Losing Our Country

[gifford1967]

June 10, 2005
Losing Our Country
By PAUL KRUGMAN

Baby boomers like me grew up in a relatively equal society. In the 1960's America was a place in which very few people were extremely wealthy, many blue-collar workers earned wages that placed them comfortably in the middle class, and working families could expect steadily rising living standards and a reasonable degree of economic security.

But as The Times's series on class in America reminds us, that was another country. The middle-class society I grew up in no longer exists.

Working families have seen little if any progress over the past 30 years. Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages.

Meanwhile, economic security is a thing of the past: year-to-year fluctuations in the incomes of working families are far larger than they were a generation ago. All it takes is a bit of bad luck in employment or health to plunge a family that seems solidly middle-class into poverty.

But the wealthy have done very well indeed. Since 1973 the average income of the top 1 percent of Americans has doubled, and the income of the top 0.1 percent has tripled.

Why is this happening? I'll have more to say on that another day, but for now let me just point out that middle-class America didn't emerge by accident. It was created by what has been called the Great Compression of incomes that took place during World War II, and sustained for a generation by social norms that favored equality, strong labor unions and progressive taxation. Since the 1970's, all of those sustaining forces have lost their power.

Since 1980 in particular, U.S. government policies have consistently favored the wealthy at the expense of working families - and under the current administration, that favoritism has become extreme and relentless. From tax cuts that favor the rich to bankruptcy "reform" that punishes the unlucky, almost every domestic policy seems intended to accelerate our march back to the robber baron era.

It's not a pretty picture - which is why right-wing partisans try so hard to discredit anyone who tries to explain to the public what's going on.

These partisans rely in part on obfuscation: shaping, slicing and selectively presenting data in an attempt to mislead. For example, it's a plain fact that the Bush tax cuts heavily favor the rich, especially those who derive most of their income from inherited wealth. Yet this year's Economic Report of the President, in a bravura demonstration of how to lie with statistics, claimed that the cuts "increased the overall progressivity of the federal tax system."

The partisans also rely in part on scare tactics, insisting that any attempt to limit inequality would undermine economic incentives and reduce all of us to shared misery. That claim ignores the fact of U.S. economic success after World War II. It also ignores the lesson we should have learned from recent corporate scandals: sometimes the prospect of great wealth for those who succeed provides an incentive not for high performance, but for fraud.

Above all, the partisans engage in name-calling. To suggest that sustaining programs like Social Security, which protects working Americans from economic risk, should have priority over tax cuts for the rich is to practice "class warfare." To show concern over the growing inequality is to engage in the "politics of envy."

But the real reasons to worry about the explosion of inequality since the 1970's have nothing to do with envy. The fact is that working families aren't sharing in the economy's growth, and face growing economic insecurity. And there's good reason to believe that a society in which most people can reasonably be considered middle class is a better society - and more likely to be a functioning democracy - than one in which there are great extremes of wealth and poverty.

Reversing the rise in inequality and economic insecurity won't be easy: the middle-class society we have lost emerged only after the country was shaken by depression and war. But we can make a start by calling attention to the politicians who systematically make things worse in catering to their contributors. Never mind that straw man, the politics of envy. Let's try to do something about the politics of greed.

http://www.nytimes.com/2005/06/10/opinion/10krugman.html?hp=&pagewanted=print

[RocketMan Tex]

Another excellent column by Krugman!

[langal]

He seems as partisan as those he accuses of being partisan.

I don't think GW's policies really have anything to do with this perceived income redistribution to the wealthy. He's only been president since 2000. Krugman says the trend began in 1973. We've had 12 years of Democrat white houses and many years of Democrat-controlled legislatures since that time.

How do income-tax rates, bankruptcy law, and inheritance tax affect a person's wages?

[Saint Louis]

I'm inclined not to totally blame GWB and the GOP, not that they have helped matters. Overall our government has bowed to the wishes of the wealthy, no matter which party is in office. Part of the problem is globalization. The U.S. doesn't live in a glass bowl. Cheaper labor and free trade contribute to the problem. Not that most CEO's or stockholders would care. Most of today's business is keeping the numbers looking good so CEO's get their bonuses and the stockholders are happy. If you have to layoff workers, cut wages, do away with pensions or slap the cost of healthcare on the employee’s shoulders, then that is what you do. Is that right, depends on who you talk to. America is becoming a nation of the haves and the have nots. Of course if you have too many have nots, then the haves may lose their heads.

[FranchiseBlade]

He seems as partisan as those he accuses of being partisan.

I don't think GW's policies really have anything to do with this perceived income redistribution to the wealthy. He's only been president since 2000. Krugman says the trend began in 1973. We've had 12 years of Democrat white houses and many years of Democrat-controlled legislatures since that time.

How do income-tax rates, bankruptcy law, and inheritance tax affect a person's wages?
Some are taken directly from a person's wage. Others affect only the wealthiest Americans by giving them breaks while taking money out of the coffers used by all Americans.

[langal]

Some are taken directly from a person's wage. Others affect only the wealthiest Americans by giving them breaks while taking money out of the coffers used by all Americans.

Then I suppose Krugman's income data is post-tax? Didn't GW lower income-tax rates for everybody? It seems that even if all the projected lost revenues from GW's tax cut were added on the middle-classes' share of the GDP, it would not raise the middle-class household income by that much. I may very well be wrong about this since I haven't researched any exact figures.

Not sure about Bush41 and Clinton. Even then - those tax hikes passed a Democrat-Congress (in one case) and were signed by a Democrat president (in the other case).

I think St Louis's globalization theory holds a lot more water than Krugman's partisan gripes. Maybe St Louis should write for the NYTimes.

[wnes]

I'm inclined not to totally blame GWB and the GOP, not that they have helped matters. Overall our government has bowed to the wishes of the wealthy, no matter which party is in office. Part of the problem is globalization. The U.S. doesn't live in a glass bowl. Cheaper labor and free trade contribute to the problem. Not that most CEO's or stockholders would care. Most of today's business is keeping the numbers looking good so CEO's get their bonuses and the stockholders are happy. If you have to layoff workers, cut wages, do away with pensions or slap the cost of healthcare on the employee’s shoulders, then that is what you do. Is that right, depends on who you talk to. America is becoming a nation of the haves and the have nots. Of course if you have too many have nots, then the haves may lose their heads.

