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is the title of this Monday op ed in the New York Times.   It is a well-reasoned and thorough piece, full of relevant links.

Krugman reminds us that inequality is not a new issue, starting with a reference to Oliver Stone's 1987 movie Wall Street with the famous Gordon Gekko quote "Greed is Good."  While politicians may have shied away from addressing inequality, Krugman believes the election of Bill de Blasio in New York, Elizabeth Warren's endorsement of expanding Social Security, and President Obama's speech all serve to provide the possibility of a different political environment, one in which it becomes possible to take on the issue of inequality.  And yet,

Still, the discussion has shifted enough to produce a backlash from pundits arguing that inequality isn’t that big a deal.

They’re wrong.

This is different.

The criciticism Krugman makes is not of the mindset that says austerity is the real issue, the need to balance our accounts.  Instead he takes on those who argue that restoring economic growth is more important than worrying how the gains from that growth are distributed.

First of all, even if you look only at the direct impact of rising inequality on middle-class Americans, it is indeed a very big deal. Beyond that, inequality probably played an important role in creating our economic mess, and has played a crucial role in our failure to clean it up.

Start with the numbers. On average, Americans remain a lot poorer today than they were before the economic crisis. For the bottom 90 percent of families, this impoverishment reflects both a shrinking economic pie and a declining share of that pie. Which mattered more? The answer, amazingly, is that they’re more or less comparable — that is, inequality is rising so fast that over the past six years it has been as big a drag on ordinary American incomes as poor economic performance, even though those years include the worst economic slump since the 1930s.

Krugman views the real crisis of economic inequality to be political, pointing at the bipartisan consensus for financial deregulation (Glass Steagall was finally abolished under Bill Clinton although it had been whittled back for years) that underlay the financial crisis that so hurt ordinary Americans, most of whom have not yet recovered.  Besides that, after the crash, our government rushed to bail out the banks.
What do the pre- and postcrisis consensuses have in common? Both were economically destructive: Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both consensuses, however, corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth.
That is pretty direct.

It is also accurate as to both the politics and the financial impact.

Krugman points out that it is the wealthy who argue for cutting back the social safety net and they are the ones driving our policy debate.  Here I think especially of the likes of Pete Peterson, but as an educator of the many billionaires who are seeking to destroy truly public education and to shift the resources to their profit-making entities.

In education, we regularly get folks bloviating about things they do not understand.

Krugman also has his criticisms of the chattering class:  

Underlying some of the backlash against inequality talk, I believe, is the desire of some pundits to depoliticize our economic discourse, to make it technocratic and nonpartisan. But that’s a pipe dream. Even on what may look like purely technocratic issues, class and inequality end up shaping — and distorting — the debate.
In education policy discussions, we have found the voices of professional educators excluded, along with those of parents and - yes - students.

When it comes to economics, those who are bearing the brunt of the economic burden are similarly excluded from the discussion.

Here I think it worthwhile to look at the Boston Globe piece by my friend Anat Shenker-Osorio, And then inequality happened which is subtitled "How Obama’s language left no one to blame."  Her point is that by clever use of the passive voice Obama avoids placing blame where it belongs, on the banksters who created the mess, who have been bailed out at our expense, who fight like hell to avoid paying appropriate taxes, who negotiate to avoid criminal penalties for clearly illegal actions, and who now advocate cutting the programs that can enable the rest of us to survive.

I thought that caveat was necessary before looking at the final words from Krugman, which are:

So the president was right. Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?
If we are unwilling to name the disease, which is the greed of the financial sector;

If we are unwilling to require those who continue to make obscene amounts of money to pay fairly for the benefits they have clearly received from the tax dollars of all of us, then the answer to Krugman's question is clearly negative.

Inequality is one of many defining challenges of our time.

So is anthropogenic climate change.

So is the privatization of the commons.

We used to recognize that we needed to address inequality - of race, gender, and - yes - economics.

We had a New Deal, which probably kept the Communist party from flourishing the way it did in many Western European nations, and also may have prevented serious violence.

