Politics & Policy

Squeezed Out

Kerry is lying about the economy -- and the New York Times proves it.

A signature campaign issue for John Kerry is the idea that the middle class is being “squeezed.” A couple months ago he concocted a “Middle-Class Misery Index” designed to show how bad things are today (and how great they were under the presidency of Democrat Jimmy Carter). In his acceptance speech at the Democratic National Convention, he went so far as to melodramatically warn that George Bush is squeezing so hard that “our great middle class is shrinking.”

That’s a lie. To prove this, I’ll go to the least likely source you can imagine — the pages of that crusading liberal newspaper, the New York Times.

David Cay Johnston — whose liberal credentials include a ringing endorsement from Paul Krugman for his best-selling book on how conservative “ideologues have made America safe for wealthy people who don’t feel like paying taxes” — wrote a story for the Times that was published on the very same day that Kerry made his claim about the shrinking middle class. Johnston’s story is typical Johnston and typical Times. It is designed to trash-talk the Bush economy. The headline blares, “I.R.S. Says Americans’ Income Shrank for 2 Consecutive Years.” The story reports a drop in average income of 5.7 percent in 2001 and 2002, compared to 2000 — that zenith of the much-nostalgized “Clinton prosperity.”

Johnston claims that that’s a new record — that there has never been another two-year period of back-to-back income declines.

But there’s something remarkable revealed in one of the tables that accompany Johnston’s story — which he cleverly avoids in the text. As Jim Glass, a perspicacious reader of my blog, pointed out to me, the table shows that the entire income-decline in 2001 and 2002 is due exclusively to losses by taxpayers making over $100,000 a year, with the vast majority of the decline coming from taxpayers making over $1 million. Taxpayers earning less than $100,000 — the overwhelming majority of American households — actually saw their incomes rise during the two-year period.

It’s plain as day: The richer you were, the worse you got hit. So why wasn’t the headline “The Rich Get Poorer, and The Poor Get Richer”? Because the Times and the rest of the liberal establishment will never admit that such a thing occurred during George W. Bush’s presidency.

Another table accompanying the story shows that the middle class is not only doing fine, but expanding — in direct contradiction to Kerry’s convention claim that it’s shrinking. This second table (pictured below) shows the change in the number of tax returns filed in each income category. Note that the lowest-income category shrank as people on the bottom rung of the economic ladder advanced. All of the highest-income categories shrank, too, as “the rich” fell down a rung or two (from the artificial heights of the Clinton bubble, back when liberals weren’t so concerned with income inequality because their team was in the White House).

Which categories grew? Those within the middle class, of course.

As they say on TV, “the truth is out there.” It can even be found on the pages of the New York Times — if you know what to look for and what to ignore.

But you’ll have to ignore a lot of what’s written these days. Get a load of the very first sentence of an article in the current issue of the leading liberal magazine, The American Prospect:

For most Americans, the last four years have represented a low point in our economic history.

Never mind that Great Depression thing you learned about from your grandparents. That was hyped intelligence. But as for what Kerry and his surrogates are saying about the economy, that’s hyped stupidity.

– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your comments at don@trendmacro.com.

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