Libertarians and corporate elites keep touting the concept of "Ownership Society" to advance their agenda. One of their must-quote examples is 68% of American households own homes. The questions are how many have the true ownership, i.e., have paid off their mortgages? How many are one of two paychecks away - without digging their retirement funds - from losing their ownership status when a major health problem strike upon a family member? Or shall I say, how many are living an American dream that are actually on shaky ground?

[SamFisher]

Then I suppose Krugman's income data is post-tax? Didn't GW lower income-tax rates for everybody? It seems that even if all the projected lost revenues from GW's tax cut were added on the middle-classes' share of the GDP, it would not raise the middle-class household income by that much. I may very well be wrong about this since I haven't researched any exact figures.

Not sure about Bush41 and Clinton. Even then - those tax hikes passed a Democrat-Congress (in one case) and were signed by a Democrat president (in the other case).

I think St Louis's globalization theory holds a lot more water than Krugman's partisan gripes. Maybe St Louis should write for the NYTimes.

Partisan gripes? I trust you're not that acquainted with Krugman's academic resume, which makes him one of the few Times columnists that I respect other than as a talking head.

I'm not really sure what your question is. It has been agreed upon for the last few years that while the overall tax burden decreased under Bush- the share of the overall tax burden which was borne by the middle classes in percentage terms has increased as opposed to those born by the very lowest and highest classes. Likewise, the vast majority of tax cuts (which are responsible for about half of each years deficits) go back to the uber classes - a lot of whom (Gates, Buffet, Soros, Turner, etc) think it's an idiotic idea.

I'm not sure what you're really arguing with here - the fact that income inequality has been skyrocketing over the past 20 years, and particularly so over the last 5 is not controversial or disputed - it is as plain as black and white. We are following the economic model followed by Argentina and other latin american countries - huge deficits, huge income inequality - but an overriding faith that things will take care of themselves at some point somehow, some way.

[tigermission1]

I don't think it is just a GOP thing, it is simply the fault of the entire political system under which we live today, where both parties have become nothing more than pawns for corporate America. I was having this discussion once with a former college professor of mine, and he used the "f" word (fascism) and basically said that it isn't a stretch to say that our country is a corporatist state. I was sort of taken aback by that a bit, and decided to read more about fascism as a political economic model.

I don't think it's much of a secret that we live under a polical system where our elected leaders cater almost entirely to the elite class.

[langal]

Partisan gripes? I trust you're not that acquainted with Krugman's academic resume, which makes him one of the few Times columnists that I respect other than as a talking head.

I'm not really sure what your question is. It has been agreed upon for the last few years that while the overall tax burden decreased under Bush- the share of the overall tax burden which was borne by the middle classes in percentage terms has increased as opposed to those born by the very lowest and highest classes. Likewise, the vast majority of tax cuts (which are responsible for about half of each years deficits) go back to the uber classes - a lot of whom (Gates, Buffet, Soros, Turner, etc) think it's an idiotic idea.

I'm not sure what you're really arguing with here - the fact that income inequality has been skyrocketing over the past 20 years, and particularly so over the last 5 is not controversial or disputed - it is as plain as black and white. We are following the economic model followed by Argentina and other latin american countries - huge deficits, huge income inequality - but an overriding faith that things will take care of themselves at some point somehow, some way.


I am just asking people smarter than me how tax-cuts, bankrupcty laws, and inheritance taxes DEPRESS real wages. Isn't that the crux of Krugman's article?

I only have a Bachelor's in Economics so I never learned these things from my professors. The one thing I did learn was that it is a very "dismal" science to say the least. Hard truths are not easily obtainable.

Just because Krugman has a PhD and such doesn't make his OPINIONS correct. I'm sure I can dig up stuff from the Cato Institute PhD's that would refute Krugman.

[SamFisher]

I am just asking people smarter than me how tax-cuts, bankrupcty laws, and inheritance taxes DEPRESS real wages. Isn't that the crux of Krugman's article?

I only have a Bachelor's in Economics so I never learned these things from my professors. The one thing I did learn was that it is a very "dismal" science to say the least. Hard truths are not easily obtainable.

Just because Krugman has a PhD and such doesn't make his OPINIONS correct. I'm sure I can dig up stuff from the Cato Institute PhD's that would refute Krugman.


I'm not sure where you're getting this "tax cuts depress real wages" as being the crux of the article. It is not mentioned or implied anywhere that I can see. Where do you get this? Which line or paragraph? I don't see it anywhere.

The crux of the article, and I read, and of the whole series from the Times on which it is based for the last 10 days or so, is that income inequality is rising and that income mobility is declining - which is based off of numbers from the IRS, inter alia. Again - this conclusion is not disputed by anybody - you could most definitely not find a Cato institute paper that said that the opposite was true with a straight face.

It really doesn't get much more "hard" than that.

[langal]

I'm not sure where you're getting this "tax cuts depress real wages" as being the crux of the article. It is not mentioned or implied anywhere that I can see. Where do you get this? Which line or paragraph? I don't see it anywhere.

The crux of the article, and I read, and of the whole series from the Times on which it is based for the last 10 days or so, is that income inequality is rising and that income mobility is declining - which is based off of numbers from the IRS, inter alia. Again - this conclusion is not disputed by anybody - you could most definitely not find a Cato institute paper that said that the opposite was true with a straight face.

It really doesn't get much more "hard" than that.

this was the part that caught my eye:

"Working families have seen little if any progress over the past 30 years. Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages"

"From tax cuts that favor the rich to bankruptcy "reform" that punishes the unlucky, almost every domestic policy seems intended to accelerate our march back to the robber baron era."

From what I know, GW cut every tax rate. I understand how 1 percent of 1 million is more than 1 percent of 100 - but the average guy did pay less $$ in taxes. Furthermore - i don't see how the bankruptcy law reforms would have a depressing effect on real wages.

All I did was ask someone smarter than me how tax cuts, death taxes, and bankrupcty depress wages - as Krugman implies.

[SamFisher]

this was the part that caught my eye:

"Working families have seen little if any progress over the past 30 years. Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages"

"From tax cuts that favor the rich to bankruptcy "reform" that punishes the unlucky, almost every domestic policy seems intended to accelerate our march back to the robber baron era."

