Paul Krugman: Why We’re in a New Gilded Age

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This piece was first published in The New York Review of Books.

World Fair of 1900 in Paris. (Wikimedia Commons)
World Fair of 1900 in Paris. (Wikimedia Commons)

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age — or, as Piketty likes to put it, a second Belle Époque — defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work. In particular, he and a few colleagues (notably Anthony Atkinson at Oxford and Emmanuel Saez at Berkeley) have pioneered statistical techniques that make it possible to track the concentration of income and wealth deep into the past — back to the early 20th century for America and Britain, and all the way to the late eighteenth century for France.

The result has been a revolution in our understanding of long-term trends in inequality. Before this revolution, most discussions of economic disparity more or less ignored the very rich. Some economists (not to mention politicians) tried to shout down any mention of inequality at all: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004. But even those willing to discuss inequality generally focused on the gap between the poor or the working class and the merely well-off, not the truly rich — on college graduates whose wage gains outpaced those of less-educated workers, or on the comparative good fortune of the top fifth of the population compared with the bottom four fifths, not on the rapidly rising incomes of executives and bankers.

The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to 19th-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again — and in the United States it’s back to what it was a century ago.

Still, today’s economic elite is very different from that of the 19th century, isn’t it? Back then, great wealth tended to be inherited; aren’t today’s economic elite people who earned their position? Well, Piketty tells us that this isn’t as true as you think, and that in any case this state of affairs may prove no more durable than the middle-class society that flourished for a generation after World War II. The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to 19th-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

It’s a remarkable claim — and precisely because it’s so remarkable, it needs to be examined carefully and critically. Before I get into that, however, let me say right away that Piketty has written a truly superb book. It’s a work that melds grand historical sweep — when was the last time you heard an economist invoke Jane Austen and Balzac? — with painstaking data analysis. And even though Piketty mocks the economics profession for its “childish passion for mathematics,” underlying his discussion is a tour de force of economic modeling, an approach that integrates the analysis of economic growth with that of the distribution of income and wealth. This is a book that will change both the way we think about society and the way we do economics.

1.

What do we know about economic inequality, and about when do we know it? Until the Piketty revolution swept through the field, most of what we knew about income and wealth inequality came from surveys, in which randomly chosen households are asked to fill in a questionnaire, and their answers are tallied up to produce a statistical portrait of the whole. The international gold standard for such surveys is the annual survey conducted by the Census Bureau. The Federal Reserve also conducts a triennial survey of the distribution of wealth.

After 1980…the lion’s share of gains went to the top end of the income distribution, with families in the bottom half lagging far behind.

These two surveys are an essential guide to the changing shape of American society. Among other things, they have long pointed to a dramatic shift in the process of US economic growth, one that started around 1980. Before then, families at all levels saw their incomes grow more or less in tandem with the growth of the economy as a whole. After 1980, however, the lion’s share of gains went to the top end of the income distribution, with families in the bottom half lagging far behind.

Historically, other countries haven’t been equally good at keeping track of who gets what; but this situation has improved over time, in large part thanks to the efforts of the Luxembourg Income Study (with which I will soon be affiliated). And the growing availability of survey data that can be compared across nations has led to further important insights. In particular, we now know both that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference in outcomes can be attributed directly to government action. European nations in general have highly unequal incomes from market activity, just like the United States, although possibly not to the same extent. But they do far more redistribution through taxes and transfers than America does, leading to much less inequality in disposable incomes.

Yet for all their usefulness, survey data have important limitations. They tend to undercount or miss entirely the income that accrues to the handful of individuals at the very top of the income scale. They also have limited historical depth. Even US survey data only take us to 1947.

Enter Piketty and his colleagues, who have turned to an entirely different source of information: tax records. This isn’t a new idea. Indeed, early analyses of income distribution relied on tax data because they had little else to go on. Piketty et al. have, however, found ways to merge tax data with other sources to produce information that crucially complements survey evidence. In particular, tax data tell us a great deal about the elite. And tax-based estimates can reach much further into the past: the United States has had an income tax since 1913, Britain since 1909. France, thanks to elaborate estate tax collection and record-keeping, has wealth data reaching back to the late eighteenth century.

Exploiting these data isn’t simple. But by using all the tricks of the trade, plus some educated guesswork, Piketty is able to produce a summary of the fall and rise of extreme inequality over the course of the past century. It looks like Table 1 below.

As I said, describing our current era as a new Gilded Age or Belle Époque isn’t hyperbole; it’s the simple truth. But how did this happen?

krugman_2-050814

 

2.

Piketty throws down the intellectual gauntlet right away, with his book’s very title: Capital in the Twenty-First Century. Are economists still allowed to talk like that?

It’s not just the obvious allusion to Marx that makes this title so startling. By invoking capital right from the beginning, Piketty breaks ranks with most modern discussions of inequality, and hearkens back to an older tradition.

The general presumption of most inequality researchers has been that earned income, usually salaries, is where all the action is, and that income from capital is neither important nor interesting. Piketty shows, however, that even today income from capital, not earnings, predominates at the top of the income distribution. He also shows that in the past — during Europe’s Belle Époque and, to a lesser extent, America’s Gilded Age — unequal ownership of assets, not unequal pay, was the prime driver of income disparities. And he argues that we’re on our way back to that kind of society. Nor is this casual speculation on his part. For all that Capital in the Twenty-First Century is a work of principled empiricism, it is very much driven by a theoretical frame that attempts to unify discussion of economic growth and the distribution of both income and wealth. Basically, Piketty sees economic history as the story of a race between capital accumulation and other factors driving growth, mainly population growth and technological progress.

To be sure, this is a race that can have no permanent victor: over the very long run, the stock of capital and total income must grow at roughly the same rate. But one side or the other can pull ahead for decades at a time. On the eve of World War I, Europe had accumulated capital worth six or seven times national income. Over the next four decades, however, a combination of physical destruction and the diversion of savings into war efforts cut that ratio in half. Capital accumulation resumed after World War II, but this was a period of spectacular economic growth — the Trente Glorieuses, or “Glorious Thirty” years; so the ratio of capital to income remained low. Since the 1970s, however, slowing growth has meant a rising capital ratio, so capital and wealth have been trending steadily back toward Belle Époque levels. And this accumulation of capital, says Piketty, will eventually recreate Belle Époque–style inequality unless opposed by progressive taxation.

Why? It’s all about r versus g — the rate of return on capital versus the rate of economic growth.

Just about all economic models tell us that if g falls — which it has since 1970, a decline that is likely to continue due to slower growth in the working-age population and slower technological progress — r will fall too. But Piketty asserts that r will fall less than g. This doesn’t have to be true. However, if it’s sufficiently easy to replace workers with machines — if, to use the technical jargon, the elasticity of substitution between capital and labor is greater than one — slow growth, and the resulting rise in the ratio of capital to income, will indeed widen the gap between r and g. And Piketty argues that this is what the historical record shows will happen.

Here, too, there is a redistribution in favor of capital underway. Notably, corporate profits have soared since the financial crisis began, while wages — including the wages of the highly educated — have stagnated.

If he’s right, one immediate consequence will be a redistribution of income away from labor and toward holders of capital. The conventional wisdom has long been that we needn’t worry about that happening, that the shares of capital and labor respectively in total income are highly stable over time. Over the very long run, however, this hasn’t been true. In Britain, for example, capital’s share of income — whether in the form of corporate profits, dividends, rents, or sales of property, for example — fell from around 40 percent before World War I to barely 20 percent circa 1970, and has since bounced roughly halfway back. The historical arc is less clear-cut in the United States, but here, too, there is a redistribution in favor of capital underway. Notably, corporate profits have soared since the financial crisis began, while wages — including the wages of the highly educated — have stagnated.

A rising share of capital, in turn, directly increases inequality, because ownership of capital is always much more unequally distributed than labor income. But the effects don’t stop there, because when the rate of return on capital greatly exceeds the rate of economic growth, “the past tends to devour the future”: society inexorably tends toward dominance by inherited wealth.

Consider how this worked in Belle Époque Europe. At the time, owners of capital could expect to earn 4-5 percent on their investments, with minimal taxation; meanwhile economic growth was only around one percent. So wealthy individuals could easily reinvest enough of their income to ensure that their wealth and hence their incomes were growing faster than the economy, reinforcing their economic dominance, even while skimming enough off to live lives of great luxury.

And what happened when these wealthy individuals died? They passed their wealth on — again, with minimal taxation — to their heirs. Money passed on to the next generation accounted for 20 to 25 percent of annual income; the great bulk of wealth, around 90 percent, was inherited rather than saved out of earned income. And this inherited wealth was concentrated in the hands of a very small minority: in 1910 the richest one percent controlled 60 percent of the wealth in France; in Britain, 70 percent.

No wonder, then, that 19th-century novelists were obsessed with inheritance. Piketty discusses at length the lecture that the scoundrel Vautrin gives to Rastignac in Balzac’s Père Goriot, whose gist is that a most successful career could not possibly deliver more than a fraction of the wealth Rastignac could acquire at a stroke by marrying a rich man’s daughter. And it turns out that Vautrin was right: being in the top one percent of 19th-century heirs and simply living off your inherited wealth gave you around two and a half times the standard of living you could achieve by clawing your way into the top one percent of paid workers.

You might be tempted to say that modern society is nothing like that. In fact, however, both capital income and inherited wealth, though less important than they were in the Belle Époque, are still powerful drivers of inequality — and their importance is growing. In France, Piketty shows, the inherited share of total wealth dropped sharply during the era of wars and postwar fast growth; circa 1970 it was less than 50 percent. But it’s now back up to 70 percent, and rising. Correspondingly, there has been a fall and then a rise in the importance of inheritance in conferring elite status: the living standard of the top one percent of heirs fell below that of the top one percent of earners between 1910 and 1950, but began rising again after 1970. It’s not all the way back to Rastignac levels, but once again it’s generally more valuable to have the right parents (or to marry into having the right in-laws) than to have the right job.

And this may only be the beginning. Figure 1 below shows Piketty’s estimates of global r and g over the long haul, suggesting that the era of equalization now lies behind us, and that the conditions are now ripe for the reestablishment of patrimonial capitalism.

krugman_3-050814

Given this picture, why does inherited wealth play as small a part in today’s public discourse as it does? Piketty suggests that the very size of inherited fortunes in a way makes them invisible: “Wealth is so concentrated that a large segment of society is virtually unaware of its existence, so that some people imagine that it belongs to surreal or mysterious entities.” This is a very good point. But it’s surely not the whole explanation. For the fact is that the most conspicuous example of soaring inequality in today’s world — the rise of the very rich one percent in the Anglo-Saxon world, especially the United States — doesn’t have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes.

3.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

And yet there is one thing that slightly detracts from the achievement — a sort of intellectual sleight of hand, albeit one that doesn’t actually involve any deception or malfeasance on Piketty’s part. Still, here it is: the main reason there has been a hankering for a book like this is the rise, not just of the one percent, but specifically of the American one percent. Yet that rise, it turns out, has happened for reasons that lie beyond the scope of Piketty’s grand thesis.

What we have seen in America and are starting to see elsewhere is something “radically new” — the rise of “supersalaries.”

Piketty is, of course, too good and too honest an economist to try to gloss over inconvenient facts. “US inequality in 2010,” he declares, “is quantitatively as extreme as in old Europe in the first decade of the 20th century, but the structure of that inequality is rather clearly different.” Indeed, what we have seen in America and are starting to see elsewhere is something “radically new” — the rise of “supersalaries.”

