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Jewish World Review Oct. 14, 1999 /5 Mar-Cheshvan, 5760

Mort Zuckerman

Mort Zuckerman
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A nation divided -- WE ARE BECOMING two nations. The prosperous are rapidly getting more prosperous and the poor are slowly getting poorer. George W. Bush did well to rebuke his party when House Republicans maneuvered to balance the budget by proposing to delay the earned income tax credit for the working poor–paying it in monthly installments rather than an annual lump sum. "I don't think they ought to balance the budget on the backs of the poor," Bush said. Instead, it is time for aspiring leaders to ponder how the two nations might more closely become one.

The American economy is growing dramatically. But this prosperity is being distributed very unevenly. The America that is doing well is doing very well indeed. But most benefits have gone to those who work in industries where the main product is information. The losers have been the producers of tangible goods and personal services–even teachers and health care providers. The high-tech information economy has been growing at approximately 10 times the rate of the older industrial economy. It has enjoyed substantial job growth, the highest productivity gains (about 30 percent a year), and bigger profits. It can therefore afford bigger wage gains (about four times that of the older economy). And this wage gap is likely to widen for years to come.

The rich get richer. The concentration of wealth is even more dramatic. New York University economist Edward Wolff points out that the top 20 percent of Americans account for more than 100 percent of the total growth in wealth from 1983 to 1997 while the bottom 80 percent lost 7 percent. Another study found that the top 1 percent saw their after-tax income jump 115 percent in the past 22 years. The top fifth have seen an after-tax increase of 43 percent during the same period while the bottom fifth of all Americans–including many working mothers–have seen their after-tax incomes fall 9 percent. The result is that 4 out of 5 households–some 217 million people–will take home a thinner slice of the economic pie than they did 22 years ago.

There are those who point out that these income figures do not fully reflect the improvement in the standard of living and say that attention should be paid to what Americans own, what they buy, and how they live. A fair point. Two economists, W. Michael Cox and Richard Alm, have revealed that each person in the average household today has 814 square feet of living space compared with 478 square feet in 1970; that 62 percent of all households own two or more vehicles compared with 29 percent back then; that the number of gas ranges has increased sixfold, air travel four times, and the median household wealth–i.e., the family right in the middle–has jumped dramatically. Even given such improvements in life quality, our public policy must not exacerbate the disproportionate concentrations of wealth.

Fortunately, Americans are pragmatists. They know that what you earn depends on what you learn, especially in a digital economy; so 83 percent of our children now complete four years of high school, compared with 55 percent in 1970. This is good news. But vast numbers of people feel marginalized in an information-based economy. For too many, work no longer provides the kinds of wages and promotions that allow them to achieve economic success or security. Wage increases do not substantially increase their real income, so they have to work longer hours, get a higher-paying shift, or find another job. These are the people who are particularly concerned about the benefits they stand to gain from Medicare and Social Security. If they do manage to put together a successful strategy to survive, they should not be hit with sudden shocks–like the denial of the lump-sum tax credit.

Bush may have discomfited his Republican colleagues, but his words served to remind that they are out of touch with the realities of life for so many Americans. He later softened his criticism, but it is time, nevertheless, for a more generous leadership from the House Republicans. They should not berate Bush. Indeed, they may well find themselves in his debt should his appeal to the center of American politics provide them the coattails they will need when voters head to the polls in just over a year.

JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.


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©1999, Mortimer Zuckerman