The great income divide

CLEARLY, there are major differences between the economic policies of Senators Barack Obama and John McCain. Mr McCain wants more tax cuts for the rich; Mr Obama wants tax cuts for the poor and middle class. They also disagree on health care, energy and many other topics.

Such differences are hardly surprising. Many Americans know that there are characteristic policy differences between the two parties. But few are aware of two important facts about the post-World War II era, both of which are brilliantly delineated in a new book, Unequal Democracy, by Larry M Bartels, a professor of political science at Princeton. Understanding them might help voters see what could be at stake, economically speaking, in November.

I call the first fact the Great Partisan Growth Divide. Simply put, the US economy has grown faster, on average, under Democratic presidents than under Republicans.

The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 per cent per capita under Republican presidents versus 2.78 per cent under Democrats.

That 1.14-point difference, if maintained for eight years, would yield 9.33 per cent more income per person, which is a lot more than almost anyone can expect from a tax cut.

Such a large historical gap in economic performance between the two parties is rather surprising, because presidents have limited leverage over the nation's economy. But statistical regularities, like facts, are stubborn things. You bet against them at your peril.

The second big historical fact, which might be called the Great Partisan Inequality Divide, is the focus of Professor Bartels's work.

It is well known that income inequality in the US has been on the rise for about 30 years now - and has finally touched the public consciousness. But Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps overall. And the bad news for America's poor is that Republicans have won five of the seven elections since 1980.

The Great Partisan Inequality Divide is not limited to the poor. To get a more granular look, Professor Bartels studied the post-war history of income gains at five different places in the income distribution.

The 20th percentile is the income level at which 20 per cent of all families have less income and 80 per cent have more. It is thus a plausible dividing line between the poor and the non-poor. Similarly, the 40th percentile is the income level at which 40 per cent of the families are poorer and 60 per cent are richer. The 95th percentile is the best dividing line between the rich and the non-rich that the data permitted Professor Bartels to study.