Monday, November 07, 2011

Daily Kos|DSWright: Nobel Prize Winning Economist Paul Krugman: "Occupy Wall Street Basically Right"

Nobel Prize winning economist, Princeton University Economics Professor and New York Times Columnist Paul Krugman is echoing the statements of every respectable expert - Occupy Wall Street is right on the facts, from the New York Times:

The budget office report tells us that essentially all of the upward redistribution of income away from the bottom 80 percent has gone to the highest-income 1 percent of Americans. That is, the protesters who portray themselves as representing the interests of the 99 percent have it basically right, and the pundits solemnly assuring them that it’s really about education, not the gains of a small elite, have it completely wrong.

Facts can be stubborn things:

Like the fact that Citigroup was actually a cause not a casualty of the financial crisis.

Or the fact that contrary to popular misconceptions only a few companies control most of the global economy.

Or the fact that Occupy Wall Street is not in any way Antisemetic.

Or the fact that America has historic wealth inequality.

All fun facts that stubbornly insist upon themselves despite constant attempts at obfuscation by the bought priesthood of hack think tank intellectuals and right wing media barons.

Facts are stubborn things. And Krugman not only acknowledges that OWS is right on the facts but sees a more disturbing trend also highlighted by the movement.

(please continue)

For those who missed it the Congressional Budget Office issued a report on income inequality, from that report:

CBO finds that, between 1979 and 2007, income grew by:

    275 percent for the top 1 percent of households,
    65 percent for the next 19 percent,
    Just under 40 percent for the next 60 percent, and
    18 percent for the bottom 20 percent.

The share of income going to higher-income households rose, while the share going to lower-income households fell.

    The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
    Most of that growth went to the top 1 percent of the population.
    All other groups saw their shares decline by 2 to 3 percentage points.

Market Income Shifted Toward Higher-Income Households

Shifts in the distribution of market income underlie most of the changes in the distribution of after-tax income. (Market income—or income before taxes and transfers—includes labor income, business income, capital income, capital gains, and income from other sources such as pensions.)

    Each source of market income was less evenly distributed in 2007 than in 1979.
    More concentrated sources of income (such as business income and capital gains) grew faster than less concentrated sources (such as labor income).

Government Transfers and Federal Taxes Became Less Redistributive

Government transfers and federal taxes both help to even out the income distribution. Transfers boost income the most for lower-income households, while taxes claim a larger share of income as people's income rises.

In 2007, federal taxes and transfers reduced the dispersion of income by 20 percent, but that equalizing effect was larger in 1979.

    The share of transfer payments to the lowest-income households declined.
    The overall average federal tax rate fell.

Hmmmm. So trickle down economics (Reagan, Bush, Clinton, Bush, Obama) doesn't actually work it seems.

So what happens to a democracy when wealth is massively redistributed up? Krugman continues:

So what you need to know is that all of these claims are basically attempts to obscure the stark reality: We have a society in which money is increasingly concentrated in the hands of a few people, and in which that concentration of income and wealth threatens to make us a democracy in name only.

Did you see it? Re-read if you need too. That is what OWS is all about - the corruption that crony capitalism brings has shredded our democracy. The feedback loop, or as Krugman might call it "path dependence" of the rich getting richer using their wealth to turn elections into auctions - then getting even more rewards and becoming richer to buy more elections - has hollowed out our republic turning America into a procedural - not substantive - democracy.

We have elections, but they mean nothing because they decide nothing. They decide nothing because the decision has already been made, in dollars and cents.

So this is an Oligarchy, a plutocracy to be exact. Does Krugman think America can keep fooling itself?

The budget office laid out some of that stark reality in a recent report, which documented a sharp decline in the share of total income going to lower- and middle-income Americans. We still like to think of ourselves as a middle-class country. But with the bottom 80 percent of households now receiving less than half of total income, that’s a vision increasingly at odds with reality.

Reality is such a downer. What's on TV? Wait, I remember there is one more lie we can tell ourselves - Education is Magic! It's really a question of the 99% becoming educated then they can all somehow, despite math, become the 1%!

Right Paul...Paul?

In response, the usual suspects have rolled out some familiar arguments: the data are flawed (they aren’t); the rich are an ever-changing group (not so); and so on. The most popular argument right now seems, however, to be the claim that we may not be a middle-class society, but we’re still an upper-middle-class society, in which a broad class of highly educated workers, who have the skills to compete in the modern world, is doing very well.

It’s a nice story, and a lot less disturbing than the picture of a nation in which a much smaller group of rich people is becoming increasingly dominant. But it’s not true.

Workers with college degrees have indeed, on average, done better than workers without, and the gap has generally widened over time. But highly educated Americans have by no means been immune to income stagnation and growing economic insecurity. Wage gains for most college-educated workers have been unimpressive (and nonexistent since 2000), while even the well-educated can no longer count on getting jobs with good benefits. In particular, these days workers with a college degree but no further degrees are less likely to get workplace health coverage than workers with only a high school degree were in 1979.

So who is getting the big gains? A very small, wealthy minority.

Aww dammit I thought that one could work too. Didn't they tell us that in school? Just keep spinning your hamster wheel faster and faster, take out a bunch of debt, and you too can be rich enough to afford a sweet coffin. Cha-ching!

But aren't those protesters being too negative? This is the land of self-help books and bullshit artistry. Maybe some positive thinking or a different spin, visualize with the power of confidence a democratic society - just stop dwelling on negativity. Don't think about it, or think at all!

Turns out OWS may be low-balling it:

If anything, the protesters are setting the cutoff too low. The recent budget office report doesn’t look inside the top 1 percent, but an earlier report, which only went up to 2005, found that almost two-thirds of the rising share of the top percentile in income actually went to the top 0.1 percent — the richest thousandth of Americans, who saw their real incomes rise more than 400 percent over the period from 1979 to 2005.

Wow, even most of the 1% aren't the richest. Good lord talk about a pyramid scheme. But wait I forget one more mental trick...

Aren't these .1% really smart. I mean America is a meritocracy right? These must be innovators and entrepreneurs who improve society so much they deserve to be Pharaohs.

Who’s in that top 0.1 percent? Are they heroic entrepreneurs creating jobs? No, for the most part, they’re corporate executives.

Oh Corporate America, I knew it was you all along. You stole our heart (and our houses, and pensions, and... well everything really).

So can we have this extreme wealth concentration, political corruption, and crony capitalism AND still be a democracy? Krugman doesn't think so:

The larger answer, however, is that extreme concentration of income is incompatible with real democracy. Can anyone seriously deny that our political system is being warped by the influence of big money, and that the warping is getting worse as the wealth of a few grows ever larger?

Some pundits are still trying to dismiss concerns about rising inequality as somehow foolish. But the truth is that the whole nature of our society is at stake.


Also republished by Occupy Wall Street.


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