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“On Inequality Denial”: Good Ideas Don’t Need To Be Sold On False Pretenses

A while back I published an article titled “The Rich, the Right, and the Facts,” in which I described politically motivated efforts to deny the obvious — the sharp rise in U.S. inequality, especially at the very top of the income scale. It probably won’t surprise you to hear that I found a lot of statistical malpractice in high places.

Nor will it surprise you to learn that nothing much has changed. Not only do the usual suspects continue to deny the obvious, but they keep rolling out the same discredited arguments: Inequality isn’t really rising; O.K., it’s rising, but it doesn’t matter because we have so much social mobility; anyway, it’s a good thing, and anyone who suggests that it’s a problem is a Marxist.

What may surprise you is the year in which I published that article: 1992.

Which brings me to the latest intellectual scuffle, set off by an article by Chris Giles, the economics editor of The Financial Times, attacking the credibility of Thomas Piketty’s best-selling “Capital in the Twenty-First Century.” Mr. Giles claimed that Mr. Piketty’s work made “a series of errors that skew his findings,” and that there is in fact no clear evidence of rising concentration of wealth. And like just about everyone who has followed such controversies over the years, I thought, “Here we go again.”

Sure enough, the subsequent discussion has not gone well for Mr. Giles. The alleged errors were actually the kinds of data adjustments that are normal in any research that relies on a variety of sources. And the crucial assertion that there is no clear trend toward increased concentration of wealth rested on a known fallacy, an apples-to-oranges comparison that experts have long warned about — and that I identified in that 1992 article.

At the risk of giving too much information, here’s the issue. We have two sources of evidence on both income and wealth: surveys, in which people are asked about their finances, and tax data. Survey data, while useful for tracking the poor and the middle class, notoriously understate top incomes and wealth — loosely speaking, because it’s hard to interview enough billionaires. So studies of the 1 percent, the 0.1 percent, and so on rely mainly on tax data. The Financial Times critique, however, compared older estimates of wealth concentration based on tax data with more recent estimates based on surveys; this produced an automatic bias against finding an upward trend.

In short, this latest attempt to debunk the notion that we’ve become a vastly more unequal society has itself been debunked. And you should have expected that. There are so many independent indicators pointing to sharply rising inequality, from the soaring prices of high-end real estate to the booming markets for luxury goods, that any claim that inequality isn’t rising almost has to be based on faulty data analysis.

Yet inequality denial persists, for pretty much the same reasons that climate change denial persists: there are powerful groups with a strong interest in rejecting the facts, or at least creating a fog of doubt. Indeed, you can be sure that the claim “The Piketty numbers are all wrong” will be endlessly repeated even though that claim quickly collapsed under scrutiny.

By the way, I’m not accusing Mr. Giles of being a hired gun for the plutocracy, although there are some self-proclaimed experts who fit that description. And nobody’s work should be considered above criticism. But on politically charged issues, critics of the consensus need to be self-aware; they need to ask whether they’re really seeking intellectual honesty, or are effectively acting as concern trolls, professional debunkers of liberal pieties. (Strange to say, there are no trolls on the right debunking conservative pieties. Funny how that works.)

So here’s what you need to know: Yes, the concentration of both income and wealth in the hands of a few people has increased greatly over the past few decades. No, the people receiving that income and owning that wealth aren’t an ever-shifting group: People move fairly often from the bottom of the 1 percent to the top of the next percentile and vice versa, but both rags to riches and riches to rags stories are rare — inequality in average incomes over multiple years isn’t much less than inequality in a given year. No, taxes and benefits don’t greatly change the picture — in fact, since the 1970s big tax cuts at the top have caused after-tax inequality to rise faster than inequality before taxes.

