04.21.12

To Win in November, Obama Should Pray for Increased Income Gap

Team Obama is miscalculating with its relentless messaging on income inequality and fairness. Studies show the income gap grows when the economy is strong—so it’s key to the president’s reelection, says Mark McKinnon.

A $35 million payday is piracy.

That was the upfront guarantee for Johnny Depp to appear in the fourth fourth Pirates of the Caribbean movie. The eight-figure salary does not include his share of worldwide box office profits, but it does represent about 745 times the average annual wage in the United States.

But no one is “occupying” Hollywood.

Or Yankee Stadium, where Alex Rodriguez is under contract for $30 million and where the average player will earn $6.2 million this year.

Arguments about income inequality and fairness seem to focus only on millionaires on Wall Street, where Citigroup shareholders judge the CEO’s $14.9 million pay package “obscene.”

And President Obama is wielding fairness as a messaging bludgeon in his reelection campaign, even going so far as to add a calculator to the White House website so citizens can compare their tax rate to a millionaire’s. (Oddly, the page does not disclose IRS data showing that the top-earning 1 percent already pay nearly 40 percent of all federal income taxes.)

But Team Obama is miscalculating.

Gallup shows 90 percent of Democrats are likely to vote for Obama, and 90 percent of Republicans are likely to vote for Mitt Romney, the presumed GOP nominee. That leaves the folks in the middle, self-identified independents, as the key to victory.

If Obama focuses on income disparity, he’s going to run into an unfortunate reality. The stronger the economy, the greater the gap in pay.

A recent study by the moderate think tank Third Way shows 40 percent of independents could swing either way. But an important caveat: only 15 percent would pick a candidate “focusing on income inequality,” while 80 percent would choose a candidate “focusing on economic growth and opportunity.”

While all is fair in love and war and politics, the blame for the disparity in pay between millionaires on Wall Street and the Joneses on Main Street, which has increased under Obama, is placed on a prior president.

Not on Bill Clinton, under whose watch the pay gap between CEOs and the average worker skyrocketed to a record 525-to-1 ratio.

But on George W. Bush, even though the income gap in his two terms was nearly halved after increasing five-fold in the previous decade.

But credit should not go to Bush, Game Change author and journalist John Heilemann pointed out the other day on Morning Joe: “It was the stock market crash; it was the effects of 9/11. It wasn’t the president’s policies.”

And John is right. He makes the point I was trying to make—though admittedly I should have said, “The gap was halved during his term, rather than ‘Bush cut it in half.’” Market events obviously drove CEO salaries down. And drove them up. You can see that in the timeline. So if we really want to reduce the income disparity, history suggests we should all hope for a deep and lasting depression.

At the same time, average annual wages increased every year of W.’s two terms, according to the Bureau of Labor Statistics.

If Bush doesn’t get the credit, then he should not get the blame for the impact of economic policies and decisions of the Obama administration these past three years.

A fair day’s pay for a fair day’s work for everybody who works hard in America—I can live with that as our collective goal.

But with comparable compensation packages, who creates more jobs and generates a larger return to the nation’s GDP: Depp, playing dress-up in a Hollywood movie, or the CEO of Exxon-Mobil, providing fuel to grow America?

To folks who say, “Well, numbers can be made to say anything,” that’s my point. Numbers can be made to say anything.

But, if President Obama focuses on income disparity then he’s going to run into an unfortunate reality. The stronger the economy, the greater the gap in pay. And that gap is now larger under his administration then when President Bush left office. But given what Obama needs to happen with the economy in order to get re-elected, he should pray the income gap is even greater under his watch by November.