DeLong: productive vs. extractive

Very Rough: Exploding Wealth Inequality and Its Rent-Seeking Society Consequences: (Early) Monday Focus for October 27, 2014 by DeLong

What I would like to see Emmanuel and Gabriel guess it is the share of wealth that is productive–that boosts the productivity of the working class and that shares those productivity benefits with workers–and the share of wealth that is extractive–that are pure claims on income rather than useful instruments of production, and thus that erode rather than boost the incomes of others. Wealth plays two roles, you see: as useful factors of production that boost productivity, and as extractive social power that is the result, the cause, and the maintainer of the rent-seeking society.

Baker and Krugman on QE

Krugman on Quantitative Easing and Inequality by Dean Baker

Yellen, the Fed, K21 and inequality

Perspectives on Inequality and Opportunity from the Survey of Consumer Finances by Chair Janet L. Yellen

Chair Yellen Holds Forth on the Inequality of Opportunity by Jared Bernstein

What Janet Yellen Said, and Didn’t Say, About Inequality by Neil Irwin

World's Richest Man Tries to Defend Wealth Inequality by Dean Baker

inequality

A New Report Argues Inequality Is Causing Slower Growth. Here’s Why It Matters. by Neil Irwin

inequality and Democrats; Strange Defeat

Inequality: Don't Blame the Market by Dean Baker

Goldfarb:

Jason Furman, the chairman of the Council of Economic Advisers, has estimated that overall, the health care programs and Obama's tax policies should undo years of growing inequality. 

"Just the tax changes we made in this administration undid about half a decade of the increase in inequality," he said in a press briefing last week on an unrelated topic. "If you add in the Affordable Care Act, it’s more than a decade of inequality that was undone. " 

He said future work must tackle the pre-tax inequality, by doing things like raising the minimum wage, which would immediately increase the income of the poor, and improving educational attainment, which could reduce inequality over the long run.

First off: defeat the Republicans. Secondly, purge the Democrats of the Rubinites. We need the Democrats to not bother talking about supply side policies to fix pre-tax inequality like improving education. They need to focus on full employment and rising real wages. They need to take to heart Kalecki's point that the economy should not depend upon the whims of investors and business managers. The base line should be set by the government and government spending. Then who cares when an asset bubble pops.

The "strange defeat" of the Democratic Party - to take the title of J.W. Mason's blog post - happened when Bill Clinton dropped his campaign pledge for a middle class spending bill in the face of Greenspan's threats to raise interest rates. As James Carville quipped "I want to be reincarnated as the bond market. Everyone's afraid of you." Greenspan did deliver 4 percent unemployment, but it was unsustainable and led to increasing inequality as the tech boom busted and morphed into the housing bubble. Clinton's deficit reduction was squandered by Bush's tax cuts for the rich which Greenspan endorsed.

Mason's post a response to his article where the conservative writer mentions India. They wish America, Japan and Europe were more like developing nations and were more vulnerable to bond vigiliantes. But they have their own printing presses.

The Constition

The U.S. Constitution was created to form a government that wouldn't devolve into a tyranny along the lines of the monarchies of contemporary Europe.

But the more conservative of the framers were worried about the mob and wanted to put checks on the majority.

As Piketty's K21 and the last 40 years shows we should be more concerned about the opposite problem, the ability and tendency for the power and wealth of the minority to self-replicate, reinforce and grow - metastasize - at the expense of the majority.

Watch John Oliver completely destroy the idea that hard work will make you rich

The facts about economic inequality in America are pretty staggering. The top 1 percent of Americansbrings home close to 20 percent of income. Income inequality is the highest it's been since 1928. And Pew found that by a 60 to 36 percent margin, Americans believe they live in a country with a system that unfairly favors the wealthy. 

So the big question is: Why do Americans allow this to happen?

The answer, in John Oliver's estimation, is the American sense of optimism. He notes that a shockingpercentage of Americans feel the economic system unfairly favors the wealthy, but still believe that they will be wealthy if they put in the hard work. 

"I can clearly see this game is rigged, which makes it so sweet when I win this thing," Oliver says.

Piketty

Doug Henwood reviews Thomas Piketty's Capital in the Twenty-First Century

Forces of Divergence: Is surging inequality endemic to capitalism? by John Cassidy

PIKETTY’S INEQUALITY STORY IN SIX CHARTS by John Cassidy

Dialogue: Eleven (so Far) Worthwhile Reviews of and Reflections on Thomas Piketty’s “Capital in the Twenty-First Century”: Wednesday Focus: March 26, 2014 by DeLong

left left - inequality and creditors

The biggest thing centrists miss about the inequality debate by Ryan Cooper

Progressives see inequality as a fundamental part of why our economy is not working as it once did, not a problem to be placed above job creation.

Bill Keller recently provided a representative sample:

The left-left sees economic inequality as mainly a problem of distribution — the accumulation of vast wealth that never really trickles down from on high. Their prescription is to tax the 1 percent and close corporate loopholes, using the new revenues to subsidize the needs of the poor and middle class…

The center-left — and that includes President Obama, most of the time — sees the problem and the solutions as more complicated. Yes, you want to provide greater security for those without independent means (see Obamacare), but you also need to create opportunity, which means, first and foremost, jobs. … The center-left … agrees on the menace of inequality, but places equal or greater emphasis on the fact that the economy is not growing the way it did for most of the last century.