This picture makes some people uncomfortable, because it plays into populist demands for higher taxes on the rich. But good ideas don’t need to be sold on false pretenses. If the argument against populism rests on bogus claims about inequality, you should consider the possibility that the populists are right.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, June 1, 2014

June 2, 2014 Posted by | Economic Inequality, Populism | , , , , , , , | 1 Comment

“GOP’s New Plutocratic Populism”: A Bizarre Vision Of The Working Class

Fresh off his victory over Tea Party challenger Matt Bevin, Senate Minority Leader Mitch McConnell headed to the American Enterprise Institute Thursday to make himself over as a GOP populist. The party, as you’ve heard, has decided it needs “middle-class outreach” – since it’s given up on outreach to women, Latinos, African-Americans and the LGBT community – and thus some intellectuals and politicians have tried to craft “a middle class agenda.”

While the party should continue to stand for the free market and business interests, McConnell said, it had to face facts: “For most Americans whose daily concerns revolve around aging parents, long commutes, shrinking budgets and obscenely high tuition bills, these hymns to entrepreneurialism are as a practical matter largely irrelevant. And the audience for them is probably a lot smaller than we think.”

That, you’ll recall, was the takeaway from Mitt Romney’s 2012 campaign, where the plutocrat’s self-satisfied slogan “You built that!” was meant to mock Obama’s declaring that nobody builds a business entirely alone, but seemed to mock anyone who drew a paycheck, which is most of us.

But what is the tangible help McConnell and his friends are now offering to middle-class families? Very little, it turns out. McConnell had the audacity to present his union-busting National Right to Work Act as a pro-middle class reform, ignoring the way the labor movement actually built the middle class from the 1940s through the 1970s. Oh well.

The AEI event also included Sens. Mike Lee and Tim Scott, along with House Majority Leader Eric Cantor and writers like Ross Douthat, Ramesh Ponnuru and Reihan Salam, who contributed to a collection of essays on the new middle-class agenda called “Room to Grow.” They talked about helping single mothers, tackling student debt and ending corporate cronyism. But they offered very few ideas that would make a difference, and their good ideas are strangled by GOP orthodoxy. Lee wants to develop a package of tax cuts and credits for the middle class, for instance, but it adds $2.4 billion to the deficit so he hasn’t worked out his numbers.

The Utah Tea Party favorite also proposes to help the middle class while cracking down on the poor: Since he believes poverty programs create a “disincentive to work,” he wants to cut them and step up work requirements for those who do get help.  “We don’t want people to have to make that kind of awful choice” between welfare and work, Lee told a reporter, so we’ll cut back welfare and make it harder to access. Bless his heart.

Ending corporate cronyism seems like a place the two parties might find common ground, but every time Democrats and a few Republicans put together a proposal for cutting the tax loopholes that make the tax code so unfair, conservatives squash it.

Still, let’s give the folks behind “Room to Grow” credit for trying, again, to buck the prevailing pro-plutocrat direction of their party. In the conservative Washington Free Beacon, Matthew Continetti praised the agenda, but offered a caveat. “I do not doubt for a moment that if the Republican Party adopted Room to Grow as its platform tomorrow, then both the GOP and the country would enjoy a better future,” he wrote. But he remembered a similar reception for Douthat and Salam’s widely praised “Grand New Party: How Republicans Can Win the Working Class and Save The American Dream,” and concluded the GOP “is no closer to embracing the ideas of Salam [and] Douthat…than it was when we celebrated the publication of ‘Grand New Party’ at the Watergate in 2008.”

Continetti deserves credit for explaining exactly why that is:

The outreach Republicans make to single women and to minorities inevitably repels the groups that give the party 48 percent of the popular vote—Christians and seniors and men. As has been made abundantly clear, 48 percent of the popular vote does not a presidential victory make. But 48 percent is not quite something to sniff at either. That number can always go down.

So if the GOP can craft an agenda that it can sell to Christian senior men, this middle-class thing is a go. Otherwise, it’s going to have to wait for people with the courage to sacrifice part of that 48 percent to get to 51 percent.

