Mitt Romney: “I, for instance, as you know, part company with many of the conservatives in my party…
…on the issue of the minimum wage. I think we ought to raise it. Because frankly, our party is all about more jobs and better pay…
Category: Economic Stability
Morning Must-Read: James Kwak: Tax Policy Revisionism
James Kwak: Tax Policy Revisionism: “In an otherwise unobjectionable article…
…the generally excellent David Leonhardt wrote… In the 1950s, the top rate exceeded 90 percent. Today, it is 39.6 percent, and only because President Obama finally won a yearslong battle with Republicans in early 2013 to increase it from 35 percent.”… The 39.6 percent tax rate… was lowered to 35 percent by the 2001 Bush tax cut, which had a sunset provision at the end of 2010…. The 35 percent rate was then extended for two years by the December 2010 tax cut, which was supported by President Obama…. It finally expired on January 1, 2013, at which point the 39.6 percent rate reappeared in its original form. A few hours later, Congress passed a new tax cut for just about everyone, except households with income over $450,000, who were left with the 39.6 percent rate…. President Obama didn’t fight a battle with Republicans. He fought a battle with himself. In 2010 and 2012 he could have restored the top tax rate to 39.6 percent simply by doing nothing and letting the Bush tax cuts expire. The January 2013 tax bill also locked in big tax preferences for capital gains and dividends…. President Obama talks a good game when it comes to inequality, but he hasn’t backed it up…. [In] tax policy, his main impact has been to make permanent most of the inequality-increasing tax cuts that were his predecessor’s most treasured legacy.
Morning Must-Read: John Quiggin: Wealth: Earned or Inherited?
John Quiggin: Wealth: earned or inherited?: “The efforts of the right to discredit Piketty’s Capital…
…have so far ranged from unconvincing to risible…. One point raised in this four-para summary by the Economist is that ‘today’s super-rich mostly come by their wealth through work, rather than via inheritance.’… For those who haven’t… got around to reading [the book]….
Wealth inequality is also high, though it has not increased as much as income inequality…. Rattner [says]… ‘those at the top were more likely to earn than inherit their riches’. Since I’m already noticing that point popping up in the places you might expect… let me point out that Rattner’s explanation… is wrong, and that there is every reason to expect a boom in inherited wealth. The fact that currently wealthy Americans have not, in general, inherited their wealth follows logically from the fact that, in their parents’ generation, there weren’t comparable accumulations of wealth to be bequeathed… growing inequality of income must precede growing inequality of wealth, since wealth is simply the cumulative excess of income over consumption…. So, given highly unequal incomes, and social immobility, we can expect inheritance to play a much bigger role in explaining inequality for the generations now entering adulthood than for the current recipients of high incomes…
Morning Must-Read: Heather Boushey: On Thomas Piketty
Heather Boushey: On Thomas Piketty: “Has Piketty convinced us that ‘The past tends to devour the future’…
…[that] we are likely to see ever-increasing inequality unless we take action?…. Piketty’s predictions hinge on a few assumptions…. Policy makers in developed-country democracies obviously have the ability to raise tax rates, but for Piketty the assumption they will not is useful, as it establishes the outer bound on the rate of return if policymakers choose to eliminate all capital taxes…. Piketty provides a convincing case that there is nothing natural about equitable growth…. I agree with Piketty that we should worry whether income inequality is calcifying into wealth inequality. I am far less concerned about whether his predictions about the rate of return on capital or the rate of growth are precisely true…. I’m living in the here and now, where the top 1 percent take home an astonishing 22 percent of total national income, leaving too many unable to tap into the benefits of economic growth. This is not a sustainable system… not good for the economy… either.
Lunchtime Must-Read: Ricardo Hausmann: Technological Diffusion and Economic Theory
Ricardo Hausmann: Technological Diffusion and Economic Theory: “One idea about which economists agree almost unanimously is that…
…huge income difference between rich and poor countries [are] attributable to neither capital nor education, but rather to “technology”… [which] sounds more meaningful than confessing our ignorance, [but] it really is not…. Devices can be put in a container and shipped around the world, while recipes, blueprints, and how-to manuals can be posted online…. So the Internet and free trade should make the ideas and devices that we call “technology” available everywhere…. Daron Acemoglu and James Robinson’s book Why Nations Fail… [argues] essentially that technology does not diffuse because the ruling elite does not want it to…. I am also struck by how often governments that embrace the goal of shared growth–post-apartheid South Africa is a good example–fail to achieve it. Such governments promote schooling, free trade, property rights, social programs, and the Internet, and yet their countries’ economies remain stuck. If technology is just devices and ideas, what is holding them back?
The problem is that a key component of technology is knowhow, which… neither involves nor can be acquired through comprehension… tacit knowledge… an ability to recognize patterns and respond with effective actions…. Knowhow moves to new areas when the brains that hold it move there. Once there, they can train others. Moreover, now that knowhow is becoming increasingly collective, not individual, diffusion is becoming even slower…. Progress happens by moving into what the theoretical biologist Stuart Kauffman calls the “adjacent possible”… technology does not diffuse because of the nature of technology itself.
Afternoon Must-Read: Derek Thompson: Reads Annie Lowrey on Why America’s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap
Derek Thompson: Why America’s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap: “Here’s a fascinating snapshot….
You occasionally hear conservatives say that poor people aren’t really poor because, you know, they have refrigerators and TVs, don’t they? Yes, they do…. But the power to alter the temperature of your food and watch FOX is not quite the same as being rich…. Why does it seem like the least important things in life—TVs, toys, and DVD players—are getting cheap while the most important parts of the economy are getting more expensive?….
