On the other hand

by Brian on April 12, 2004

As many bloggers have noted over the years, one of the weaknesses of modern journalism is that in a political campaign journalists feel compelled to try and present an even-handed picture when evaluating the claims made by the leading candidates, even when one side is exaggerating while the other side is simply making things up. This CNN/Money article is a classic of the genre.

Here’s the lead paragraph.

John Kerry says the nation’s household income situation is miserable. George Bush says it’s improving. Economists say the truth is somewhere in between.

When we get to the actual data, we find the following. Before tax, the median household income fell 3.3 percent in real terms since 2000. That looks pretty miserable to me.

Ah, but there’s a twist. When you add in the tax-cut-and-spent policies of the Bush administration, the after tax fall is only 0.6 percent. Now it’s not clear why this isn’t a miserable situation, just as Kerry said. For one thing, real household income is supposed to rise. Remember, 0% GDP growth over any extended period of time is a disaster by almost any measure, so flatline household income is not, or at least should not, a neutral baseline. Flatline is a disaster, and even by tilting the playing field in their favour, the Bushies don’t rise to that level. Miserable, just as Kerry said.

Tilting the playing field? Well, yes, because there’s another twist. It’s hard to quantify (to say the least) but at some stage there is a cost to ordinary households in the increased deficits. If there wasn’t, we could increase median household income by a few percent by simply doubling the automatic deduction, and there would be no real cost to average citizens. (By the way, my back of envelope calculations suggest doubling the automatic deduction couldn’t have cost much more than the actual Bush cuts, and would have done a lot more good.)

To put this in some perspective, the budget deficit last year was approximately $4000 per household. If you assign that debt to each household, the median income has fallen by something like 10% since Clinton’s time. Now that is obviously unfair because that can’t be exactly how the deficit is made up, but it’s clear that on any reasonable assignment of the costs of deficit financing the overall performance is much worse than the 0.6% fall that CNN/Money is prepared to run with.[1]

In this case there was no need to split the difference between what the two camps were saying. Kerry was simply right. Economic performance under Bush has been miserable.

fn1. To be clear, I don’t oppose deficit financing in the right circumstances, if done correctly. Something like increasing the automatic deduction, or increasing the EITC, or increasing the amount for exemptions, would have been quite appropriate in 2001. I’ve never been a particularly strong deficit hawk. But the actual budgets that were passed, blowing an historically large hole in the deficit while not even increasing median household income over what it was under Clinton were unconscionable.

{ 9 comments }

1

Bob McGrew 04.13.04 at 12:35 am

Isn’t it usual for median household income to fall during a recession? Also, surely, whether they are improving now is different from whether they have improved since before the beginning of the recession.

I’m just not seeing the contradiction between Bush’s and Kerry’s statements.

2

Grammar Nazi 04.13.04 at 12:39 am

“journalists feel compelled to try and present an even-handed picture”

try to present

3

lerxst 04.13.04 at 5:46 am

The decline in median income is not a slam dunk for Kerry … but not because of the reasons cited in the article.

I show a chart on the yearly percent change after-tax median income since 1980 and discuss it here

4

Andrew Boucher 04.13.04 at 6:14 am

I think the good news is that it doesn’t really matter. My guess is that Americans don’t care what either candidate says about how the economy is doing. Instead they just assess their personal situation and those close to them, and judge accordingly. Points probably to Kerry.

5

Thomas 04.13.04 at 6:46 am

Real income isn’t supposed to rise over time. There’s no connection between the expectation that GDP will rise over time–which it would, in the US, simply by increased population producing at the same level as in the initial period–and the expectation that real income will rise over time. Flatline GDP growth in the US over an extended time would be a disaster, because that would mean real living standards must be falling.

The discussion of deficits is much more complicated than the discussion here. Note that the figures presented are for the first two years of the Bush administration (2001 and 2002), and do not include 2003. Note also that the largest decline in household income occured in 2001. Note also that the budget was in surplus in 2001.

6

bryan 04.13.04 at 8:46 am

grammar nazi has been trying for a while to control the grammar, they will presently realize that this is impossible and that the grammar must instead be exterminated.

The truth can still be between miserable and improving if the truth is just ‘really bad’.

7

nick 04.13.04 at 10:43 am

In this case there was no need to split the difference between what the two camps were saying.

As Paul Krugman has often noted, if Bush said ‘The earth is flat’ and the Democrats said ‘The earth is round’, then the US media would write it up as ‘Shape Of Earth: Views Differ’.

8

Matthew 04.13.04 at 11:19 am

Er…to the extent that the defict was funded by domestic purchases of bonds it is an increase in household wealth, not a decrease. Otherwise you’re double counting.

9

Robin Green 04.13.04 at 9:25 pm

I don’t understand your point, Matthew. IANAE (not an economist), so please bear with me. Do you mean that buying bonds would increase a household’s wealth now (if so, how?) or later?

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