The Rich Were Better Off Under Clinton Than Bush

As I noted yesterday, a standard liberal talking point (one that is constantly reinforced by a sympathetic and uncritical media) goes like this:

Democratic leaders, candidates, and their surrogates are likely to maintain their argument that the Bush tax cuts in 2001 and 2003 resulted in a windfall for the wealthy and contributed to the relative stagnation in income for middle- and low-income families. They cite data showing that most American families saw their take-home pay lag behind inflation in the past five and half years, and they say that Republican tax cuts have made the distribution of wealth and income more unequal today than at any other time since the early 20th century.

This quote is taken from a new article by John Maggs in the National Journal, but I have seen the same point made in countless other articles and news stories.

Today, in an effort to investigate this claim in more detail, I look at after-tax incomes for the last 3 years of the Clinton administration (1998-2000) vs. the first 3 years of the Bush administration (2001-2003). As before, the data were taken from the Congressional Budget Office and were compiled by the Tax Policy Center. 2003 is the most recent year for which figures are available, and you can analyze the data yourself by going here.

In the first graph, I show the after-tax figures for each quintile of the population (where quintile 1 = the poorest 20%, and quintile 5 = the richest 20%). What we should see, if the Democrats and the media are to be believed, is that incomes were equitably distributed during the Clinton years and then became seriously skewed in favor of the rich (due to the 2001 tax cuts) during the Bush years. Here is what the data actually suggest:



The evidence simply does not support the claim. Can you imagine what it would be like if every article suggesting that the Bush tax cuts favored the wealthy included a chart like this? Well, the article would not work, so it will never happen.

As you can see, inflation-adjusted after-tax incomes for the middle quintiles (quintiles 2, 3 and 4, which make up the middle 60% of the population) remained at their historically high levels or even edged up a bit during the first 3 years of the Bush administration, this despite the 2001 recession. This completely contrasts with the widespread belief that average folks have been falling behind as prices for healthcare and education have increased. Even more astonishing to me is the fact that incomes for the richest among us (quintile 5) have actually dropped during the early Bush years -- the exact opposite of what liberal gospel would have you believe. To put this another way (and this is the main point of today's post), the richest 20% of the population fared better under Clinton than they did under Bush. The poorest 20% did, too, but as I explained yesterday, most of their losses occurred during Clinton's last year in office (losses that continued during the Bush years). Still, if my analysis is accurate, it would be fair to say that by 2003, the Bush tax cuts had not helped to maintain the incomes of the poorest 20%.

My main point is that the Democrats' claim that the Bush tax cuts helped only the wealthy does not square with the facts, and I am both astounded to discover that this is true and discouraged to know that there is no possible way the American public will ever appreciate it. If the media hasn't figured it out by now, they never will. Instead, they will continue to focus on wages (i.e., on only part of the income story) or on pre-tax incomes (as if that could tell you about the effects of the tax cut) to tell a story that just makes perfect sense to the liberal mind. Liberals believe that they have George Bush pegged, and one of things they just know about him is that he doesn't care about the little guy because he's too busy lining the pockets of his rich Halliburton buddies. It's perfectly natural to fall prey to confirmation biases (i.e., to uncritically accept evidence that supports your preconceived notions while filtering out contradictory evidence), and I believe that explains why the media keeps bringing you a story that appears not to be true. The existence of confirmation bias is the main reason why it would be better to have a mainstream media composed of both liberals and conservatives.

The analysis presented above focused on the wealthiest 20% of the population. Perhaps you think that it is not the wealthiest 20% that made off like bandits due to the 2001 Bush tax cuts but that it was the wealthiest 10% (or the wealthiest 5% or the wealthiest 1%) instead. If that is what you think, my question for you is this:

Why do you think that?

I am sure it would not be hard to find a claim to that effect made by a mainstream media reporter, but that doesn't mean anything. What evidence convinces you that it is true? Here is the evidence that convinces me that it isn't true:


Even the wealthiest 1% (especially the wealthiest 1%) were better off under Clinton than under Bush. Yet the media would have you believe that the Bush economy -- unlike the egalitarian Clinton economy -- is further enriching the wealthy at the expense of everyone else. And they would have you believe it because it's what they, themselves, sincerely believe to be true. As best I can determine, what they believe to be true (and what they are trying to persuade the American public is true) is actually false.

Perhaps the 2003 tax cuts (unlike the 2001 tax cuts) enriched the wealthy while leaving the rest of us behind, but the data are not available to say one way or the other (at least not that I can find). I can hardly wait to find out the truth of the matter. Unfortunately, if the past is any guide, the facts will be available only after the media regales us with hundreds of stories that knowingly explain how Bush's tax cuts did little more than provide "a windfall for the wealthy."