lot of oil drilling going on! Our population is also growing by leaps and bounds. The economic refugees of the decadent Northern states are getting here as fast as they can.
PJB: You asked about Ohio.
Relatively conservative and largely GOP-dominated Metro Cincinnati is doing all right. The Dem-dominated city itself is struggling, but showing some signs of improvement, thanks to what appear to be (finally) a determination to do something about the crime problem.
Metro Columbus outside of the city itself is still doing pretty well.
Dem-dominated Cleveland, Akron, Youngstown, Canton, Toledo, and to a lesser extent Dayton are falling of the cliff.
The commenters who say we mostly have ourselves to blame here in the Buckeye State are correct.
Thanks for asking. :–>
If it’s true that everyone is doing better thanks to the economic policies of the Bush administration then all the Republicans have to do is tell all those who are doing better now than they were in 2000 to vote Republican and those who are doing worse should vote Democrat. What makes this strategy perfect is the Democratic Party has been saying the same thing since 2006.
But would somebody please tell me why the party that says it’s fiscally responsible is running a monster deficit? It seemed to start before 9/11 so that can’t be the cause and the Republicans controlled the House, Senate, and The White House between 2000-2006 so it’s hard to blame Democrats. Perhaps the Republicans only read half of Keynesian Economics 101. Funny, I’ve never heard a Republican say anything nice about Keynes.
Richard Nixon said, “We’re all Keynsians now”.
Feel better Northern Light?
If I make 1,000 more this year but my food, heating/cooling, health-care, and transportation costs went up by 2,000, how would I rate the performance of the economy and my place in it? The author only examines half the equation.
JeffA, much (not all) of what you’re referring to relates to 2008; the jury is, obviously, still out on that.