From what I know, GW cut every tax rate. I understand how 1 percent of 1 million is more than 1 percent of 100 - but the average guy did pay less $$ in taxes. Furthermore - i don't see how the bankruptcy law reforms would have a depressing effect on real wages.

All I did was ask someone smarter than me how tax cuts, death taxes, and bankrupcty depress wages - as Krugman implies.


Where does he say real wages are depressed under Bush? It does not say it all - in fact the portion that you quote (which does not refer to real wages being depressed) refers to the period of 1973-2003, which obvously isn't only referring to the Bush Administration.

I don't see it up there. Why are you reading this in? :confused: Maybe I am smarter than you, or you are smarter than me - but I don't see anything remotely resembling that statement in the quoted text (or the entire article for that matter).

By the way - bankruptcy reform was disfavored by a lot of conservative economists as it tends to discourage access to cheap capital and hence discourage innovation & productivity gains - so if you are thinking of labeling that as a partisan cross to bear you might be barking up the wrong tree.

[Sishir Chang]

All I did was ask someone smarter than me how tax cuts, death taxes, and bankrupcty depress wages - as Krugman implies.

But in none of your quotes does Krugman mention real wages. What he's talking about is wealth disparity and those things you cited exacerbate the wealth disparity since they primarily favor the wealthy while in the case of bankruptcy primarily hit the poor the hardest.

And yes I am smarter than you. :p ;)

[Sishir Chang]

Libertarians and corporate elites keep touting the concept of "Ownership Society" to advance their agenda. One of their must-quote examples is 68% of American households own homes. The questions are how many have the true ownership, i.e., have paid off their mortgages? How many are one of two paychecks away - without digging their retirement funds - from losing their ownership status when a major health problem strike upon a family member? Or shall I say, how many are living an American dream that are actually on shaky ground?

I think this is a great point. IMO the biggest problem is that we're not so much an ownership society as we are a credit soceity. We've been racking up so much debt collectively and governmentally that our economy is in some ways a house of cards held together by a flow of easy credit.

[langal]

By the way - bankruptcy reform was disfavored by a lot of conservative economists as it tends to discourage access to cheap capital and hence discourage innovation & productivity gains - so if you are thinking of labeling that as a partisan cross to bear you might be barking up the wrong tree.

"From tax cuts that favor the rich to bankruptcy "reform" that punishes the unlucky, almost every domestic policy seems intended to accelerate our march back to the robber baron era.

It's not a pretty picture - which is why right-wing partisans try so hard to discredit anyone who tries to explain to the public what's going on."

Actually it was Krugman who labeled that as a right-wing partisan move. Not me.

[SamFisher]

"From tax cuts that favor the rich to bankruptcy "reform" that punishes the unlucky, almost every domestic policy seems intended to accelerate our march back to the robber baron era.

It's not a pretty picture - which is why right-wing partisans try so hard to discredit anyone who tries to explain to the public what's going on."

Actually it was Krugman who labeled that as a right-wing partisan move. Not me.

Sure, the Bankruptcy Abuse Act of 2005 was overwhelmingly supported by congressional Republicans at the behest of their campaign donors and signed by the president - however, opposition to it comes from both sides is the point I was making.

[langal]

But in none of your quotes does Krugman mention real wages. What he's talking about is wealth disparity and those things you cited exacerbate the wealth disparity since they primarily favor the wealthy while in the case of bankruptcy primarily hit the poor the hardest.

And yes I am smarter than you. :p ;)

When Krugman says that household income only grew by 22 percent from 1973 to 2003 (largely due to longer hours and working wives as he puts it) , I am assuming that he thinks that "partisan" (I assume he means Republican) policies have had a depressing effect on real wages.

Maybe I just don't like the tenor of his article and just disagree, at heart, with his opinions. Economics is largely opinion-based. I suppose if super-robots came down and gave us all the magical formulas (like Hari Seldon), the D&D board would be relegated to abortion arguments.

I think you and Sam Fisher are both very smart people even though I don't agree with you all a lot of the times. It is very refreshing to hear intelligent counters to my libertarian-conservative opinions. My current circle of friends, though self-styled "liberals", don't really follow the news or anything. I must admit that I have become more moderate since participating on this board.

[StupidMoniker]

If, adjusted for inflation, the middle class stay at the same level they were at in 1973 (which is implied here with the women working more bit), how are they worse off than they were in 1973? Just because the super rich are more super rich, what difference does that make to the middle class. The problem doesn't come from someone else getting more, it comes from you getting less. If no one is getting less, then I don't see a problem. People are bitching because those who are driving the growth of the economy are the one's benefitting from that growth.

[SamFisher]

If, adjusted for inflation, the middle class stay at the same level they were at in 1973 (which is implied here with the women working more bit), how are they worse off than they were in 1973? .

nobody said anybody was worse off in real terms.


The problem doesn't come from someone else getting more, it comes from you getting less. If no one is getting less, then I don't see a problem. People are bitching because those who are driving the growth of the economy are the one's benefitting from that growth.

There is an extensive historical record of the economic and social instability that occurs when societies become extremely stratified - see Latin America, 18th C- present, France, 1789, etc etc etc.

In any event, the biggest news is the decline in social mobility - wealth now tends to concentrate itself in the top classes by virtue of inertia rather than merit or productiviy or anything else - which is not only the symbolic death of the american dream but likely inefficient over the long run as it screws up incentive structures.

[Saint Louis]

Well I am not economist, but a couple of observations from my own life.

Heatlh care cost are killing me. In six months I have a had a daughter break her arm that needed resetting and another child need eye surgery and an MRI. It isn't the overall cost to me since I have health insurance, but just the sum of all the bills piled together on top of my normal family budget.

Housing costs are unreal. I bought a new home in Arizona, signed the contract last June. In one year the price of the base model that I bought has risen to more then the total cost of my house, add-ons included. Base model price has increased in one year by more then $45K. An increase of 32%. Part of the problem is investors from out of state are gobbling up all the used houses as investment properties. So basically people with money are driving the prices of homes up out of the reach of the people who need them.

