The Danger and Damage of Extreme Income Inequality

From “Plutocracy, Paralysis, Perplexity,” Paul Krugman, NYT:

“If something like the financial crisis of 2008 had occurred in, say, 1971 — the year Richard Nixon declared that ‘I am now a Keynsian in economic policy’ — Washington would probably have responded fairly effectively.  There would have been a broad bipartisan consensus in favor of strong action, and there would also have been wide agreement about what kind of action was needed.

“But that was then.  Today, Washington is marked by a combination of bitter partisanship and intellectual confusion — and both are, I would argue, largely the result of extreme income equality.

“For the past century, political polarization has closely tracked income inequality, and there’s every reason to believe that the relationship is causal.  Specifically, money buys power, and the increasing wealth of a tiny minority has effectively bought the allegiance of one of our two major political parties, in the process destroying any prospect for cooperation.

“Disputes in economics used to be bounded by a shared understanding of the evidence, creating a broad range of agreement about economic policy. … Now, however, the Republican Party is dominated by doctrines formerly on the political fringe.

“And why is the GOP so devoted to these doctrines regardless of facts and evidence?  It surely has a lot to do with the fact that billionaires have always loved the doctrines in question, which offer a rationale for policies that serve their interests. … And now the same people effectively own a whole political party.

“Many pundits assert that the U. S. economy has big structural problems that will prevent any quick recovery.  All the evidence, however, points to a simple lack of demand, which could and should be cured very quickly through a combination of fiscal and monetary stimulus.

“No, the real structural problem is in our political system, which has been warped and paralyzed by the power of a small, wealthy minority.  And the key to economic recovery lies in finding a way to get past that minority’s malign influence.”  Emphasis added.

I think it’s obvious that if Mitt wins, this problem won’t get better.