Tuesday, December 17, 2013

Ezra Klein, Steve Waldman & Paul Krugman

The man on the street just read an article at the Washington Post where Ezra Klein asks, "Is inequality really the country’s most pressing problem? Imagine you were given a choice between reducing income inequality by 50 percent and reducing unemployment by 50 percent. Which would you choose?"

The man on the street was laid off from his job in 2008 and has been unemployed for the past 5 years, so a job would be much more of a concern to him at the moment, rather than whether or not CEOs were making 100 times more or 300 times more than their average employee. Right now, the man of the street just needs a job (any job) to pay for his rent.

Ezra Klein then goes on to say, "Some argue that that’s a false choice: Joblessness is a consequence of inequality, and vice versa. The popular mechanism here is that inequality puts money in the hands of people who don’t spend it, and so the economy is suffering from a persistent demand shortfall. Cure inequality, and you’d solve many of the economy’s other problems, too."

The man on the street knows that it's not just a "popular mechanism", that inequality puts money in the hands of people who don’t spend it. A very wealthy man named Nick Hanauer once explained it very well to him:

"Somebody like me makes hundreds or thousands as times much as the median American, but I don't buy hundreds or thousands of times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and shirts a year like most American men. Occasionally we go out to eat with friends."

Ezra Klein points the man on the street to a paper released by the economist Jared Bernstein, who Klein interprets to mean, that Bernstein didn't find any "strong evidence for the idea that inequality is weakening demand". Then Klein refers to a speech by the disgraced Larry Summers, who said that prior to the economy tanking in 2008, "there was a vast amount of imprudent lending going on...too much borrowing, too much wealth."

The man on the street didn't borrow too much; he only had a regular auto loan with a monthly payment that he had easily afforded to make for two years, that is, before he was laid off from his job in 2008.

But the man of the street did appreciate the fact that Klein went on to say that "the plight of the long-term unemployed and the economy's stubborn refusal to generate catch-up growth are more abstract concerns to someone with a good job. It's harder to build a political movement around the intense pain of the few than the more generalized anger of the many."

The man on the street believed that he was one of those people --- the few who felt intense pain, while others where angry at him because he needed food stamps to survive. Then Klein concludes:

"A world in which inequality is the top concern is a world in which raising taxes on the rich is perhaps the most important policy choice the government can make. A world in which growth and unemployment are top concerns are worlds in which very different policies -- from stimulus spending to permitting more inflation -- might be the top priorities."

Steve Randy Waldman then argues:

"Read Bernstein’s paper. Klein is misrepresenting Bernstein’s views. An intelligent reader would interpret Klein as saying that Bernstein looked for evidence, failed to find it, and concluded it just wasn’t there. In fact, Bernstein reviews the research and finds lots of suggestive connections between inequality and growth. The unfortunate bit that Klein quotes reflects a kind of hand-wringing on Bernstein’s part — no, the research is not incontrovertible, there are a lot of “moving parts”, the research is young. Bernstein offers a cautious invitation to take seriously evidence of connections between inequality and growth. Klein pulls the caution out of context and misuses it as an excuse to dismiss those connections."

Paul Krugman weighs in with his own thoughts:

"There’s also an intellectual backlash, with people like Ezra Klein arguing that inequality, while an issue, doesn’t rate being described as “the defining challenge of our time”. This in turn infuriates others, with Steve Randy Waldman going medieval on Klein....You can argue that the damage done by unemployment is greater than the mere income loss, and I’d agree. Still, it’s hard to look at this kind of calculation and dismiss inequality as a secondary issue."

Then Krugman goes on to make his case and concludes:

"Inequality is definitely a defining challenge; whether it is “the” defining challenge can be argued, but it makes very good sense for progressives to focus much of their energy on the issue. And yes, it’s also true that inequality is easier to explain to the public than demand-side macroeconomics — but since these concerns are complements rather than substitutes, that’s not something that should induce any feelings of guilt."

And what does the man on the street think of this exchange between all the experts? "I believe that reducing income inequality AND reducing unemployment are both equally important, and are not separate of the other, because one begets the other."

But what does the man of the street know? He only knows that he is broke, poor and unemployed --- and no "smart people" have been doing anything to fix the problem. And the Republicans also want to cut his food stamps --- and some of the Democrats might agree.

So, it's no wonder that the man on the street has just heard: According to a new Gallup Poll, members of Congress are now less trusted than a car salesman.

But the man on the street does like the stories about the unemployed that Ezra Klein's wife writes.

No comments:

Post a Comment