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
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?
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.
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.
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?
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 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.
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.
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? 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.
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.
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.
"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.
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.
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 b****ing because those who are driving the growth of the economy are the one's benefitting from that growth.
nobody said anybody was worse off in real terms. 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.
