Income Inequality Has Intensified Under Bush
by Guest Blogger, 3/21/2006
Though the Bush administration continues to laud the strength of the economy and the success of its economic and tax policies, a large percentage of Americans are continuing to struggle to make ends meet as income growth has become increasingly concentrated at the top of the income scale. Income inequality, in fact, is at an all-time high, illustrating that current tax, budget, and wage and employment policies are all not working in favor of average American families. The country experienced relatively broad-based wage growth during the latter part of the 1990's, but this growth ended with the 2001 economic downturn. Growth in real wages for low- and moderate-income families began to slow, and by 2003 wages began to decline and have not picked up in real terms. The economic recovery after the recession, one of the weakest recoveries on record, has not been diverse enough to generate the kind of income gains among low- and middle-income families seen over the last decade. This real wage stagnation comes despite economic expansion over the last two years, relatively strong Gross Domestic Product (GDP) growth of late, and record highs for corporate profits in many sectors. These gains have not been reflected in job and wage growth across the board for averages workers. Real hourly wages fell for most low- and middle-wage workers by 1 - 2 percent last year and have not increased since 2000 after adjusting for inflation. In addition, the Federal Reserve recently reported in its Survey of Consumer Finances that average income for American families declined 2.3 percent between 2001 and 2004 after adjusting for inflation. Compounding this trend has been Congress's utter inability to pass even one minimum wage increase in the last nine years. 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. The connection between the drastically low minimum wage and growing economic inequality seems to have escaped notice only in the nation's capitol. Eighteen states have now enacted higher state minimum wages, and many others are currently considering increases of their own. According to the Ballot Initiative Strategy Center, as many as 30 states could consider legislative proposals this November to increase the minimum wage or tie it directly to inflation. Other Bush administration policies have contributed to these negative income trends, particularly the regressive redistribution of federal revenues through the President's tax cuts. The Bangor Daily News summed up the problem succinctly:
- "Suppose that the administration's tax cuts, which began in 2001, remain in effect until 2015. Over these 15 years, more than half of the tax cuts - 53 percent - will go to people with incomes in the top 10 percent, according to studies commissioned by The New York Times. And 15 percent of the cuts will go to the top one-tenth of 1 percent of taxpayers. By 2015 the tax cuts, if retained, will provide average yearly tax savings of $23 to taxpayers in the bottom 20 percent. The wealthy will fare better. The top one-tenth of 1 percent of all taxpayers will save an average of $196,000 a year, or a total of $2.9 million over the 15 years. By 2015, the top 1 percent of taxpayers will pay a lower share of total taxes than they did in 2001."