Robert Samuelson actually wrote the following as the concluding paragraph of his column today:
Still, the present concentration of income and wealth instinctively feels excessive. It understandably stirs resentment. We’d be better off if the rich were less so and other Americans were more so. But it’s doubtful that political action to force this transformation would be similarly beneficial. Class warfare is bruising; today, it would degrade the confidence needed for a stronger recovery.
Let’s look at this:
Premise A: less income inequality would be better.
Premise B: political action to create less income inequality would not be better.
Conclusion: Since A does not equal B, confidence fairies, ponies, and rainbows.
If you don’t want higher taxation on the rich, you should just say so. No rationale is really required. But to present this as a logical argument is beyond embarrassing. It’s a preference.
Insofar as there is any logic to it, the argument is that the government cannot take action to lower income inequality because that would “bruise” rich people and cause them to lose confidence, which would cause them to withdraw from investment opportunities, which would lessen economic growth, which would hurt everyone and solve nothing.
One problem with this argument is that Samuelson acknowledges that there was a time when income inequality wasn’t so great in this country:
In 1954, American economist Simon Kuznets (1901-85) argued that income inequality would fall as societies modernized. Workers would move from low-paid farm jobs to better-paid industrial jobs. Gaps would narrow.
This seemed to have happened in the United States. From the 1920s to the 1950s, the income share of the richest 10 percent fell from around 50 percent to about 35 percent. But now it’s rebounded to the late 1920s’ level. This stunning fact, published previously in academic journals, helped make inequality a big political issue.
What happened policy-wise in the period between the 1920’s and the 1950’s? That happens to correspond exactly with FDR and Truman’s five terms in office. Therefore, it also corresponds with the apogee of labor power and the introduction of strong regulatory and redistributive schemes that have been systematically weakened since that time. If you look an income distribution as a grandfather clock, the pendulum has swung all the way back to where it began in the 1920’s.
Remember that Mr. Samuelson wrote that it “would be better” if there were less income disparity. Either he doesn’t really believe that or he expects some kind of magic to solve the problem. But we have at least a rough blueprint for how to tackle the problem. Obviously, times have changed and we can’t expect to just slap 1930’s solutions onto 2010’s problems and get the exact same results, but we also don’t need to reinvent the wheel.
Before we can do anything, however, we have to admit that policy has the power to address the issue.
Workers would move from low-paid farm jobs to better-paid industrial jobs
Which no longer exist in this country. At least not the level needed. That combined with both a move to the so called “service economy” and too low taxes is where we’re at. They want it both ways.
Policy DOES has the power to address the issue!
It’s compliant, complicit, compromised, and cowardly politicians who don’t want to address the issue – for fear of their reelection funds being negatively compromised.
Let’s not forget Ike and his top marginal tax rate of 92%.
I can’t keep up, but aren’t capital gains taxes based on how long you’ve held the equity before you sell it?
Shouldn’t there be two capital gains taxes? One for primary residential real estate and one for everything else? And shouldn’t those rates be progressive?
Or maybe those Princeton professors were right about this not being a democracy anymore?
91%.
But the point is an excellent one. Very few actually paid that rate because it was high on the income scale, but what it created was, in effect, a maximum wage. I forget what the limit was, but it was the equivalent to about $5M today. And there were more deductions allowed for “business” expenses and techniques like income averaging – and tax shelters that allowed an individual to grow wealth without paying taxes on it until they converted the fixed asset to a liquid one. But even with all of those tricks there still was a maximum to your post-tax income. It was so effective that millionaires were rare – and it really meant something to say something like “he’s a millionaire three times over”. Yes, wages were capped.
Now, something funny happens when you cap wages. Society is far better off. All that time our current CEOs spend trying to find ways to funnel even more profits to themselves were instead spent on other things by Presidents (the term “CEO” is an invention of the early second gilded age) in the 1950s. Many of them devoted a ton of time to charities and foundations – or promoting themselves for, say a possible political career, by having their companies do good things.
It becomes much harder to buy off politicians. Today a Senator is paid a tiny fraction of what his lobbyists and CEO benefactors are paid, so by envy if nothing else he or she is desperate to get in on the action. Back then the pay of a legislator was closer to the maximum wage. Now this didn’t mean that corruption wasn’t common – it was, but when bribes were made they were legally bribes. A few got rich over long political careers (see: LBJ) but relatively speaking there were still limits.
Thus, people tended to trust their government. Imagine that. But in the 1950s the government ranked very high on trust in polls taken at the time.