First of all, this is a bit rich to hear from the center. The left has been howling about jobs and growth for five years now, for so long and so loud that our collective tonsils have about come unglued — and who were we arguing against? The centrists, who were a major bloc of support behind the premature turn to austerity back in 2010. Better late than never, I guess. Welcome to the party, guys!

He links to:

Depression is a choice by Steve Randy Waldman

But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave.

Waldman suggests buying off the "median influencer."

left left

Bill Keller's Center-Left Is the Reason We Are Growing Less Rapidly by Dean Baker

How the Inequality/Growth Debate Has Evolved Over Time by Jared Bernstein

inequality-palooza (political economy)

I highlight the discussion of the political economic dynamics of inequality.

Inequality isn’t ‘the defining challenge of our time’ by Ezra Klein

Inequality, Ezra, Paul, and the Unifying Theory (and Evidence) by Jared Bernstein

Well, here’s a unifying theory: demand-side policies that that significantly lower unemployment will also reduce inequality. It’s right there in figures 2.5-2.7 of my new book with Dean Baker on getting back to full employment.

A major factor driving inequality, particularly earnings’ gaps, is the diminished bargaining power of middle and low-wage workers. In an economy like ours, with little (not-enough, IMHO) pressure from collective bargaining, low minimum wages, and a large low-wage sector relative to other advanced economies, very tight job markets are about the only friend working families have.

...

Second, my point here is that full employment enforces a more equitable distribution of growth.  That’s not saying anything about the impact of inequality on growth itself, though the theory I develop in my CAP paper does introduce what I think are potentially important feedback loops between inequality, debt bubbles, and recession, with a generous sprinkling of money-in-politics to close the loop.

Inequality As A Defining Challenge by Krugman

Third, there’s the political economy aspect, where you can argue that policy failures both before and, perhaps even more crucially, after the crisis were distorted by rising inequality, and the corresponding increase in the political power of the 1 percent. Before the crisis, there was an elite consensus in favor of deregulation and financialization that was never justified by the evidence, but aligned closely with the interests of a small but very wealthy minority. After the crisis, there was the sudden turn away from job creation to deficit obsession; polling suggests that this wasn’t at all what the average voter wanted, but that it did reflect the priorities of the wealthy. And the insistence on the importance of cutting entitlements is overwhelmingly a 1 percent thing.

...

Finally, very much tying in with this, is the question of what progressive think tanks should research. Klein suggests that “how to fight unemployment” should be a more central topic than “how to reduce inequality.” But here’s the thing: we know how to fight unemployment — not perfectly, but good old basic macroeconomics has worked very well since 2008. There’s no mystery about the economics of our slow recovery — that’s what happens when you tighten fiscal policy in the face of private deleveraging and monetary policy is constrained by the zero lower bound. The question is why our political system ignored everything macroeconomics has learned, and the answer to that question, as I’ve suggested, has a lot to do with inequality.

Inequality and Incomes, Continued by Krugman

Ezra Klein Misses the Mark: Inequality and Unemployment Are the Same Problem by Dean Baker

These are the people who are most likely to get jobs. And those with jobs will also have the opportunity to work longer hours. And, a tight labor market will create conditions in which workers at the bottom will have more bargaining power. Walmart and McDonalds will be paying workers $15 an hour if that is the only way that they can get people to work for them.

For this reason, the high unemployment policy that Congress is pursuing with its current budget policy is a key factor in the upward redistribution of income that we have seen in the last three decades. This means that people concerned about inequality should be very angry over budgets that don't spend enough to bring the economy to full employment (also an over-valued dollar). So Ezra is absolutely right that progressives should be yelling about unemployment, but inequality is a very big part of that picture.

Is the American Left Wrongheaded? And Is the WCEG Part of the Problem?: Ezra Klein vs. Ashok Rao and Brad DeLong and **UPDATE** Steve Randy Waldmann: Friday Focus (December 13, 2013) by DeLong

And then there are the political consequences of inequality. A more unequal economy is one in which the voice of the rich speak louder in the political debate, and the rich want to keep what is theirs. Before 1975 the U.S. made a uniquely large effort to educate its people, and win the race between education and technology. The result was a middle-class society for white guys (and, alas, for white guys alone). Then came what Robert Kuttner calls The Revolt of the Haves: the great pulling-up of the ladder of free public higher education. The consequence was another factor pushing for the great widening of income inequality, as America began to lose the race between education and technology. And the consequence was that 0.3%/year of American real economic growth simply vanished as we were no longer making the requisite educational effort to keep our population the best-educated in the world. Over 35 years that failure has made us another 10% poorer–and more unequal to.

Terrible by Steve Randy Waldman

"There is little tension between addressing inequality and pursuing the other goals Klein says we should focus on. Klein sets up a straw man when he argues

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."

Ten Theses on Growth, Employment, and Inequality by Matt Yglesias

The Defining Problem of Our Age by Ashok Rao

Obama's inequality speech

Inequality is ‘the defining issue of our time’ by Greg Sargent

Yellen and inequality

Yellen’s Challenge at the Fed: Speaking Persuasively to Investors by Binyamin Appelbaum

Some analysts see these shifts as relatively inconsequential. They argue that Ms. Yellen would retain the strongest hand in setting the Fed’s course, and that tapering asset purchases would be a sufficient concession to maintain a majority.

“The institutional momentum is there even as the people in the chairs change,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.

Ms. Swonk said the new voices probably would cause some confusion, but “it increases uncertainty more than it changes the course of monetary policy.”

Rethinking the Rise of Inequality by Eduardo Porter

Inequality: The Democrats' Next Frontier by Yglesias