Time for yet another reminder of why you can never, ever trust the Wall Street Journal editorial page. This is a basic rule for life -- the intellectual equivalent of telling children not to talk to strangers.
It's been a rough week for John Edwards, and now comes more bad news for his "two Americas" campaign theme. A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991.
The CBO results don't fit the prevailing media stereotype of the U.S. economy as a richer take all affair -- which may explain why you haven't read about them. Among all families with children, the poorest fifth had the fastest overall earnings growth over the 15 years measured. (See the nearby chart.) The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s.
The Journal then writes euphemistically that "Earnings growth tapered off as the economy slowed in the early part of this decade, but earnings for low-income families have still nearly doubled in the years since welfare reform became law."
However, as TNR's Jon Chait points out, the Journal fails to explain that earnings for the poor have actually declined under President Bush, nor does it recognize that comparisons between recession years and expansion years are essentially uninformative:
But wait. Why fifteen years? Well, it is a nice, round number. But fifteen years (from the last year where data) is available is 1991. That was a recession year, when incomes for this group collapsed. So the CBO study that Gregg demanded measures the change from a recession year to a boom year. Incomes for the poor -- or anybody -- always rise over the course of a business cycle. The measurement Gregg demanded is simply useless.
If you look closely at the study, you find that all the low-income growth occurred in the 1990s -- more than all, in fact. It peaked in 2000, and has fallen since. One table in the study shows that low-income households with children had their income drop more than 10% from 2000 to 2005. You could take that point and argue that the Bush administration has made the poor poorer. That wouldn't be a fair argument-- Bush didn't cause the 2001 recession -- but it would be much fairer than the point Gregg and the Journal are making.
The interesting question is whether, by the time the current business cycle hits its peak, incomes for people at the bottom will recover to where they were at the peak of the last business cycle. As of 2005 they still haven't caught up.
Figure 2 from the study (PDF) makes the point especially clearly: