Down Is Up

Saturday, May 13, 2006

THE BUSH administration occasionally dips a toe into the inequality debate. In March Treasury Secretary John W. Snow described inequality as "the new sort of battle line in the political arena," but he has since gone silent on the subject. Now Edward P.

Lazear, the chairman of the Council of Economic Advisers, has addressed inequality in a May 8 Wall Street Journal op-ed column, co-authored with Katherine Baicker, a fellow council member. The article contains the following assertion: "The president's tax cuts have made the tax code more progressive, which also narrows the difference in take-home earnings."

This really is a jaw-dropper. Calculations by the nonpartisan Tax Policy Center clearly show that the Bush tax cuts have expanded inequality, not narrowed it. People in the bottom fifth of the income spectrum have enjoyed a 0.4 percent increase in their after-tax income thanks to the tax cuts, but people in the top fifth have enjoyed a 3.8 percent increase. For the richest households, the gains have been still larger: The top 1 percent got a 5 percent raise courtesy of the tax cuts, and the top 0.1 percent got 5.9 percent. There's no ambiguity about it: The tax cuts widened the gap in take-home earnings.

The Lazear-Baicker article did acknowledge that high school dropouts have made no gains since 1980: Their wages fell by 3 percent. It might also have mentioned that this wasn't true only of high school dropouts: Wages for those in the bottom half of the income spectrum have fallen after adjustment for inflation. The failure of economic growth to generate gains for half of society is a serious worry. The administration needs to come at it with more serious analysis.

© 2006 The Washington Post Company