Now if health care costs and housing costs have been increasing at a much larger rate then wages, then I am not doing as well as my parents back in 1973. These are the two big ones that jump out at me. Even with the rise of gasonline prices, I think most other goods are similar in price to 1973 when adjusted with inflation. Also, America in 1973 was a cashed based society that paid as you went. Today America is a credit based society that pay later. So the big question, if you took away all credit except for mortgages and car payments; what would happen to America's economy? What would happen if half of America suddenly defaulted, went bankrupt, on all of their credit card debt?

[gifford1967]

Well I am not economist, but a couple of observations from my own life....


Good, thoughtful post.

[langal]

Well I am not economist, but a couple of observations from my own life.

Heatlh care cost are killing me. In six months I have a had a daughter break her arm that needed resetting and another child need eye surgery and an MRI. It isn't the overall cost to me since I have health insurance, but just the sum of all the bills piled together on top of my normal family budget.

Housing costs are unreal. I bought a new home in Arizona, signed the contract last June. In one year the price of the base model that I bought has risen to more then the total cost of my house, add-ons included. Base model price has increased in one year by more then $45K. An increase of 32%. Part of the problem is investors from out of state are gobbling up all the used houses as investment properties. So basically people with money are driving the prices of homes up out of the reach of the people who need them.

Now if health care costs and housing costs have been increasing at a much larger rate then wages, then I am not doing as well as my parents back in 1973. These are the two big ones that jump out at me. Even with the rise of gasonline prices, I think most other goods are similar in price to 1973 when adjusted with inflation. Also, America in 1973 was a cashed based society that paid as you went. Today America is a credit based society that pay later. So the big question, if you took away all credit except for mortgages and car payments; what would happen to America's economy? What would happen if half of America suddenly defaulted, went bankrupt, on all of their credit card debt?

The credit card debt isn't as bad as many people report. While the household average is around 8,000 - only 29 percent have over 1000.

source - http://moneycentral.msn.com/content/Banking/creditcardsmarts/P74808.asp

I think a lot of rich people use their credit cards like bank cards - rack up huge balances, and then just pay them off when they get their bill.

I am scared about the flurry of interest-only mortgages though.

I hope you kids are doing well!

[Saint Louis]

I am scared about the flurry of interest-only mortgages though.


Oh yeah, I have one of those mortgages too. Not that I wanted it, but my wife lost her job two months before we closed on our house. Hopefully I will be able to refinance to a 30 year fixed before the bubble bursts.

The kids are going well. Never a dull moment with little ones.

[Rocket River]

He seems as partisan as those he accuses of being partisan.

I don't think GW's policies really have anything to do with this perceived income redistribution to the wealthy. He's only been president since 2000. Krugman says the trend began in 1973. We've had 12 years of Democrat white houses and many years of Democrat-controlled legislatures since that time.

How do income-tax rates, bankruptcy law, and inheritance tax affect a person's wages?


actually it is not about Demos and Repubs

hell most of the Senators are Rich
and
Representatives ain't exactly hurting either

Rocket River

[Sishir Chang]

Well I am not economist, but a couple of observations from my own life.


Well I'm not an economist either but I do play one on TV. ;)

[StupidMoniker]

nobody said anybody was worse off in real terms.

The article did say that financial security is a thing of the past. It is also titled losing our country. It is hard not to read doom and gloom into it.

There is an extensive historical record of the economic and social instability that occurs when societies become extremely stratified - see Latin America, 18th C- present, France, 1789, etc etc etc.

America still has mostly middle class people. You are talking about examples with mostly very rich and very poor. There is no comparison.

In any event, the biggest news is the decline in social mobility - wealth now tends to concentrate itself in the top classes by virtue of inertia rather than merit or productiviy or anything else - which is not only the symbolic death of the american dream but likely inefficient over the long run as it screws up incentive structures.

I think this is a result of having more focus on being a professional than an entrepreneur. You don't get rich by working for somebody else, you do it by having others work for you. That, combined with the culture of the lower class that does not value education (often even stigmatizing it), when they are the people that can move into the middle class by getting a degree leads to a lack of social mobility. I think it goes far beyond inertia, and ties into our who modus operendi in raising children.

[pirc1]

The credit card debt isn't as bad as many people report. While the household average is around 8,000 - only 29 percent have over 1000.

source - http://moneycentral.msn.com/content/Banking/creditcardsmarts/P74808.asp

I think a lot of rich people use their credit cards like bank cards - rack up huge balances, and then just pay them off when they get their bill.

I am scared about the flurry of interest-only mortgages though.

I hope you kids are doing well!


Ha, I do have around 9000 in credit card debt , but it was given to me at 0% for a year. So I figure why not make some money in interest at 3.5%, that is close to 300 bucks. :D

[SamFisher]

The article did say that financial security is a thing of the past. It is also titled losing our country. It is hard not to read doom and gloom into it.


Sure it is negative - it presents negative economic trends which are undeniable - but you didn't answer the question - why did you specifically read into it the fact that the middle class is worse off in real terms - it does not say this, nor anything remotely approaching that taxes depress real wages, which you were apparently aattmepting to defend?


America still has mostly middle class people. You are talking about examples with mostly very rich and very poor. There is no comparison.


But the america's middle class in relation to it's super rich are becoming increasingly less wealthy - the point is that when capital accumulates at the top (as it did, for example, in thee 1920's) instability results. Likewise, the argentinian economy in the 90's in a broader sense exhibits many characteristics similar to ours right now. If you are claiming that there is "no comparison" you are simply wrong, just like you were wrong about your claim that the article states wages are depressed in real terms.

[StupidMoniker]

I didn't say that the article claimed anyone was worse off in real terms. I said that the fact that people are not worse off makes the doom and gloom, sky is falling tone of the article unjustified. From that, you accused me of saying the article made false claims of people being worse off. I also never mentioned taxes depressing real wages. For some reason, you like to attribute views to me that I have not expressed.

I would say the problems that arose in the '30s were more a result of a rampant increase in stock speculation on credit, more so than the stratification of wealth. The stock market crashes and a lot of people are in the poor house. If people were not investing money they didn't have, then a) the stock market probably would not have collapsed so badly from everyone pulling out at the beginning, and b) any depression of the stock market would not have led to such an increase in severe poverty. I don't see the same thing happening now, or the precipitous drop a while back would have had a similar disasterous result as the '29 crash. I really don't see modern America as a copy of France at the time of the revolution. We do not have the hordes of starving people and the tiny aristocracy, we have mostly middle class. I haven't studied Argentina enough to talk about that, but if it is anything like your french revolution example, then I stand by my claim of no comparison. Mostly middle class is much different than mostly poor and starving.

