Policy of the One Percent, by the One Percent, for the One Percent

From “The 1 Percent’s Solution,” Paul Krugman, NYT:

“Thus, the average American is somewhat worried about budget  deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face.  And how should the budget deficit be brought down?  The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.

“You get the idea:  The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor.  What the top 1 percent wants becomes what economic science says we must do.

“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.

“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make.  To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”

 

Beware the Robots and Robber Barons

While Washington obsesses about what high-thirties number will be our top tax rate come January 1, I worry about what jobs will be available come the next few decades and what incomes they will provide.  Our American prescription for success — get more education than your parents — may not work anymore.

From “Robots And Robber Barons,” Paul Krugman, NYT:

[T]he wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then.  Indeed, recent college graduates had stagnant incomes even before the financial crisis struck.  Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.

“[T[here are two plausible explanations, both of which could be true to some extent.  One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power.  Think of these two stories as emphasizing robots on one side, robber barons on the other.

[M]any of the jobs being displaced [by robots] are high-skill and high-wage; the downside of technology isn’t limited to menial workers.

What about robber barons? …  [I]ncreasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.”  Emphasis added.

We may be heading for a jobs cliff much scarier than the fiscal cliff. 

Our Two Economies

When I was growing up, the stock market pretty much tracked the job market — chances are if the Dow was high, unemployment was low.  Productivity gains translated into higher wages.  Wall Street and Main Street prospered together.  Since the Great Meltdown, we’ve seen the stock market come back, while unemployment and underemployment have remained high, and productivity gains go to profits, not wages.  I believe this hurts Mitt’s chances for election.

Americans don’t doubt that Mitt is amazing at making money.  We know he’d be good for corporate profits and the stock market.  Where we have less confidence is that he’d be good for getting us or our brother or neighbor a job.

Back in 2004, in the first post-9/11 presidential election, Bush defeated Kerry by convincing us that Kerry wasn’t ruthless enough to deal with the terrorists. That’s what the Swift-Boating was all about, casting doubt on the toughness of someone who’d actually served in combat, unlike Bush himself.

In this election, Obama will defeat Mitt by convincing us that Mitt, based on his Bain record, is too ruthless to deal with the Main Street side of our economy, as opposed to the Wall Street side.  Mitt identifies with the bottom line, not the unemployment line.  If 2004 called for toughness abroad, 2012 calls for some tenderness at home, a trait we don’t associate with Mitt.

Strong corporate profits, a high Dow Jones no longer mean the jobs are “trickling down” to us.  There’s definitely a trickle, but it’s just the one percent peeing on your leg.