We had a Great Society, in part because we were shamed, starting before LBJ, with things like "Harvest of Shame" and the realization that a large portion of our country was still, decades after the words from FDR, ill-housed, ill-clad, and ill-nourished.

that our GINI index continues to rise demonstrating that inequality continues to grow at a time when corporate profits are at an all-time, when the concentration of wealth exceeds that of the Gilded Age, we are losing the American Dream.

Franklin Roosevelt worried about 1/3 of a nation.

We are approaching 1/2 of our public school children living in poverty.

Will we do anything about this?

Yet again I repeat the words of Hubert Humphrey,

It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.
I look at the just negotiated budget deal, coming as it has after years of attacks on the social safety net in particular and the notion of government services in general, and say that we are failing that moral test.

Krugman has told us Why Inequality Matters from an economic standpoint.

Perhaps we need some politicians to recognize that it matters morally, and that if allowed to continue to expand it will inevitably mean the demise of the democratic republic in which we claim to live.

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Comment Preferences

  •  Good catch, nice analysis. (8+ / 0-)

    Move Single Payer Forward? Join 18,000 Doctors of PNHP and 185,000 member National Nurses United

    by divineorder on Sun Dec 15, 2013 at 07:06:58 PM PST

  •  The Inequality Is the CAUSE of Slow Growth. (11+ / 0-)

    If the rich had the much smaller % of family wealth and income they did in the late 60's, with the people having their then-peak share of these, demand would skyrocket growth.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Dec 15, 2013 at 07:19:24 PM PST

    •  which actually justifies social safety net (9+ / 0-)

      because those on it spend all of it immediately, which reinjects money back into the economy

      whereas corporations and wealthy people sit on cash when they get more, which does not help the economy

      "We didn't set out to save the world; we set out to wonder how other people are doing and to reflect on how our actions affect other people's hearts." - Pema Chodron

      by teacherken on Sun Dec 15, 2013 at 07:21:43 PM PST

      [ Parent ]

      •  And political action to protect it (2+ / 0-)
        Recommended by:
        teacherken, Egalitare

        Krugman's strength here is to remind people of the politics of economic policy.

        What do the pre- and postcrisis consensuses have in common? Both were economically destructive: Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both consensuses, however, corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth.

        This is especially clear if we try to understand why Washington, in the midst of a continuing jobs crisis, somehow became obsessed with the supposed need for cuts in Social Security and Medicare. This obsession never made economic sense: In a depressed economy with record low interest rates, the government should be spending more, not less, and an era of mass unemployment is no time to be focusing on potential fiscal problems decades in the future. Nor did the attack on these programs reflect public demands.

        Surveys of the very wealthy have, however, shown that they — unlike the general public — consider budget deficits a crucial issue and favor big cuts in safety-net programs. And sure enough, those elite priorities took over our policy discourse.

        The elite has always pushed for policies that benefit wealth (the gold standard in the 19th c is but one persistent example). The question is, what will the people demand instead? Will we fight austerity as a theory, whether it's here or in Greece? Will we emphasize how contracting the economy has always been the tool of the super-rich?
  •  Wow. I spent my whole life trying to achieve (0+ / 0-)

    some income inequality, and now it's a bad thing.

    I wish someone had told me fifty years ago, and saved me the effort.

    “Most people are willing to take the Sermon on the Mount as a flag to sail under, but few will use it as a rudder by which to steer.” ― Oliver Wendell Holmes Jr.

    by SpamNunn on Sun Dec 15, 2013 at 07:39:05 PM PST

  •  The same sorts of policy that creates (5+ / 0-)

    income - I like to use the word- disparity, also destabilizes the economy, from 1938 to 1988 we had shorter and shallower economic downturns. Since then they are longer and deeper on average.

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sun Dec 15, 2013 at 08:35:05 PM PST

    •  Yes, 'inequality' is so 'War on Poverty' (1+ / 0-)
      Recommended by:
      Roger Fox

      terminology, so Equal Opportunity Act Dem speak.  This President's inequality speech was a distractor, a triangulation imo.  Followed by majority of House Dems getting down with teh 'suck' and voting for throwing the unemployed under the bus. Disparity is more modern and does what you say.