Capital still matters; at the very highest reaches of society, income from capital still exceeds income from wages, salaries and bonuses. Piketty estimates that the increased inequality of capital income accounts for about a third of the overall rise in US inequality. But wage income at the top has also surged. Real wages for most US workers have increased little if at all since the early 1970s, but wages for the top one percent of earners have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent. If Rastignac were alive today, Vautrin might concede that he could in fact do as well by becoming a hedge fund manager as he could by marrying wealth.

What explains this dramatic rise in earnings inequality, with the lion’s share of the gains going to people at the very top? Some US economists suggest that it’s driven by changes in technology. In a famous 1981 paper titled “The Economics of Superstars,” the Chicago economist Sherwin Rosen argued that modern communications technology, by extending the reach of talented individuals, was creating winner-take-all markets in which a handful of exceptional individuals reap huge rewards, even if they’re only modestly better at what they do than far less well paid rivals.

Piketty is unconvinced. As he notes, conservative economists love to talk about the high pay of performers of one kind or another, such as movie and sports stars, as a way of suggesting that high incomes really are deserved. But such people actually make up only a tiny fraction of the earnings elite. What one finds instead is mainly executives of one sort or another — people whose performance is, in fact, quite hard to assess or give a monetary value to.

Who determines what a corporate CEO is worth? Well, there’s normally a compensation committee, appointed by the CEO himself. In effect, Piketty argues, high-level executives set their own pay, constrained by social norms rather than any sort of market discipline. And he attributes skyrocketing pay at the top to an erosion of these norms. In effect, he attributes soaring wage incomes at the top to social and political rather than strictly economic forces.

Now, to be fair, he then advances a possible economic analysis of changing norms, arguing that falling tax rates for the rich have in effect emboldened the earnings elite. When a top manager could expect to keep only a small fraction of the income he might get by flouting social norms and extracting a very large salary, he might have decided that the opprobrium wasn’t worth it. Cut his marginal tax rate drastically, and he may behave differently. And as more and more of the supersalaried flout the norms, the norms themselves will change.

There’s a lot to be said for this diagnosis, but it clearly lacks the rigor and universality of Piketty’s analysis of the distribution of and returns to wealth. Also, I don’t think Capital in the Twenty-First Century adequately answers the most telling criticism of the executive power hypothesis: the concentration of very high incomes in finance, where performance actually can, after a fashion, be evaluated. I didn’t mention hedge fund managers idly: such people are paid based on their ability to attract clients and achieve investment returns. You can question the social value of modern finance, but the Gordon Gekkos out there are clearly good at something, and their rise can’t be attributed solely to power relations, although I guess you could argue that willingness to engage in morally dubious wheeling and dealing, like willingness to flout pay norms, is encouraged by low marginal tax rates.

Overall, I’m more or less persuaded by Piketty’s explanation of the surge in wage inequality, though his failure to include deregulation is a significant disappointment. But as I said, his analysis here lacks the rigor of his capital analysis, not to mention its sheer, exhilarating intellectual elegance.

Yet we shouldn’t overreact to this. Even if the surge in US inequality to date has been driven mainly by wage income, capital has nonetheless been significant too. And in any case, the story looking forward is likely to be quite different. The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

4.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation — in particular taxation of wealth and inheritance — can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

It’s true that during much of the 20th century strongly progressive taxation did indeed help reduce the concentration of income and wealth, and you might imagine that high taxation at the top is the natural political outcome when democracy confronts high inequality. Piketty, however, rejects this conclusion; the triumph of progressive taxation during the 20th century, he contends, was “an ephemeral product of chaos.” Absent the wars and upheavals of Europe’s modern Thirty Years’ War, he suggests, nothing of the kind would have happened.

As evidence, he offers the example of France’s Third Republic. The Republic’s official ideology was highly egalitarian. Yet wealth and income were nearly as concentrated, economic privilege almost as dominated by inheritance, as they were in the aristocratic constitutional monarchy across the English Channel. And public policy did almost nothing to oppose the economic domination by rentiers: estate taxes, in particular, were almost laughably low.

Then as now great wealth purchased great influence — not just over policies, but over public discourse.

Why didn’t the universally enfranchised citizens of France vote in politicians who would take on the rentier class? Well, then as now great wealth purchased great influence — not just over policies, but over public discourse. Upton Sinclair famously declared that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Piketty, looking at his own nation’s history, arrives at a similar observation: “The experience of France in the Belle Époque proves, if proof were needed, that no hypocrisy is too great when economic and financial elites are obliged to defend their interest.”

The same phenomenon is visible today. In fact, a curious aspect of the American scene is that the politics of inequality seem if anything to be running ahead of the reality. As we’ve seen, at this point the US economic elite owes its status mainly to wages rather than capital income. Nonetheless, conservative economic rhetoric already emphasizes and celebrates capital rather than labor — “job creators,” not workers.

In 2012 Eric Cantor, the House majority leader, chose to mark Labor Day — Labor Day! — with a tweet honoring business owners:

Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success.

Perhaps chastened by the reaction, he reportedly felt the need to remind his colleagues at a subsequent GOP retreat that most people don’t own their own businesses — but this in itself shows how thoroughly the party identifies itself with capital to the virtual exclusion of labor.

Nor is this orientation toward capital just rhetorical. Tax burdens on high-income Americans have fallen across the board since the 1970s, but the biggest reductions have come on capital income — including a sharp fall in corporate taxes, which indirectly benefits stockholders — and inheritance. Sometimes it seems as if a substantial part of our political class is actively working to restore Piketty’s patrimonial capitalism. And if you look at the sources of political donations, many of which come from wealthy families, this possibility is a lot less outlandish than it might seem.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

From The New York Review of Books. Copyright © 2014 by Paul Krugman
 
Paul Krugman is a columnist for The New York Times and a professor of economics and international affairs at Princeton. 
He was awarded the Nobel Prize in Economics in 2008. Follow him on Twitter @NYTimeskrugman
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  • Cynthia Davis

    Seems to me the only flaw in this assessment is that in the US the oligarchy is still forming.. but the KEY point is that it is not capital or earnings – but the CONTROL of such things – and in that – the US falls squarely in the same situation as other countries. The difference is the allowance of bringing in the crafty to offset those inheritors that are not so crafty that have led to declines of inequality. This allowance will make the US far MORE cemented to a feudal system in the coming years than other more “mature” societies..

  • Bruce Miller

    Paternal Capitalism involves our own “Ministry of Truth” controlled by Main Stream Media. Ownership of this media are in bed with these family dynasties and willingly supporting their views. Easily we can see this influence from the corruption of democracy to the Oligarchy’s massive influence in Social Authoritarianism in state and local government. All three branches of our government are involved and bought media advertising supports billions in influence peddling on TV,Print, Radio to create “the message” in the “Echo Chamber”. ” Free ” Speech is obviously not “Free”.
    Multinational corporation control of “public relations” or propaganda as it was called before the 1920s is crucial for the return of Paternalist Capitalism. Support for limits on freedoms are supported by the .01 percent and their Right Wing Authoritarian (RWA) followers at least in the US.
    Massive spying and invasion of privacy by multinational corporation via NSA (masquerading as a search for terrorist) perpetuates this “Double Think”. The Rise of the RWA followers will be crucial to our loss of freedoms. The gridlock in government in the last decade points to control by these dynasties through “lobbyist, donations, and Super PACs”. We can assume this control will preclude relief to the masses. Source materials abound. See Mike Lofgren, John Dean, Robert Altimeyer to name a few I have recently read. Can’t wait to read this economist also, not just the book reviews.

  • Anonymous

    “Sometimes it seems as if a substantial part of our political class is
    actively working to restore Piketty’s patrimonial capitalism.” It doesn’t seem that way, it is. Rethuglicans love to praise the 1890s and openly advocate going back to that period.

  • Shirley0401

    Interesting stuff. The issue moving forward, I imagine, will be how to convince people this is everybody’s issue. As so many in the US continue to consider themselves “temporarily embarrassed millionaires,” how do we get more average people to wake up and realize having a tiny percentage of the population in possession of truly dynastic wealth is bad for everyone else (and democracy)?
    There’s admittedly a real appeal to the narrative of the self-made man earning his way to the top, through hard work or talent, and appeals to this narrative make it difficult to get a lot of folks (especially in SC, where I live) to even consider supporting real change that places the good of the overwhelming majority over the more intuitive (to many) “rights” of rich people to “keep what they have.”
    How to use what Piketty has given us? Thoughts? Ideas?

  • Anonymous

    Two points, a question, then a suggestion:

    First, anyone who doesn’t think that a business owner actually works but instead exploits the employees has never owned a business. I’ve started two companies, been moderately successful with both, and will never start another company again… at least not one with employees. For most small businesses, the owners are the exploited ones… on the hook for salaries and taxes, and constrained on how they can manage.

    Second, anyone can accumulate capital and join the ranks of those who earn income from investments. Warren Buffett wasn’t born wealthy, and while everyone can’t, and won’t, be another Buffet, a surprising number of the wealthy in this country made their money by working, saving, and investing. What is wrong with that?

    Now, the question: why is income inequality a bad thing? Every country with low levels of income inequality, today and historically, has been a poor country. Most countries with low levels of income inequality have had authoritarian forms of government; low inequality correlates with low personal liberty.

    Here’s the suggestion: if we really want to tax accumulated wealth, why not eliminate the income tax entirely and put in a national sales tax on everything with exemptions only for grocery store food and clothing (limited to X dollars per family member based on a nominal realistic figure, e.g., $1200/year for food and $1200/year for clothing). Everything above that pays a tax. The US GDP is around $14 trillion, and up until 2009 we spent about $2.8 trillion. Given that corporate taxes are about 25% of the total tax revenue, we need to take in around $2.1 trillion 2008 dollars… or a 15% national sales tax. The young couple working hard and saving pay very little taxes; the trust fund kid, the old retired folks with winter homes, the tech millionaires, and the pop stars, athletes, and actors with their exotic sports cars and houses in L.A., Miami, and New York will be paying a lot of taxes because they’re spending a lot of money. A very short tax form for everyone that fits on a postcard, because you’ll enter your SS# every time you purchase to get ‘credit’ for your paid taxes, and you report your actual spending on food and clothing. It will be a lot harder to cheat on your taxes, too, since they’re being collected as you spend.

  • Anonymous

    Note that our country was founded on the ideal of individual rights… not sacrificing the few for the benefit of the many. The right to property, including money, is fundamental, even though you may want what I have… or think you are better able to decide how to utilize what i have.

  • Lance

    Obijohn, was that meant to be satire?

    let me see if I got this straight: we poor won’t have to pay as many taxes because we’re not buying as much. Brilliant. What’s the sales tax rate on campaign donations to be?

    Aside from your dodgy numerology (25% of tax rev, etc.), the crucial fact you’re denying is that the highest levels of inequality have been found in the richest countries (see Pikketty’s chart’s above). To be clear: no one is aiming at punitive measures on the filthy rich, as if it’s a personal attack on the benighted ultra wealthy victims–the target is a rigged economic system.

    The issue you should be concerned with is less and less access to opportunity, politically and financially, because of the incentives of the current system. In case you missed it, the current tax code and legal framework have been re-written by the oligarchs who purchased the machinations of our democratic system (i.e gaming the system; i.e. cheated; i.e. are not honest, accountable citizens)

    A flat sales tax would need allocation and it seems the more populated areas would win the argument on fair distribution–further hollowing out the country.

