“Is Vast Inequality Necessary?”: Inequality Is Inevitable; The Vast Inequality Of America Today Isn’t
How rich do we need the rich to be?
That’s not an idle question. It is, arguably, what U.S. politics are substantively about. Liberals want to raise taxes on high incomes and use the proceeds to strengthen the social safety net; conservatives want to do the reverse, claiming that tax-the-rich policies hurt everyone by reducing the incentives to create wealth.
Now, recent experience has not been kind to the conservative position. President Obama pushed through a substantial rise in top tax rates, and his health care reform was the biggest expansion of the welfare state since L.B.J. Conservatives confidently predicted disaster, just as they did when Bill Clinton raised taxes on the top 1 percent. Instead, Mr. Obama has ended up presiding over the best job growth since the 1990s. Is there, however, a longer-term case in favor of vast inequality?
It won’t surprise you to hear that many members of the economic elite believe that there is. It also won’t surprise you to learn that I disagree, that I believe that the economy can flourish with much less concentration of income and wealth at the very top. But why do I believe that?
I find it helpful to think in terms of three stylized models of where extreme inequality might come from, with the real economy involving elements from all three.
First, we could have huge inequality because individuals vary hugely in their productivity: Some people are just capable of making a contribution hundreds or thousands of times greater than average. This is the view expressed in a widely quoted recent essay by the venture capitalist Paul Graham, and it’s popular in Silicon Valley — that is, among people who are paid hundreds or thousands of times as much as ordinary workers.
Second, we could have huge inequality based largely on luck. In the classic old movie “The Treasure of the Sierra Madre,” an old prospector explains that gold is worth so much — and those who find it become rich — thanks to the labor of all the people who went looking for gold but didn’t find it. Similarly, we might have an economy in which those who hit the jackpot aren’t necessarily any smarter or harder working than those who don’t, but just happen to be in the right place at the right time.
Third, we could have huge inequality based on power: executives at large corporations who get to set their own compensation, financial wheeler-dealers who get rich on inside information or by collecting undeserved fees from naïve investors.
As I said, the real economy contains elements of all three stories. It would be foolish to deny that some people are, in fact, a lot more productive than average. It would be equally foolish, however, to deny that great success in business (or, actually, anything else) has a strong element of luck — not just the luck of being the first to stumble on a highly profitable idea or strategy, but also the luck of being born to the right parents.
And power is surely a big factor, too. Reading someone like Mr. Graham, you might imagine that America’s wealthy are mainly entrepreneurs. In fact, the top 0.1 percent consists mainly of business executives, and while some of these executives may have made their fortunes by being associated with risky start-ups, most probably got where they are by climbing well-established corporate ladders. And the rise in incomes at the top largely reflects the soaring pay of top executives, not the rewards to innovation.
Don’t say that redistribution is inherently wrong. Even if high incomes perfectly reflected productivity, market outcomes aren’t the same as moral justification. And given the reality that wealth often reflects either luck or power, there’s a strong case to be made for collecting some of that wealth in taxes and using it to make society as a whole stronger, as long as it doesn’t destroy the incentive to keep creating more wealth.
And there’s no reason to believe that it would. Historically, America achieved its most rapid growth and technological progress ever during the 1950s and 1960s, despite much higher top tax rates and much lower inequality than it has today.
In today’s world, high-tax, low-inequality countries like Sweden are also both highly innovative and home to many business start-ups. This may in part be because a strong safety net encourages risk-taking: People may be willing to prospect for gold, even if a successful foray won’t make them quite as rich as before, if they know they won’t starve if they come up empty.
So coming back to my original question, no, the rich don’t have to be as rich as they are. Inequality is inevitable; the vast inequality of America today isn’t.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 15, 2016
“The Last Stage Of Grief”: From ‘Panic’ To ‘Acceptance’ On Trump?
For much of 2015, one of the most commonly uttered words in Republican circles was “panic,” as in, “irritation is giving way to panic” among GOP insiders “as it becomes increasingly plausible” that Donald Trump might win the Republicans’ presidential nomination.