      Move Single Payer Forward? Join 18,000 Doctors of PNHP and 185,000 member National Nurses United

      by divineorder on Sun Dec 15, 2013 at 08:45:48 PM PST

      [ Parent ]

  •  Excellent analysis Ken, as always, thank you. (1+ / 0-)
    Recommended by:
    teacherken
    •  u r welcome (3+ / 0-)
      Recommended by:
      The Jester, Musial, Zack from the SFV

      however, for whatever reason, this is not getting that much traction.  We'll see if it gets more in the AM at the time of the Pundit roundup  - I am in planning period then tomorrow, so I will be able to put a link up

      want to be sure people read the Krugman

      think my words have some value as well

      "We didn't set out to save the world; we set out to wonder how other people are doing and to reflect on how our actions affect other people's hearts." - Pema Chodron

      by teacherken on Sun Dec 15, 2013 at 09:01:04 PM PST

      [ Parent ]

  •  Crickets (0+ / 0-)

    Thinking about the structure of America's economy is asking too much of most of DKos.

  •  Krugman is the problem (0+ / 0-)

    Krugman's super easy money ideas are inflationary, and the wealthy own the assets.

    Krugman's theories take from the poor and give to very wealthiest.

    •  In time of high debt, inflation helps debtors (1+ / 0-)
      Recommended by:
      a2nite

      & helps borrowers.

      Give yourself an introductory quiz:

      which of the "poor" and "very wealthiest" are debtors, and which are borrowers?
      Unfortunately, besides being wrong about the results of inflation under present debt circumstances, you are also wrong about the likelihood of inflation under the low-demand circumstances of the past five years.  It has consistently run much lower than predicted by the austerity-fetishist deficit- and inflation-hawks that you are listening to. Their predictions have been proven wrong repeatedly, but they refuse to change their analysis because they are wedded to ideology over empiricism.

      Duckmg, you should try to do better than them. Reading a few Krugman articles with an open mind. Delong is also very clear on this stuff, and not behind a paywall.  Mark Thoma aggregatres dozens of empirically open-minded writers, and attracts intelligent debate in comments. These sources do not agree with each other on everything, but they all agree that you are wrong on the two points above.

      •  Inflation encourages debt (1+ / 0-)
        Recommended by:
        Sparhawk

        Which again hurts the poor and helps the wealthy.

        It does not help the middle class to have to go further into debt to pay for a house because it's price is rising.  And even more so a car.

        We have seen greater wealth inequality with the FED being loose as a goose.  Point proven.  Especially with big bankers that should have gone bust being the wealthiest.  As the big bankers gain the most from Krugman's policy.

        •  Stick to environmentalism, your economic "logic" (2+ / 0-)
          Recommended by:
          Egalitare, Sinan

          is merely buzz-words without real-life connections to each other.  

          The key relevant points (which are easily understood through an open-minded reading of economists who are not austerity fetishists) include the following:

          1. Moderate inflation is necessary for many purposes.

          2. Insufficient inflation benefits lenders (including investors in bonds) and hurts debtors.

          3. The Fed has been trying but failing to get inflation up closer to 2% (Krugman and others argue persuasively that higher than 2% would have been very helpful in recent years). A big reason the Fed has been unable to do this is because the pre-crash inflation target was a bit too low, which did not leave enough space to lower real interest rates, because nominal rates are normally impossible to lower below zero.

          4. The argument that the federal government should be borrowing less in this period of insufficient inflation, insufficient demand and very low borrowing costs has been winning in DC, for purely ideological reasons, and the results have been destructive. Among those results is that the Fed has been using less suitable tools to try to accomplish the stimulus of demand, and the increase in inflation, that higher federal deficit spending could have accomplished more directly and reliably.

          But you are correct that

          big bankers ... should have gone bust
          ... or at least should have been brought under control as the price of being bailed out.
          •  Clarification on "gone bust": Krugman & Delong (2+ / 0-)
            Recommended by:
            Sinan, cjtjc

            et al say persuasively that simply standing aside to allow the big banks to default on their debts during the financial crisis would have crippled the rest of the economy.

