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updated 10/13/2006 5:12:47 PM ET 2006-10-13T21:12:47

One way to determine how good the economy has been under George W. Bush is to compare it with the economy during a similar period of time for the two most recent two-term presidents -- Bill Clinton and Ronald Reagan.

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Reagan endured the worst recession since the Great Depression, yet that was balanced with one of the biggest growth spurts of the postwar period. Clinton reigned during the longest economic boom of the 20th century, but its best years came after mid-1998, the equivalent of mid-2006 in this presidency. Unlike Bush, Clinton didn't have a recession, but the slow economic growth during his first two years was similar to the mild recession and early recovery that Bush saw in 2001 and 2002.

Under Reagan, unemployment averaged 8.2 percent from 1981 to mid-1986, compared with 5.7 percent under Clinton in the first five and a half years of his presidency, and 5.3 percent under Bush. Inflation was also much higher for Reagan, and when it is removed from the equation, gross domestic product grew 17.4 percent under Reagan, 20.6 percent under Clinton, and 15.3 percent under Bush. Even with a long and terrible recession in 1981 and 1982, the first five and a half years of Reagan's presidency delivered more growth than Bush's has to date. The comparable period under Clinton generated a third more growth.

Income has also lagged under Bush, and this is crucial because polling experts say that sluggish growth in income is a key cause of an anti-incumbent mood in elections. By delving into income, one can see who the winners and losers have been in the Bush presidency. The details tend to support Bush critics who say that most working people have gotten a smaller piece of the pie. In general under Bush, being a shareholder or a business owner has been better than being a worker. Being a retiree has also been better than being a worker and, surprisingly for a conservative president, being a government worker has been better than being a private-sector employee.

After adjusting for inflation and including the big tax cuts that have essentially kept taxes at their 2000 level, disposable personal income rose 14.1 percent under Bush, 20.4 percent under Clinton, and 22.7 under Reagan. On a per capita basis, the disparity is even greater: Growth has been 8.5 percent under Bush versus 13.2 percent under Clinton and 17 percent under Reagan.

The news on income isn't good for Republicans. Bush's results are worse than those for any other two-term president since World War II except Dwight Eisenhower. Worse than under Richard Nixon, a period that was not a very good time for the economy. During four horrendous years for the economy, income grew faster under Jimmy Carter than it has since 2001. The only recent president who had a worse record on income growth was -- George H.W. Bush.

More interesting, though, is how that growth has been distributed. Corporate profits have doubled under Bush -- they grew 104.4 percent, to be precise -- compared with 57.2 percent during Clinton's first five and a half years (before the really spectacular profits of the late 1990s) and 43.3 percent under Reagan. Some corporate profits are retained and invested, but the bulk are distributed disproportionately to the wealthy through dividends and boosted stock values. More than one-quarter of the increase in GDP under Bush came from corporate profits, compared with 13.7 percent of GDP growth under Clinton, and 7.1 percent under Reagan. Meanwhile, tax revenue from corporate profits is about the same as it was during the Reagan years.

Another way to look at this is to compare corporate profits and pay for private workers -- most of the labor force. While corporate profits were doubling, wages and salaries to workers grew 21.9 percent under Bush. This compares with wage and salary growth of 44.7 percent under Clinton and 42.2 percent under Reagan.

Corporate profits grew by $813 billion under Bush, not much less than the total of all raises earned by private workers ($912 billion). By contrast, workers got a much larger slice of the pie under Reagan and Clinton. Under Clinton, pay raises were about four times as much as profits, while under Reagan, workers got five times as much.

Less For Wages, More For Health Insurance
When confronted with the facts about how little worker pay has increased, Bush officials often note how other compensation, in the form of pension benefits and health insurance, has risen faster than average, and this is true. Employer contributions for pensions and health insurance for workers (this includes public-sector workers, who were excluded from the earlier measure) rose 56.6 percent under Bush, 49 percent under Reagan, and only 14 percent under Clinton. Health care costs rose much more slowly under Clinton. A lot of the increase during Reagan's presidency was caused by inflation, but inflation gets factored out when the increase is computed as a percentage of the total growth in personal income -- pension and health care compensation was 8 percent of added income under Reagan and only 3.3 percent under Clinton, but 16.1 percent under Bush.

Workers could argue that this growth doesn't really count as money in the bank -- almost all of it went for higher health care premiums, at a time when coverage is not improving for many workers and half of all workers aren't covered at all. In addition, as compensation in the form of health insurance from companies has increased, so too has the amount deducted from paychecks for health care.

