Bush Addresses Income Inequality

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By Michael Abramowitz and Lori Montgomery
Washington Post Staff Writers
Thursday, February 1, 2007

NEW YORK, Jan. 31 -- 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.

The comments came during a generally upbeat economic speech outlining Bush's economic agenda and the state of the economy.

They appeared to be another presidential nod to the evolving political landscape on Capitol Hill, now controlled by Democrats after a campaign that focused in part on their complaints of corporate greed and growing middle-class insecurity. House Democrats have pressed that agenda with legislation to raise the minimum wage, cut interest rates for college loans and reduce prescription drug prices for Medicare recipients.

In three separate hearings Wednesday in Washington, Democrats probed the causes of middle-class angst, focusing on rising income inequality. Meanwhile, the Senate separately has taken aim at executive compensation, adding a provision to the minimum-wage bill that would limit the ability of executives to amass millions of dollars in tax-deferred accounts.

In his remarks, Bush also touched on that hot-button issue, saying the "salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders." While Bush said the government should not set compensation, he told the business executives gathered in the ornate rotunda of Federal Hall that they "need to pay attention to the executive compensation packages that you approve."

Democrats said Bush's speech is a reaction to the success of their agenda and to growing anger among voters who feel they are being left behind.

"They recognize the unhappiness voters have with inequity in this country," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. "For much of last year, they tried to deny this. But the election finally clinched it. So I guess there's no point in denying it anymore."

Bush aides did not deny that Bush was seeking to address Democratic concerns, but they said income inequality has been on the minds of senior administration officials such as Treasury Secretary Henry M. Paulson Jr., who mentioned the subject in his first major address last spring, and chief economic adviser Edward Lazear.

"It's something that obviously the administration has made note of," said presidential counselor Dan Bartlett. The president "understands that there are many Democrats who have spoken to this issue. It is an important time for the Congress and the American people to hear what he says," Bartlett said.

Few economists would disagree that income inequality is real and getting worse. The gap between rich and poor has been growing wider since the 1970s. According to the nonpartisan Congressional Budget Office, the wealthiest 20 percent of households accounted for 45.4 percent of total U.S. income in 1979, but claimed 53.5 percent in 2004. Households in the bottom fifth dropped from 5.8 to 4.1 percent over the same period.


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