Family Income Down, Poverty Up

That's what the Census says. So where's this "corner" the economy's supposed to have turned?

| Fri Aug. 27, 2004 3:00 AM EDT

Anyone paying close attention to White House spin over the past three years would have pegged 2003 as a banner year for the American economy. After all, weren't we in the second year of an expansion, with the economy growing at a brisk 3 percent clip? And hadn't President Bush told us that his tax cuts were working their supply-side magic and helping the country "turn the corner"? Too bad the American people never got the message. According to a new data from the U.S. Census Bureau, during 2003 poverty rose, income levels stagnated, and an increasingly large number of workers scraped by without health insurance. Perhaps things aren't quite so rosy as we've been led to believe.

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The big news was that real median household income actually fell 0.1 percent—from $43,381 to $43,318—during the fairly robust recovery in 2003. And ever since the beginning of George W. Bush's presidency in 2000, median household income has dropped a whopping 3.5 percent.

Meanwhile, the poor get poorer and the rich get richer. The poorest 20 percent of U.S. households saw their average income decline 1.9 percent between 2002 and 2003. The wealthiest 20 percent, for their part, enjoyed a 1.1 percent increase in average income over the same time.

The country made no progress whatsoever in closing up existing race and gender income inequalities. Hispanics actually saw their incomes decline considerably, by 2.6 percent, in 2003. As for other minority groups, black households still make about 62 percent of what white households make, and Hispanic households now make about 69 percent. At the same time, there was a real decline of 0.6 percent in wages of women who worked full time—the first such drop since 1995. And, according to the Census, women earn about 76 percent of what men earn. (A study published earlier this year by two economists took issue with the Census' methods and suggested that the gender wage gap could be as high as 38 percent.)

The most eye-catching statistic is that poverty rose dramatically in the United States—an additional 1.3 million people ducked under the poverty line, raising the percentage from 12.1 percent to 12.5 percent. (Keep in mind, too, that some experts believe the Census Bureau sets the poverty line too low.) And the poverty rate for children rose from 16.7 percent to a shameful 17.6 percent—that's 12.9 million children in poverty. Looking at long-term trends, poverty has risen for three consecutive years, since the beginning of the Bush administration.

Many of these statistics can be traced to the jobless nature of the recovery. Pundits can banter all day about household surveys versus payroll surveys and how many jobs we've "actually" lost, but at the end of the day, the employment-to-population ratio has definitely plummeted under Bush's tenure—from 64.4 in 2000 to 62.3 in 2003. And as Jared Bernstein has noted in the American Prospect, full employment is necessary before economic gains can be shared by all Americans.

Economists have proffered an endless supply of reasons for the piddling job growth—from large productivity gains (firms are getting more output per worker, obviating the need for further hiring) to structural shifts in the economy (when certain job sectors shrink, it takes time for those workers to retrain and enter new sectors). But recent analyses have also shown that Bush's tax cuts were partially to blame: they contributed very little to the recovery, and a smarter set of policies (tax cuts aimed at low- and moderate-income families) would have probably spurred greater growth and greater job gains. The notion that the president couldn't have done anything about poverty and income levels just won't fly.

It's worth noting, too, that the president has done little to ease the painful transitions workers face when they lose their jobs. At the end of 2003, the Republican-held Congress let the Temporary Extended Unemployment Compensation program expire. As a result, during the first half of 2004, over 2.2 million workers exhausted their unemployment benefits and were unable to receive further aid—a statistic suggesting that the income and poverty data for 2004 will be just as bleak. Meanwhile, Bush has announced plans to gut the welfare safety net, even though evidence shows that the current welfare program is abandoning families before they can find a steady source of income. Even if Bush didn't cause American poverty, he has certainly done nothing to alleviate it.

There's also a good deal of evidence that the rising cost of health care is crowding out wages and eating into family income. Indeed, with businesses complaining about skyrocketing health costs, any conversation about wages and income will have to grapple with questions about health care. The Census data says that the percentage of the U.S. population without health insurance rose from 15.2 percent to 15.6 percent in 2003. For the record, there are now 45 million people without any sort of health coverage. Part of the problem is that businesses are dropping workers from their insurance rolls—the percentage of people who receive health insurance from their job dropped from 61.3 percent to 60.4 percent. Considering that President Bush is crafting a health care agenda designed to dismantle employer-based health coverage, this could be a number to watch.

One of the most striking aspects of the Census report was that the percentage of uninsured Americans rose even though government programs like Medicaid continued to expand. This is noteworthy because, as the Center for Budget and Policy Priorities notes, more than $1 billion in federal funds for the State Children's Health Insurance Program (SCHIP) are soon set to expire. Meanwhile, states such as Texas, Florida, and Utah are cutting back on their SCHIP programs, a trend that could soon lead to a massive increase in the numbers of uninsured children. Without an expansion of government health programs for the poor—as John Kerry has proposed—the situation will only deteriorate further over time.

The numbers, then, are very bad, and none of this should come as good news to President Bush's reelection campaign. The states experiencing drops in household income over the last two years include crucial swing states like Arizona, North Carolina, Illinois, and Pennsylvania. (On the other hand, West Virginia and Washington, two other swing states, have made steady gains during that time.) And voters in suffering states have shown themselves more than willing to punish the president. Already, Kerry has made inroads in solid Republican states like Kentucky, Arkansas, and Texas—all states suffering income losses, according to the Census data. And Kerry has garnered strong support from Hispanic voters—many of whom are no doubt irked over their 2.6 percent income drop. If these trends continue, and families continue to struggle, Bush could find himself the victim of a vast disconnect—between his sunny speeches and the actual, disgruntled state of working America.