But NBC News raised an interesting point this morning about the stages of grief.
[H]ave we finally reached the last stage, acceptance? Now none of this means that Trump is going to win the GOP presidential nomination. But it does mean that he’s become much more acceptable to Republicans than we ever thought possible; that he’s indelibly shaped the GOP contest in his own image; and that he’s in firm control of this GOP race.
I feel like this is the first week of the entire cycle in which I’ve seen and heard a growing number of Republicans reach this point. National Review’s Rich Lowry noted this week, for example, that from his conversations, the GOP establishment’s mood on Trump is “moving from fear/loathing to resignation/rationalization.” (MSNBC’s Chris Hayes added soon after that he’s heard the same thing.)
Jon Chait flagged examples of others making similar comments. The Daily Caller’s Matt Lewis quoted a Republican source saying, “On the ground? Everyone literally is getting resigned to Trump as nominee.” Ari Fleischer, the former press secretary in the Bush/Cheney White House, said he now gives Trump a 60% chance of winning the party’s nomination.
Slate’s Jamelle Bouie added this morning, “[I]nstead of brushing Trump aside, Republican elites are learning to love the Donald and accept him as a potential nominee, or at least a candidate they can work with.”
Try to imagine commentary like this from, say, August. It would have been almost unfathomable.
This is not, by the way, a prediction saying I think Trump will be the nominee. A grand total of zero votes have been cast – the Iowa caucuses, which Trump may very well lose, is still 16 days away – and there are all kinds of questions we don’t know the answer to, not the least of which is whether the frontrunner’s backers will actually show up when it counts.
My point, however, is that we appear to have entered a very different, largely unexpected stage in the race: one in which Republicans stop obsessing over when Trump will collapse and start accepting the idea that maybe, just maybe, he won’t.
The “stages of grief” framework is admittedly a bit of a cliche, but NBC’s First Read may be onto something here. Republicans were initially in denial (“Come Labor Day, Trump will be an unpleasant memory”), which led to anger (“This guy is going to tear the party apart and hand Congress to Democrats!”). Soon after, there was some bargaining (“What can we do to elevate someone from the establishment ‘lane’?”), followed by plenty of depression (“I’ve seen the latest polls and I need another drink.”)
The fifth stage is acceptance. Watch this space.
By: Steve Benen, The Maddow Blog, January 15, 22016
“Graham Snubs Rubio Over Immigration ‘Cut and Run’”: His Snub Was Personal. Rubio Hung Him Out To Dry
Just a few weeks after ditching the presidential race, Lindsey Graham tried to shake it up Friday by snubbing a close Senate colleague.
The South Carolina senator and Sunday show perma-guest endorsed Jeb Bush this Friday morning, popping into a meeting room in a North Charleston DoubleTree hotel to praise the former Florida governor. And, since no Bush event would be complete without a discussion of Marco Rubio, the governor’s rival came up throughout.
Bush has done little to hide his disapproval of Rubio’s presidential politicking but Graham’s decision to get on board with the Marco-bashing surprised some. After all, Rubio and Graham are cut from identical ideological cloth when it comes to foreign policy, and Graham joined with Rubio in 2013 to push for comprehensive immigration reform.
So why did Graham opt for a low-polling former governor saddled with a problematic last name instead of teaming up again with his Senate ally? There are a host of interesting theories, but immigration was the most prominent issue at the press event where Graham announced the endorsement.
Flanked by other supporters and addressing national media, Bush charged that Rubio’s abandonment of his immigration reform efforts—the Florida senator decided to oppose his own bill a few months after it passed—reflected poorly on his character.
“Marco cut and run, plain and simple, for whatever reason,” the former governor said. “There may be legitimate reasons, but he cut and run. He asked for my support on a bill and he cut and run. He cut and run on his colleagues as well.”
Graham, of course, was one of those colleagues. And when reporters pressed him on the issue, he didn’t have kind words for his erstwhile ally.