    I’ll let you go now. You’ll want to go back to doing “more work” than your employees who constrained you with quaint notions of fair compensation and safe working conditions and who didn’t enable your businesses to operate (cuz you built it all yourself, got it). I’ve heard many from your club the last 30 years; seems there is no shortage of selfish minds that believe in the carrot chase and the kool-aid chaser who refuse to check this merry-go-round so that they can get some for themselves when a simpler, more humane path is right in front of us..

    “We” the people are in this together and always have been. Your property fetishization notwithstanding, cooperation is the mantra of nature, not conquest.

  • Anonymous

    There are two main problems with Piketty’s and Krugman’s analysis.

    First, they both seem to think that the 1950s, 1960s were “the norm”. They think that high income taxation, extortive unions, and high growth were the lasting natural state of economies. In fact, that period was the anomaly. The singularity. Only possible in the US, for example, because the rest of the industrial world had been bombed into ruins, we had suppressed household formation for 5 years by shipping millions of lung men overseas to fight wars, and then let it all loose with a common enemy – communism.

    What are the likelihood of that set of conditions reposting itself – not likely and we would not like WWIII as a tool to ameliorate inequality.

    Second, they look at it from the US/European point of view. If you look at it from a global level, there is a lot less global inequality now than in the 50s and 60s. The income of Americans then was over 100 times greater than the Chinese. Now it is merely 6 times greater. 1,000,000,000 people have been lifted out of poverty into the middle class in the last 15 years. That is more than the entire population of the US and Europe.

    Labor’s share of the economy and economic growth is very much keeping pace with the growth of capital returns. The only difference is that labor in China and other emerging economies is taking share from labor in the US and EU.

    But Krugman and Piketty will never realize that. They are analyzing the US for example as a closed system. They don’t even attempt to measure inequality on a global scale.

    Why? Because inequality globally has been DECREASING since the 50s/60s. The only losers are rich country unskilled and low skilled labor in industry exposed to global competition. They had unsustainable and uncompetitive wages and WILL be brought down to market rates like it or not over time.

  • Anonymous

    Lance, given that the US Supreme Court has held that campaign donations are a form of free speech, there will not be any sales tax on donations as that is an infringement of a fundamental right. FDR tried taxing newsprint to shut his opposition in the press up back in the ’30s, but lost that battle in court, too.

    I agree that the richest countries have the highest level of income inequality, just as the poorest countries have the lowest level of income inequality. I’d still rather live in the USA of today than the Congo of today… where most everyone is desperately poor yet equivalent in terms of income.

    Regarding honesty, who is to blame if indeed the system is rigged… the people who bought the politicians, or the politicians who sold themselves? I say they’re both to blame, and that’s why I favor less power to the central government so they cannot have enough of an effect on my income, my job, or my well-being to be worth bribing.

    A national flat sales tax would not result in any different spending patterns than today’s income tax; the US Congress will still get to decide on budget priorities (if, in fact, the Congress actually can come together and pass a budget, something that Harry Reid has prevented since 2008).

    Regarding my employees, you don’t know me. You don’t know that I provided health care for my employees when none of my competitors did. You don’t know that I had many good employees who are still good friends, and a few dishonest ones who stole considerable sums from my business, and my pocket (because employees always get paid, even if it comes directly from the business owner’s personal bank account). You don’t know that a business owner gets paid last, after employees, vendors, and the government. You need to step up and start a business, and walk a mile or two in someone else’s shoes before you presume to think you know what it’s like.

    We the People are in this together. That’s why it’s unfair to make some of the People pay a disproportionate share, when others pay nothing at all.

  • JHarper

    I wish more people realized the true engine of inequality is exactly what Krugman champions: more control for the government and the banking cartel known as the federal reserve. Why has it been so important to reinflate the stock/housing bubble with QE? Krugman is all about loose monetary policy. That helps fight income inequality because we all know that it is the poor and middle class people who own most of the property, stocks and bonds right? (That is sarcasm for all you blind Krugman followers who failed your intro econ courses)

  • Anonymous

    Our country was founded on slavery. Surely, you don’t want to return to those days, do you ?

  • irishrow

    Obijohn, let’s start by announcing that I’ve owned the business for over 30 years.

    Money as speech was never a “fundamental right” until some truly clueless Republican judges tossed the idea over the fence in 2010. It certainly isn’t ensconced in the Constitution.

    When you say, ” A national flat sales tax would not result in any different spending patterns than today’s income tax…” your cleverness stumbles over your ontologically-challenged belief system.

    The proposed tax would shift an even greater share of the expense of our society on the poor and middle class, while relieving the wealthiest of even that lopsided disgrace that exists today, thanks to their unflinching tendency toward greed.

    The truly rich in this country arent paying nearly their share. I’m embarrassed for you. The depth of of your ignorance leaves me wondering, “Which of Obijohn’s employees has been running the place while he’s been sitting in his office pouring over the latest right-wing claptrap that passes for serious thought over at Fox News?”

  • Anonymous

    It seems to me that this book demonstrates the failure of tax systems to ensure the economic viability of workers. It makes absolutely no sense, for example, for Walmart workers to need federal and state subsidies in order to approach some semblance of a living wage while the company and the owners avoid paying compensatory taxes.

    What is needed is a bifurcated system where taxes finance the safety net for the unemployed and a new method is used to guarantee that workers receive a living wage and a statutory share of GDP. The problem with any proposal is that, as Thom Hartmann has written, there is a “great forgetting” after a couple of generations which leaves the door open for the financial elites to corrupt the system to their advantage.

    Once we have the inevitable next major economic collapse do to failing wage-based demand, time will be ripe for a constitutional amendment to ensure workers get a fair share of GDP and also return to the Fairness Doctrine with no political or issue ads.

  • Anonymous

    The question to be asked for any new tax plan is quite straightforward — if the wealthy pay less and workers pay no more, then who exactly will bear the burden of reducing our deficit?

  • Lance

    ObiJohn,

    So you’re against big gub’mint but not so much you won’t allow them to change the tax code so you can benefit? What convenient principles you have.

    As for your flat tax ruse, are you confident our democratically selected representatives in this republic would select budget priorities favoring those of us who didn’t “speak” to them loudly enough?

    I’m also a bit baffled by your perverse take on incentives, and concerned by your patriotic desire to isolate yourself at the expense of the rest of us, but I really can’t stay– I’ve got to go accumulate some more capital at my minimum wage job so I can reach the goal of life of earning income from investments like the icons you want us to worship.

  • Anonymous

    A sales tax is a regressive tax that falls on the shoulders of the 99% and not the 1%. It really is that simple. Fair Tax, Sales Tax what ever you want to call it they are winners for the rich and punishment for the rest of society.

  • Anonymous

    Actually our country was founded on a strong central government that was for the people.

  • Anonymous

    I favor a national sales tax for two reasons:

    First, I’d rather see the trust fund kids pay more taxes than the young couple starting out who are scrimping and saving and trying to get ahead. Generally, I’d like to see us incentivize working and saving, and disincentivize spending, because that would make for a financially healthier America, and Americans.

    Second, I’d probably pay about the same amount in taxes, if not more, over time. The benefit to me, and to you, and to everyone, is that this would let people choose when to pay taxes… and they can only avoid taxes if they avoid using money.

    All that saved money doesn’t live under someone’s mattress. It is invested in the economy, used to help fund things like college loans or new businesses or construction. All those activities create JOBS… Joe Biden’s favorite three-letter word.

    Tell you what I’m baffled by… the hostility of the people who disagree with me and how instead of responding with counter-proposals utilize ad hominem attacks.

  • bmiller

    Ubiquitous a role as money plays in our lives, I’m always astounded by how few people really understand how our money system works. We have debt-based currency. Except for coinage, *every* dollar comes into existence as debt — T-Bills, loans from the Fed, from member banks, etc. To “reduce the deficit” literally means reducing the amount of money in circulation.

    In this system, the immediate problem isn’t the level of debt but the fact that money isn’t circulating freely. There is more money in existence than ever before, yet we are in an ongoing struggle with recession because most of it never “trickles down” from the realm of the 1-percenters and their investments. Hence, growing inequity.

    There *is* a longer-term problem with debt-based money in that there is never enough money at any one time to pay off all loans plus interest – so the economy must continually “grow” in order to avoid implosion. If you believe the economy can grow to infinity, no problem. However, if you believe a finite planet has ultimate limits, we’d better start thinking of a better way to do things.

  • Anonymous

    Yes but, as Paul Krugman has pointed out, you can only grow debt so long as someone will buy the supporting bonds. QE is NOT an open-ended option. The results of arbitrarily high QE would be hyperinflation.

  • Anonymous

    Looking at our financial history, there have been several cataclysmic financial events. Certainly the record high percentage of GDP flowing to corporate profits along with the record low percentage flowing to wages, along with the similarity to 1929, indicates to me that we won’t have long to wait.

  • bmiller

    Apart from this book and analysis (both excellent), there is a critical mis-perception about money that I have never seen discussed. Because money was originally invented as a token for physical goods, there is an apparently unconscious assumption that money itself is a possession to be owned – just like the physical goods it represents.

    In truth, money should be viewed as a government-supplied utility (like roads and bridges) to be *used*, not owned. We commonly refer to the street we reside on as “my street”, but few would think to put up gates and charge the public a fee to use our section of it. Yet this is exactly what we do with money.

    Another “elephant in the room” rarely discussed is that money currently serves two opposing functions: medium-of-exchange and store-of-value. The more it does of one, the less is available for the other. Though there is more money in existence than ever before, we are in a chronic struggle with recession because those at the very top are so adept at siphoning up and storing the dollars that there is not enough circulating to fund robust economic activity.

    Like any form of energy, money needs to circulate and do work, not be unproductively stored. While some savings might be needed for larger purchases and emergencies, if money was circulating freely, and therefore more readily available, there would be far less need to hoard up a pile of it.

  • Lance

    ObiJohn,

    Not sure which ad-hominem argument you’re referring to, but I do apologize for offending your delicate sensibilities.

    I thought I heard you say you didn’t like big government interfering wielding to much power over your life, but then you ask for that same institution to stack the deck in a way you’d prefer (that is wield power over somebody else’s life). There’s a word for holding those conflicting positions, but it escapes me right now .. . .

    However, I do see you depend on a lot of straw men, false binaries, and pathos in your argument when you pick vague stereotypes like “trust funds kids” (evidently shorthand for lazy spoiled rich kids who inherited their wealth–I guess like the Koch Bros? maybe you meant the Bushies?)

    When you pose that so obviously distasteful group against the pure young couple struggling to get ahead, you polish off the either/or frame for us quite nicely. This handy rhetorical device allows you to elide the mass of difference among, around, and
    through these two options–a mass of actual people like me and your neighbors who founder when the tax cuts you propose demolish the funding for a whole slew of programs and safeguards vital to a democratic republic and a safe modern
    society. 



    But instead the philosophy you espouse prefers to protect the hoards of tax dodgers and misanthropes who prioritize profit over people and the world we all share and will pass on to future generations.

    

Now I’ve not said one word that’s attacking you as a person or even as a failed business owner. I do, however, take exception with baseless assertions about incentivizing work and disincentivizing spending “because that would make for a financially healthier America.” This sounds like austerity, which of course doesn’t touch the plutocracy, but will demoralize the rest of us who make the profits for our overclass.

    Again, you may be a fine chap, but your libertarian rhetoric about flat taxes will not help most of us in the long run. It does preserve one thing: your personal gains and that is what is the issue. Your philosophy values the individual at the expense of the whole. I hear many of your sort speaking like this Randian wet dream, but your collective will not succeed if no one is able to purchase (i.e. spend).

