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NYT's Main Economic Writer Says Obama-Care Will Help Fix Reagan's 'Economic Inequality'

Wednesday's front-page "Economic Scene" column in the New York Times, "In the Process, Pushing Back At Inequality," by Times economic guru David Leonhardt, fed conservative suspicions that Obama's push for health "reform" was not so much about improving health care as it was about social engineering. Leonhardt harped on how the legislation will give a boost to reducing U.S. income inequality (a burning issue for Leonhardt).

For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government's biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform's effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan.

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Finally, the bill will also reduce a different kind of inequality. In the broadest sense, insurance is meant to spread the costs of an individual's misfortune - illness, death, fire, flood - across society. Since the late 1970s, though, the share of Americans with health insurance has shrunk. As a result, the gap between the economic well-being of the sick and the healthy has been growing, at virtually every level of the income distribution.

Leonhardt blamed Ronald Reagan for the "patchwork safety net" that has contributed to wealth inequality (never mind that social spending actually increased in real terms during the Reagan years), and threw global warming into the mix:

Since 1980, median real household income has risen less than 15 percent. The only period of strong middle-class income growth during this time came in the mid- and late 1990s, which by coincidence was also the one time when taxes on the affluent were rising.

For most of the last three decades, tax rates for the wealthy have been falling, while their pretax pay has been rising rapidly. Real incomes at the 99.99th percentile have jumped more than 300 percent since 1980. At the 99th percentile - about $300,000 today - real pay has roughly doubled.

The laissez-faire revolution that Mr. Reagan started did not cause these trends. But its policies - tax cuts, light regulation, a patchwork safety net - have contributed to them.

Health reform hardly solves all of the American economy's problems. Economic growth over the last decade was slower than in any decade since World War II. The tax cuts of the last 30 years, the two current wars, the Great Recession, the stimulus program and the looming retirement of the baby boomers have created huge deficits. Educational gains have slowed, and the planet is getting hotter.

Clay Waters is editor of Times Watch. You can follow him on Twitter.