The Clinton Economic Record and Rising Tides

[Dardedar]

The Clinton Economic Record and Rising Tides



This is a chart, culled from Census Bureau data, showing the performance of real (inflation-adjusted) household income for various income classes during the last several presidencies. As you'll see, I've lumped together consecutive administrations when the same party remains in power. Also, the data omits transition years -- for example, 2001 is a transition year between Clinton and Bush, and it's not clear who to credit/blame for the economy's performance in that year, so I'm skipping it.

There's a lot to look at in this little chart. Under Nixon/Ford, the very wealthiest did reasonably well, but oddly enough, so did the very poorest (this may have been LBJ's Great Society programs belatedly kicking in rather than anything Nixon/Ford did). But the middle class was left out of the mix, their incomes barely growing over eight years.

In Jimmy Carter's one term in office, the economy wasn't performing terribly well for most anyone, but the poor bore the brunt of the problems. The principal problem during Carter's tenure was inflation; there is some evidence that higher inflation rates tend to hit the poor disproportionately, although this is debated.

Then we get to Reagan/Bush. And we see a large accumulation of wealth up the economic ladder. When Ronald Reagan took office in 1981, the ratio between income at the 90th percentile and income at the 10th percentile was 9.2; when he left office eight years later, it was 10.2.

Under Clinton, by contrast, the economy was a rising tide that lifted all boats. The poor, finally, did quite well for themselves, their incomes appreciating at about 2.5 percent annually, but the rich did just about as well -- in fact, the rich did better under Clinton than they had under Reagan and Bush. The rich/poor gap, if measured as a ratio, did not increase appreciably under Clinton. The 10th percentile saw their incomes increase by about 17 percent during his tenure, and so did the 90th percentile.

Finally, we get to #36, George W. Bush. Bush is getting a bit of a break here, in fact, because the Census Bureau does not yet have data online for 2008; the numbers will be even worse once it does. Nobody did especially well under Bush, but it was the poorest quartile or so who actually saw their incomes decrease.

FiveThirtyEight

[L.Wood]

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The principal problem during Carter's tenure was inflation; there is some evidence that higher inflation rates tend to hit the poor disproportionately, although this is debated.
FiveThirtyEight

Of course it hits the poor disproportionately just as sales taxes hits them disproportionately. Lower income people spend most or all of their income on basics- food, transportation, energy, shelter- etc.
Inflation doesn't just happen on Rolex watches, BMWs and nice yachts. It's across the board and as we saw recently as soon as oil-energy prices move upward food prices are not far behind.

Let's not be too quick to blame Carter for the inflation. Nixon fought a war on credit and reduced tax revenues via cuts. Then along came the Mideast crisis with Iran which pushed oil prices upward. Next
to reign in Nixon's huge deficits and rising prices Fed Reserve Board Chairman Paul Volcker raised interest rates to new levels. This really fueled the flames of inflation. Many consumer loans in the late 70s and early 1980s were going for 22%. Finding a mortgage for under 9-11% was great. I recall amortizing the interest on some long-term bonds which carried a rate of 15%.