“I’m not here to talk about Marco Rubio’s commitment to immigration reform,” he said. “I’ve seen Jeb has been consistent. All I can say is that I worked hard to pass a bill. You can always make the bill better. I never cut and run.”
Graham allies, speaking anonymously because Graham didn’t authorize them to talk, argued that the South Carolinian sustained more political injury because of his consistent immigration stance and Rubio hung him out to dry. They say Florida’s growing Hispanic population means Rubio could have stayed the immigration-reform course without seriously jeopardizing his political future. Graham, meanwhile, won the “Lindsey Grahamnesty” nickname from Rush Limbaugh because of his work on the issue, and faced two tricky primary elections because of his pro-reform stance.
In their view, Rubio’s repudiation of his own bill—four months after he voted for it—didn’t exactly make him a profile in courage.
And it seems to have made Graham’s decision to join Team Bush just a tad easier.
By: Betsy Woodruff, The Daily Beast, January 15, 2016
“The Politics Of The Deficit Are Utterly Backward”: Ignore The Rending Of Garments From Deficit Paranoiacs
One of the most frustrating things about being a lefty during the depths of the Great Recession was watching giant policy errors build on the horizon like some sewage tsunami, and being powerless to stop them. And in 2010 the biggest and sewage-iest of the errors was the turn to austerity — the combination of budget hikes and spending increases that has slowed economic recovery across the developed world.
Five years later, as the deficit has fallen dramatically and so has interest in its supposed danger, it provides an interesting window into the politics of deficit paranoia — and how it is 180 degrees from reality.
Let me quickly review the story up to the present. A recession means the economy is suffering a shortage of aggregate demand. People are losing their jobs, meaning companies have fewer sales, so they fire employees or go out of business — rinse and repeat. The standard response to this is economic stimulus, both monetary and fiscal. For the former, the Federal Reserve cuts interest rates, making loans easier to get and thus stoking the economy; for the latter, the government borrows and spends directly, mechanically jacking up total spending.
Like the Great Depression, fiscal stimulus was particularly important during the Great Recession, because by late 2008, the Fed had cut interest rates all the way to zero — pushing its economic accelerator all the way to the floor — and it didn’t halt or even much slow down the recession.
Initially, with big Democratic Party majorities in both the House and Senate, the government did the right thing. Right after President Obama took office, it passed the Recovery Act, a fairly sizable piece of fiscal stimulus. But as trusted center-left commentators like Paul Krugman pointed out, it wasn’t nearly big enough to fill the economic hole visible at the time — and later measurements would show the hole to be vastly larger than the initial estimates.
So after that first round of stimulus, the deficit was very large due to all the borrowing. However, its inadequacy was also obvious, as unemployment plateaued at nearly 10 percent — then stayed there for an entire year. During and immediately after the crisis, the centrist establishment was too shocked to respond, but they eventually regrouped and began demanding immediate cuts to balance the budget — effectively aligning themselves with resurgent conservatives, who as usual demanded all social insurance programs be torched.
After the 2010 election, the centrists and conservatives got much of what they supposedly wanted: tons of austerity, most of it in cuts to government spending (particularly when compared to previous presidencies). The effects were obvious: a recovery that was grindingly slow and weak. It still shows no sign of returning to the previous trend.
In other words, austerians were successful in cutting the short-term deficit at the worst imaginable time. But what about now, as the economy is returning to at least a modicum of health? According to the standard economic script, government deficits aren’t always good. When recovery has been reached, then it’s time to cut back. “The boom, not the slump, is the right time for austerity at the Treasury,” as John Maynard Keynes said (though adherents of Modern Monetary Theory would quibble with this).
What are the centrist austerians doing? Why, they’ve gone almost totally silent, of course. Ron Fournier, the avatar of D.C. centrism and a fanatical austerian, has barely mentioned the subject over the last year. More broadly, as Andrew Flowers documents for FiveThirtyEight, mentions of “deficit” and “debt” by Republican presidential candidates have fallen by about two-thirds since 2012. Mentions in Congress have fallen even further.