 

By: Joan Walsh, Editor at Large, Salon, May 23, 2014

May 24, 2014 Posted by | GOP, Middle Class, Plutocrats, Populism | , , , , , , | 1 Comment

“Aggressive, Progressive Governance”: The New Populism Begins At The Local And State Level

As Republican obstruction keeps anything from moving in Washington (except, of course, the package of corporate tax dodges known as “extenders” that are likely to glide through with bipartisan support), populist movements and leaders are moving at the local and state level, from New York City to Seattle, Maine to Minnesota.

“Fate loves the fearless.” Quoting the fierce 19th-century abolitionist James Russell Lowell, New York City Mayor Bill de Blasio summarized his first 100 days in office in a speech last week at New York’s historic Cooper Union. Embattled but unbowed, the mayor detailed what he’d been able to move of the populist agenda that he ran on.

De Blasio, no one’s fool, began with the good news on the nuts and bolts vital to running any city: Crime is down, pedestrian deaths are down, potholes are being filled faster and the winter’s record snowfalls got cleaned up.

He then announced success in gaining the most state funding in history for his pledge of universal pre-K. De Blasio’s previous call to pay for this by raising taxes on those making over $500,000 a year was sabotaged by Democratic Governor Andrew Cuomo, a stalwart of the Wall Street wing of the party, but de Blasio still got much of the money he sought. Beyond this success, after-school programs are being made available to ever more students. The mayor announced a move away from high-stakes testing, with educators empowered to make more comprehensive assessments as to a child’s progress. Paid sick leave has been extended to half a million more New Yorkers. More affordable housing is being built, as the city made it a requirement for luxury developers.

Unfortunately for New Yorkers, Cuomo swatted away de Blasio’s effort to get authority to raise the city’s minimum wage. But across the country, Seattle Mayor Ed Murray is championing a $15-an-hour minimum wage, with a commission set up to work out the details. Murray, considered a moderate in a city that just elected a socialist city councilperson, quotes Franklin Roosevelt on the need for “bold, persistent experimentation.” In addition to pay, he is pushing on public housing, renewable energy and universal pre-K.

San Francisco now has a minimum wage of $10.55, indexed to Bay Area inflation, and a working families tax credit to supplement the federal one. The city requires employers to provide paid sick leave, and has a Healthy San Francisco plan, that essentially offers universal health care with a public option to city residents.

And while Republicans refuse even to allow a vote on raising the minimum wage in Congress, Minnesota, Maryland and Connecticut have all recently passed minimum wage increases, with more states likely to follow.

Congress has blocked any major effort to capture a lead in the green industrial revolution, but cities are filling the gap. Seattle, blessed by plentiful dams, is carbon neutral. Portland gets half of its energy from renewable sources. Austin aims to be carbon neutral by 2020 and has devoted 10 percent of the city’s land to parks.

While national leaders continue to bolster the banks at the same time as they abandon underwater homeowners, in Richmond, Calif., a Green Party mayor is pushing to use eminent domain to take over underwater mortgages, refinance them at current value and allow families to keep their homes. The city has fined banks for not maintaining the homes that they’ve foreclosed on. Wall Street has retaliated, essentially boycotting the city’s last bond offering.

While efforts to shut down the offshore tax dodges used by multinationals have been blocked in Washington, Oregon just enacted a bill to tax the state’s share of profits stashed in 39 countries and territories; Maine’s state legislature just approved similar legislation and several other states are considering the same.

In his Cooper Union speech, De Blasio noted the “resistance from some powerful interests . . . people who have a stake in the status quo and don’t want to see these changes.” But he noted, “This administration is a product of movement politics. . . . A movement of people who share a vision . . . We believe we are at our best when everyone gets a shot at fulfilling their dreams.”

