ECONOMIC REPORT OF THE PRESIDENT

to policy changes enacted during each administration, but the length of the
historical period, the substantial changes in demographics and the economy,
and the number and complexity of policy changes involved make such a
comparison infeasible.
A comparison along these lines, however, would not change the conclusion
that the Obama Administration’s investments in reducing inequality
have been historic, and it would be unlikely to change the relative ranking
of the Obama Administration and previous administrations in an important
way. As noted above, the increase during the Obama Administration largely
reflects new programmatic investments in the form of the coverage provisions
of the ACA and expanded tax credits for working families. Much of
the increase in the investment in anti-inequality programs during the first
Bush Administration, which ranks second by the simple change in spending
over time, is attributable to factors other than changes in policy, as discussed
above. And the increase in the investment in anti-inequality programs
occurring during all other administrations since the Great Society is much
more modest than the increase during the Obama Administration.
A Partial Reversal of Increasing Inequality
The historic investments in reducing inequality made during the
Obama Administration have achieved a partial reversal of the increase in
income inequality in recent decades. However much more work remains
due to the sheer size of the increase in inequality between 1979 and 2007.
According to CBO, the share of after-tax income received by the bottom
quintile of households fell from 7.4 percent at the business cycle peak in 1979
to 5.6 percent at the business cycle peak in 2007, and the share accruing to
the top 1 percent increased from 7.4 percent in 1979 to 16.7 percent in 2007
(CBO 2016b). While CBO’s estimates of the income distribution and the
Treasury estimates of the distribution of changes in tax policy and the ACA
coverage provisions are not precisely comparable due to different methodological
choices, they are sufficiently similar to make broad comparisons
informative.12
12 The comparisons presented in this chapter implement one adjustment to the Treasury analysis
before comparing to CBO. Treasury percentiles are defined to contain an equal number of tax
families while CBO defines percentiles to contain an equal number of people. An approximate
adjustment is applied to the Treasury figures to put them on a similar equal-people basis that
assumes families shifted between percentiles have the average family size of the percentile range
into which they are shifted, incomes equal to the boundary between the income classes, and a
tax rate equal to the simple average of the tax rate in the classes on either side of the boundary.
This adjustment is applied only in determining the fraction of the increase in inequality reversed
and the equivalent growth rate; the changes in shares and changes in after-tax income reported
in this section are unchanged from the prior section for consistency.
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