The Obama Watch

Obama’s Rising Inequality

He can’t even get equality right, as under his policies the rich get richer and everyone else gets poorer.

By 5.8.13

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The day after his second inauguration, the New York Times and the Washington Post blared about Obama’s speech heralding a new vision and agenda for equality in America. But apparently the Left is happy with just words.

Official U.S. government data shows that inequality is rising sharply under President Obama. It was stable under Bush. But Obamanomics has brought back exactly the rich getting richer and the poor getting poorer.

Obama proclaimed in that second Inaugural Address, “our country cannot succeed when a shrinking few do very well and a growing many barely make it.” But that is exactly what is happening under Obama’s economy.

Investor’s Business Daily editorialized on January 23, “that’s precisely what’s happened over the past four years, as Obama’s economic policies left the majority of Americans falling behind while the wealthy few got further ahead.” The official measure of income inequality is the “Gini Index,” published by the Census Bureau. That index has risen every year Obama has been President, meaning inequality has increased. But the index was flat during the eight years Bush was President, meaning inequality was not increasing then.

Under Reagan, the rich got richer and the poor got richer. After Reaganomics took hold in 1983, incomes for every quintile, from the top 20% to the bottom 20%, rose. The poverty rate also declined for every year thereafter while Reagan was President.

But President Obama is following exactly the opposite of every policy of Reaganomics, so he is getting basically the opposite results. The incomes of the top 20% have still been rising under Obama. But the incomes of everyone else, the bottom 80%, have been falling!

Since President Obama entered office in January 2009, real median household income, representing the income for the middle class, has declined by about $4,500, or 8%. That’s the equivalent of the middle class losing one month’s income every year.

Moreover, if you start from when the recession ended, in June 2009, the middle class has lost more in income during the Obama recovery than during the Bush recession! Real median household income declined by 2.6% during the recession from December 2007 to June 2009. It has declined by twice that since then!

The Obama economy has not been creating jobs. So the demand for labor has fallen, which translates into declining real wages and incomes, after inflation. As a result, even where jobs have been created, “higher paying jobs lost during the recession are being replaced by lower paying jobs in the Obama recovery, which hurts the middle class,” as Investors Business Daily explained it on April 25.

The foundation for job creation and rising real wages and incomes is capital investment, which finances the opening of new businesses, and the expansion of existing ones. That capital investment increases the productivity of workers, by providing them with more advanced tools and equipment to work with, and increases the demand for workers, bidding up their wages to the level of their increased productivity.

But Obama has been steadily increasing taxes on investment, and waging an economic and rhetorical war on “the rich,” who are precisely the ones who have the most capital to invest. So capital investment has been declining, which means that job creation has been lagging, which means reduced demand for labor, which means declining real wages and incomes.

President Obama said in his second Inaugural, and features at the opening of his 2014 budget proposal, “A growing economy that creates good, middle class jobs -- that must be the North Star that guides our efforts.” Those pretty sounding words are enough to satisfy the Left, and apparently today’s middle class. Because Obama now has a record growing on five years, and his policies are not creating anything like that.

The real incomes of the poor have been declining precipitously too. As IBD added on April 25, “Since Obama took office, the average income of the poorest 20% of households fell nearly 8% to levels last seen in the Reagan era.” The poor can afford losing this income and Obama’s rising gas prices the least. The high cost of gas is keeping the poor stuck in ghettoes unable to move to even look for jobs.

Just the opposite of Reaganomics, under Obamanomics the poverty rate has increased every year. The poverty rate has increased from 12% in 2008 to 16.1% today, higher than when the War on Poverty started in the 1960s. That represents an increase in the poverty rate under President Obama of more than one third! The Census Bureau reports more Americans in poverty today than ever before in the more than 50 years that Census has been tracking poverty.

Now the Pew Research Center reported late last month, based on Census Bureau data, that from 2009 to 2011 under President Obama the net worth of the richest 7% of Americans increased by nearly $700,000 on average, or 28%. But the net worth of everyone else in America declined by 4% on average. Again, the rich getting richer, and the poor getting poorer.

The result under President Obama is a greater concentration of wealth, with the share of wealth held by the top 7% increasing from 56% in 2009 to 63% in 2011.

When Barack Obama was running for President in 2008, he told us his economic policies would “foster economic growth from the bottom up and not just the top down.” He claimed he had “an immediate rescue plan for the middle class.” He promised to replace the “tired, worn-out, trickle down ideologies we’ve been seeing for so many years.”

But he has not delivered on any of those fine sounding words. Instead he has delivered just the opposite, a declining middle class, and soaring poverty. But the Left is happy to settle for just the pretty words.

Photo: UPI

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.