    Now I’m off to accumulate more capital so I can invest it. What an alienated joy you’ve left me. Yay!

  • Anonymous

    The earth’s economy can never be flat. The US would fall into full-fledged anarchy and revolution if workers were forced to work for Bangladesh wages. If US economy fails, the ROW goes down with it.

  • Anonymous

    I have made a counter-proposal — mandate a floor on payrolls as a portion of GDP and implement it by setting a cap on each company’s earnings to payroll ratio based on its historical record. We can only sustain and grow our economy if workers have sufficient wage-based purchasing power to keep up with GDP.

  • Dude

    Lance you can’t understand obijohn because you are starting from a philosophical premise that the successful people are inherently bad people. Your not being very open minded. Talk to people than own their own businesses about what it’s like to be awake all night because the economy has turned down and you don’t know if you have the money to make the payroll. Ask them what it like to have to hire an attorney to defend against frivolous employee or liability lawsuits and wonder if everything you have worked for for any entire lifetime is going to be lost. Once you have walked in those shoes read obijohn’s comments.

  • Anonymous

    First of all wages are meaningless. What matters is purchasing power. If wages go down at the same rate that Walmart (et al) goods and services go down, few will notice.

    For example – yet another failure of Prof Krugman’s analysis – in the latex 70s (when he claims things were still good) to borrow 100,000 to buy a house, cost you 15% a year or $15,000/year to service your mortgage. Now to borrow $200,000 it costs you $7,000 year. So even if home prices are twice as high, it costs 1/2 as much to buy them.

    I.e. With globalization and excess capital seeking return, wages in advanced economies may be suppressed, but credit and goods costs are incredibly lower.

    Second, unskilled wages in the advanced economies WILL go down in relative terms and wages in developing economies WILL go up in relative terms.

    The convergence will be in the middle somewhere. As of lately, the awakes in China and other developing economies are increasing faster than the wages in advanced economies are declining. So there will be no anarchy.

    Besides the militarized police in the US and republican gun ownership is sufficient insurance against working class anarchy.

  • Lance

    Rather, I’m not overvaluing a narrow sliver of our populace whose worries and suffering is no greater than the rest of us.

  • Anonymous

    Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth.

    Wow — all that to come to the stunningly unpredictable conclusion that we need more government control over the economy, with politicians and bureaucrats deciding which citizens have too much, which ones deserve more, who must relinquish their own property to the state, and which citizens are more worthy of having it instead.

    Now that really IS innovative and transformative. New and different.

    Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

    Wake me up when you start singing a different tune.

  • Anonymous

    There are two main problems with your conclusion:

    1. The Nobel prize has become a meaningless joke, most frequently awarded to the collectivist du jour.

    2. This piece is simply the latest bit of sophistry to conclude that the government needs to be charged with deciding who deserves what.

  • Anonymous

    That’s a good one. Thanks.

  • Anonymous

    The Right isn’t trying to take us back to the era of Marx — the Left is.

  • Anonymous

    Like any form of energy, money needs to circulate and do work, not be unproductively stored.

    That “unproductive storage” is more commonly known as “capital investment” — what do you think the purpose of that is?

  • Pat Branigan

    There are those that would own the street that fronts your house. In Chicago the mayor sold the right of usage of our streets to a private company. We now pay that private company to park our cars on streets maintained by our taxes. Their rights to our streets is serviced by a public service, police. So your assumption of ownership is incorrect. Capitalists will not be satisfied until they own the entire money supply and everything else on this earth. They are systemically confiscating middle class assets and once that is complete they will thenl squabble between each other to try to own everything just as the monarchies of Old Europe did.

  • Pat Branigan

    Money hoarded in Cayman Island bank accounts is not invested in anything. It sits and does no one any good.

  • Anonymous

    Oh, so THAT’S where it all went. Thanks.

  • Anonymous

    RETURN to those days? Perhaps not so ironically, those who promoted slavery (Democrats) are the same people who today continue to demand policies that reward jobs, admissions and government benefits on the basis of race and skin color.

    The real question is, when will you people finally, at along last, leave those days behind?

  • Rouzbeh

    That’s why the right isn’t advocating unrestrained Capitalism, tax cuts that actually create more inequality than jobs and a ridiculous distribution of government spending on things that have great rate of return for the rich but not for the society as a whole.That’s what the right wing never does.They have never done it and never will.That’s why all worker unions, legislation for better pay and vacations, legislation for social security and unemployment benefit all came from the right wing without any left wing movement to force their hands.
    I’m glad we cleared this up.

  • Anonymous

    You sound like you’re reciting from a high school textbook. The founders were divided and attempted to find a balance between federalism and state sovereignty. This failed attempt resulted ultimately in the civil war.

    If America was “founded on the concept of individual sovereignity and enlightened self-interest”, why were only one in 5 of the population considered citizens with the ability to vote?

  • Lance

    “politicians and bureaucrats deciding which citizens have too much, which ones deserve more, who must relinquish their own property to the state, and which citizens are more worthy of having it instead”

    You mean just like it is today? You just can’t palate a decision that alters the status quo. You think robber barons and entrenched interests are more deserving–yet the imbalance to which you have adapted cannot persist.

  • Anonymous

    Yes, you’re right. Using our vast wealth to help the poor and historically mistreated is just like supporting slavery. I should have seen it sooner. What ?

  • Anonymous

    Perhaps not so coincidentally, income inequality has risen over the last five years.

    Nevertheless, it’s heartwarming to see you finally owning up to creating the unsustainable federal Ponzi schemes that are headed for certain collapse, not to mention the great pay and vacations Detroit’s unionized public work force has enjoyed lo these many years.

  • Anonymous

    No, I’d love to see an alteration of the status quo. Just not back to the retrograde collectivism you prefer.

  • Lance

    Got it: you like collectivism the way it is–the lot of us fighting over crumbs, while the plutocrats call the shots from above–because the individual has rights greater than the whole. Got it: you hate most people, and only respect those with means to corrupt our representatives.

  • Lance

    Agree on #1,

    #2 seems like you’re one of those utopians pining for a society that never existed and never will. The government (that is, human beings who help manage civic affairs) are necessary in a society with 300+million peeps.

  • Anonymous

    Well, if you’d like to discuss “the poor,” we can do so. But then, that’s different than the topic of government-sanctioned discrimination.

    What started out as a noble form of helping the historically mistreated has simply become another form of graft to reward a loyal voting bloc. It’s long past time that government end discrimination against people on the basis of their race and skin color. Unfortunately, the inclination to discriminate appears to be too deeply imbedded in the DNA for too many.

  • Anonymous

    Wow — you can see right through me. LOL.

  • Rouzbeh

    yes the problem is with the workers. If only we had beaten them up like we used to in the 10s,20s and 30s to be obedient, work 7 days a week with so little pay that by the time they retired they had nothing left and had to stay with their kids.And no benefits.
    The problem wasn’t with the managers,who made off like bandits with huge severance packages even when they screwed up. The problem wasn’t that Detroit’s designs became too uncompetitive and their quality sank, not because of the workers but because of what they were given to work and what they were told to do.So yeah screw the workers.And while we are at it, screw civil rights, cause let’s not forget that that was a movement supported by the Communist Party and major unions.So it must be bad.
    If only we could eliminate unions all together cause you know, who likes representation on the job?People shouldn’t get a say on the decisions that affect their lives,that’s against democracy!
    In fact, the federal government with its laws like the Glass-Steagall act (that gave the US 40 years of economic stability against massive crashes and its repeal cause the market crash of 07) is clearly useless and should be abolished .

  • Lance

    so what change to the status quo will you permit us, Mr. BM?

  • Anonymous

    Hmmm, you sure do like to draw bizarre (and somewhat deranged) conclusions that don’t come within miles of the mark.

    But feel free to keep wildly firing away in all directions.

  • Lance

    so who will you permit to manage large modern societies?

  • Anonymous

    Always the straw men. What WOULD you do without your straw men?

  • Anonymous

    Why, but of course, I’d put people like you in charge of “managing” it.

  • Anonymous

    The Founders almost universally rejected an all-powerful federal government. Their primary disagreements were about how best to restrain it.

    And the race issue back then, in the context of forming the Constitution, was vastly more complex than the sophomoric views you apparently hold.

  • Anonymous

    Lance, BM really has no answer is for the status quo he thinks trickle down being pissed on is the only way to run the so called Utopian free market Economy in all it’s glory if only because he thinks Obama is a Commie Socialist Kenyan Muslim. BM will shill for the Koch brothers all day long as long as Democrats keep calling for a higher tax obligation on corporations and the 1% whose lobbyist write legislation that puts the 1% needs ahead of everyone else and to hell with our countries infrastructure at all cost.

  • Anonymous

    Dang — had you thrown in a “HALLIBURTION!” you’d have received bonus sheep points for hitting all of the grammar school talking points. Better luck next time.

  • Anonymous

    BM, actually it went into Dubya, Darth Cheney’s, Rummy’s and Condi’s two illegal wars, about $5 trillion and counting since president Obama put the cost on the books along with two huge tax cuts and the Rx donut hole and the other unfunded liabilities Dubya was sold on by the 1%.

  • Anonymous

    Do you actually know how to debate or just throw out ridiculous word salad?

  • Anonymous

    Permit? Now you’re confusing me with the authoritarian set — your brethren.

    Let’s just say the government at almost every level is completely and utterly out of control. Government has grown vastly beyond anything ever contemplated (or permitted by law, which, frankly, no longer exists, and is merely given token lip service). The bureaucracy is exercising a degree of control and authority it was never supposed to. The EPA, IRS, NSA, BLM, FCC — ALL of them are wildly out of control, constantly acting without the consent of the governed, far too removed from any accountability, and badly in need of being cut down to size. And that’s just the tip of the iceberg. And yet, there are some who think it’s a good idea to hand over even more control to these tyrants. That’s absolutely… insane.

    But then, perhaps you PREFER it this way. After all, about one-third to 40% supported the King during the Revolution. Some people WANT to be ruled over.

    “When government fears the people, there is liberty. When the people fear the government, there is tyranny.”

    Which condition do you think exists today?

    There’s clearly a role for government, but it was never meant to be what it has become, and what it has become is abjectly un-American.

  • Anonymous

    That’s funny, coming from somebody who uses “the Koch Brothers” as a boogeyman. LOL.

  • Lance

    almost funny–but seriously, how will a modern infrastructure maintain itself? How will a continent-spanning nation regulate border traffic? What proposals have you for ensuring food, air and water can be consumed safely?

  • Lance

    and about $6t in off-shore tax havens

  • Anthony Endres

    Piketty is unfortunately correct to some interesting degree, but he seems to choose also ignore to mention 3 predominate facts:

    after WW2 most of all military and economic power concentrated into the USA and into the hand of nepotistic connected old-money family clans in fact rather said. That superior power-/money concentrations helped further increased not only the American corporate oligarchic-wannabe greed but the American megalomanic delusions and grandiosity were primarily increased with the monopolistic ownership of the nuclear bomb.

    Secondly: The USA has been due to the long history of slavery and institutional keeping-them-poor Apartheid a reckless self-glorifying, racist, KKK and others thus airily discriminating, it’s own populations and others fucking-over US American society

    ( NSA mass surveillance, Patent and Copyright dominance while wire-tapping and electronically stealing IPs from the entire globe)

    American rising inequality is a built-in default state of mind in an already excessively partially ruthlessly faulty militaristic religious-fanatic racist society.