This demonstrates that the conventional politics around deficits and debt are fundamentally disconnected from any sort of rational understanding as to why they might be a problem. And due to those same actual mechanics, the political salience of austerity moves in inverse proportion to its real importance — insane overreaction when the deficit should be very high, bland disinterest when it ought to be coming down again.
It’s maddening, but at least predictable. The next time a liberal administration is in charge during a recession, it may safely ignore the rending of garments from deficit paranoiacs. As soon as the immediate crisis is over, they’ll quickly forget all about it.
By: Ryan Cooper, The Week, January 15, 2016
“No Guns Allowed, Punk”: New York Values; What Tiny Ted Cruz Will Never Understand About The Big City
Exactly what does Ted Cruz mean when he sneers about “New York values” as a reason to reject Donald Trump? Disparaging New York has long been a favorite trope for reactionary loudmouths, always with an ugly undertone of bigotry against racial, ethnic, religious and, more recently, sexual minorities.
Demagogues denigrating New York come and go with boring predictability — and the nation’s greatest city will continue to thrive long after the Texas senator is merely an unpleasant memory. But in the meantime, his cheap insult tells us much more about him than about his target.
For someone who went to the very best schools – and flaunted his academic elitism until that no longer served his ambition – Cruz is remarkably narrow in his outlook, or at least he pretends to be. While he reeks of phoniness, perhaps he truly is so small-minded that he cannot comprehend just how large New York really is, in every way.
Despite the city’s well-deserved liberal reputation, its tolerance for the broadest possible variety of opinions, faiths, and lifestyles is its deepest strength. Conservatives are welcome in New York, birthplace of the Conservative Party and home of the National Review, its late founder William F. Buckley, Jr., and so many who followed in his wake. They could have gone anywhere, but they took Manhattan – just as David Koch and scores of other influential right-wingers do today.
Those rightward-leaning New Yorkers include significant supporters and donors to the Cruz campaign, although one can hope they will reconsider that choice now. Either way, his remark suggests that Cruz is one of those oh-so-clever people who assume that everyone else is stupid. He seems to believe that nobody will notice how eagerly he sucks up to New Yorkers who can benefit him, even as he seeks to inflame prejudice against their hometown.
Of course slurring New York has always served as a thin scrim for traditional anti-Semitism, which is what Cruz evoked with his remark about “money and media” at the Republican debate on Thursday evening. He must think nobody noticed that his wife works for Goldman Sachs – or that he took a big fat loan from that very Jewish-sounding Wall Street outfit when he first ran for the Senate.
In Trump’s response, he spoke angrily and eloquently of 9/11 — a moment when most of the nation rallied around the city, with admiration for the resilience and solidarity displayed by its people. Later, New Yorkers learned how shallow that support could be, notably among Republicans in Congress who resisted approving the aid they always expect when their own districts confront disaster, and even sought to deny assistance to suffering first responders. At worst, support for New York turned into an excuse for hatred of Muslims and immigrants.
But the aftermath of 9/11 represented a perfect expression of real New York values: tolerance and charity across all boundaries of ethnicity, religion, lifestyle, class, and occupation; decency and justice toward those who have the least, suffered the most, and sacrificed for all; cooperation and collaboration in the face of tragedy; and the kind of knowing toughness that is sometimes mistaken for cynicism. Only a rube thinks that New York is about money and media alone; it is much, much bigger than that. New York values have always been the most enduring American values.
Now along comes Ted Cruz, who wants to grub New York money and then insult New Yorkers by suggesting they are somehow less upstanding than he claims to be. Since he’s such a tough guy — blustering on about assault weapons and carpet-bombing innocent people far away – he should try running his mouth about New York on the streets of Queens or Brooklyn, and see how that works out. (But no guns allowed, punk.)
By: Joe Conason, Editor in Chief, Editor’s Blog, Featured Post, The National Memo, January 15, 2016
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