Paul Krugman still agnostic regarding role of inequality in the crisis

Paul Krugman and Robin Wells, posting on Salon, April 15, 2012, remain agnostic regarding the role of inequality in causing the Crisis of 2008.

They write: 

By 2007, America was about as unequal as it had been on the eve of the Great Depression – and sure enough, just after hitting this milestone, we plunged into the worst slump since the Depression. This probably wasn't a coincidence, although economists are still working on trying to understand the linkages between inequality and vulnerability to economic crisis. Here, however, we want to focus on a different question: Why has the response to the crisis been so inadequate?

They then argue that extreme inequality has funneled so much money through the 1% to politicians, lobbyists, think tanks, the media and academia that the entire intellectual establishment has, in effect, been bought by the rich, and is unable to develop solutions to the economic crisis that challenge the entrenched positions and interests of their paymasters. 

Their argument is compelling. However, when it comes to stating their conclusions Krugman and Wells remain agnostic regarding the causes of the crisis:

In summary, then, the role of rising inequality in creating the economic crisis of 2008 is debatable; it probably did play an important role, if nothing else than by encouraging the financial deregulation that set the stage for the crisis.

The writings of Paul Krugman often exhibit extreme irritation and frustration. He seems to be saying: "Over and over again I have proposed reasonable, short-run Keynesian solutions to the crisis. Governments should pump spending into the economy now and worry about deficits and inflation later. I am frustrated. Why are my spending proposals not being adopted, when they are so obviously right and austerity is so obviously wrong?"

We at Inequality 2012 feel a similar frustration with the proponents of austerity. However, we go further. Another object of our frustration is Krugman himself. Why does he refuse to accept the role of inequality in causing the crisis, a role that other observers like Robert Reich have clearly identified?

Linkages

Straight talk from the Daily Iowan:

As income inequality grows, middle- and working-class Americans consume less. When there is no demand, employers have no incentive to hire new employees. There are no more excuses for inaction. We know what the problem is — now, let's fix it.

New study on Millennial generation finds deep concerns about inequality:

Younger Millennials are divided on whether the American Dream – the idea that if you work hard you’ll get ahead – holds true today. They are moderately optimistic about their long-term financial prospects, when they use their parents’ financial situation as a point of comparison. 

• A plurality (45%) of younger Millennials believe that the American Dream once held true, but not anymore, while 4-in-10 (40%) say the American Dream still holds true. One-in-ten (10%) younger Millennials say that the American Dream never held true.
• Approximately 4-in-10 (42%) of younger Millennials believe that, in their lifetime, they will be better off than their parents, compared to 18% who expect to be less well off than their parents, and 38% who predict that their financial situation will be about the same as their parents’.

College-age Millennials see the need for economic reform to address the gap between the rich and the poor.

• Nearly three-quarters (73%) of college-age Millennials agree that the economic system in this country unfairly favors the wealthy, while (24%) disagree. Majorities of members of all political parties agree: 85% of Democratic Millennials, 71% of Independent Millennials, and 59% of Republican Millennials.
• A strong majority (63%) of younger Millennials agree that one of the big problems in this country is that we don’t give everyone an equal chance in life. Approximately 3-in-10 (28%) disagree, saying that it is not really that big a problem if some people have more of a chance in life than others.
• Nearly 7-in-10 (69%) Millennials believe that the government should do more to reduce the gap between the rich and the poor, while 28% disagree.
• Younger Millennials strongly favor (72%) a policy sometimes called the “Buffett Rule,” which would increase the tax rate on Americans earning more than $1 million a year. Majorities of Republican, Independent and Democratic Millennials support the “Buffett Rule.

The NY Times paws at Burkhauser et al (New York Times)

So does CEPR's Dean Baker (Business Insider):

The big point that they are hitting on these days is that most middle income and poor people get health insurance, either from their employer or the government, which costs lots of money. If we add in this expense to their cash income, then the rise in inequality does not seem as large. 

... 

[But] it seems a bit perverse to argue that the poor are actually doing better than we thought because we are paying lots of money to cardiologists. 