            So the appropriate amount of 'going bust' would have been for the shareholders in banks to have lost much of their equity, by treating the federal government's bailout funds as an injection of capital in return for issuance of new shares (diluting the previous shareholders down to a much smaller ownership percentage).

            As the controlling shareholder, the government could have forced the big banks to reform in ways such as:

            1. separate their gambling from their deposit-taking and other 'public utility'-type functions;

            2. stop over-paying their top personnel (the "big bankers" referred to in the previous exchange of comments); and

            3. stop over-influencing government policy by massive spending on political contributions and lobbying. (More restrictions on revolving door employment might also be necessary to reduce this influence).

          •  The biggest debtors are Wall Street corp.s (0+ / 0-)

            Encouraging debt is not helping anyone.  This is your big mistake in logic here.

            Your second mistake is assuming inflation is a benefit.  This is just nonsense.

            •  Encouraging debt does help the very wealthy (0+ / 0-)
              •  The conclusory assumptions in this dialog are (0+ / 0-)

                entirely from you, with no attempt to explain the logic or evidence that underlies them. (I have explained mine and you have ignored them.)

                Relevant evidence and logic is easily available for you to read in case you ever decide to subject your conclusory assumptions to the test of reasoned debate.

                •  You assume inflation is needed, (0+ / 0-)

                  You assume that the poor are debtors and therefore encouraging debt is a blessing.

                  Both are false assumptions not based on reason.

                  It is hard to argue with the fact that the wealthy own the assets.  It is hard to argue with the fact that Krugman's policy is causing assets to rise which obviously enriches the wealthy.

                  So we have the wealthy enriched and nothing but less purchasing power for those that don't own assets.

                  •  The assets owned by wealthy consist substantially (0+ / 0-)

                    of debts, which are owed by governments (i.e. taxpayers) and (after netting out) by the non-wealthy.

                    Wealthy who do not hold many debts do exist, but they are exceptions, like self-capitalizing entrepreneurs and Silicon Valley venture capitalists.

                    (I am not sure what sort of economy you envision in which it is possible for these types of debts to be greatly reduced, but it would be an economy very different than has been seen for a very long time, and one in which a poor person could not afford to buy any house, or start virtually any business.)

                    Krugman's policies have not been tried. Most significantly:

                    1. Government spending (especially the combination of federal and local governments) has been lower than Krugman recommended, while

                    2. the Fed's inflation target has been higher than Krugman recommended.

                    You are correct that the Fed's Quantitative Easing (which was a desperate non-optimal attempt to overcome the consequences of the above points 1 and 2) has pushed up the traded prices of various investments held by the wealthy, but this is not generally what economists are talking about when they refer to (wage-price) "inflation". ("Asset inflation" is considered a separate issue, although not completely unrelated).

                    You are also correct that the Fed's efforts have encouraged housing prices to rebound from post-crisis lows, reducing their affordability to poor people. But this is a relatively small part of a big picture.  What most potential house buyers and poor people need are jobs, which depend on aggregate demand, which has been constrained from rebounding by excessive worries about inflation.

                    As for the question you raise of:

                    'whether it is beneficial to encourage the poor to borrow more',
                    ...I believe the question more relevant to Krugman's recommendations and analysis, including what policy towards inflation is optimal, which I have been discussing, is increased government borrowing, which increases government debt. I am persuaded by Krugman and others that the poor would have benefited greatly if governments had borrowed more in the last five years, at the prevailing very low (sometimes negative "real") interest rates, in order to increase aggregate demand and to address long-term investment needs.
                    Every repair of a broken bridge:

                    (a) employs construction workers (who spend their salaries to create salaries and profits for other people, all of whom consequently pay more taxes, receive fewer government benefits, and engage in fewer socially costly and disruptive activities), and

                    (b) increases the efficiency of every trip across that bridge, for the benefit of consumers and of businesses and their employees.