[langal]

If tax-cuts, bankruptcy reform, and death tax do not have an impeding effect on real wage growth for the middle-class, then what is Krugman so concerned about? Those are the specific examples of partisan ppolicies he writes in his article.

No one here has explained to me why the afformentioned "partisan" policies would have a impeding effect on real wage growth.

It's also a little hypocritical to accues the right-wing partisans of name-calling when Howard Dean is the chairman of the DNP.

[FranchiseBlade]

If tax-cuts, bankruptcy reform, and death tax do not have an impeding effect on real wage growth for the middle-class, then what is Krugman so concerned about? Those are the specific examples of partisan ppolicies he writes in his article.

No one here has explained to me why the afformentioned "partisan" policies would have a impeding effect on real wage growth.

It's also a little hypocritical to accues the right-wing partisans of name-calling when Howard Dean is the chairman of the DNP.
But it goes both ways. In the other thread I mentioned Karl Rove calling Democrats dumb, and Tom Delay has said they have 'no class'.
He went on to say that Republicans helped the nation get over 9/11 while democrats did nothing.

AP) House Majority Leader Tom DeLay, facing an audience of conservative well-wishers who reject as politically motivated the ethics questions that have dogged him for months, on Thursday night fired back at Democrats by calling them members of a party with no ideas and "no class."
http://www.cbsnews.com/stories/2005/05/13/politics/main694959.shtml

It isn't a pleasant state of politics, but Howard Dean isn't doing anything different.

[langal]

But it goes both ways. In the other thread I mentioned Karl Rove calling Democrats dumb, and Tom Delay has said they have 'no class'.
He went on to say that Republicans helped the nation get over 9/11 while democrats did nothing.

It isn't a pleasant state of politics, but Howard Dean isn't doing anything different.

I totally agree with you. The crap flies both ways. I'm just trying to point out Krugman's article for what it is - another partisan editorial.

I remember that I had to read on of his books or something for my econ degree (forget which one) - and I knew he had political leanings (everyone does). I just didn't know it had gone this far.

[calurker]

I would say the problems that arose in the '30s were more a result of a rampant increase in stock speculation on credit, more so than the stratification of wealth. The stock market crashes and a lot of people are in the poor house. If people were not investing money they didn't have, then a) the stock market probably would not have collapsed so badly from everyone pulling out at the beginning, and b) any depression of the stock market would not have led to such an increase in severe poverty. I don't see the same thing happening now, or the precipitous drop a while back would have had a similar disasterous result as the '29 crash. I really don't see modern America as a copy of France at the time of the revolution. We do not have the hordes of starving people and the tiny aristocracy, we have mostly middle class. I haven't studied Argentina enough to talk about that, but if it is anything like your french revolution example, then I stand by my claim of no comparison. Mostly middle class is much different than mostly poor and starving.

Replace "stock market" with "housing market" and you get a pretty good snapshot of today's perilous economy, with the rest of things that you described soon to follow. But the real question is, if you are not one of the super rich, why are you so adamant about defending an inequitable situation, other than blind partisan loyalty? In other words, why do you think the middle class should NOT become better off at the same proportionate rate as the super wealthy?

[StupidMoniker]

In other words, why do you think the middle class should NOT become better off at the same proportionate rate as the super wealthy?

Because I am not so egocentric as to be unable to take an unbiased view of things. People who innovate and take risks, investing their time and money to create a business are the people that grow the economy. Somebody working as a machinist, an actor, or a secretary keep everything going, but it is the factory owner, the producer, and the entrepreneur that give them those jobs and expand the economy. Since they are the one's creating new wealth, I have no problem with them getting a disproportionate cut of the new wealth created. We also have to consider that while the middle class as a proportion of the population may be pretty stagnant, the raw number of people in the middle class is increasing with the population. It is the rich that are providing the jobs for those workers. If the upper class were causing the middle class to become less wealthy, then I would agree that the situation is unteneble and we are quickly moving toward a country of haves and have-nots. As it stands now we are a country of haves and have-mores.

[SamFisher]

I totally agree with you. The crap flies both ways. I'm just trying to point out Krugman's article for what it is - another partisan editorial.


Facts are so totally partisan these days - it's just not fair.

[SamFisher]

No one here has explained to me why the afformentioned "partisan" policies would have a impeding effect on real wage growth.



For the fifth time, why are you fabricating an alleged effect on real wage growth? I thought we went over this. :confused:

[langal]

Facts are so totally partisan these days - it's just not fair.


You don't like me do you Sam?

[langal]

For the fifth time, why are you fabricating an alleged effect on real wage growth? I thought we went over this. :confused:

Sam- it's pretty obvious you're just saying that because you know you can't defend Krugman's claims.

His article clearly claims that real wage growth has been stagnant since 1973 and clearly blames republican policies for making it so.

If right-wing partisan policies have not hurt middle-class income, then what is Krugman complaining about?

[MadMax]

It is more and more likely that I will vote Dem in the next election...congressional and presidential.

[gifford1967]

It is more and more likely that I will vote Dem in the next election...congressional and presidential.


What issues make you say this Max?

[MadMax]

What issues make you say this Max?

the bankruptcy reform act and the fallout from that are some of the large issues.

the ultimate conclusion, at least from what we know so far, about what went on in iraq.

but ultimately because the pendulum shifts back and forth. it has shifted too far to the right, now. there needs to be a correction.

[rhester]

the bankruptcy reform act and the fallout from that are some of the large issues.

the ultimate conclusion, at least from what we know so far, about what went on in iraq.

but ultimately because the pendulum shifts back and forth. it has shifted too far to the right, now. there needs to be a correction.

I feel your pain...

later

[SamFisher]

Sam- it's pretty obvious you're just saying that because you know you can't defend Krugman's claims.

His article clearly claims that real wage growth has been stagnant since 1973 and clearly blames republican policies for making it so.

If right-wing partisan policies have not hurt middle-class income, then what is Krugman complaining about?


I'm not really sure what the disconnect is with you, because the point of this article is obvious and indisputable - income inequality has increased in both the short and long term - due in no small part to GWB's policies as far as the short-term goes.

