Gerard Jackson
BrookesNews.Com
Monday 15 March 2004

Marian Wilkinson, Washing Correspondent for The Sydney Morning Herald, aka The Saddam Times, gave us another example of media Bush-bashing in Shaping up for battle, 6 March. This Australian cheerleader for Kerry told us that under President Bush there hadn't been such income inequality since the 1920s.

Wilkinson was obviously trying to impress people with the idea that that rich were getting richer under Bush at the expense of wage earners. Well, it just ain't true. This is what Dr. Daniel H. Weinberg had to say on the subject in a U.S. Census Bureau press release, 26 September 2003:

"Several measures of household money income inequality indicate that inequality did not change from 2001 to 2002. However, the alternative measures of income all show a decline in income inequality between 2001 and 2002".

If there had been a significant change I don't doubt that Dr Weinberg would have mentioned it in his press release. Anyone acquainted with the history of boom-bust cycles knows damn well that they tend to skew incomes by inflating some at the expense of others.

On closer examination we find that these heavily inflated incomes are usually the result of rapid and unsustainable increases in asset prices. By the latter half of the 1920s 5 per cent of the population was receiving 30 per cent of all personal income. (Incidentally, this imbalance gave rise to the myth that the Great Depression was caused by underconsumption).

Critics overlook the fact that a good deal of this income came from inflated dividends and rents, which by 1928 were about twice as high as their post-WW II levels. (This figure should give one a good idea of the magnitude of the '20s boom). In the final stage of the boom more than 920,000,000 million shares exchanged hands compared with about 568,000,000 in 1927.

This leads us to deduce that Clinton’s boom should have had a similar though less dramatic result. This is exactly what a Business Week report found:

"The income gap between rich and poor increased across the country even as the nation's economy blasted upward on the strength of technology and worker productivity, The Massachusetts Institute for a New Commonwealth reported" (30 August 2001).

This was based on a study by Andrew Sum of Northeastern University's Center for Labor Market Studies. He state that his findings mean that "the income gap has grown since 1979 when the wealthiest earned about nine times as much as the poorest". And that was just for Massachusetts.

But Marian Wilkinson would have us believe that the widening of the income gap was caused by President Bush. It's a pity that she didn't bother to look up the late Rudi Dornbusch, Ford Professor of Economics and International Management at MIT, who said that the "1960 and 1980 income distribution was much the same…" However, he did state that "compared to 1980, today there is a major shift. The top 5 percent of the households are receiving an extra 6 percent of total income raising their share of the pot to 20 percent" (US Inequality & Prosperity, May 8-9, 2000).

If reporters are going to look at incomes, why stop at the US border? For example, in 1998 a Canadian Industry Department study found that Canadian incomes had fallen significantly below American incomes which were 25 per cent larger. The study found that American wage rates and salaries were higher than in Canada and that the income gap was widening.

Then there is Sweden, the country that progressive reporters once urged the rest of us to emulate. A study by the Swedish Institute of Trade found Swedish family incomes have fallen way below American family income levels. As for the masses of poverty stricken black Americans, their average income now greatly exceeds the average Swedish income.

As is invariably the case with lefty reporters, there is just no genuine economic or historical perspective.

Now implicit in Wilkinson's phony accusation of a widening income gap is the belief that income disparities are immoral. But in a free market most incomes are earned, not distributed. (I'm prepared to concede that Wilkinson is probably one of those exceptions to the earnings rule).

Any meaningful discussion about income disparities between households (I presume she meant household incomes) has to take into account differences, for example, in household size and working hours. As Professor Thomas Sowell pointed out:

"It is equally misleading to compare high-income families or households with low income families and households . . . . It is not uncommon for families in the top 20 per cent of income earners to supply several times as many man-hours of word per year as families in the bottom 20 per cent". (Basic Economics: A Citizen's Guide to the Economy).

But the ideological likes of Wilkinson are about trying to skewer conservatives like President Bush and the facts be damned. That's probably why she claimed in her article that "John Kerry knows that it's still the economy, stupid".

A couple of days later a gallop survey found that 82 per cent of Americans thought that international terrorism is a "critical threat" to the US, while 75 per cent the spread of WMDs is also a critical threat. I suspect that the recent bombings in Madrid will strengthen this mood.

So how does a US-based Australian reporter fail to read the mood of the American electorate? Perhaps Wilkinson will oblige us with an explanation, one that is not meant to promote flip-flop Kerry and his dangerous delusion that the war on terrorism has been deliberately exaggerated by President Bush.

Gerard Jackson is Brookes' economics editor