Bush Addresses Income Inequality

Democrats have blamed Bush's tax policies for contributing to that trend. Wealthy households reaped the most benefit from tax cuts enacted between 2001 and 2006, according to an analysis by the Tax Policy Center, a project of the Urban Institute and the Brookings Institution. Last year, families making more than $1 million a year saw their after-tax income increase by 6 percent because of the tax cuts, while families making $40,000 to $75,000 saw after-tax income rise by about 2.5 percent.

"Years ago, we used to have a grade at Princeton called 'flagrant neglect.' That's what they should get. Because they're aggressively making the problem worse," said Alan S. Blinder, a Princeton University economist and the former vice chairman of the Federal Reserve Board of Governors.

At the same time, Blinder said, neither Bush nor federal policies in general are responsible for the problem. And Bush is correct, he said, in arguing that the nation's economic losers typically lack sufficient education. "Sometime in the 1970s, the market turned ferociously against the less skilled and the less educated," Blinder told a hearing of the congressional Joint Economic Committee.

But that is likely to change in the future, he said, as globalization and technological advances begin to trigger the same kind of upheaval in the service sector as has hit manufacturing.

Bush cited income inequality in the part of his speech touting the No Child Left Behind Act. He described the bill as "one of the most important economic initiatives" of his presidency because of its role in closing what he terms the "achievement gap" between students.

"The question is whether we respond to the income inequality we see with policies that help lift people up, or tear others down," Bush said. "The key to rising in this economy is skills -- and the government's job is to make sure we have an education system that delivers them."

Montgomery reported from Washington.