Critics Say GOP Tilts Toward Rich
WASHINGTON — AS lawmakers put the finishing touches on the new federal budget, some Democrats charge that the planned tax changes and spending cuts will exacerbate a growing gap between America's rich and poor.
Citing new studies - including United States Census Bureau data indicating that income inequality has reached record-breaking levels - critics say the 20-year drop in workers' real wages will steepen.
Congressional moves to balance the budget ''couldn't come at a worse time,'' contends Isaac Shapiro, associate director of the left-leaning Center on Budget and Policy Priorities in Washington. Republican measures are ''much more tilted in favor of wealthy households than those earning $30,000 and under,'' Mr. Shapiro says.
Republican plans to reduce federal outlays for the earned income tax credit by $23 billion over the next seven years in the House legislation and $44 billion in the Senate bill will have a dramatic impact on the working poor, Shapiro continues.
Joseph Stiglitz, chairman of the White House Council of Economic Advisers, defends the tax credit as an effective tool to boost the income of the lowest rung of wage earners by as much as 40 percent.
Shapiro adds that revised means-testing entitlement programs for the needy will only sharpen the economic differences between the lower tier of the work force and the more upwardly mobile.
''Low-income programs are hit twice as hard as their share of the budget,'' he says.
But supporters of the Republican effort to balance the budget have a different view.
''This [criticism] is merely an example of people trying to use a few pieces of a complex puzzle to mislead and deceive the general public in order to support more government programs and higher federal spending,'' says Mark Wilson, a labor economist with the conservative Heritage Foundation in Washington.
He challenges Shapiro's interpretation of the US Census data, as well as a just-released report from the Paris-based Organization for Economic Cooperation and Development (OECD). That report shows the US on a continuing course of income disparity, due in part to the explosion of self-employment, working women, and early retirement. The US has one of the lowest rates of government spending on social benefits, finds the OECD, and hence the highest poverty rate among nonelderly households.
''What these numbers don't tell you is that the median income of families with no children went up by 36 percent over the past 25 years, and that families with one to two children did less than half that well, while families with three children saw hardly any gain, and those with four actually reversed their fortunes,'' Mr. Wilson says.
Sen. Connie Mack (R) of Florida, chairman of the Joint Economic Committee, is intent on debunking what he calls myths. For those in the bottom to middle income levels at the end of the 1970s, there was considerable upward mobility during the 1980s, he says. ''About 86 percent of the tax filers in the bottom quintile [one-fifth] had exited over nine years, moving into a higher quintile by 1988.''
The new Census findings show that in 1994, income gaps were the widest since the bureau began collecting data in 1967. The bottom 40 percent of households received 12.5 percent of national income, an all-time low, while the top 20 percent of households received a record high 49.1 percent of income.
The Clinton administration intends to highlight these statistics as it makes an election-year issue out of the economic risk in curbing the scope of government help for the working poor.