There is nothing partisan about that - it is simply a fact that the rich have gotten richer at a much, much, much faster rate than the rest of us.

If you were going to assume the standard right wing position on this point - you would argue "yeah but who cares, income inequality never hurt anybody"

Instead you are making silly claims about real wages being depressed by tax cuts (which apparently, after a few days, you finally modified to "stagnated", ) which don't appear in the text. Really, it's not that hard to understand this. There are really no legitimate grounds to dispute the factual conclusion that income disparities are increasing.

[langal]

I'm not really sure what the disconnect is with you, because the point of this article is obvious and indisputable - income inequality has increased in both the short and long term - due in no small part to GWB's policies as far as the short-term goes.

There is nothing partisan about that - it is simply a fact that the rich have gotten richer at a much, much, much faster rate than the rest of us.

If you were going to assume the standard right wing position on this point - you would argue "yeah but who cares, income inequality never hurt anybody"

Instead you are making silly claims about real wages being depressed by tax cuts (which apparently, after a few days, you finally modified to "stagnated", ) which don't appear in the text. Really, it's not that hard to understand this. There are really no legitimate grounds to dispute the factual conclusion that income disparities are increasing.

Whatever - I think most people read into it the article the way I did. I'm not taking your opinion of the standard right-wing position. I'm just saying the article is obviously slanted.

[andymoon]

Whatever - I think most people read into it the article the way I did. I'm not taking your opinion of the standard right-wing position. I'm just saying the article is obviously slanted.

Slanted, perhaps, but factual nonetheless.

How come the facts are so blindly partisan?

[deepblue]

I think people are giving GW way too much credit for making rich people richer. Sure the tax cut help a bit, but people didn't get rich from tax cuts.

The rich have always accumulated wealth faster than the rest, no matter who is the president. With innovation and luck, smart people usually gets ahead. And with today's market, those people who get ahead, get ahead much faster (better communication, access to the global market).

Clinton didn't make Bill Gates the richest man alive, and GW didn't make the people at google billionaires.

[Sishir Chang]

Whatever - I think most people read into it the article the way I did. I'm not taking your opinion of the standard right-wing position. I'm just saying the article is obviously slanted.

I think you could read into it that he was talking about real wages but he never mentioned that. My own reading is that Krugman is looking at a variety of factors in regard to building and maintaining wealth. While wages are one factor with more access to things like the stock market and credit there are many other factors.

Its a fair question if the policies you cited depress real wages but its tangential to the article.

[Sishir Chang]

I think people are giving GW way too much credit for making rich people richer. Sure the tax cut help a bit, but people didn't get rich from tax cuts.

The rich have always accumulated wealth faster than the rest, no matter who is the president. With innovation and luck, smart people usually gets ahead. And with today's market, those people who get ahead, get ahead much faster (better communication, access to the global market).

Clinton didn't make Bill Gates the richest man alive, and GW didn't make the people at google billionaires.

I don't think Krugman is saying that Presidential policies have made more people rich but have made it easier for the wealthy to build and maintain their wealth while the middle and lower classes are having a harder time hanging on to their own.

[thegary]

I think people are giving GW way too much credit for making rich people richer.

of course he made them richer, he gave them a tax cut. as you say, the rich don't need help getting richer, SO WHY GIVE THEM THE CUT?

[deepblue]

I don't think Krugman is saying that Presidential policies have made more people rich but have made it easier for the wealthy to build and maintain their wealth while the middle and lower classes are having a harder time hanging on to their own.

Short of introduce a wealth tax where you tax people's net worth, its hard to re-distribute the wealth among the population.

Even if you re-distribute wealth, those people who got ahead before will get ahead again, unless you are living in a communist country.

My point is the widening of the wealth gap has less to do with tax cuts/hikes, but more to do with the global economy/information age. (Just think about the insane amont of wealth Bill Gate accumulated during the Clinton years, he sure has widen the gap between himself and the average joe)

The big jump in productivity over the past 15 years also helped to create this crop of super rich.

[Major]

My point is the widening of the wealth gap has less to do with tax cuts/hikes, but more to do with the global economy/information age.

When accounting for payroll taxes (medicare and social security), the tax structure is now nearing the point of being regressive from the middle class to the upper class (it is still certainly still progressive for the poor). If you tax the rich at a lower net rate than the middle class, that definitely affects the wealth gap.

When looking at the income + payroll taxes as a percentage of disposable income, then the entire system is currently regressive, which means that the rich suffer less of the "burden" as a percentage of disposable income.

Another area where tax cuts/hikes affects the wealth gap is dividend and capital gains taxation. The wealthy make a far larger portion of their net income from investments than from wages, and they pay a much lower rate on that income. So again, we tax the wealthy relatively less than the middle or lower classes, expanding the wealth gap.

The information age and structural changes in the economy do have some impact on this as well, though.

[deepblue]

of course he made them richer, he gave them a tax cut. as you say, the rich don't need help getting richer, SO WHY GIVE THEM THE CUT?

I said you guys are giving him TOO MUCH credit.
I am guessing the goal of tax cut was to stimulate the economy.

[Major]

I am guessing the goal of tax cut was to stimulate the economy.

Well, sort of. Keep in mind, Bush started pushing this tax cut when he first started running from President (late 1999?) and the economy was good. At the time, the justification for it was that we had a surplus and we should give the money back to the people.

Then, when the economy went bad, the exact same tax cut became a tax cut to stimulate the economy. Strange, though, that nothing changed in the proposal. Tax cuts designed for economic growth and tax cuts designed as simply "we pay too much across the board" should be designed and targetted very differently.

What we got was a tax cut designed as a "our general tax level is too high" that was used to try to stimulate growth - essentially, a very badly planned cut if that was the goal.

[deepblue]

My point is the widening of the wealth gap has less to do with tax cuts/hikes, but more to do with the global economy/information age.

When accounting for payroll taxes (medicare and social security), the tax structure is now nearing the point of being regressive from the middle class to the upper class (it is still certainly still progressive for the poor). If you tax the rich at a lower net rate than the middle class, that definitely affects the wealth gap.

When looking at the income + payroll taxes as a percentage of disposable income, then the entire system is currently regressive, which means that the rich suffer less of the "burden" as a percentage of disposable income.