    Thirdly: The USA was never a Democracy nor a Capitalistic system in the objective or realistic sense! It’s an economy based more on organized frauds, deceiving & holding back all other nations, barbaric militarism, perpetuating false-flag and divide&conquer warfares, global Banking ponzi scheming, ideologic-religious snakes oil-selling tax-exempted “Charities” which makes out of psychotic racist simpletons who can recite the Bible and talk BS powerful political-religious billionaires

    The US is rather what I consider a pretense-Democracy, a crony-capitalism -run by corrupted rich self-serving, extremist opportunistic old incompetent families of cronies and religious fanatic theocrats-wannabe corporate racist mega church lackeys wit the help of various corrupt private US “non”profit” organization and private fake-news media propaganda networks, such a Fox news, ran around the globe brainwashing the human masses to believe incoherent illogical corporate meg church nonsenses as the “truth, while the same news media is willfully instigating crazy US White Supremacists like Kansas City shooter, Frazier Glenn Miller, to attempt to gun down innocent minorities out of pure ethnic hatred. Ethnic hatred which is inherited part of America ( comes with the slaveowners “wealth” I’ll presume) because the US has always run and denied that a part of the USA is indeed a vile, hateful racist murderous country, even-though that part of the US clearly still is all that and more these days.

    Now, Mr Piketty, Mr. Krugman When it is obvious that bankrupting a too big to fail Corporation and tricking the world governments to repeatedly bail you out make FAR more money than running the too big not to fail business, why would you not choose the bankrupt, government bail-out by your federal buddies and ever-bigger big CEO bonus coffers for you – easy bigger stock-option? Precisely!

    The true dimension of the destructiveness caused by such egomaniac human greed led by the old-money 1%, the “Belle Époqueis”, is still not calculated and visualized to the global public yet!
    When US too big to jail Corporations are given Constitutional “Personhood” by old oligarchic-ideologic self-serving judges and corporations are demanding the quasi legal rights to discriminate based on their “beliefs”, and when no-one in the USA has the brain to mathematically question that “job-creator” fairy tale, you know America is not a capitalistic Democracy any more, but rather very f*cked!

    But then, us common people will only get what we are wiling to fight for, – no not with arms nor weapons – but with every single brain cell we have. N’est pas? Demos and Cratos after-all can only come from the most comnon of people.

  • Anonymous

    Standing ovation. Indeed, I’m going to award you significant bonus sheep points for this post. You covered nearly all the collectivist crowd’s favorite boogeymen in one fell swoop.

    You da man!

  • Lance

    well since 27¢ of each dollar is sucked by our bloated military–what say we start trimming there, and then work our way down to pollution regulations.

    Taxation, per se, is not tyranny–it’s the without representation part, that we rightly resist. Which is why the outsized influence that follows from extreme income inequality is dangers to all free citizens. The collective of private interests are actually tyrannizing us. EPA regulators are not. Get real.

    We also can’t be captive to a 18th century understanding of the world. We must adapt to the reality before us. Get real, in other words, and stop wallowing in libertarian idealism

  • Dude

    Obijhn: I too am baffled by the comments I see here. What shocks me is the degree to which the extreme left is every bit as closed minded as the extreme right. You make some very interesting points, but you are being pillared because you dare step outside this site’s neo classic liberal orthodoxy. The left’s lack of understanding of business and economics is scary.

    They seem to live in some sort of alternate economic / social universe. They have no idea how to read a financial statement. They are always so willing to give away someone else’s money, but I doubt they would sing that tune if they won a million dollars in the lottery tomorrow. In fact, they would be beside themselves if they knew how much tax they would have to pay on that $1MM USDLRS as they have no understanding of how the tax system actually works for 9/10th of the “1pct.”. Socialism works until you run out of other people’s money. Everyone should keep that in mind.

    The constant theme on this web site is that the “1 pct.” is some sort of evil cabal that gets together and schemes to take from the “99 pct.” every Friday night at the country club. They think all big business is bad, but all unions are good and that money grows on trees, that foreign competition does not exist, that personal responsibility is selectively part of life and that it’s all some sort of simple zero sum game. Someones success must be at the expense of someone else.

    I do in fact think, in general, that it’s often well-intentioned, but it’s not a starting point for constructive realistic solutions. I don’t excuse the extreme right either. I think they are lost in some sort 1950′s American time warp.

    So, obijohn – keep writing. Your comments are very much worth reading even if I don’t 100 pct. agree. Civil discourse is what is needed here.

  • Lance

    no–the illegal wars were real and costly. And they are still costing us. If you want to trim back out-of-control government, you’d want to rein in our military as well, no?

  • Lance

    No, money grows out of the sweat of the laborers exploited by the overclass. When CEOs are making 300x that of the average worker, something is wrong. This isn’t about poor choices made by irresponsible people, it’s about the choices left to poor people. Extreme income inequality is a moral and democratic hazard.

  • Anonymous

    Military spending is a legitimate topic for discussion — no disagreement there. However, national defense is a core constitutional function of the federal government. Spreading the wealth is not. In fact, taking property from one citizen to give to another is forbidden by the Constitution (of course, we live in a post-constitutional world and that ship sailed long ago).

    Private industry has next to zero influence on you, except to the extent that it influences government policy in a detrimental way. But then, that’s really just another way of noting that the government is the root of the problem. Government absolutely can and should play a role; but just look at the grotesque creature that it has become. And you think it deserves MORE power?

    Once again — in the REAL world, we have a government that is utterly out of control. In your Utopian vision, all of these agencies are stocked with benign individuals all working for the common good, where big Daddy Government is making everything more fair and even.

    Talk about living in dream world.

  • moderator

    BM, Lance and C1h2…

    Looks like you will have to agree to disagree. Please move on before someone breaks the comment policy.

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    Sean @ Moyers

  • moderator

    C1h2…,BM, and Lance

    Looks like you will have to agree to disagree. Please move on before someone breaks the comment policy.

    Thanks

    Sean @ Moyers

  • moderator

    Lance,and BM

    Looks like you will have to agree to disagree. Please move on before someone breaks the comment policy.

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    Sean @ Moyers

  • Dude

    Sorry, Marxism has worked exactly nowhere. The shareholders of a company should be concerned about whether or not a CEO gets paid a lot of money. That is their money being spent, not yours.

  • Anonymous

    but seriously, how will a modern infrastructure maintain itself?

    Surely that’s not a serious question?

    Why do people on your side always equate a belief that government is out of control with desiring no government at all? Is there no middle ground?

    How will a continent-spanning nation regulate border traffic?

    By passing the “Dream Act?”

    What proposals have you for ensuring food, air and water can be consumed safely?

    See above.

    The idea that the EPA can regulate a person’s backyard because it has a puddle on it is hardly what I would call rational environmentalism. It’s would be more accurately described as “totalitarianism.”

    You know, pointing out the FACT that the EPA is totally out of control is not the same thing as being desirous of contaminated food. Is that really so hard to grasp?

  • Lance

    The government is made up of millions of private citizens–you are conflating the major political figures with the whole of government operations. So the government is made up of a bunch of real people replete with flaws.

    As for constitutional priorities, providing for the general welfare is part of the social contract as well. Taxation, by definition, spreads the wealth and I for one am happy to pay for my roads, schools, fire department, environmental safeguards, and military. We can quibble over the distribution, but that’s the very definition of taxes.

    So how do you propose we pay for the core constitutional functions? And how do you propose we strive for more fairness?

    As for no influence of private industry–you have got to be kidding. “Except to the extent it influences governmental policy in a detrimental way” Yeah, that’s a problem. One of those policies is the perverted tax allocation in favor of corporate interests that’s developed over the last 30 years. And some of us would like to tilt the balance back.

  • Anonymous

    Come on Lance, I think you’re a little better than this.

    But then, maybe not.

  • Lance

    right–shareholders are concerned about profit–not about jobs. And that’s why they don’t create them here, but ship them overseas to get a cheaper labor source.

  • Anonymous

    Well, it’s a shame they don’t find the US a more appealing investment option. Wonder why?

  • Anonymous

    Fair enough, Mod.

  • Lance

    at the risk of getting the mod peeved at us–let me say its good that you advocate some environmental protections and some governmental involvement. We agree

    The part we part company on is the percentages of taxes on income–this decision is well within the purview of US government, however.

  • Dude

    Lance: Its just not that simple. I wish it was, but it’s not.

  • Anonymous

    The government is made up of millions of private citizens–you are conflating the major political figures with the whole of government operations. So the government is made up of a bunch of real people replete with flaws.

    Tell that to parade of victims of the EPA, IRS, BLM, NSA, etc.

    As for constitutional priorities, providing for the general welfare is part of the social contract as well. Taxation, by definition, spreads the wealth and I for one am happy to pay for my roads, schools, fire department, environmental safeguards, and military. We can quibble over the distribution, but that’s the very definition of taxes.

    No argument there. But those are core functions of government, and I know of few who disagree with that.

    One of those policies is the perverted tax allocation in favor of corporate interests that’s developed over the last 30 years. And some of us would like to tilt the balance back.

    If you think I support crony capitalism, you couldn’t be more wrong. But, we have the highest corporate tax rate in the industrialized world. Maybe that offshore capital would come back to our shores if that weren’t the case.

    Anyway, Mods are cutting this off, so, nice speaking with you Lance. After cutting through all the BS, you’re OK.

  • Lance

    Simple: because the capitalist ethos values $$ instead of people. Breaking the social contract is fair play. Wonder why you don’t find their behavior unpatriotic?

  • Anonymous

    LOL. Just made a similar comment to you.

    Take care.

  • Lance

    they earn their obscene profits precisely because of cheap labor source. That’s why they choose to manufacture off shore. They’d also like to keep this profits as free from taxes as possible, thus robbing the national coffers of much need resources. These aren’t loyal American citizens. They value profit above all. its that simple. And we shouldn’t allow them. Its not noble nor neighborly.

  • Anonymous

    Wonder why you don’t find their behavior unpatriotic?

    I find it rational.

  • Lance

    it’s not rational if it leads to the instability and corruption we’ve got now. At best, it’s short term good for a narrow minority of the population.

  • Anonymous

    I dunno, I don’t necessarily equate the idea of a person bending over and saying “thank you sir, may I have another?” to be a form of patriotism. Or resisting it to be “corruption.” How about we make the US a more enticing investment environment, and attract both that capital and trillions more to our shores? Isn’t that a better answer?

    (I expect we’ll be cut off my the Mod any moment now.)

  • Lance

    Corruption meaning the outsized influence pooled wealth wields. They’ve got lobbyists trimming the corporate tax code to the lowest rate in decades, and it leads to lack of regulation and no accountability for the elites calling the shots, wrecking the economy and bombing brown-skinned peeps.

    Again, taxation means helping to support the whole, and I’m in favor. When cuts inevitably come they always fall on the most vulnerable.

    I don’t want to entice more cutthroat crony capitalists to our shores. Our nation could have a huge influence on the global economic policy if it chose to do so–but our reps are not permitted to vote that way because they are beholden to the outsized influence permitted under the current tax structure.

    (Sorry mod)

  • 2noame

    The call to arms of a global wealth tax is an extremely difficult goal to obtain at this moment in time. An unconditional basic income however is something both the left and the right can agree on, is something that will expand opportunity, reduce inequality, and benefit everyone, including the rich, who despite the increase in taxes to pay for it, would enjoy lower crime rates, a healthier population, and stronger demand. Basic income is the call to arms we need to organize around, if we wish to recognize Piketty’s work for what it is – a warning to capitalism as it currently exists.

