Alan Reynolds

It suddenly became clear that Hillary Clinton and her advisors intend to run a negative presidential campaign -- not negative about other candidates, but about the U.S. economy.

On May 29, Sen. Clinton launched her "Modern Progressive Vision: Shared Prosperity," which strains to justify "returning high-income tax rates to the 1990s levels." It was full of gloomy rhetoric blaming "globalization" (bargains at Wal-Mart?) for some bizarre allegations about falling U.S. living standards for all but a lucky few.

Clinton said, "Last year, the share of America's national income ... going to the salaries of American workers was the lowest (since 1929)." Huh? The labor share was just 64 percent in 2006, but it was 63.9 percent in 1997. Employee compensation averaged 64.9 percent of national income from 1960 to 2005, 65 percent from 1993 to 2000 and 65.3 percent from 2001 to 2006.

Clinton even claimed 59 percent of "net corporate revenues" went to profits over the past five years -- a number so patently ridiculous that it only served to demonstrate that she is easily confused about numbers.

Three days earlier (coincidentally), the Pew Charitable Trusts released the first of many reports on economic mobility timed (coincidentally) to hit the press between now and the election. The slickly dismal pamphlet -- subtitled, "Is the American Dream Alive and Well?" -- was written by John Morton of Pew Charitable Trusts and "a team of Brookings Institution scholars," led by Isabel Sawhill. Two conservative think tanks were ostensibly involved, but must have been out to lunch.

The Pew-Brookings report was full of alarming rhetoric, similar to Clinton's, about "the rough edges of capitalism." Some data were the same. Clinton said, "CEOs have seen their pay go from 24 times the typical worker's in 1965 to 262 times the typical worker's in 2005." The Pew-Brookings pamphlet found "figures that are perhaps even more striking. Between 1978 and 2005, CEO pay increased from 35 times to nearly 262 times the average worker's pay."

Those figures from the Economic Policy Institute bear little relationship to typical pay of CEOs or their corporate employees. They instead compare onetime windfalls of just 350 CEOs (exercised stock options) with a narrow measure of production worker wages, which includes part-timers' low wages multiplied by 2,080 hours.

The Pew-Brookings paper claims we currently face "rapidly growing income inequality" because "the Congressional Budget Office (CBO) finds that between 1979 and 2004, the real after-tax income of the poorest one-fifth of Americans rose by 9 percent, that of the richest one-fifth by 69 percent, and that of the top 1 percent by 176 percent."

Alan Reynolds

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