Another area where tax cuts/hikes affects the wealth gap is dividend and capital gains taxation. The wealthy make a far larger portion of their net income from investments than from wages, and they pay a much lower rate on that income. So again, we tax the wealthy relatively less than the middle or lower classes, expanding the wealth gap.

The information age and structural changes in the economy do have some impact on this as well, though.

So would you say people making 100k a year as upper class? what about 150k?

As for social security, you are suppose to get back what you put in, so you really shouldn't count that in your calculation.

Wealth gap increases because some people are getting richer. The very words of "getting rich" means widening the wealth gap (someone is getting richer relative to his/her peers). And that's not a bad thing, you want to reward innovation, growth, competition. If narrowing the gap is the goal, then everyone eventually will be making the same amount of money, have same amount of wealth, we all know how well that system worked.

Cap gain tax is very much related to capital investment, which drives the economy. Everyone benefits from that.

[thegary]

I said you guys are giving him TOO MUCH credit.

that is an absurd statement. as a matter of fact, i'm pretty sure that i've never given the imbecile credit for a damn thing.
http://img157.echo.cx/img157/3033/georgy1np.jpg



i'll bow to the dark side and give credit to:
http://img157.echo.cx/img157/6799/smallrovebeetle1ru.jpg

noun: rove beetle*rowv 'beetl

The Rove Beetle is found in or near decaying organic matter, especially dead animals. He is an early visitor to corpses and feeds on larvae of all species. He lays his eggs in the corpse, and the emerging larvae are also predators. He also eats dung and feeds on other insects that are found in decaying matter, such as maggots. When disturbed, the Rove Beetle raises the tip of its abdomen and may squirt a foul-smelling mist at its enemies.

[deepblue]

that is an absurd statement. as a matter of fact, i'm pretty sure that i've never given the imbecile credit for a damn thing.


You are centainly giving him credit for making rich folks a lot richer. (that's what I meant)

[Major]

So would you say people making 100k a year as upper class? what about 150k?

Depends on the size of their family, where they live, etc.

As for social security, you are suppose to get back what you put in, so you really shouldn't count that in your calculation.

Except we all know that's not the case, and making policy on what you know will not happen is a bad idea. Social Security cannot and will not pay what people put into it 30 years from now. And while the rich person can afford to give up some money each year and get the equivalent of a 2% or so return 40+ years from now, the poor person cannot. So it again hits the poor much harder.

Wealth gap increases because some people are getting richer. The very words of "getting rich" means widening the wealth gap (someone is getting richer relative to his/her peers).

This isn't necessarily true. The idea of getting rich could mean increasing the quality of life, or getting rich relative to the citizens of other countries. The wealth gap increases when the rich get richer faster than the poor get richer.

If narrowing the gap is the goal, then everyone eventually will be making the same amount of money,

The goal is not to narrow the gap. It is to keep it in a relatively stable range.

Cap gain tax is very much related to capital investment, which drives the economy. Everyone benefits from that.

Two things here. First, telling the poor person "hey, we're going to cut the rich guy's taxes by $500, and he'll invest it and maybe it will come back to benefit you 5 years from now" isn't a great strategy. The poor person needs the money now, and if you give him the tax cut, he will spend it immediately and put it right back in the economy which also spurs growth, and eventually it will trickle up to profits for the rich. But in the latter case, if things don't go quite as planned, you helped the person that needed it the most.

Second, this goes to supply side economics. The whole theory in supply side economics is that giving money to the wealthy drives investment which then helps everyone (the whole rising tide thing). The whole theory there is counter to the wealth gap - the growing wealth gap is saying that the rich are benefitting far more than the poor. Supply side economics basically says that giving money to the rich helps the poor and that the wealth gap won't grow.

[SamFisher]

Fact bias continues, even corrupting ex-ayn rand boy toy and part time adminstration shill Alan Greenspan





By Peter Grier, Staff writer of The Christian Science Monitor Tue Jun 14, 4:00 AM ET

WASHINGTON - The income gap between the rich and the rest of the US population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself.
ADVERTISEMENT

Is that a liberal's talking point? Sure. But it's also a line from the recent public testimony of a champion of the free market:
Federal Reserve Chairman Alan Greenspan.

America's powerful central banker hasn't suddenly lurched to the left of
Democratic National Committee chief
Howard Dean. His solution is better education today to create a flexible workforce for tomorrow - not confiscation of plutocrats' yachts.

But the fact that Mr. Greenspan speaks about this topic at all may show how much the growing concentration of national wealth at the top, combined with the uncertainties of increased globalization, worries economic policymakers as they peer into the future.

"He is the conventional wisdom," says Jared Bernstein, senior economist at the Economic Policy Institute, a liberal think tank. "When I'm arguing with people, I say, 'Even Alan Greenspan....' "

Greenspan's comments at a Joint Economic Committee hearing last week were typical, for him. Asked a leading question by Sen. Jack Reed (news, bio, voting record) (D) of Rhode Island, he agreed that over the past two quarters hourly wages have shown few signs of accelerating. Overall employee compensation has gone up - but mostly due to a surge in bonuses and stock-option exercises.

The Fed chief than added that the 80 percent of the workforce represented by nonsupervisory workers has recently seen little, if any, income growth at all. The top 20 percent of supervisory, salaried, and other workers has.

The result of this, said Greenspan, is that the US now has a significant divergence in the fortunes of different groups in its labor market. "As I've often said, this is not the type of thing which a democratic society - a capitalist democratic society - can really accept without addressing," Greenspan told the congressional hearing.

The cause of this problem? Education, according to Greenspan. Specifically, high school education. US children test above world average levels at the 4th grade level, he noted. By the 12th grade, they do not. "We have to do something to prevent that from happening," said Greenspan.
[continues]


http://news.yahoo.com/s/csm/20050614/ts_csm/ataxing_1

what a partisan slanter - talking about stagnant real wages like that....:rolleyes:

[langal]

Fact bias continues, even corrupting ex-ayn rand boy toy and part time adminstration shill Alan Greenspan



http://news.yahoo.com/s/csm/20050614/ts_csm/ataxing_1

what a partisan slanter - talking about stagnant real wages like that....:rolleyes:

"The cause of this problem? Education, according to Greenspan. Specifically, high school education. US children test above world average levels at the 4th grade level, he noted. By the 12th grade, they do not. "We have to do something to prevent that from happening," said Greenspan."

