The Piketty Panic
By PAUL KRUGMAN
New scholarship by the French economist is a bona fide phenomenon, and the right is terrified.
APRIL 25, 2014
The Piketty Phenomenon
By DAVID BROOKS
The reaction to Thomas Piketty’s new book says more about class rivalry within the educated classes than it does about expanding opportunity.
APRIL 25, 2014
I will leave it to others with much heftier throw-weight to fisk the entire thing. I will only point out the striking difference between Dr. Krugman's economics-based analysis --
...
“Capital in the Twenty-First Century,” the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”
-- and David Brooks' trenchant "C'mon, bro-ham! You know hippies don't really give a shit about the poors. Because coastal cities!" commentary:
Many people join the political left driven by a concern for the poor. But, over the past several years, the Democratic Party has talked much more about the middle class than the poor. Meanwhile, progressive political movements like Occupy Wall Street directed their fervor at the top 1 percent. Progressive movies and books have focused their attention on conspiracy and oligarchy at the top, not “Grapes of Wrath” or “How the Other Half Lives” stories at the bottom.
This is natural. The modern left is led by smart professionals — academics, activists, people in the news media, the arts and so on — who tend to live in and around coastal cities...
Also the contrast between Dr. Krugman's specific focus on what the book does and does not say --
...
Mr. Piketty is hardly the first economist to point out that we are experiencing a sharp rise in inequality, or even to emphasize the contrast between slow income growth for most of the population and soaring incomes at the top. It’s true that Mr. Piketty and his colleagues have added a great deal of historical depth to our knowledge, demonstrating that we really are living in a new Gilded Age. But we’ve known that for a while.
No, what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.
For the past couple of decades, the conservative response to attempts to make soaring incomes at the top into a political issue has involved two lines of defense: first, denial that the rich are actually doing as well and the rest as badly as they are, but when denial fails, claims that those soaring incomes at the top are a justified reward for services rendered. Don’t call them the 1 percent, or the wealthy; call them “job creators.”
But how do you make that defense if the rich derive much of their income not from the work they do but from the assets they own? And what if great wealth comes increasingly not from enterprise but from inheritance?
...
-- and David Brooks' bored swipe at economists generally because "economists are really not good at predicting the future" ascends to a very special level of hilarious when you consider Mr. Brooks is a man notorious for being wrong about everything since forever:
...
And into this fray wanders Thomas Piketty. His book “Capital in the Twenty-First Century” argues that the real driver of inequality is not primarily differences in human capital. It’s differences in financial capital. Inequality is not driven by young hip professionals who arm their kids with every advantage and get them into competitive colleges; it’s driven by hedge fund oligarchs. Well, of course, this book is going to set off a fervor that some have likened to Beatlemania.
The book is very good and interesting, but it has pretty obvious weaknesses. Though economists are really not good at predicting the future, Piketty makes a series of educated guesses about the next century.
Piketty predicts that growth will be low for a century, though there seems to be a lot of innovation around...
But it was this last sentence -- "Piketty predicts that growth will be low for a century, though there seems to be a lot of innovation around..." -- that sank its tiny claws into my hippocampus and demanded that I think, man, think!
Why does this specific sentiment -- David Brooks invoking the magic conjure word "innovation" to swat down criticism of the economic system on which parasitically feeds -- sound so damn familiar?
Oh yeah! I remember now.
The year was 2001.
We had just spent eight, ugly years digging the country out from under the crippling deficits which the destructive economic voodoo of Ronald Reagan and George H. W. Bush had racked up -- deficits about which Republicans never gave a shit until Bill Clinton was elected. So, for eight years Clinton spent his time scaling down or sacrificing programs and promises that were near and dear to Liberals so he could repair the crippling disasters Conservatives left behind...while Conservatives spent their time on witch-hunts and show trials designed to destroy the presidency of the man who was cleaning up their messes.
Sound familiar?
Anyway, after eight lean years of Liberal dreams short-sheeted so we could pay down Conservative profligacy, we were then forced to accept the fact that the dry-drunk halfwit son of the last Republican president was going to get away with stealing the election.
And what was Dubya's first order of business?
Huge fucking tax cuts!
Wheeee!
Of course a lot of economists and ordinary people who could count to twenty without taking off their shoes and socks thought this was a terrible idea. Something that would undo all the sacrifices Democrats had made in the name of fiscal prudence and plunge us right back into the kind of everything-crushing deficits which Republicans had spent the 12 years of Reagan/Bush completely ignoring, and the eight years of Clinton shrieking about being the Death Of The Republic.
And for those people, David Brooks had a name.
And that name was "Stupid".