And the only vehicle for that is aggressive, progressive governance. De Blasio closed by quoting one of his heroes, Robert F. Kennedy, “Everything that makes our lives worthwhile — family, work, education, a place to raise one’s children and a place to rest one’s head — all this depends on the decisions of government. Therefore, our essential humanity can be protected and preserved only where government must answer — not just to the wealthy, not just to those of a particular religion or a particular race, but to all its people.”

The new populism is just beginning to form. In cities and states across the country, people are beginning to be heard and beginning to find leaders who will stand with them. And that offers some promise for the future.

 

By: Katrina vanden Heuvel, Opinion Writer, The Washington Post, April 15, 2014

 

April 21, 2014 Posted by | Populism, Progressives | , , , , , , , , | Leave a comment

“Real Vs. Republican Populism”: How To Win The War On Inequality

So Republicans are going populist, or at least two of them are, reports The Daily Beast’s Patricia Murphy. And perhaps it’s only in the sense that unlike Mitt Romney and many in the House GOP, they’re not speaking of working people with contempt. Well, it’s a start. But I wish they’d pick up copies of Thomas Piketty’s Capital in the Twenty-First Century. Oh, of course Ted Cruz and Rand Paul would find ways to pooh-pooh the book’s findings and conclusions, but it’s nice to think of them merely having to immerse themselves in empirical reality for a few hours instead of the magical economic fairy tales that undoubtedly constitute their usual diet.

If you’ve not heard of Piketty or Capital, it’s certainly the economic book of the year, and probably of the decade so far. (You can read Paul Krugman’s rave in The New York Review of Books here.) I admit I’ve only waded into it so far, but I went to see the author, a French economist, speak at the Economic Policy Institute in Washington to a room full of people who braved a hideous, monsoon-ish rain Tuesday morning. (The video of the event is here.) What Piketty has done, my economist friends tell me, is nothing short of revolutionary and deserves to change the way we think about wealth and inequality. Much more important, it also deserves to alter what we do about them.

Here’s the story in a ridiculously small nutshell. Thirty scholars collected data from 20 countries over about 100 years. Piketty pored over the data trying to pinpoint salient reasons for our insane levels pf income inequality, which is worse in the United States, where the richest 1 percent own nearly 40 percent of the wealth, than in most other advanced countries but hardly endemic to America.

The one key: In all times and places under study, the rate of return on capital increases at a faster rate than general economic growth. Growth averages 1, 1.5 percent. Rate of return averages 4 or 5 percent. So presto, the people with the capital—money and assets of all kinds, land and equipment and what have you—are getting richer a lot faster than the rest of us. And as Nobel Prize-winning economist Robert Solow, a panelist at the event, pointed out: “Note that this is not a market failure.” This disparity (r > g, in wonk-speak) is a feature, not a bug, as they say, and it’s just our fate, and on and on it shall go, as the rivers roll to the sea.

And is there anything we can do to mitigate this? Three things, said panelist Josh Bivens of the Economic Policy Institute: 1) Make sure more people enjoy more access to r; 2) raise g; 3) lower r.

Now, if you are reasonably conversant in our economic debates, you already have some idea of what all this means. It means what Cruz and Paul would call “socialism” and what I would call “the kinds of reasonable, worker-focused economic policies this country had for about 40 years that were, on balance, the best years this country ever had.” We had large-scale public investment, near full employment at times, a more heavily unionized work force, a minimum wage that until 1968 kept pace with productivity, a more progressive tax system, a much more heavily regulated financial sector in which banks couldn’t gamble against themselves, and all the rest. Even with all these measures in place, r still grew faster than g, but not the way it does in today’s America.

In other words, Piketty makes the case that inequality will just grow and grow unless societies take affirmative steps to reduce the gap between the rate of return on capital and overall economic growth. The problem is the old one: In our present political climate, there’s not a chance of that happening.

