Category: Equitablog

Martin Luther King: Letter from a Birmingham Jail [King, Jr.]:

My Dear Fellow Clergymen: While confined here in the Birmingham city jail, I came across your recent statement calling my present activities “unwise and untimely.” Seldom do I pause to answer criticism of my work and ideas. If I sought to answer all the criticisms that cross my desk, my secretaries would have little time for anything other than such correspondence in the course of the day, and I would have no time for constructive work. But since I feel that you are men of genuine good will and that your criticisms are sincerely set forth, I want to try to answer your statement in what I hope will be patient and reasonable terms.

Continue reading “Morning Must-Read: Martin Luther King Jr. (April 16, 1963): Letter from a Birmingham Jail” →

Wolfgang Munchau: The real scandal is France’s stagnant economic thinking:

If you want to understand the financial crisis and the subsequent recession, Say’s Law is of no help whatsoever…. When you try to solve a shortage of aggregate demand through supply-side policies, the results are not going to be any different in France than they were elsewhere…. Do not romanticise his U-turn two years into his term and compare it with François Mitterrand’s similarly-timed adoption of the “franc fort” policy in 1983. The purpose of the Mitterrand’s decision was to allow France to coexist in a semi-fixed exchange rate regime with West Germany. It was a political choice of macroeconomic adjustment, not one of supply-side voodoo and ideological convergence….

Continue reading “Must-Read: Wolfgang Munchau on the Real Francois Hollande Scandal” →

Jonathan Chait: Deficit Scolds Holding the Unemployed Hostage: “The main reason for the stalemate is the combination of strategic obstruction and ideological radicalism that dominates Congressional Republican thinking. But a second and nontrivial reason is that the deficit scolds have given the Republicans cover at every turn.

The deficit scolds are a loose amalgamation of business executives, activists, and pundits, often centered around Pete Peterson and his network of activist groups, allied around the goal of bringing both parties together to agree on a plan to reduce the long-term budget deficit…. I don’t find their policy goals terrible…. The long-term deficit, while hard to predict… is probably too high. A bipartisan agreement along the lines suggested by the deficit scolds might be a positive thing….

But their influence has been an unremitting disaster for America….

Continue reading “Morning Must-Read: Jonathan Chait on How the Deficit Scolds Holding Short-Term Prosperity Hostage to Long-Term Agreement Are Harming America” →

Must-Reads:

1. Buce: Underbelly: Slow Boring of Hard Boards: Gates, Shultz, Acheson And the Art of the Political Memoir: “I’m barreling through Robert Gates’ much-hyped memoir… it is a delight–one of the very best memoirs of actual governing that I’ve ever read… not remotely that farrago of political gamesmanship that the prince of courtiers, Bob Woodward, described… why anybody still takes that guy seriously is beyond me. It is… a remarkably unbuttoned affair…. The thrust, the heft of the book lie not so much in the sharp judgments but in the rich and densely textured account of what it is to be a cabinet secretary, juggling a trunk full of hot knives every day for something like four years… the kind of book you would want every one to read before they took up a position of such trust and responsibility–except that if you did, the chances are that all the people you really want on the job would run yelping for the door.”

2. Steven Fazzari: Rising Income Inequality Set the Stage for the  Great Recession: “During the ‘Consumer Age’ period from the early 1980s through 2007, much of U.S. demand growth was generated by the rapid growth of consumer spending financed by unprecedented increases in household debt…. The debt-income ratio for households… was stable from 1960 through 1983 and then began to increase…. This correspondence was not a coincidence: rising income inequality was a central factor that led to increased household debt and therefore to the forces that created the housing bubble and, finally, the Great Recession…”

Continue reading “Things to Read at Lunchtime on January 19, 2014” →

Buce: Underbelly: Slow Boring of Hard Boards: Gates, Shultz, Acheson And the Art of the Political Memoir:

I’m barreling through Robert Gates’ much-hyped memoir… it is a delight–one of the very best memoirs of actual governing that I’ve ever read… not remotely that farrago of political gamesmanship that the prince of courtiers, Bob Woodward, described… why anybody still takes that guy seriously is beyond me. It is… a remarkably unbuttoned affair…. The thrust, the heft of the book lie not so much in the sharp judgments but in the rich and densely textured account of what it is to be a cabinet secretary, juggling a trunk full of hot knives every day for something like four years… the kind of book you would want every one to read before they took up a position of such trust and responsibility–except that if you did, the chances are that all the people you really want on the job would run yelping for the door….

