In his videotaped weekly address released by the White House Saturday, President Barack Obama made a demonstrably false statement about what has happened to the incomes of middle-class Americans over the past three decades.
Anyone capable of doing a Google search can see for themselves how the president lied.
On Tuesday, Oct. 25, the Congressional Budget Office released a report entitled, “Trends in the Distribution of Household Income Between 1979 and 2007.”
The very first sentence of this report revealed a fact that may run counter the impression Americans get from the establishment media about what happened to the average American’s income in the approximately three decades that preceded the year that Obama was elected president.
It said that after deducting federal taxes, accounting for government transfer payments (redistributions of wealth) and adjusting for inflation, the income of the average American household had grown significantly in the 28 years from 1979 to 2007.
“From 1979 to 2007,” the report said, “average household income, measured after government transfers and federal taxes, grew by 65 percent.”
Now, someone given to a class-war interpretation of American society might suspect that this number showing that the inflation-adjusted, after-tax income of the average household increased by 65 percent from 1979 to 2007 must cloak a darker reality: i.e. that middle-class Americans in fact saw their after-tax, inflation-adjusted incomes go down, while the wealthiest Americans saw their’s massively increase, thus yielding a higher overall average even as the average middle-class income declined.
But that was not the case, according to CBO.
It is true that the inflation-adjusted, after-tax household income of the wealthiest Americans did massively increase between 1979 and 2007. In fact, said CBO, for the wealthiest 1 percent of households it went up a remarkable 275 percent.
“For the wealthiest 1 percent with the highest income,” the report said, “average real after-tax household income grew by 275 percent between 1979 and 2007.”
But this incredible growth in the income of the wealthiest Americans did not cloak a decline in the real after-tax income of middle-class households—far from it.
“For the 60 percent of the population in the middle of the income scale (21st through 80th percentiles),” said CBO, “the growth in average real after-tax household income was just under 40 percent.”
That means that a family that would have been earning the equivalent of about $50,000 per year in constant dollars in 1997 would be making the equivalent of $70,000 in 2007.
Those who have not made it into the top 1 percent, but who have made it to the upper middle class, also did extraordinarily well in the period from 1979 to 2007, according to the CBO report. “For others in the 20 percent of the population with the highest income (those in the 81st through 99th percentiles), average real after-tax income grew by 65 percent over that period,” said CBO.
Surely, then, if the top 1 percent, and top 20 percent, and the middle 60 percent all saw their real after-tax household incomes rise in the years from 1997 to 2007, then the income of the poor must have declined? Right?
Not so, said the CBO report.
"For the 20 percent with the lowest income,” said CBO, “average real after-tax household income was about 18 percent higher in 2007 than it had been in 1997.”
But this is not what Obama said in his weekly address on Saturday.
“This week, a new economic report confirmed what most Americans already believe to be true: over the past three decades, the middle class has lost ground while the wealthiest few have become even wealthier,” said Obama.
This is false. As noted, according to the CBO report released Tuesday, both the middle class and the wealthiest Americans became wealthier in the roughly three decades from 1979 to 2007, with both groups seeing their inflation-adjusted after-tax income go up.
“In fact,” said Obama, “the average income for the top one percent of Americans has risen almost seven times faster than the income of the average middle class family.”
This is true, but it contradicts Obama’s first sentence and appears to prove that—even though he does not cite it by name—that Obama was using the CBO report as his source. The report said the average, inflation-adjusted after-tax income of the top 1 percent of households went up 275 percent, or about 6.9 times as much as the 40 percent increase in the average, inflation-adjusted after-tax income of the middle 60 percent of households.
“And this has happened during a period where the cost of everything from health care to college has skyrocketed,” Obama said.
This is misleading. The increases in income that the CBO documented among the wealthiest, the middle class and the poorest American households were in inflation-adjusted dollars—meaning that each type of household saw its income rise over and above the level of inflation between 1979 and 2007.
Leaving aside Obama’s false claim that the “middle class has lost ground while the wealthiest few have become even wealthier,” the president’s evident dismay that Americans did not see their income change at a uniform rate across all income levels raises a compelling question: Would he feel better about America if inflation-adjusted after-tax income at all levels had risen at a uniform 18 percent—the level of increase the poorest 20 percent of households saw between 1979 and 2007? Would he feel better had income at all levels risen by only 10 percent? What if income at all levels had remained static with a 0-percent average, after-tax, inflation-adjusted rate of growth in the years from 1979 to 2007?
What if they had all declined by a uniform 10 percent?
Would that have better fulfilled President Obama’s vision for an America where no one’s income grows faster than anyone else’s?