Stupid Democrats, who cooked up some crazy "brainless, self-destructive" fantasy that Bush Administration policies were about to wipe out the Clinton surplus, run up a gargantuan deficit and put Social Security under the gun:
The New Stupid Party
LONG AGO, the Republican party was nicknamed the Stupid Party, and at times Republicans have done their best to live up to the label. But after the past week, it is perhaps time to acknowledge that when it comes to brainless, self-destructive behavior, the Democratic party has achieved a level of excellence that will be unsurpassed in our lifetime.
Last week the Congressional Budget Office came out with a budget forecast. The report immediately got submerged in a chatterstorm about whether Congress or the White House would dip into something called the Social Security trust fund, but the essential facts are these: The CBO economists estimated that the federal government will run a surplus of about $150 billion in 2001. That’s a lower surplus than the CBO estimated a few months ago, before the economic slowdown, the Bush tax cut, and the recent congressional spending splurge. But even in these adverse circumstances, the surplus is still projected to grow to about $200 billion a year in 2004 and close to $300 billion a year by 2006.
The Democratic party proceeded to work itself up into a collective aneurysm. Dick Gephardt—who, when given the chance to play the demagogue, never goes halfway—said that the United States now faces "an alarming fiscal crisis." Democratic national chairman Terry McAuliffe said on Face the Nation that it had taken Bill Clinton eight years to build up the surplus, but Bush was able to "blow it in eight months." Other Democrats rose up en masse to declare that the Bush administration was going to bankrupt Social Security/the federal government/western civilization because the administration was going to have to "raid the Social Security trust fund."...
The Pelosi Democrats
Are they going to become the stupid party?
ARE THE DEMOCRATS about to go insane? Are they about to decide that the reason they lost the 2002 election is that they didn't say what they really believe? Are they about to go into Paul Krugman-land, lambasting tax cuts, savaging Bush as a tool of the corporate bosses? Are they about to go off on a jag that will ensure them permanent minority status in every state from North Carolina to Arizona?
...
And why were they so stupid?
Because they did not understand that the Economy had been Fundamentally Transformed!
Yes, There Is a New Economy
Thanks to once-in-a lifetime productivity gains, Bush's plans are easily affordable
MAR 19, 2001
...There is a rough historical pattern here. A new technology is invented. It takes a long time before people figure out how to use it. The electric motor was invented in the 1880s, but it didn't transform factories until the 1920s, economist Paul David has noted. Once the technology is fully deployed, however, there are decades of positive results. Daniel Sichel of the Federal Reserve points to previous technology-driven surges that lasted 10 and 25 years. That suggests we may still be near the beginning of this particular period of bounty.
If we are, an occasional period of slower growth or even a recession may occur, but the U.S. economy is fundamentally strong, and both laymen and legislators have good reasons to believe it will remain strong for many years. Industrial productivity is surging. Americans are not only the hardest working people on earth (the average American works about 10 weeks a year more than the average European) but also the most productive workers -- by far. If you measure value added per hour worked, Americans do about 20 percent better than Germans and the French, and 40 percent better than the Japanese.
In other words, if you wade through the economic literature, it's hard not to agree with the Cleveland Fed's Jerry Jordan: We are living at a once-in-a-generation moment of economic opportunity. As productivity grows, the economy will grow. As the economy grows, revenues will grow, maybe beyond what the CBO projects. The real question about the Bush tax cuts, then, is not, Can we afford them? The real question is, Why are they so small?
They are not small in a dollar sense. They are intellectually small. Now, maybe for the last time in our lives, we have the financial opportunity to enact fundamental changes. We will have enough revenue to allow us to reform our entire tax system. We can simplify it, cut it, and turn it into a system Americans will at least regard as fair. We have the chance to reform our entitlement system, and much else. Bill Clinton squandered the first three years of this opportunity. The Bush administration promises fundamental Social Security reform. But the Bush tax plan is a meager response to events. It was designed two years ago, and, stubbornly, the Bush team has refused to change it, even as the new productivity trends have become obvious.
So to the immediate question on people's minds in Washington -- Can we afford a $1.6 trillion dollar cut? -- the answer is plainly yes. The Bush plan is better than nothing. But it is not the ambitious rethinking the times demand.
Anyone who wants to take the time and do the reading can learn with very little effort that David Brooks has been bit as consistently and spectacularly wrong about economics as he was about Iraq.
And Bush.
And poor people.
And the middle class.
And the rich.
And Mitt Romney.
And John McCain.
And the Conservative movement.
And the GOP.
And Liberals.
And the past.
And the future.
And the present.
And, well, everything.