As I sat there Tuesday morning, I kept wondering to myself: Is there any way a politician, a presidential candidate, can turn these concepts into plain English, something that can capture people’s imaginations—an answer to the right’s vacuous “a rising tide lifts all boats,” but which happens to have the benefit of being true? We now have ample evidence that the “rising tide” of the better part of the last 30 years has not lifted all boats. The ocean liners are getting farther and farther away from the pack.

I think there must be a way, but before we ponder that question, we first have to wonder whether the presidential candidate I have in mind (it’s not Cruz or Paul) even believes all this. I think she does, or most of it. But this is class politics—not “class warfare,” just class politics—and that hasn’t exactly been Hillary Clinton’s game over the years. The great question looming over her expected campaign is the extent to which she’ll address the inequality crisis head on.

Given the 1 percent’s ownership of our political system these days, we’re probably stuck with living out this crisis for a very long time, until even the 1 percenters are finally forced to agree that something has to be done. We seem a long way away from that. But things do change sometimes. “In 1910 in America, everybody would have said a progressive income tax was impossible,” Piketty said Tuesday. “It could not be permissible under the Constitution, and so forth. But, you know, things happen.” Three years later, we had one. So it’s not impossible. And if trickle-down could start on a dinner napkin, surely the process of reversing its malignant effects can start with a book.

 

By: Michael Tomasky, The Daily Beast, April 16, 2014

April 16, 2014 Posted by | Economic Inequality, Populism, Republicans | , , , , , , , | Leave a comment

“Populism Needs To Be Popular”: Not A Viable Political Strategy For Conservatives

Having already posted my thoughts on the problems associated with the Republican Party adopting some ideology or message of “libertarian populism,” I will note in passing Ramesh Ponnuru’s succinct rejection of the idea that combining hostility to state subsidies for big businesses and other special interests with the traditional conservative hostility to state “redistributive” efforts on behalf of the needy will work electoral magic.

It was not until Monday that Tim Carney, a libertarian-populist writer (and a colleague of mine at the American Enterprise Institute), got around to publishing a manifesto for the group. It is a document that contains several good ideas — but not a viable political strategy for conservatives.

The main focus of Carney’s work is that big government and big business collude at the expense of the little guy, and he recommends that Republicans run against that collusion in order to win working-class votes. In particular he wants them to break up the big banks, end corporate-welfare programs, clean up the tax code so that powerful interests no longer profit from it, and end regulations that protect established businesses from competitors (regulations that stifle food trucks, for example). He would also cut the payroll tax and end government policies that favor employer-based health insurance.

I’m sympathetic to most of the items on Carney’s list — and those on the list that fellow populist Conn Carroll has compiled. Taken together, though, they do not seem to amount to a winning political platform. A Republican party that took on the U.S. Export-Import Bank might improve its image a bit, but how many Americans really care enough about the issue to change their votes based on it? Nor does freeing the food trucks seem like it would win many votes, however right it might be as a policy matter….

Cutting the payroll tax, unlike most of these ideas, would tangibly affect most people’s lives by raising their take-home pay. If Republicans proposed it, though, they would surely be accused of jeopardizing Social Security and Medicare, which seems like a rather large political defect. Other Carroll proposals, such as ending student loans and the mortgage deduction, seem likely to be unpopular even at first glance.

Republicans ought to propose conservative answers to the concerns that are uppermost on most voters’ minds. The libertarian-populist method seems to be to start with the solutions and then to imagine that voters have the relevant concerns. And while many of the proposed solutions have great potential appeal to conservative voters, few would do much to expand their ranks.

In other words, if you want to sell a political party highly resistant to change a “new” ideology of “populism,” it had better be popular. Because it’s not, you typically find Republicans taking the easier route of defending government programs that benefit their own constituencies against the claims of those people. I don’t think it’s a winning formula in the long run, but it’s more promising than pretending the voters Republicans need would be happier if government stayed out of their lives altogether.

 

By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, July 18, 2013

July 19, 2013 Posted by | Conservatives, Populism | , , , , , | Leave a comment

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