Why Oh Why Are We Ruled by These Liars
Greg Ip is annoyed by John Snow--who isn't a real Treasury Secretary, but occasionally plays one in high school gyms around the country:
WSJ.com - Snow Defends President's Handling of Economy: Treasury Chief Says Many Benefit From Expansion; Some Data Show Otherwise By GREG IP March 20, 2006; Page A3
WASHINGTON -- Confronting criticism of the Bush administration's economic record, Treasury Secretary John Snow said the widening gap between high-paid and low-paid Americans reflects a labor market efficiently rewarding more-productive people. But "What's been happening in the United States for about 20 years is [a] long-term trend to differentiate compensation," Mr. Snow said in an interview with The Wall Street Journal last week. "Look at the Harvard economics faculty, look at doctors over here at George Washington University...look at baseball players, look at football players. We've moved into a star system for some reason which is not fully understood. Across virtually all professions, there have been growing gaps."
Mr. Snow said the same phenomenon explains why compensation for corporate chief executive officers has climbed so sharply. "In an aggregate sense, it reflects the marginal productivity of CEOs. Do I trust the market for CEOs to work efficiently? Yes. Until we can find a better way to compensate CEOs, I'm going to trust the marketplace." Since the 1970s, CEO compensation has gone from 40 times to more than 300 times the average worker's salary, according to a study by Carola Frydman of Harvard University and Raven Saks of the Federal Reserve.
Mr. Snow, a former CEO of CSX Corp. who holds a doctorate in economics, said the administration intends to publicly challenge perceptions that typical workers and families haven't benefited much from the economic expansion.... Mr. Snow distributed a fact sheet that showed after-tax income per person, adjusted for inflation, rose 8.2% from January 2001, when George W. Bush took office as president, through January 2006. The sheet also showed that per-person net worth -- total assets minus debt -- rose 24%, unadjusted for inflation, from early 2001 to the end of 2005. "People have more money in their pocket" and in their bank accounts, he said.
Mr. Snow's case relies on averages, which can be skewed by big gains among the wealthiest.... Census Bureau data show median family income -- half of families have income greater than the median, half have less -- fell 3.6% from 2000 through 2004. Incomes for the poorest families fell even further. The only group to gain was the family at the 95th percentile -- that is, richer than 95% of all families.... Alan Krueger... [said] the real median wage rose 3% from 2000 to 2005. Gains were smallest for the lowest-paid workers and largest for the best-paid. "From the standpoint of the work force, it's been a very weak recovery," he said. Wage data don't incorporate the effects of taxes, investment income or government payments.
As for net worth, a triennial Federal Reserve survey found that the net worth of the median family rose 1.5%, after inflation, from 2001 through 2004. That is far less than the 17% increase from 1995 to 1998 and the 10% increase from 1998 to 2001.... Robert Gordon... says the past few years represent the continuation of a 35-year trend in which a growing share of all labor income goes to a small group of "superstars."... On top of this trend, income on capital -- such as interest, dividends, rent and capital gains -- has taken a growing share of national income from labor, and it "goes mainly to a small slice of the population at the very top."...
Mr. Snow argued the administration's tax cuts have made the tax code more progressive, because the rich now pay a larger share of total individual taxes.... The Tax Policy Center, a joint venture of the Brookings Institution and Urban Institute think tanks, estimates that after-tax incomes of the richest 1% of taxpayers were 4.6% higher in 2005 than they would have been without the tax cuts. Incomes of the middle 20% were 2.6% higher, and incomes of the bottom 20% were 0.3% higher.
Still, Greg Ip didn't react *nearly* as strongly when handfed b.s. by John Snow with a spoon as David Wessel had reacted when Paul O'Neill did the same thing.