Continue reading “Morning Must-Read: Buce on the Robert Gates Memoir” →

Steven Fazzari: Rising Income Inequality Set the Stage for the  Great Recession:

During the “Consumer Age” period from the early 1980s through 2007, much of U.S. demand growth was generated by the rapid growth of consumer spending financed by unprecedented increases in household debt…. The debt-income ratio for households… was stable from 1960 through 1983 and then began to increase…. This correspondence was not a coincidence: rising income inequality was a central factor that led to increased household debt and therefore to the forces that created the housing bubble and, finally, the Great Recession…

An anchor post:

Paul Krugman: Why We Talk About the One Percent: “Many people in Washington, even those willing to concede that inequality has been rising rapidly, are uncomfortable talking about the famous 1 percent — perhaps because it sounds too populist, too much like an invitation to crowds with pitchforks. For a long time respectable discussion focused on the top 20 percent; today I see my colleague David Brooks talking about the top 5 percent. But framing the discussion in terms of some broader group is in this case deeply misleading…”

And fifteen contributions worth noting:

1. Thomas Piketty and Emmanuel Saez: Income Inequality in the United States
2. Dean Baker: David Brooks’ Primitive Defense of the Rich
3. Arindrajit Dube: Minimum Wages and the Distribution of Family Incomes
4. Josh Barro: We Need A New Supply Side Economics
5. Matthew Yglesias: David Brooks’ made-up consensus to help the poor
6. David Cay Johnston: Willful Blindness Worsens Inequality
7. Josh Barro: David Brooks Is Wrong About Inequality
8. M.S.: Those crazy class-conscious leftists
9. Harold James: The policy response to the financial crisis is fueling income and wage inequality worldwide
10. Josh Barro: David Brooks Is Wrong About Inequality
11. Robert Kuttner: David Brooks’s Worst Column Ever
12. CBO: Trends in the Distribution of Household Income Between 1979 and 2007
13. John Schmitt and Janelle Jones: Low-wage Workers Are Older and Better Educated than Ever
14. Shawn Fremstad: Robert Samuelson Blames “Failure” of War on Poverty on Women’s and Latino’s Insufficient Focus on Self-Improvement
15. David Brooks: The Inequality Problem

Stephen Fiddler: Where Deflation Risks Stir Concerns:

Must-Reads:

1. Obama to Snowden: thanks for showing me the gaping hole we tore in the Constitution. Here's a band-aid. Now please go to jail.— Pierre Omidyar (@pierre) January 17, 2014

1. Josh Barro: David Brooks Is Wrong About Inequality: “David Brooks has a column about inequality today and it’s wrong… in a way that helps explain why conservatives have no idea how to talk about inequality. Brooks… attacks the ‘primitive zero-sum mentality’ that holds ‘growing affluence for the rich must somehow be causing the immobility of the poor’…. [But] while growing affluence for the rich isn’t causing low and moderate incomes to stagnate, they are to a large extent results of the same forces. There is a zero-sum tradeoff between the two, so a zero-sum mentality (primitive or otherwise) is called for…. Because of the declining marginal utility of money, a more unequal distribution of the returns to economic growth is undesirable, all else being equal. The question is, is all else equal? Have there been economic changes in the last four decades that make greater returns to capital necessary for innovation and growth? Or is the shift in returns just an artifact of policy choices on taxes, trade, inflation, and intellectual property that we can reverse without sinking the economy? I think the answer is probably ‘some of each’. But ‘some of each’ means there are a lot of policy choices that can and should be made to reduce inequality in a zero-sum manner.”

