Tool Chest Builder: Inequality in the Clinton Years

In an earlier post, I made the point that while inequality of income has grown dramatically during the Reagan, GH Bush and GW Bush administrations, there was a respite – actually a small rollback – during the Clinton years. Right-wingers, Clinton-haters and mere Republican apologists love to minimize the importance of that fact, however, by pointing out that the wealth gap grew bigger even while Clinton was in office.

The message, in other words: that inequality is a force of nature, the invisible hand, so it’s not George’s fault or the fault of Republican policies. On its face, the observation is true, but consider why. The wealth gap grew mainly because the stock market grew rapidly – and then spectacularly in the dot.com bubble -- from growing confidence in the economy. A big part of that confidence came from Clinton apparently untying the Gordian Knots that conservative economists had drawn in recent decades: that we could not have low unemployment and low inflation at the same time;, that we could not eliminate huge endemic budget deficits or raise tax revenues without stalling the economy; that we could not raise the minimum wage without losing jobs. But I think it would be a mistake not to give significant credit to successful efforts to stimulate income growth at the lowest levels and reduce poverty. In effect, reducing inequality of income – for the brief time Democrats had – increased inequality of wealth as an artifact of the resulting exuberance, most of it rational. Over more time, had GWW not thrown everything in reverse, the curves would have smoothed out and started moving in the same direction at more or less the same rates.

The simple message: Yes, while Clinton was in office, wealth inequality grew -- because income inequality was reduced for the first time in two decades!