The other point is to keep in mind is that if we look at health outcomes like life expectancy, then it adds to the view that inequality is increasing. While all income groups shared more or less equally in the gains in life expectancy in the three decades immediately following World War II, a hugely disproportionate share of the gains have gone to the top in last three decades.

 The New Yorker poses a seeming contradiction:

Since rich people are poorer in votes than they are in dollars, you’d think that, in an election year, the ninety-nine per cent would look to politics to get back some of what they’ve lost, and that inequality would be a big issue. So far, it hasn’t been.

and - several moderately entertaining thumbnail philosophical sketches later - comes away with an "unlovely" downer of a resolution:

Because groups with wildly different perspectives dominate politics, the observation that ninety-nine per cent of Americans are being left behind economically isn’t of much use politically. The ninety-nine per cent is too big a category to be an effective political force.

...  [I]f we are to go further—and get the political system to try seriously to reverse the trends of the past thirty years—somebody will have to figure out how to stitch together a coalition of distinct, smaller interest groups that, in their different ways, care deeply about inequality, and, together, can pressure Washington in favor of specific policies. It’s an unlovely business, but if you believe that government is the best instrument with which to address the problem it’s also a morally urgent one.

ttfn.

Addressing the Problem of Stagnant Wages

The weighty paper with the above title was written by Frank Levy and Tom Kochan and is available on the EPRN Employment Policy Research Network website. It is essential reading!!! The great thing about the paper is its thoroughness, showing how many things political and economic have contributed to the problem of wage stagnation, and how many things would have to be righted to get the situation back to where wages are keeping up with productivity, the way they did in the three decades after World War II, but have failed to do since the 1970s

A point, which is overlooked by many of us, and, in the welter of detail in the paper, may not stick in a reader's mind: there really are two different classes of workers in America. One is the internationally competitive class of manufacturing workers, engineers, high-tech workers and others. They are (at least partly) holding their own, and are often earning well above the approximately $10 dollar an hour level that could be a politically feasible candidate for a new national minimum wage (the current level being $7.25). With the education and training programs that Levy and Kochan emphasize, a reduction in payroll taxes, and perhaps a gradual decline in the dollar, it seems possible that this class's pay could keep up with productivity and even recoup some of the losses of recent decades.

The other class is relatively low-skilled service sector workers. Despite the fact that it is engaged in a sector that is not for the most part an internationally competitive sector, this class has clearly suffered from wage stagnation. What it needs, it seems, is simply higher wages without necessarily additional education, training, etc. Its wages should catch up with and keep up with national productivity trends. For these workers, a reasonable minimum or living wage is crucial.

This is tricky terrain, and comments would really be appreciated. Clearly, the whole issue of low wages is a key part of the political-economic debate this year, and it is certain to remain at the center of economic debates for years to come.

Do employees have a right to know labor law?

We are getting a nice view of exactly how far "equality under the law" goes in the U.S. these days. The District Court of South Carolina has ruled that the NLRB doesn't have the right to make employers post rules informing workers of their rights under the National Labor Relations Act.

I was having an argument with my cousin the other day about whether we should have retirement plans guaranteed by the government. His basic argument was that he "wanted to give people the opportunity to save their own money." Of course, flip that around and you see that this also gives people the "opportunity" to live out their old age in poverty.

Same idea here. The U.S. Chamber of Commerce - who is backing the case against the NLRB - cannot argue that workers shouldn't be "equal under the laws" of the United States. So instead, they boldly proclaim their support of the "equal opportunity" of workers to be ignorant of the law!

The poster the U.S. Chamber of Commerce doesn't want you to see:

(click on picture for larger version, or get the pdf)

Linkages

Education the reason for inequality? Wrong. Also not disappearance of "middle-skill jobs".

The New Republic on point on the inequality debate? Color me impressed:

A growing body of evidence suggests that greater income inequality translates into lower mobility; as Isabel Sawhill of the Brookings Institution has observed, it gets harder to climb the ladder as the rungs grow farther apart.

...

The "claimed shift toward inequality can be made to disappear." No, it can't. When you correct for household size (a lot more of us live alone than used to be the case) you find the level of income inequality to be lower, but the rate at which it's growing to be faster.

...

