President Obama's budget speech on Wednesday was remarkable in its absence of anything remotely newsworthy other than Vice-President Biden falling asleep... and remarkable in its audacity of perpetuating two debunked liberal myths: the myth of the Clinton surplus and the myth of declining income.

Myth of the Clinton Surplus

The first whopper was the unfortunate (but predictable) invocation of the liberal myth that Clinton ran a budget surplus. The president said:

As a result of these bipartisan efforts, America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers.

This is incorrect. As I wrote in 2007, Clinton never had a surplus. The national debt increased every year Clinton was in office without exception.

Clinton's claim to a surplus is based on smoke and mirrors and ridiculous government accounting. Clinton wasn't the only president to use this deceptive government accounting, but he was the only one that was able to claim a surplus even while debt continued to increase.

But the bottom line is that since we were further in debt at the end of every fiscal year of the Clinton administration, did we really have a surplus? Nope.

Yet Obama promoted this debunked myth.

Since I I wrote about this extensively in a separate article years ago, I won't go into it further again right now. But I would encourage everyone to be familiar with the myth of the Clinton surplus since, a decade later, it's still one of the most commonly used liberal myths when arguing matters of fiscal responsibility.

Myth of Declining Income

Obama made the claim that the vast majority of Americans--the "bottom 90%"--saw their incomes decline over the last decade. In Wednesday's speech Obama said:

In the last decade, the average income of the bottom 90% of all working Americans actually declined. The top 1% saw their income rise by an average of more than a quarter of a million dollars each.

This claim would have to be considered a derivative of the "rich got richer while the poor got poorer" liberal meme that is usually an indicator that a liberal is entering campaign season. Indeed, Obama launched his reelection campaign just last week.

This specifically caught my interest because I wrote an article back in 2006 that was based on census data that demonstrated that conventional liberal "wisdom" to be false.

So when I heard Obama make this claim during his speech, I wondered if something had changed in the years since I wrote my article. Indeed, within a few hours of Obama's speech I received an email from an individual who had read my article and wondered the same thing.

I did some research.

When I wrote my article in 2006, the latest data available was from 1998. At that time, the top of the lowest fifth bracket was $16,116 and the top bracket was at $75,000. The latest data I can now find is for 2004--at which time the lowest fifth had grown to $18,500 (an increase of 14.8%) and the upper fifth had grown to $88,030 (an increase of 17.3%).

It appears that from 1998-2004, income of the top fifth of wager earners only increased 2.5% more than the lowest fifth. Far from declining, it appears that everyone's income was still increasing--and the the lowest fifth of wage earners saw their income rise at a rate almost identical to that of wage earners of the top fifth. That's actually much more balanced than it has been historically.

This seemed consistent with the article I wrote five years ago and completely inconsistent with what Obama said in his speech.

So I did some more research and found the following possible source for Obama's claim:

Income inequality: It wasn't always this way (February 9, 2011)

In other words, while average annual incomes over the seven-year period between 2000 and 2007 grew by $1,460, that growth was extremely lopsided. Average incomes for the bottom 90% of households actually declined. - Economic Policy Institute

The Economic Policy Institute is a "liberal non-partisan non-profit American think tank" operating out of Washington DC. The home page of its website is attacking Rep. Paul Ryan's budget and promoting the over-the-top liberal "People's Budget." Funding for the EPI comes 53% from foundation grants and another 29% comes from labor unions.

So the EPI is not exactly an unbiased source of information.

Digging further, the source of the statistics was cited as being from Emmanuel Saez's website at Berkeley University (http://www.econ.berkeley.edu/~saez), specifically the spreadsheet: http://www.econ.berkeley.edu/~saez/TabFig2008.xls.

It goes without saying that Berkeley isn't exactly an unbiased source of information, either.

As it turns out, I'm not the first one to find this data to be in contradiction to the economic census data I cited in my earlier article. After Googling further I found the following critique of Saez's work:

The Myth of Income Decline - "How a flawed study based on IRS data, since corrected, continues to generate the idea that only the top one percent of Americans saw gains in income over the past 30 years, while 90 percent of Americans saw their incomes decline."

Upon encountering these results nearly two years ago, I emailed Saez to ask him how he and Piketty reached their conclusion, which was so different from results based on the main Census surveys on income.

First, the money received by low income people from Social Security, welfare, and other government programs were generally not included... Second, there has been an ongoing debate among economists in and out of the government on how to account for inflation... Third, companies were contributing a higher percent of their payrolls to benefits (due primarily to rising employer contributions for worker health insurance). Since these are untaxed they are not included in IRS income... Finally, they did not account for changes in household sizes over the last quarter-century, which were dramatic.

P&S conclude that if a different price indicator were used and adjustments were made for the missing incomes, changing family sizes, and rising benefits, 'from 1973 to 2000, the average income of the bottom 99% would have grown by about 50% in real terms instead of stagnating (as displayed on the figure above.' This remarkable difference is rarely acknowledged by the many writers who cite P&S findings.

So, when asked about the methodology, the original authors of this data apparently confess that when all relevant variables are taken into account, the earnings of the bottom 99% would have grown by about 50% over a period of time in which their data suggests income stagnation. To say such data is deceptive would be an understatement.

Thus, it would appear that President Obama utilized wildly biased information from the liberal Economic Policy Institute which itself utilized unreliable (and thoroughly debunked) data from Emmanuel Saez at the liberal Berkeley University.

The Question

The question we must ask is: Did President Obama promote these two liberal myths out of ignorance or with the intent to deceive?

Update 4/14/2011: That last question was rhetorical. It doesn't matter which is true, his policies are destructive. For what it's worth, personally, I think the answer to the above question is "both."