- On poverty: Jordan Weissmann nails it: “Prices are rising on the very things that are essential for climbing out of poverty”… college… sick[ness]… daycare…. Just as the benefits of wealth create a virtuous cycle of behavior, the challenges of poverty start a vicious circle that continues to spin down through multiple generations.
- On productivity: When you look at the items in red with falling prices, they largely reflect industries whose jobs are easily off-shored and automated…. Now consider education, health, and childcare, the blue sectors above where prices are rising considerably faster than average. These are service industries that employ local workers. They are not, to use the economic term, “tradable”… are mostly gaining jobs, not shedding them…. Health care, education, and childcare have entirely different products than a television or iPod. Their product is people: healthy people, educated people, and safe baby-people…
Afternoon Must-Read: Danielle Kurtzleben: Don’t Panic About Slow Economic Growth Last quarter. Panic About 6 Years of It
Danielle Kurtzleben: Don’t panic about slow economic growth last quarter. Panic about 6 years of it: “Individual-quarter GDP charts miss the bigger picture…
…that this recovery is truly, phenomenally disappointing. Economists Atif Mian, professor of economics and public policy at Princeton University, and Amir Sufi, professor of finance at the University of Chicago’s Booth School of Business, show this in a new post today on their House of Debt blog:
Astonishing Imprint of the Pattern of Racial Housing Segregation on Jogging Routes in Kansas City…
Joseph Stromberg: This interactive map shows the most popular running and cycling routes in your city: “Strava, a popular app used to log routes and times for cyclists and runners…
…has an an interactive heatmap of 77 million rides and 19 million runs recorded by users over the past few years. It is made up of more than 220 billion total data points, and it is amazing…
Terrifying rather than amazing, I would say…
Morning Must-Read: Annie Lowrey: Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones
Annie Lowrey: Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones: “The poor economy has replaced good jobs with bad ones….
‘Fast food is driving the bulk of the job growth at the low end…’ said Michael Evangelist…. Higher-wage industries–like accounting and legal work–shed 3.6 million positions during the recession and have added only 2.6 million positions during the recovery. But lower-wage industries lost two million jobs, then added 3.8 million…
The Daily Piketty: Kathy Geier, Michael Bird, and Tim Noah
Kathy Geier rounds up conservative critics:
Kathy Geier: What Piketty’s Conservative Critics Get WrongThe Baffler: “A conservative backlash to Piketty was inevitable…
…the only surprise is that it’s taken so long to develop…. Send in the clowns! Reihan Salam… doesn’t appear to have read a word of the book, but took it upon himself to write about it anyway…cribbing from one of the few less-than-glowing reviews of Piketty on the left, by economist Dean Baker, Salam decides he didn’t like the book because of its ‘pessimism.’ But he disagrees with Baker’s ideas about policies to fix inequality…. Earlier this week, the economist Branko Milanovic tweeted, “And the award for the stupidest review of Piketty’s book so far goes to… (no surprise there) @WSJ”… Daniel Shuchman…. I didn’t think it was possible to find a more hack-stastic review of Piketty in a major publication than the one by Shuchman. Like Milanovic, I was ready to award the dunce cap to the Journal and call it a day. But then along came Megan McArdle… one of the most extraordinary openings of a book review I have ever read:
I apologize in advance, because I am going to talk about a book that I have not yet read. To be clear, I intend to read Thomas Piketty’s “Capital in the Twenty-First Century”…
Okay then! She proceeds to argue vigorously against Piketty’s policy proposal on taxes—although, to repeat, she did not read his arguments in favor of them….
There have been more serious reviews as well…. Kevin Hassett… claims that consumption inequality is not on the rise. Nice try, but no…. Scott Winship claims that… the bottom 90 percent still experienced significant gains…. I’m skeptical…. [And] let’s be real: are we to deduce from Winship-type arguments that conservatives believe that the way to deal with inequality is to increase welfare spending, and make the tax system more fair for low-income earners?…
And Michael Bird surveys worthwhile reviews:
Michael Bird: A revue of reviews – everything you could ever want to read about Piketty’s Capital: “You may not have read French Economist Thomas Piketty’s…
…near-700 page long Capital in the Twenty-First Century, but there’s no need to worry – neither have some of the people who’ve reviewed it. Below are some of the biggest reviews…. If I’ve missed one or several that you think should be included, please leave a comment…”
And Timothy Noah adds a good, substantive review:
Tim Noah: The Dead Are Wealthier Than the Living: Capital in the 21st Century: “Patrimonial capitalism—and the landed or urban gentry living off of inherited wealth…
…was dealt a mortal blow by the Great Depression and World Wars. But it’s making a comeback, and the only way to stop it might be a worldwide tax on capital…. To belong to the landed or urban gentry of the 18th and 19th centuries—that is, to possess “books or musical instruments or jewelry or ball gowns”—you needed at least 20 to 30 times the income of the average person, and the most lucrative professions paid only half that. You needed capital, typically in the form of land. And you needed a lot of it…. Consequently, “society” (i.e., the rich) consisted almost entirely of rentiers living off inherited wealth…. Like most public-policy books, Capital is more satisfying in its diagnoses than in its prescriptions…. It’s always dangerous to project current trends into the future, but here’s one extrapolation I’ll subscribe to: predictions about the future will usually prove wrong…. We lack sufficient data to determine how, or whether, capital accumulation goes haywire in the coming years…