I have never understood why Dems can’t make an argument about the so called “class war” and “redistribution” that since society would not work if
then those who profit enormously by how the tax system, off shore accounts, lobbying methods, bought Congressmen work should pay back into that system from which they profit so unproportionately.
Whew. Maybe it could be simplified…
First, a majority of Democrats today differ from Republicans on the so-called major non-economic, social issues. Second, they accept neo-liberal economics as well as the opposition does — they just wear a softer and gentler mask when running for office. (For an example, see Why Do Democrats Love This Guy) Third, USians measure worth in dollars — and DEMs wouldn’t be superior and entitled to hold positions of high office if they hadn’t or wouldn’t in the future become extremely wealthy.
IOW — the concerns of the Democratic Party are power and not the people.
I know the history. But the wealth inequality issue has already pulled out of the station and Dems aren’t going anywhere if they don’t hop on board soon. Minimum wage, ACA and wealth inequality should be on the agenda of any blue state Dem if they want political futures. And they need to learn to sell those issues proactively.
They don’t need to do anything until there is competition from the left. Like that’s going to happen anytime soon.
But they’ll blather a lot about the unfortunate existence of high income inequality and stick whatever bandaids on the declared problem that Republicans won’t filibuster.
Democrats are scared of the word “Marx” and the epithet “communist”. It nearly undid the New Deal in 1946 and it’s been behind the “soft on defense” smear ever since. The Democratic strategy on defense has always been to outhawk in action the hawks. LBJ went blindly into Vietnam out of fear that Barry Goldwater would “soft on communism” him in 1968. Bill Clinton, having avoided being drafted just like the pillars of the GOP hawk administration that succeeded him, tried to look tougher than Poppy Bush in Somalia and allowed the deep state to set him up. And then he acted too precipitately in Kosovo and ineffectively bombed Saddam Hussein and an al Quaeda training ground just to show “toughness”. In a way, Monica Lewinsky saved him from David Brooks saying he lacked “manhood”.
So now, Democrats are the errand boys and girls of their adopted rich and rich kids. And the Republicans appeal to working folks on “cultural” grounds. Still do in spite of the blatant hypocrisy.
How far do Samuelson’s opinions carry? It this a totally inside debate trying to shape the opinions within the Beltway, a debate among national “opinion leaders”, or what?
it’s been behind the “soft on defense” smear ever since.
It’s amazing to imagine that with military expenditures over twice the rest of the world combined the wingnuts still think we need to spend more military money. It’s like there is a psychological disorder involved or something ….
LBJ went blindly into Vietnam out of fear that Barry Goldwater would “soft on communism” him in 1968.
Well, he did go blindly into Vietnam, but I’m not sure that it was fear of Goldwater and 1968. The stories told since suggest that he told the Joint Chiefs of Staff to just let him play the peace card during the election campaign and after that the constraints would be removed.
There were a lot of people in positions of power who desperately wanted that war. LBJ, being the artful politician he was, knew not to ignore forces of power.
By the way, similar stories are told of Nixon offering assurance to the same forces of power despite campaigning in 1968 on a secret plan to end the war.
Sure wouldn’t have been rational for a Dem prez in, say, early 1965, to fear anything Barry and the Right would have said in 1968 — not after they’d been crushed and discredited in 1964.
But then Lyndon didn’t always act rationally.
Btw , LBJ played both the peace card and the war card in the 1964 election. Covering all possibilities, leaving nothing to chance.
Samuelson’s “it understandably stirs resentment” ignores why it stirs resentment. It is not the absolute inequality it is the way that the inequality happens through blatant use of power and theft. Most employees of any duration have experienced or had someone in their personal networks experience wage theft (off-clock overtime), misclassification as an exempt employee, differential pay for performance all of which benefit those managers above them. A growing number of people have experience dramatic wage deflation through the recessions of the past 15 years or through the deindustrialization of the past 40 years. All of those just happened to advantage the top 1% and led to the growth of the billionaire oligarchy and its monetary stranglehold on politics through lobbying, control of media, and direct purchasing of politicians.
People know they have been flim-flammed, but the billionaire investment in media ensures that they remained confused about who is responsible. The logic is that in a democracy they can control the government but they shouldn’t control private corporations.
Mr. Samuelson wants to continue the confusion, nothing more. It’s what he’s done for years leveraging the Samuelson name.