Thanks Sam. I guess Greenspan attributes this phenomenom to education - something Krugman never mentioned in his article.

I, for one, never denied the wage gap. I just don't jibe with Krugman's reasoning that tax cuts, bankrupcty reform, and death taxes are the causes of this. Those are the specific policies that he outlined in his article.

[langal]

Slanted, perhaps, but factual nonetheless.

How come the facts are so blindly partisan?

I don't like it when any pundit solely blames one party for economic (down) trends. When you consider the make up of the white house and legislature since 1973 - Krugman's take on it certainly seems to be one-sided.

[SamFisher]

I, for one, never denied the wage gap. I just don't jibe with Krugman's reasoning that tax cuts, bankrupcty reform, and death taxes are the causes of this. Those are the specific policies that he outlined in his article.
No, you didn't deny it, you just took us on some irrelevant sidetrip about things that were not present in the original editorial - such as the conjured thesis that tax cuts depress real wages - and used them to discredit the thrust of the article - that the income inequality is increasing and that this increase is fraught with negative ramifications.

Are you honestly arguing that Bush's tax cuts have not contributed to this disparity over the past 5 years? The facts are the facts - if you cut a tax that only affects ultra high income groups -like the estate tax, necessrily, you are going to exacerbate the disparity to some degree.

It's simple math, langal. You don't need an econmics degree to understand that

[langal]

No, you didn't deny it, you just took us on some irrelevant sidetrip about things that were not present in the original editorial - such as the conjured thesis that tax cuts depress real wages - and used them to discredit the thrust of the article - that the income inequality is increasing and that this increase is fraught with negative ramifications.

Are you honestly arguing that Bush's tax cuts have not contributed to this disparity over the past 5 years? The facts are the facts - if you cut a tax that only affects ultra high income groups -like the estate tax, necessrily, you are going to exacerbate the disparity to some degree.

It's simple math, langal. You don't need an econmics degree to understand that

But middle-class wages have been stagnant since 1973. Bush was probably snorting lines off a stripper's back in 1973. Krugman does mention the stagnant wage growth (22 percent growth since 1973 largely attributable to working moms and longer hours). I just think the reasons he outlines for this are too one-sided and wrong.

My econ degree is catching dust in the attic somewhere.

BTW - I'm not the super supply-sider that I may admittedly come off as. While I supported most of GW's tax cuts (especially for the poor and middle-class), I think he could have introduced some sort of "millionaire's" tax bracket to balance it out - targeted especially at the super-rich.

[pirc1]

But middle-class wages have been stagnant since 1973. Bush was probably snorting lines off a stripper's back in 1973. Krugman does mention the stagnant wage growth (22 percent growth since 1973 largely attributable to working moms and longer hours). I just think the reasons he outlines for this are too one-sided and wrong.

My econ degree is catching dust in the attic somewhere.

BTW - I'm not the super supply-sider that I may admittedly come off as. While I supported most of GW's tax cuts (especially for the poor and middle-class), I think he could have introduced some sort of "millionaire's" tax bracket to balance it out - targeted especially at the super-rich.

That might be reasonable, but Bush is too much of an extremist to consider such an option.

[Sishir Chang]

My point is the widening of the wealth gap has less to do with tax cuts/hikes, but more to do with the global economy/information age.

When accounting for payroll taxes (medicare and social security), the tax structure is now nearing the point of being regressive from the middle class to the upper class (it is still certainly still progressive for the poor). If you tax the rich at a lower net rate than the middle class, that definitely affects the wealth gap.

When looking at the income + payroll taxes as a percentage of disposable income, then the entire system is currently regressive, which means that the rich suffer less of the "burden" as a percentage of disposable income.

Another area where tax cuts/hikes affects the wealth gap is dividend and capital gains taxation. The wealthy make a far larger portion of their net income from investments than from wages, and they pay a much lower rate on that income. So again, we tax the wealthy relatively less than the middle or lower classes, expanding the wealth gap.

The information age and structural changes in the economy do have some impact on this as well, though.

Geez Major quit stealing my thunder I was going to post the same thing. ;)

[deepblue]

But middle-class wages have been stagnant since 1973. Bush was probably snorting lines off a stripper's back in 1973. Krugman does mention the stagnant wage growth (22 percent growth since 1973 largely attributable to working moms and longer hours). I just think the reasons he outlines for this are too one-sided and wrong.

My econ degree is catching dust in the attic somewhere.

BTW - I'm not the super supply-sider that I may admittedly come off as. While I supported most of GW's tax cuts (especially for the poor and middle-class), I think he could have introduced some sort of "millionaire's" tax bracket to balance it out - targeted especially at the super-rich.

I am not sure simply tax the rich more is necessarily going to narrow the wealth gap. A person making 2 million a year is going to widen the gap between him/her and the person making 60k a year no matter what tax rate is at.

[langal]

I am not sure simply tax the rich more is necessarily going to narrow the wealth gap. A person making 2 million a year is going to widen the gap between him/her and the person making 60k a year no matter what tax rate is at.

No it wouldn't really narrow any gaps that much. I just think for that taxing those making 1million+ a year andd using that to reduce the deficit would having a more profound effect on interest rates than the supply-side - trickle-down reasons.

[deepblue]

No it wouldn't really narrow any gaps that much. I just think for that taxing those making 1million+ a year andd using that to reduce the deficit would having a more profound effect on interest rates than the supply-side - trickle-down reasons.

The thing is people care about rich people getting richer a lot more than how much is the deficit. They are focused on the wealth gap where tax cut/hikes would have little impact.

[langal]

The thing is people care about rich people getting richer a lot more than how much is the deficit. They are focused on the wealth gap where tax cut/hikes would have little impact.


I suppose capital gains tax cuts help the rich out more but going that way probably won't help out much either.

I suppose one way to increase wages is to limit the labor supply (offshore or right here).

[pirc1]

The thing is people care about rich people getting richer a lot more than how much is the deficit. They are focused on the wealth gap where tax cut/hikes would have little impact.


The biggest problem with deficit is spening. Everyone wants to spend and spend and spend. This president have never turned down any spending bill.