    #BasicIncome

  • Lance

    correction: our country’s wealth was founded on slavery and genocide. FTFY

  • Anonymous

    That’s a great slogan from a radical perspective, but completely without factual basis. Maybe the reason you make minimum wage is due to your education, or lack of it… and your situation the result of making decisions on the basis of faulty knowledge.

  • Anonymous

    Using force to take from some and give to others isn’t a form of charity, it’s a form of robbery. Don’t pat yourself on the back for it.

  • Lance

    you’re right–we didn’t commit genocide nor profit from slavery. I stand corrected.

  • Lance

    so how do you propose collecting funds to maintain our infrastructure? honor system? And don’t say sales tax because that’s still enforced.

  • Lance

    who you calling least productive, dude? And btw, this crony capitalist country of ours is an economic basket case. We’re a real-life test-case of the failure of unregulated capitalism.

  • bmiller

    In today’s economy, the purpose is generally to make more money, which, as the book and review point out, largely remains in the top tier of the distribution – furthering inequity.

  • Anonymous

    Currently the wages in China amount to $0.70/hour of which because of capita controls, the savings don’t really belong to the worker. If this were to double every 5 years for the next 25 years, there still will be no parity. By then the Chinese system will have collapsed since it can only be held together with rapidly growing exports. Who will buy these, with what?

  • Anonymous

    Maybe you should read a textbook. Then you might realize that the history of America is a centuries-long struggle to live up to the ideals as espoused in the Declaration of Independence and enjoy the guarantee of rights as espoused in the Constitution. You might also realize that the right to vote is a civil right and not a fundamental right. That’s why children can’t vote, or felons.

    The US is not a perfect country; no country is. But we are moving towards the realization of those ideals and rights over time. Having one group of people decide what others should make, or own, or have, is antithetical to those ideals and rights… whether its discriminating against poor blacks or rich whites.

  • Anonymous

    There is no redistribution going on. All we are asking corporations to do is stay within the bounds of their specific, unique ratio of earnings to payroll. This means that profits and payrolls grow at the same rate so that they stay in proportion.

  • Anonymous

    An unconditional basic income? You mean everyone gets money just for existing? Two questions: where do I sign up, and who’s going to pay for it?

    Regarding Piketty’s so-called warning to capitalism (how do you warn a market philosophy? maybe he means ‘capitalists’ or ‘wealthy folks’ or ‘anyone who has some money put aside’), and a call to arms for a global wealth tax… be careful about a call to arms, because the other side has arms, too.

  • Anonymous

    I can’t wait for Nobel Laureate Professor Krugman to announce that, as a symbolic step to combat income inequality, he is going to give up his $200K+ yearly salary at CUNY’s Income Inequality Institute (almost 3x what the average CUNY professor makes).

    Until then, I’ll believe income inequality is a crisis when the people who keep claiming it’s a crisis start acting like it’s a crisis… instead of pocketing the dollars.

  • Anonymous

    Howard, your intelligent analysis and persuasive discourse has convinced me. Only Nobel Prize-winning economists are smart enough to understand what we should do, and only Nobel Prize-winning presidents are smart enough to run our country. We are in so much better shape now than we were in 2008, with less debt, smaller deficits, more people working… oh, wait.

  • 2noame

    Yes, that’s exactly what it is. Google “basic income” and you’ll find plenty of information about it. I understand it sounds crazy at first, but once you look into it, you’ll see just how possible it is, and how important it is to achieve.

  • Anonymous

    The FY2014 budget deficit is forecasted to be $650B, last year’s was $680B. The CBO projects the deficit will reach a low in the next year or so, and then start increasing again. Yet, this year’s tax revenues are at an all-time high.

    If you take everything from the top 1%, you won’t fix the problem, you’ll just hide it for a while. How long of a while depends on the total net worth of the 1%. Current figures put that at around 37% of $55 trillion, or $20 trillion. Hmmm… that would pay off the debt and keep us debt free until around 2019 according to CBO projections. Given the top 1% are destitute, their income tax revenues would go to zero. Then, given CBO spending and revenue projections, we would be back in the hole and find ourselves $17 trillion in debt sometime around 2040. Of course, there’d be a new 1% arising from the liquidation of the previous 1% and the redistribution of those assets. I guess we could just demolish the 1% every 20 years or so. If you’re okay with the fickle hand of government coming in and stomping on people in the name of fairness, that is.

    Again, the problem isn’t revenues (insufficient taxation), it’s spending. Even a mathematical genius like you should understand that.

  • moderator

    Obijohn,

    Personal attacks are against our comment policy. Please stop or you will be unable to continue participating in the community.

    Sean @ Moyers

  • Anonymous

    It doesn’t sound crazy… unless you define ‘crazy’ as financially impossible. Again, who’s going to pay for it?

    In all seriousness, I do think income inequality is a problem, but it’s a problem because of the influence the super-wealthy have on government. There never should have been a Wall Street bailout.

    Let people swing for the fences, but if they miss, if they fail… then LET THEM FAIL! That is capitalism, not propping up the ‘too big to fail’ banks or brokerages.

  • Anonymous

    I really admire Paul Krugman. He is someone who has the intelligence and the talent to keep telling the truth.

  • Dude

    In the real world where management has to get a reasonable return on equity and actually make money your concept will never work . Business operates in a dynamic global environment and because of this there will never be any “unique ratio”. Every company is different. Every quarter is different. There( is no regulatory agency or goverment or authority that will ever get that ratio right. Look through a few hundred financials statements and you will understand what I am telling you is correct.

  • Anonymous

    Wrong. Your analysis is flawed in many ways.

    1 – Chinese wages in (to the US/EU) export oriented industries is already $1.50+/hr and rising fast.

    2 – Inflation in China is running at 5 times the US rate. At some point it must be reflected in the exchange rate. Yes the Chinese gvmt can manage the exchange rate to some extent, but it will have to let the currency appreciate at some point.

    3 – Energy costs are much lower and going lower in the US.

    4 – Technological changes are reducing the direct labor content in all goods and services.

    The net result of all this is that we are at most a generation away from say a TV being assembled for sale in the US having the same ADJUSTED LABOR COST as one assembled in China.

    Of course this will happen faster for some products than others. heavy bulky items like tractors are already almost there. Lighter items like iPhones and watches are further away.

    What is the net result of that?

    Simple.

    Adjusted wage convergence will happen faster than any governmental attempt to impose tariffs and high taxation to redistribute income, making those measures irrelevant.

  • Dude

    Your concept will create a huge entitlement lobby that sits around doing nothing. How would you ever effectively figure out who is deserving and who is not? And yes, who is going to pay for all of this?

  • Dude

    It’s easy to be an uber liberal until one has to write the check for their income to be redistributed. It’s just so easy to be “principled”when someone else is writing the check.

  • Moribund Cadaver

    It’s going to take a long time for people weaned in a “dog eat dog” society of nearly unrestrained capitalism to wrap their heads around the true implications of the basic income guarantee. Here’s a different way of looking at it: when you give someone money, what happens to the money depends on who they are. Take an extremely wealthy person who cannot realistically spend all the money they make just by existing (that’s right), earning money thanks to the system giving them more in the form of capital profit. When they receive yet more money, it goes into an account and sits there.

    By contrast, when someone who is not rich in the ultimate sense gets money, the money -does things-. They have a reason to spend it – and the poorer they are, the more they are forced to spend it. They must eat, must clothe themselves, must pay rent. Society is wrapped around the fixation on separating the deserving from the undeserving, and that’s a distraction from objective reality. In a capitalistic society that incorporates a basic income, there’s still plenty of incentive to want more. To want to increase your earnings. People who literally want -nothing- more than to sit in a small room, eat basic meals, and stare at the wall represent an unrealistic archetype.

    The fear over “moochers” is preventing many from realizing that all that is happening now is working poor are trapped in an endless cycle of non-upwardly mobile labor that barely allows them to subsist – and in many cases doesn’t even allow that. They still require additional assistance to survive. But by not having to whittle one’s remaining life away in near pointless sub-survival labor, a person suddenly has options. They can go to school. They can become instantly laterally mobile and move away from bad neighborhoods. They can actually go where better work is (because right now, many people cannot find jobs as the jobs they qualify for are in a place they can’t go to and survive while waiting on that job to be available.)

    And all the while, the money being supplied to facilitate this is going right back into the economy every step of the way – rather than being hoarded as piles of gold to make someone feel good about having “won” capitalism.

    But it’s probably not going to happen until circumstances force it to happen. When there’s -no- choice left. Too much of the population is utterly conditioned to see their fellow citizens in what are actually very condescending, hostile terms.

  • Lance

    well said, MC–it’s alienation for everybody. I have no hope we’ll live to see the change you forecast, however.

  • Anonymous

    Taxing to support infrastructure isn’t redistribution. No one is against infrastructure. What many of us are against is bad stewardship and waste, and taking from one to give to another. And, a system that is explicitly designed to prevent most people from rising out of wage slavery and becoming financially independent because it discourages work and saving.

    I would accept a 10% income tax hike IF four conditions were met: no more deficit spending based on current tax rates and revenues, all of the additional tax revenue from the hike goes to pay down the debt, the hike goes away once the debt is eliminated, and government spending was capped to be no greater than last year’s budget plus the lesser of 1% or the rate of GDP growth. Let the Congress split the pie to reflect the peoples’ desires… but not via deficit spending.

  • Anonymous

    Did the wealthy take their money from the middle class, or did they get more of an expanding supply? The economy isn’t a zero sum game; Bill Gates made a lot of folks millionaires both inside and outside of Microsoft.

    Maybe you need to reexamine your premise that the wealthy somehow made their money dishonestly. That seems to be true mostly for career politicians. The rest… tech entrepreneurs, athletes, actors, pop stars… seem to have found a way to monetize their talents in a way that gets small amounts of money from large numbers of customers.

  • Pat Branigan

    I don’t think there is a problem with people who own their own business. Most are good upstanding people but when you go public that seem to be when the shareholder is even more important than the customer. Case in point how our banks here still issue cards with magnetic strips when they know that it makes it easy for someone to hack into your account. The reason that they do not change to the chip plus pin is that they have to spend money on the customer and not make the huge profits they need to for the shareholder. So the customer be damned the shareholder is who we are thinking about. It is going public on the market that makes business bad. When family owned and operated or worker owned and operated business works just fine.

  • Anonymous

    Banks in Europe have chip and pin, not the magnetic stripe, and new credit cards are issued every couple of years. Credit card fraud is a huge problem in Europe, too.This is why PayPal Mobile and Google Wallet will eventually replace cards, and be secured with biometric information. So, the customer does matter, unless it’s the government… and that is where the oligarchy of corrupt business and corrupt politicians join to screw the rest of us. The businesses do it by not delivering value for money, the politicians do it by not holding the businesses accountable because they’ve been paid off. Look at Solyndra. And they do it with the money they’ve taken from us, from our labor and savings.

  • Lance

    Actually, Robin Hood had it right: redistribution is healthy for society and increases quality of life for many at the bottom of the pyramid.

  • Lance

    You describe the need for smarter government not less. You make the case for enforcing regulations, not deregulation.

  • Lance

    Yes we all want to give our children a better life–except we’ve stopped doing that haven’t we? Only people like Sheldon Adelson get to pass on their wealth (untaxed). So where’s the limit on growth? Where’s the cap on personal wealth, ’cause unchecked it will al flow to a narrower and narrower sliver and destroy the liberty and better life of our children we pretend to care about.