Policy has the power to address the issue… No, I don’t think so. At least not policy anywhere within the capability of government. Let’s imagine what that policy would look like. It could, for example, force my employer (a major multinational corporation) to spend less on executive salaries, dividends, and share buy backs and more on salaries for its employees. What is the policy that forces that?
We cannot legislate corporate responsibility any more than we can legislate morality. We can tax all those profits but that doesn’t put them into the hands of the people that could use the money. And nothing short of collective international action will stop the money from going to the least regulated tax haven in the world.
There is no policy option.
that’s the Republican point of view anyway.
nice
I hope Booman has a write-up about this:
http://www.washingtonpost.com/lifestyle/style/as-meet-the-press-struggles-in-the-ratings-plenty-of-q
uestions-for-host-david-gregory/2014/04/20/247ed4c0-c72f-11e3-bf7a-be01a9b69cf1_story.html
later today. Sounds like NBC/Comcast is in deep denial. Hahaha!
I curse the right-leaning editorial stupidity of my local rag dropping Krugman in favor of Samuelson’s dreck within the last year or so.
When I read this latest Samuelson wanking this morning I was struck as always by the fundamental, plutocracy-serving dishonesty that’s consistent in Samuelson’s columns: Have you ever noticed? His persistent theme is that “entitlement growth” is crowding/will crowd out other societal priorities, including liberal ones. Where the dishonesty comes in: he determinedly ignores out of existence the obvious option of increasing revenues (i.e., taxes) to address this — especially obvious in the current period of overall tax burdens at/near (or perhaps even below, given the recent tax-cutting spree) post-WWII lows. Especially so for the wealthiest’s tax burden.
But the profound dishonesty (in the extreme violence against the plain meaning of language, in this case “middle”) that leaped of the page at me in this latest column was this:
Did you catch that trick? As Samuelson’s defining “middle 40 percent” and “middle class”, they fall entirely within the top half of the income. Hard to see how you’d get more dishonestly misleading than that. “Middle class” can be reasonably defined a variety of ways (the middle 3 quintiles, i.e., incomes between the bottom 20% and top 20% is an obvious and defensible one, as is the actual “middle 40 percent”), there is no possible, honest definition of “middle class” — or even worse, “middle 40 percent”, which very plainly = incomes between the bottom 30% and top 30% of the distribution — that does not include the actual “middle” (median) of the distribution, but falls entirely within the top half!
Sheesh!
(I don’t know — since he’s unclear on this and I don’t have time to check — whether Samuelson’s adopting usage from the Piketty work he’s citing or — as I think more likely — creating his own lumped categories and dishonest definitions of them from the Piketty data.)
“class warfare is bruising…”
Yes, it is. And the plutocrats have been at war with the middle class and poor for some time now. But it’s only when an argument arises that pro-plutocrat tax and capital policies need to be reconsidered that plutocrat apologists become alarmed at the prospective “bruising”.
In the “conservative era, we changed national policies on taxation and capital mobility to allow for the (re)creation of Gilded Age plutocracy under the guise that it would economically benefit all Americans. It didn’t, and the proponents likely knew it wouldn’t. It would be simple to change the rules yet again, and there are many ideas on how to do it, all of which would involve “bruising” plutocrats.
But until we recognize that we are indeed in a new Gilded Age, it is certain that policy cannot change anything. Works like Piketty’s new book are starting to make the argument. Samuelson’s gambit that wealth inequality is undesirable is conditioned on the proposition that it is more undesirable to do anything about it. The same game as the “reasonable” global warming skeptics (who are actually denialists).
In reality, Samuelson probably doesn’t agree with Piketty, but thinks this tactic is more politic with the plebes—“sure, extreme income inequality is bad for a society, but do you really want to make things much, much worse for yourself by trying to act?” The American Right is always about threats and fear mongering.
Took the words right off my keyboard. As long as it’s the right people being bruised, Samuelson is just fine with it, even if the outcome breeds resentment. It’s the correctives that tizzifies our financial overlords. Although who would argue against legislative reforms of the tax code when one of the alternatives is open revolt? You have to think there was some petit bourgeois in 1789 sipping his wine and telling his best friend, “It’ll never happen” just before the creak of the tumbrels wafted through the window.
Or, as I’ve seen roughly the same point put very succinctly: ‘”they” only think it’s “class warfare” when we show the audacity to fight back’ (i.e., against the class warfare that, as you correctly point out, the plutocrats have been succcessfully waging on the rest of us for decades, now).
Are you saying fat cats bruise easily?
Not sure the fat cats have enough blood in them to bruise, but their calf-skin leather wallets do.