Assume that every dollar of these contributions was the equivalent of wages, and private-sector workers in the Bush years come out about the same as those under Clinton, but ahead of those under Reagan. Based on their rough share of the labor force, private-sector workers' pay and other compensation was about 54.6 percent of income gained under Bush, 48.4 percent of income growth under Reagan, and 57.3 percent of added income under Clinton. Even with this extra compensation, the ratio of corporate profits to pay remains just as lopsided as outlined earlier. Under George W. Bush, being a shareholder was much better than being a worker.

Speaking of profits, at first blush it appears that another type of business owner hasn't done as well as corporate shareholders in the "Ownership Society" that Bush hopes to create. The profits of noncorporate businesses -- those small- and medium-sized operations that Bush calls the most productive beneficiaries of his tax cuts -- rose 31.5 percent under Bush, compared with 39.3 percent under Clinton and 43.9 percent under Reagan.

Bush justified cutting the top income-tax rate more than other brackets by saying that most successful business owners pay the top rate, and that the tax savings would be used more directly to invest in growth and to create jobs. But although these owners haven't gained as much in profits as that group did under Clinton or Reagan, they did make a stride toward the Ownership Society. Noncorporate business profits accounted for 6.9 percent of income gained under Reagan, 8.9 percent of income gained under Clinton, and 11 percent of added income under Bush. Put another way, noncorporate business profits were 16.4 percent of private wage and salary gains under both Clinton and Reagan, but 26.6 percent of worker pay under Bush. Being an owner has been better than being a worker under Bush -- much better than it was under Clinton or Reagan.

One effect of the rise in corporate profits was a surge in dividend payments, helped along by a tax cut in 2003 that effectively reduced the rate by more than half for most dividends. More than half of all dividend payments go to people earning more than $100,000 a year, the top 9 percent of all families.

There is evidence elsewhere that the tax cuts have unleashed higher dividends for shareholders, but not here. Dividend income rose 66.6 percent under Bush, 81.9 percent under Clinton and 54.8 percent under Reagan. But dividend recipients were a larger component of income growth. Dividends were 11.4 percent of added income under Bush, 8.1 percent under Clinton, and 3.1 percent under Reagan. Score another one for the Ownership Society.

More For Government Workers
It is also interesting to note the relationship of income growth between the private and the public sectors. Bush has sharply reduced tax rates but has done little to curb the overall growth of government. Because government workers are unionized and their pay usually increases with inflation, public-sector workers have done unusually well compared with the private sector. The gain in pay for public-sector workers (who make up about 17 percent of the workforce, a proportion fairly constant over time) was 26.1 percent, compared with 21.9 percent for the private sector. Under Clinton, public-sector workers got 18.6 percent more pay, compared with 44.7 percent more for private workers. (Part of the story here is the big reduction in defense-related government workers after the Cold War ended.) Similarly, under Reagan, public-sector workers gained 41.1 percent more pay, compared with 42.2 percent for private-sector workers. Under Bush, it has been better to be a government worker than a worker in the private sector.

Another way that government has grown under Bush is in the payout of benefits for Social Security and other entitlements. Most of the reasons here have to do with the aging of the population, but, like Reagan, Bush is a conservative who has done little to curb entitlements (in fact, he created a new one, for prescription drugs). Government payments for social benefits have grown 40.7 percent under Bush, compared with 24.9 percent under Clinton and 43.8 percent under Reagan. The share of all income that came from Social Security and other entitlements grew to 20.3 percent under Bush, compared with 9.7 percent under Clinton. It was 10.7 percent under Reagan. (Such payments loom large in bad economic times, when applications for welfare and unemployment benefits surge.)

These numbers hint at the way that entitlements will come to dominate government, and will threaten to dominate the economy itself. Beyond this, despite Bush's claim to have unleashed the productive power of the private sector, a higher share of income growth came from government (through public-sector workers' salaries and payouts from social programs) under him than under Clinton or Reagan.

The winners under Bush have been corporate owners, and, to a lesser extent, noncorporate business owners, who are getting a larger piece of the pie than those groups did under Reagan or Clinton. The losers have been private-sector workers, even with their more expensive health care insurance, who have seen their income stagnate and their share of the pie dwindle since the Clinton years. Part of the story is the slow growth in jobs -- 4 million since 2001, compared with Reagan's 9 million and Clinton's 16 million. For the first time in 25 years, government workers got a bigger slice than private-sector workers. Senior citizens and others getting income from the government also got a larger slice, the beginning of a historic shift that, left unattended, will eventually mean very little pie for anyone else.

Copyright 2012 by National Journal Group Inc.

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