  • Lance

    here, let me fix that for you “In the (world of corrupted capitalistic values) where management has to get an (ever-increasing return) on equity and actually make money (for the .001% who own everything) your concept will (not be approved).”

    Change, however imperfect, must be attempted or we can kiss our democratic values goodbye. Redistribution isn’t a bad word–it’s decent and neighborly and, in the longer term, in everybody’s best interest–including the oligarchy.

  • dcryer

    But that’s exactly what Krugman IS willing to do. The wealth taxes he advocates would apply to him too. Think it through!

  • Anonymous

    That’s what he SAYS he’s willing to do… but actions speak louder than words. Martin Luther King was willing to BE arrested, not just say it, and that’s how he changed the world.

    Don’t tell us what we should do, Professor Krugman, DO it.Lead by example if this is such a grave problem.

  • Anonymous

    ^This.

    The policy of QE that Krugman has advocated, and continues to advocate, has enabled the very inequality he decries.The rich have gotten richer, on the backs of everyone else (because of the tremendous increase to the national debt).

  • Anonymous

    Robin Hood stole the King’s tax receipts. You want to use the power of the King to steal from others. You actually want to be like the people you decry… I guess unfairness is okay if it benefits you. Isn’t that the very definition of selfishness?

  • Lance

    It’s an analogy, and Robin Hood is a fictional character.

    The principle is a simple horticultural one: trimming the top to promote more growth. The current tax rates are lower for the ultra wealthy (aka: job creators) yet where are the jobs? Oh yeah, overseas where worker protections are lower.

    Let me make it clearer for you: redistribution is another word for taxation. I am in favor of taxing the top to provide for the bottom, because a fulfilling life isn’t a privilege of inherited wealth or so-called better choices–pursuit of happiness is a right for all.

    A progressive tax code should do this and make sure everyone is paying according to their ability. That’s fair.

  • irishrow

    Obijohn, you just can’t seem to get your numbers right on anything. Direct from the CBO today:

    “As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year. CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion…”

    You’re only off by 160 billion dollars.

    You state, “…Yet, this year’s tax revenues are at an all-time high.” Well, I’m just going to go ahead and call “bullsh*t” on you, Obi.

    Current taxes amount to 16.7% of GDP. They were 17.9% in 2007. Now, hang on to your “deficit scold” hat, here. What’s interesting about 2007? Oh, right, we had a BUDGET SURPLUS! Taxes were 19.9% of GDP in 2000. They were 18% in 1954.

    So, you’ve got the temerity to declare: “Again, the problem isn’t revenues (insufficient taxation), it’s spending. Even a mathematical genius like you should understand that.”

    Well, I’ll take that moniker and wear it proudly. The Confederates (nee Republicans) slashed taxes and created larger deficits. The numbers are right there in front of you. Sure, I’m willing to cut the Defense Department. How far? I’d keep cutting it until someone, someday, somewhere can actually ACCOUNT for the money they spend, because they haven’t been able to do it for decades. We can save $200 billion a year from Defense alone. Add the taxes on the wealthy and corporations that I’ve previously outlined and the result is surpluses onto the horizon.

    I don’t care what you or Paul Ryan says. Neither of you can add or speak plainly about budget issues. You hide behind misleading or outright imaginary numbers and statistics.

    Americans don’t need to live on cat food for us to balance the budget. We CAN have expanded Social Security, Medicare, Medicaid, ACA to single-payer, good, affordable education for the next generations, infrastructure upgrades, job development, green energy initiatives, immigration reform, marriage equality, women’s control of their own bodies and more.

    And we don’t have to bankrupt the 1% to get it. We simply have to enable them to pay their true, fair share by a sensible overhaul of the US Tax Code. I just showed you how. And along the way, if we can accomplish this, I’m all for some added taxes on the lower tax brackets as well. I’ll pay another 1% of payroll to guarantee Medicare forever.

  • irishrow

    Where did I say the “wealthy made their money dishonestly”?

    Another straw man I’m not going to grace with a reply.

    But you do state, “…Did the wealthy take their money from the middle class, or did they get more of an expanding supply?”

    Both. The middle class creates great wealth that concentrates on successful companies. The Fed has used expansionary QE to shower the rich and powerful with new money.

    But let me point out, yet again, the other way they’ve been getting it: they’ve rigged the tax code so that they get to keep more of their money than the poor and middle class.

    Don’t take my word for it, go ask Mitt “9%-if-I-really-have-to-produce-even-one-tax-return-in-order-to-run-for-President” Romney.

  • irishrow

    Yeah, Lance, walk in Obijohn’s shoes…your jaw will drop at the tax breaks, write-offs and other personal advantages of running your own business allow.

    After all, who do you think is staying up at night worrying more: the business owner that may just have to lay someone off, or the poor employee worried that he’s going to lose his job?

  • Anonymous

    The right to pursue happiness (another way of describing liberty) isn’t the same as a right to happiness.

    I can see now the essential difference between us.You (Lance) believe that if we can just somehow tweak the system, maybe add some more levers and knobs to improve our ability to tune, we’ll be able to get the desired outcome. I realize this desire on your and others’ parts is misguided and stems from a lack of understanding of systems. This tweaking and tuning is a form of what Deming called, “Chasing your statistical tail,” or responding to common-cause variance as if it were special-cause variance. Doing so only amplifies variance; the things proposed and done to reduce income inequality only exacerbate it. The tweakers and tuners fail to realize that the system is comprised of billions of individuals who are seeking to maximize their individual outcomes. Put a law in place to increase the cost of domestic employees, and the response is not to pay more but instead to go where labor is cheaper. Put a law to tax domestic income, and income is moved offshore. Etc.

    The only way to reduce or eliminate common-cause variation is to fundamentally change the system. Make it easier and more renumerative to get the results you want instead of always tightening the screws… and that is why cutting cap gains tax rates increases cap gains tax revenues. Make it easier to employ people in the US, not more expensive. Make it unprofitable to bribe politicians by reducing government’s impact, by regulating less, so smaller startups can compete without capital or the anticompetitive protection that exists now. Etc.

    The problem of the oligarchy isn’t capitalism, it’s a very tightly regulated economy that benefits the oligarchy. Remove the protections and restrictions against competition, so the little guy can compete.

  • Anonymous

    Once you take the actual hours worked each week into account (100 hours), I believe my figure is closer to reality. In any case, you are correct that much of this work will be returning to the US, but not the jobs as it will be highly automated.

    In China’s case they may not be able to hold it together much longer as a country because of the following factors:

    The ruling politicians are all billionaires.

    There were more than 15,000 protests last year which had to be put down.

    China itself is suffering from automation and globalization reducing its need for workers with garments taken over by Bangladesh and Foxconn installing 1 million robots.

    China also remains highly dependent on strong exports which may not be sustainable as the ROW economies weaken.

  • Anonymous

    All the government needs is a record of all that corporation’s W2′s and earnings filings and they already have that. Like any system it would need to use imputed income and other techniques to be sure that everyone selling or providing goods and services in the US played by the same rules — but each company’s history would determine its unique ratio. This data could easily be smoothed to swamp out quarter-to-quarter variations.

    If we accept the fact that we cannot have a stable society if we allow worker share of GDP to dwindle indefinitely, then I have presented one possible solution to arrest it — what is yours?

  • Lance

    Sounds like poor regulation is a point on which we agree. And it sounds like we both see crony capitalism as a big problem. 



    But whereas you believe trickle down voodoo economics will save our national soul, recent history shows the naiveté of the view. And whereas you hold that re-tuning regulations will not fix our problems, many of us think change can occur.

    But your position is ideologically grounded, not one based on evidence. While you (and Deming I guess) believe humans can be reduced to “billions of individuals who are seeking to maximize their individual outcomes”– as if they had no other motivators– common sense, history, and nature tell us your assessment just isn’t true. You denigrate human potential by defining human nature narrowly, yet we all know and have seen that we can come together to achieve great results.

    And since your analysis begins with a profound misapprehension of your human subject, your conclusion that no good can ultimately come from flawed humans attempting to perfect our national union is likewise false.

    Normally, I’d not mind our opinions differing because in our democratic republic, tax policy is the sort of matter we could can ask our representatives to vote about. However, the current system has been tweaked by and favors the outsized influence of excessive pooled wealth and thus actual representation is rendered impossible. And as we’ve already established, taxation without representation is tyranny.

    One last point: the tax code (or whatever faulty legislation you’d like to point to) didn’t reach its present state overnight, and it wasn’t written and enforced like that because we’re all self-interested animals. Those laws became that way because a few self-interested animals tweaked and tuned the system to a desired end–and their success is validating that behavior in others.

    But as demoralized as our current political state may be, we should take heart because if regulations can be tweaked to achieve one result, they can be honed to meet another.

  • Dude

    There is nothing wrong with getting a good return on capital. It’s part of running a business well. You’re free to redistribute your money as you see fit. You can write an extra check to the IRS if you want. Nobody is preventing you from doing that. They do accept donations. I would prefer to decide how to
    redistribute my money in a manner I determine. I can send you links to lots of places to donate your money to. I
    choose to send a fair amount of money every year to Save the Children and Doctors Without Borders. I recommend these two charities as they are run very efficiently. They are
    far better managed than the US Government. I have the money to donate because I have saved and invested money over the last thirty years. Over this time my investments generated a good return. The money was utilized to finance profitable well run businesses that employ millions of people with good jobs. I obtained the money to invest by working in financial positions in a capitalist system. I didn’t inherit the
    money.

  • Dude

    I work in the world of finance for over 30 years. I can assure you that what you are proposing will never work – ever. I think if you crack open a book on finance and learn how to analyze financial statements you will understand what I am saying is correct.

  • Lance

    “I would prefer to decide how to redistribute my money in a manner I determine”

    Yeah I suppose we all would, but under the current social contract it’s not really all “your” money–you’ve benefited from infrastructure and advances we’ve all helped to fund, and your success is in part due to the work of others. Glad I could help you, brother.

    But I share your sentiment. We may not like all the choices made, but in our democratic system we select representatives to pick priorities for us. Lately, those decisions tend to support opinions and desires of radical right wing donors who can afford to speak in this country nowadays, but even still, that’s the way spending decisions are made.

    I would rather my taxes weren’t redistributed to support the war machine and US imperial maneuvers, (to the tune of 27% of every dollar collected!), but so far, nobody’s been listening to me.

    So it would be nice for you (evidently) if a self-centered tax policy was enacted, just as I’d prefer a more aware and human approach to foreign affairs, but there you have it–we can’t all have what we want. I guess that’s the way it goes in a democratic republic like ours.

  • Anonymous

    Thank you for show. I have read the CAPITAL book. I suggest additional consideration of the money supply; equity for debt swaps; WW II type financing; preventing dangerous deflation as well as hyper-inflation; liquidity high enough to usher in the abundant economy; the nature of exponential growth in knowledge leading to growth directed at ending poverty ASAP; emphasis on anti-corruption to clean up the law and increase equity and fairness in law, economics, education, guaranteed employment or self-employment; very high wages out of sales OR subsidies.

    We know the magic of money as motivator. We know money is created by law and backed by purchasing power.

    Currently money reflects private debt — which is wrong; it must ASAP reflect output for sale and produced by means of the highest tech automation we can invent and build.

    Think along these lines. Eliminate every tax that falls on the bottom 60 % (or similar fraction) of the economy. If we can produce and distribute a very high minimum standard of living, we may well be able to recruit the rich like Buffet and Gates to our side.

  • Anonymous

    Basic income and guaranteed jobs or self employment, all financed by production of the things that money will buy, is the path to success of business and governance in the future.