2. Via Matthew Boesler, Jan Hatzius: U-6 Unemployment: “Is it really possible that the unemployment rate reaches 6.1% by the end of 2014 but the first hike does not occur until early 2016, as we currently forecast? We still believe that this is the right baseline forecast… ‘optimal control’ considerations and the possibility of a temporarily depressed neutral rate provide reasons for keeping rates lower…. But… observable measures which do not depend on our ability to measure the structural participation rate… confirm that there is still a significantly larger amount of slack than implied by the 6.7% unemployment rate on its own. In particular, the U-6 measure of underemployment… still stands at 13.1%, which historically is consistent with an official unemployment rate of 7.5-8%. The behavior of wages also points to a large amount of slack…. Our inflation forecast only calls for a very slow acceleration that still leaves the core PCE index at 1.7% in early 2016. If this is the right call, we think a hike before early 2016 is unlikely…”

3. Kevin O’Rourke: Deflation in the euro zone: The euro zone needs a history lesson: “Europe’s policy-making elite… [has chosen:] to preclude any form of debt mutualisation; to have individual debtor countries pay off their existing debts; and to have them adjust macroeconomically via austerity and deflation. In Münchau’s words, ‘If you look at this with a knowledge of economic history, this is an awe-inspiring set of choices, to put it mildly’. He’s right…. The gold standard turned out to be hostage to the exogenous evolution of prices. Over… 1873-96, the declining price trend exacerbated the public finance problems of the periphery to breaking point. After 1896… inflation made convergence and steady participation in the gold zone much more attractive…. The pernicious effects of deflation on debt sustainability were further in evidence in the interwar period…’

4. Uwe Reinhardt: The Real Health Care ‘War’ on the Young: “A common theme among critics of Obamacare has been that it basically is a war on… young… men… Chris Conover… John Goodman… Avik Roy…. Now, one certainly can have misgivings over community rating on actuarial grounds…. But the authors cited above do not base their case on purely technical, economic grounds. Language such as ‘the greatest generational theft in world history’ or ‘a war on the bros’ is meant to generate moral outrage. A case in point is the gender neutrality…. Before the Affordable Care Act, premiums for women in the younger age groups in the individual and small-group market were as much as 70 percent higher than those of men of similar age because women bear children…. Imposing gender-neutral community rating on such a market inevitably leads to some economic transfer from men to women…. Among many Americans and most Europeans and Asians–men included–this mandated gender neutrality is noncontroversial. Perhaps it is thought of as a small token of gratitude for the extraordinary contribution to humanity women make in this regard. Besides, there is growing scientific evidence that the physical and intellectual development of humans into adulthood is strongly influenced by their experience and nutrition in utero and during early childhood. Thus, a nation does not even have to be particularly humane, but merely smart, to grant women of child-bearing age easy access to the best maternal and child care attainable, including good nutrition. It is a solid economic investment with high social returns over generations. Yet as I have noted previously, many other Americans seem to view children more in the nature of lovable human pets–that is, more in the nature of a private good than a precious social resource.”

Continue reading “Things to Read on the Morning of January 18, 2014” →

Josh Barro: David Brooks Is Wrong About Inequality:

David Brooks has a column about inequality today and it’s wrong… in a way that helps explain why conservatives have no idea how to talk about inequality. Brooks… attacks the ‘primitive zero-sum mentality’ that holds ‘growing affluence for the rich must somehow be causing the immobility of the poor’…. [But] while growing affluence for the rich isn’t causing low and moderate incomes to stagnate, they are to a large extent results of the same forces. There is a zero-sum tradeoff between the two, so a zero-sum mentality (primitive or otherwise) is called for…. Because of the declining marginal utility of money, a more unequal distribution of the returns to economic growth is undesirable, all else being equal. The question is, is all else equal? Have there been economic changes in the last four decades that make greater returns to capital necessary for innovation and growth? Or is the shift in returns just an artifact of policy choices on taxes, trade, inflation, and intellectual property that we can reverse without sinking the economy? I think the answer is probably ‘some of each’. But ‘some of each’ means there are a lot of policy choices that can and should be made to reduce inequality in a zero-sum manner.

Continue reading “Morning Must-Read: Josh Barro: David Brooks Is Wrong About Inequality” →