Following up on yesterday's post regarding income inequality, Paul Krugman has an op-ed in today's NY Times in which he challenges Secretary Snow's recent comments on income inequality going down between 2000 and 2003. As Krugman points out, even though the economy grew fast in 2004, few families saw the benefits of this growth. Instead, the rich got richer. As he says, "Forbes tells us that the compensation of chief executives at the 500 largest corporations rose 54 percent in 2004." Most others he says, have not seen their incomes rise. He says:

I find it helpful to illustrate what's going on with a hypothetical example: say 10 middle-class guys are sitting in a bar. Then the richest guy leaves, and Bill Gates walks in. Because the richest guy in the bar is now much richer than before, the average income in the bar soars. But the income of the nine men who aren't Bill Gates hasn't increased, and no amount of repeating "But average income is up!" will convince them that they're better off.

The Treasury has measured that the income gap has grown narrower between 2000 and 2003, with Secretary John Snow telling reporters yesterday, "There has been a decline in the inequality." This statement is based on the fact that in 2003, the top 5 percent of Americans earned earned 15.4 percent of the nation's after-tax income in 2003, down from 19 percent in 2000. The bottom 20 percent earned 2.5 percent of all U.S. after-tax income, up from 2.3 percent in 2000. The Treasury data also shows, however, that the gap was larger in 2003 than it was in 1990. As this Washington Post article points out, however:

Much of the decline in inequality during that period reflected the popping of the stock market bubble, which peaked in 2000, when executives pocketed fat bonuses and stockholders reaped huge profits from selling shares, according to economists inside and outside the Bush administration. The fall in stock prices during those years disproportionately affected high-income households and helped compress the distribution of income.

We believe that income inequality has intensified under President Bush, and in fact wrote on the issue in the last edition of the Watcher. One exerpt:

The federal minimum wage still sits at $5.15 per hour and has lost over 17 percent of its purchasing power since 1997. In 2005, minimum wage workers earned only 32 percent of the average hourly wage and in fact, the wage would have to rise to $8.20 just to reach half of the current average hourly wage. If Congress fails raise the minimum wage this year, it will mark the longest stretch the wage has remained unchanged since it was instituted in 1938 and the greatest inequality between minimum wage and average wage earners since the end of World War II.

Watcher: Income Inequality Has Intensified Under Bush

As of 2:00 PM today the Senate had yet to vote on the Harkin-Specter amendment, which would provide an additional $7 billion over the President’s budget request — allowing Congress to fund the FY07 Labor-HHS bill at the level enacted two years ago, in FY05. A one-pager on the amendment, made available by Senator Harkin's office, is available here.Among many points made, the one-pager says:

The Senate budget resolution says it has more funding for health and education than the President’s budget does. Yet it includes the same total amount for discretionary spending. Therefore, there is no guarantee that the alleged health and education increases will ever materialize in the Labor-HHS appropriations bill. The only way to ensure more funding for Labor-HHS programs is to add money to the total spending level.

After completing 50 hours of debate on the budget resolution bill, the Senate started considering amendments yesterday. So far struck down they have struck down amendments offered by Sens. Kennedy (D-MA), Murray (D-WA), Conrad (D-ND), Bingaman (D-NM), and Akaka (D-HI). They unanimously adopted an amendment offered by Sen. Burns (R-MT) to provide increased funding for veterans health programs, and to negate the need for enrollment fees and increase in pharmacy co-payments.