Thursday, November 16, 2006

Tales of Two Quarter Centuries

Several economist-bloggers have taken note of Senator-elect James Webb's temper tantrum in yesterday's Wall Street Journal:

America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes.

But, as the graph at the top makes clear, in the last quarter century (1982-2006, inclusive) there were only two (and short and mild) recessions. Compare that to the previous 25 years (1956-1981) with its six recessions.

We seem to have a clear picture of which period 'working people' are better off. Does Webb really think that allowing high income earners to pay at lower tax rates (on more reported income) is too high a price for the comparative economic bliss of the last twenty five years?

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