                    Eventually this added government debt increases the government's needed tax revenue, which would not necessarily be raised by taxing the poor, and can be largely raised through growing the size of the economy being taxed. (Because tax revenues are increased by economic growth, and that growth can be increased by government investment and other spending under circumstances of insufficient demand and high unemployment, the money is effectively free to the government at those times, like recent years, when the government can borrow at very low interest rates).

                    One of Krugman's persuasive arguments is to ask:

                    'What happened to the huge federal debt at the end of WWII?'

                    The factual historical answer is: it never went away. It was rolled over and it actually continued to increase in dollars. But, as a percentage of the US economy, it declined rapidly.
                    Reasons for this percentage decline included:

                    (i) because the US economy grew faster than the debt, and

                    (ii) because inflation reduced the real value of the debt.

                    Replicating that triumph (in which a significant factor was Eisenhower's investment in the Interstate Highway System) is hindered by obsessive hostility to inflation, and especially to government debt.
    •  eliminate krugman...problem solved! yes! (0+ / 0-)
      Krugman is the problem

      Sarah Palin is a disgusting racist pig.

      by memofromturner on Mon Dec 16, 2013 at 04:21:24 AM PST

      [ Parent ]

  •  I'd still argue that inequality is not the issue. (0+ / 0-)

    Nor is equality a solution. The issue is deprivation, the conscious withholding of resources that people need to thrive.

    Wherefor the deprivation? It is what the culture of obedience demands. How are you going to make people obey, if there's no palpable punishment?

    But, obedience is a virtue. How can it be responsible for such vicious results? The answer is coercion. Whenever virtue is coerced, it turns into a vice.

    Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

    by hannah on Mon Dec 16, 2013 at 04:25:41 AM PST

    •  To the extent that inequality is a measurement... (1+ / 0-)
      Recommended by:
      a2nite

      ...I understand why you assert that it is not the issue. But it is a pretty good avatar for the multiple and interconnected forces that in aggregate are "the issue."

      Change does not roll in on the wheels of inevitability, but comes through continuous struggle. --Martin Luther King Jr.

      by Egalitare on Mon Dec 16, 2013 at 06:02:53 AM PST

      [ Parent ]

  •  "inevitably mean the demise"- (0+ / 0-)

    you seem to acknowledge that what's left is the assertion, not the reality. Perhaps it's more accurate to admit it is gone, but could be revived, given that the constitutional structure is still in place. With the big exception of Buckley and progeny which altered the constitution to authorize an oligarchy. The process might be similar to when Dred Scott essentially outlawed the Republican Party and Lincoln responded that some decisions are not binding.

  •  Inequality isn't just the cause or the symptom; (0+ / 0-)

    It's the disease itself.

    A right answer to the wrong question is a wrong answer.

    by legalarray on Mon Dec 16, 2013 at 11:48:39 AM PST

  •  Our founders knew this: (2+ / 0-)
    Recommended by:
    teacherken, Musial

    When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny.” John Adams

    “As riches increase and accumulate in few hands . . . the tendency of things will be to depart from the republican standard.” Alexander Hamilton

    “We can have democracy in this country or we can have great concentrated wealth in the hands of a few, but we cannot have both.” Justice Louis Brandeis

    “An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.” Plutarch

    “Of all the potential perils to the new American republic, the prospect of concentrated power . . . troubled the intellectual leaders of the Revolutionary generation. Familiar as the founders were with old Europe . . . they understood why the accumulation of inherited wealth led to inequities and imbalances that inevitably corrupted any system of government.” Joe Conason

    “I hope we shall . . . crush in [its] birth the aristocracy of our monied corporations.” Thomas Jefferson

    “Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth.” Theodore Roosevelt

    “As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln

    “It [concentration of wealth and power] has been a menace to . . . American democracy.” Franklin D. Roosevelt

    We need to to tax the rich:  50% over a million in capital gains and income, 90% over a billion, with 10 year averaging, and inflation adjusted basis.

    We also need a tax on accumulated wealth.  

  •  But see confederate VP Stephens' Cornerstone (0+ / 0-)

    speech, self-evident truth that all are not created equal. The U.S. has never been a republican form of government  under Art. 4, clause 4, the Guarantee clause. Jim Crow now reinstated by Shelby County.

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