  • RICHARD RALPH ROEHL

    Yesssssssss… Old Coyote Knose that the wealth AND income gap… between one percent haves and the 99% have-$nots, especially in the United States of Perpetual War Profiteering, has become interminably wide… and savagely cruel and obscene.

    There is a seething rage percolating in the hinterlands, and it wants to roast a pound of ruling class bankster flesh over the flames of burning mansions.

  • Anonymous

    I find it interesting that Disqus on this site no longer displays the numbers of thumbs down.

  • Anonymous

    If everyone is required to abide by the same rules, then everyone can win. Growing wage-based demand along with the economy is best for all in the long run — see 1950-1975.

  • Anonymous

    The filing of company earnings and W2′s is either accurate or illegal. Take your choice. I have read many financial statements and been involved in the production of some as well.

  • Dude

    It is obvious to me that you have missed my whole point.

  • Anonymous

    I think what all of this comes down to is the need for some sort of financial transactions tax on Wall Street. What could be the harm of doing that? Seems only fair, really.

  • Anonymous

    I believe you have missed my point. One of the key valuation metrics for stock owners is earnings/share. This scheme would ensure that stockholder interest and worker interests were linked by causing earnings and payroll to grow at the same rate. This is a sure-fire way to arrest the 40-year deterioration of middle class purchasing power.

  • Anonymous

    With regard to “actually make money”, a corporation would not be affected in any way by this rule until its earnings exceeded its own historical norms as compared to payroll. In other words, it could never lose money because of this rule, not even make less than it has in the past if it retina payroll.

  • Anonymous

    Walmart hiring employees at a rate that requires state and federal tax dollars to get them close to a living wage and then having Walmart and its owners avoid paying their share of the tax burden they have created is not what I call “avoiding bending over”.

    And don’t tell me that they created jobs — they destroy more and better jobs in local businesses when they open a store.

  • Anita Railing

    Don’t hold back baby, let us know how you really feel

  • Anita Railing

    I know you are but what am thy?

  • Anonymous

    Walmart hiring employees at a rate that requires state and federal tax dollars to get them close to a living wage and then having Walmart and its owners avoid paying their share of the tax burden they have created is not what I call “avoiding bending over”.

    I think that would fall into the category of “collectivist drivel.” But thanks for your contribution.

  • Anonymous

    Professor, I’m not sure your critique of Piketty’s treatment (or lack thereof) of U.S. “supersalaries” is on the mark. Sure, it isn’t elegant, but it isn’t all that different from traditional methods of capital accumulation, either. Supersalaries are the consequence of the ownership-management divide in shareholder capitalism, which has reached its apogee in the U.S. A lot of compensation is in stock options, which is a form of capital ownership. So it seems to me that instead of being a expression to Piketty’s rule, the U.S. is just a variant of it.

  • Anonymous

    As I read this article and viewed Piketty’s Youtube video that one commenter linked to, I found myself thinking about the start of the competitions in the “Hunger Games” books/movies, in which the strongest, meanest champions storm the horn, slaughter everyone who gets in their way, and make off with all the best stuff. This is going to be one uncivilized Gilded Age, and I intend to run as fast as I can away from the horn.

  • Shirley0401

    You wrote:
    The constant theme on this web site is that the “1 pct.” is some sort of
    evil cabal that gets together and schemes to take from the “99 pct.”
    every Friday night at the country club.

    There isn’t a room, and there isn’t a schedule, but there certainly is an effort being made.
    I’m not a conspiracy theorist, and I don’t think everything is coordinated, but there is significant pressure from those at the top, in terms of income distribution, being applied. (I’m guessing you’re familiar with the Powell Memo?)
    And while I might not work in finance, I do understand the appeal of a Flat Tax. I know a lot of working people whose common sense tells them it’s a good idea, despite the fact that it would impact them negatively, and slap a bumper sticker on the back of their pickup. I also understand that it will disproportionately affect those who spend a higher percentage of earnings, while those who can afford to do so save much of theirs. It’s a Trojan Horse for lower taxes on the wealthy. It’s the opposite of what Piketty is recommending, and it’s the opposite of the right direction.
    At bottom, this is a question of what kind of world we wish to live in. I’m not a huge fan of slogans, but most of the arguments I see in opposition to Krugman (who is hardly the raging commie many seem to think he is) boil down to a reflection of “winner-take-all” thinking. And as things are ever-more consolidated, globalized, etc, we’re going to end up with progressively fewer winners, and consequently more losers.

    You wrote:
    They think all big business is bad, but all unions are good and that money grows on trees, that foreign competition does not exist, that personal responsibility is selectively part of life and that it’s all some sort of simple zero sum game. Someones success must be at the expense of someone else.

    That’s simply not true, and I suspect you know it. What might be true is that a lot of us here think is that all business isn’t necessarily good (because job creators, or something), and that a lot of what some businesses do is quite bad. Re: unions, I know I feel that some are better than others, and most could stand to do some things better. But as corporations have an increasingly outsized voice in government, the principles that led to the formation of unions are more important now than they’ve been in a long time. So, yeah, I guess I’d qualify it, but unions are good.
    Re: the rest? All commonly used as justifications for why we should accept things the way they are. What’s strange is that most of those are true/false to the extent we allow them to be true/false. Money works the way it does, for instance, because we all agree to behave in a way that allows it to work the way it does. And foreign competition has effects in direct response to our policies/behaviors in response to it. Treating any of these (except maybe the zero sum game bit, which not many people actually believe) as a given is true only to the extent that enough people treat it as a given that it stays true.

  • Shirley0401

    I feel like I should point out that you’re completely ignoring one of the points Piketty (remember him?) makes, which is the detrimental impact having a concentration of dynastic wealth at the tippy-top. So: yeah, rolling over the top 1% every now and then is a good thing, all by itself. Carry on.

  • Shirley0401

    I have always especially enjoyed the argument that people who advocate more progressive taxation, but choose not to “self-tax” by living below their means are somehow hypocrites.
    To me, it’s evidence that what we need are policies that impose the progressive taxes. (Even those who support them, in principle, require the rates be fixed externally.) As a society, we can make decisions that benefit us all, and choose to adhere to the rules that are in place, far better than we can trust individuals to act individually in such a way that benefits others first.

  • Shirley0401

    You nailed it with the last sentence. It reminds me of the one about the wealthy businessman who takes all the slices of pie except one for himself, and then warns Worker A that Worker B is out to steal his share of what’s left.
    (And yes, I know it isn’t a zero-sum game. But it’s not an infinite-resources game, either.)

  • Shirley0401

    The “who pays for it” question requires us to re-think what payment is, and what money is. But it’s possible. We create money out of thin air now, via interest banks charge that never existed before. But it wouldn’t have to come from any particular person. The short answer: the economy pays for it. Or we all pay for it. Or nobody pays for it. Or something like that. The question, itself, doesn’t quite make sense, viewed through the lens of the (new) monetary system that would have to be in place for it to work.
    The “who deserves it” question has an easy answer: everyone.
    The billionaire gets their $15K (or whatever the amount is), same as the pauper. No means-testing. No eligibility requirements, beyond maybe being 18 years old. Fewer government agencies. (Less fraud.) And the former SNAP employees get to find something useful or productive to do. It’s actually a feature, not a bug. There are a lot of arguments from a right/libertarian orientation, as there are from the left. Nixon didn’t float the idea for nothing…

  • Shirley0401

    Your “problem #1″ is pretty much exactly what Piketty found. He diagnoses exactly the fact that 50s/60s were an anomaly, if markets are allowed to do what they do.

  • Shirley0401

    You’re being disingenuous. One Krugman paying higher taxes doesn’t begin to achieve any of what are many of the explicit goals of the taxes they’re talking about. The whole point is that it has to apply to everyone.

  • Anonymous

    So, Krugman, and you, are willing to give a little bit if they can use the power of government to take a lot from others and then distribute as they see fit?

    Democracy has been defined as two wolves and a sheep holding a vote on the dinner menu. That’s why the Founders set up a constitutional republic, not a democracy. Majority rule, yes, with respect for the rights of the minority. You can’t take what isn’t yours even if you outnumber the minority. If the US is to remain a free country, thst is.

  • Anonymous

    That concentration of wealth is only ‘bad’ if it allows the wealthy to swing the system so they are treated preferentially. You seem to believe that the people who are in government will do the right thing if we give them the power to run over the 1%… but history shows that government hurts a lot more people than the 1%. Left to their own devices, the grandchildren of the wealthy will blow their inheritance via foolish recklessness. In short, the problem of the 1%, if there IS a problem, will self-correct without government intrusion… and limiting government and respecting individual property rights benefits all of us from those who mean to govern well, but mean to govern.

    Of course, that means the Pikettys and Krugmans of the world don’t get the power to force the rest of us to follow their great plans. I can live with that.

  • Anonymous

    Irishrow, aren’t you being disingenuous? Most of Romney’s income is cap gains, not wage-based, so obviously payroll taxes won’t apply. Romney paid over $1MM in taxes, and that puts him in the top 1% of taxpayers by revenue. As a policy decision, in order to encourage people to invest their money instead of socking it away where it cannot flow through the economy, cap gains are taxed at a lower rate.

    Look at dollars, not percentages. My in-laws paid a higher percentage of their total income in payroll taxes than I did, but paid almost nothing in dollars due to tax credits. Because no one can spend percentages, only dollars.

  • Anonymous

    Yes, let’s rise up and kill people because they have more than we do… even if they obtained it legally. Do we start with the politicians who have never worked in the private sector but are worth millions… and is that why they are the ones leading the call to attack the bankers?

  • Anonymous

    And yet he almost never does… hmmm…

  • Anonymous

    Of course, all that money that the rich has doesn’t just go into an account and sit there. It is invested, and that investment creates jobs. And, just like the not-rich, when the wealthy spend their money it also creates jobs and goes into the economy whether the money is spent on Dom Perignon, an iPad, a Ferrari, or a weekend in a penthouse in Manhattan. So, any approach that is based on taking money from the ‘hoard’ of the rich is foolish and misguided… based on an incorrect assessment, and thus bound to fail as it has failed everywhere it’s been tried.

    The real problem isn’t the inequality of wealth, or wages. It is the lack of opportunity for someone who wants to work hard. Some of this is localized, e.g., Detroit, but much of it is to a changed economy where machines can do manual labor more economically than humans. Raising the minimum wage or mandating higher levels of benefits only exacerbates the problem; businesses lay off workers and buy more dishwashing machines.

    The problem is, not everyone has what it takes to get a great job in Silicon Valley or on Wall Street. Small-town economies are closed loop, where the economic pie is effectively fixed (changes very slowly over time). For much of the 20th century, a high school education and a good work ethic could provide a good middle-class life; but that is increasingly not true. The competition for low-wage jobs is increasingly stiff due to immigration (legal and otherwise), and our legal climate has resulted in arbitrary roadblocks like the need for a college degree and no interaction with the law to even get considered for a salaried position.

    The only way to raise wages, and thus the standard of living for the lower and middle classes is to make labor more valuable to employers by increasing demand… not by bumping up the price artificially via minimum wage increases or mandatory benefits. How about by limiting the competition for low-skilled jobs by enforcing our current immigration laws? How about limiting H1B visas to raise middle-class professional salaries? Oversupply reduces cost, we all know that. Why are we adding to our woes by not controlling immigration to this country? And, how about easing the regulatory restrictions on manufacturing in this country? If Toyota can make a car cheaper in America than in Japan, why can’t Apple make an iPad cheaper in America than China?