… inequality makes the IMF sing a new tune:
[T]he newfound attention to income inequality isn’t just another facet of a more liberal, Keynesian economic worldview. The fund’s economists have been producing research that suggests that inequality could make the world economy less stable.
Read more here.
Quiz for today: who said this?
The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power.
Answer: Teddy Roosevelt in a 1910 speech in Osawatomie, Kansas. Paul Krugman quotes Roosevelt to make the case that taxing the rich to safeguard democracy is as American as apple pie. Krugman also quotes Irving Fisher’s 1919 presidential address to the American Economics Association, warning of the dangers of “an undemocratic concentration of wealth.”
“How,” Krugman asks,” did such views not only get pushed out of the mainstream, but come to be considered illegitimate?”
Good question. Krugman’s conclusion is right on the money:
[T]he demonization of anyone who talks about the dangers of concentrated wealth is based on a misreading of both the past and the present. Such talk isn’t un-American; it’s very much in the American tradition.
Read his column here.
That’s the question posed by Senator Elizabeth Warren. She will introduce a bill to levy a minimum tax on incomes above $1 million (known as the “Buffet rule”), and devote the revenue to lowering interest payments on student debt:
Warren’s plan would allow students with outstanding student loans to refinance at lower rates. The cost of the change would be covered by a “dollar for dollar” effort where for “every dollar the Buffet rule brings in, we use that dollar to refinance student loan debt.”
Learn more here.
Econ4′s Jerry Friedman looks at the changing composition of demand in America:
While Sears and J.C. Penney drift towards bankruptcy, Nordstrom and other luxury brands flourish. Rather than depending on sales to working-class and middle-class consumers American corporations are doing very well selling to rich consumers, here and abroad. Rather than promising workers high wages to ensure productivity, they maintain labor discipline through fear.
Read his piece here.
Sam Bowles and Arjun Jayadev reveal a dubious distinction of the American economy:
Another dubious first for America: We now employ as many private security guards as high school teachers — over one million of them, or nearly double their number in 1980.
And that’s just a small fraction of what we call “guard labor.” In addition to private security guards, that means police officers, members of the armed forces, prison and court officials, civilian employees of the military, and those producing weapons: a total of 5.2 million workers in 2011. That is a far larger number than we have of teachers at all levels.
Read more here.
Econ4′s Doug Smith writes in the New York Times:
The national discourse continues to sleepwalk past this out-of-the-box question: How about setting a maximum wage for government officials and top-paid government contractors?
Read his op-ed piece here.
In an insightful, introspective piece in yesterday’s New York Times, a recovering derivatives trader writes:
Like alcoholics driving drunk, wealth addiction imperils everyone. Wealth addicts are, more than anybody, specifically responsible for the ever widening rift that is tearing apart our once great country. Wealth addicts are responsible for the vast and toxic disparity between the rich and the poor and the annihilation of the middle class. Only a wealth addict would feel justified in receiving $14 million in compensation — including an $8.5 million bonus — as the McDonald’s C.E.O., Don Thompson, did in 2012, while his company then published a brochure for its work force on how to survive on their low wages. Only a wealth addict would earn hundreds of millions as a hedge-fund manager, and then lobby to maintain a tax loophole that gave him a lower tax rate than his secretary….
Dozens of different types of 12-step support groups — including Clutterers Anonymous and On-Line Gamers Anonymous — exist to help addicts of various types, yet there is no Wealth Addicts Anonymous. Why not? Because our culture supports and even lauds the addiction.
Read his piece here.
Joe Stiglitz points out another casualty of widening inequality:
Trust is what makes contracts, plans and everyday transactions possible; it facilitates the democratic process, from voting to law creation, and is necessary for social stability. It is essential for our lives. It is trust, more than money, that makes the world go round….
Inequality in America is degrading our trust. For our own sake, and for the sake of future generations, it’s time to start rebuilding it.
Read more here.
A humorous look at a not-so-funny subject:
Jeannette Wicks-Lim does the math:
Each time a minimum wage hike is put on the table, the political debate spins on the question of whether such a move would cause business costs to increase so much that jobs are lost. To progress past this perennial debate, one key fact has to be pounded into the American psyche: Average minimum wage hikes impose small cost increases on businesses—so small that businesses can typically adjust by means other than closing their doors or laying off workers. Recent proposals to raise the $7.25 federal minimum present a welcome opportunity to take another whack at this.
Read her piece here.