[W]hile changes in our tax code did not contribute materially to this increase [in inequality], they did nothing to mitigate it; if we want to use taxation to reduce this alarming gap between the top and the rest of us, we’ll have to broaden the debate far beyond its current bounds.

The right still running with Burkhauser's analysis:

The president's claims are based on the initial research [!] on income inequality from 1913 to 1998 by economists Thomas Piketty and Emmanuel Saez, [according to which] median American incomes rose just 3.2% from 1979 through 2007, with all figures adjusted for inflation.

...

However, a new study entitled “A Second Opinion on the Economic Health of the American Middle Class” by Cornell University researchers led by Richard Burkhauser, found that when properly measured, the median household income rose 36.7%, not 3.2%.

...

Ed Morrissey stated in his post on the new study that “the bottom line is clear: there is no income-inequality 'crisis.' At best it’s a misunderstanding of the data based on incomplete and irregular analysis, and at worst, it’s a demagogic lie intended to divide Americans along false lines. In fact, it’s most likely both.”

Just a reminder: Burkhauser's study still cruelly imprisoned behind paywall. Set it free.

Is it just envy?

It's shameless the way apologists of our current extreme level of economic inequality attack the proponents of a more progressive tax system. Inequality is an "obsession," says Holman W. Jenkins, Jr. in today's Wall Street Journal, and Mitt Romney has accused President Obama of promoting "the bitter politics of envy." Isn't this rather like criticizing a schoolteacher for promoting "envy" if he or she supports kids who are complaining that the class bully is taking their lunch money?

The case for doubling the tax share borne by the 1% is, you would think, a rather easy one to make. The incomes of the 1% have grown so large that they no longer have any meaning in terms of consumption or even large investments. They are more like monopoly money or chips in a casino, and there are so many chips out there that the 1% doesn't know what to do with them.

Meanwhile, also in today's Wall Street Journal – in what one might call the "facts" section as opposed to "opinion" section which contains the views of Holman W. Jenkins, Jr. referred to above – there is an article headed "Wage Divide Grows Wider," which is based on a Labor Department report issued yesterday. "In the first quarter of 2012 people in the bottom tenth of the work force earned $360 a week or less, the Labor Department said." How would Mr. Romney or Mr. Jenkins feel if they found themselves in this group? Have they ever thought how hard the budget choices must be for an individual or family with an income of $360 a week? Would a demand for, say, elimination of payroll taxes and increases in social services like health care services for this group, paid for by higher taxes on the rich and upper middle classes, have to be based on envy? 

Meanwhile, education and other social services that might alleviate the situation of ordinary working Americans and help them rise into higher income brackets, are being squeezed. As Treasury Secretary Timothy Geithner reminds us, by the end of the year the country will face big tax and budget decisions. A demand for fairness would surely be based not on envy but on a recognition of the desperate circumstances of many Americans in the middle and lower economic ranks.

Linkages

Objecting to the Columbia Free Trade deal - Murder, Inequality, Corporate Profits, and Free Trade Go Together (Naked Capitalism):

Here’s the AFL-CIO President Rich Trumka’s mild  and private (subsequently leaked) objection to the trade agreement.

Mr. Trumka noted that many Colombian employers continued to subcontract work in what he said was an illegal strategy to block unionization. He wrote that after municipal workers in the city of Jamundí began a unionization effort in January, the city fired 43 workers, two union leaders received threats, and one activist, Miguel Mallama, “was gunned down in the streets on March 25.”

A Catholic Grapples with Burkhauser's "debunking" of rising inequality (U.S. Catholic)

What I see is a lot of smoke and mirrors. The AEI graphic shows that wages for the lowest 20 percent have dropped by an astonishing one third since 1979; once you account for changes in household size (households have gotten smaller) and public support ("transfers") such as the earned income tax credit and the cost of health insurance, the earnings of the bottom 20 percent have "risen" by 26 percent.

...What is clear to me is that, for the most part, government subsidies (the earned income tax credit especially) are just barely making up for that 33 percent wage loss the bottom 20 percent have sufferred since 1979. In other words, the government is directly subsdizing low wages, and therefore directly subsidizing employers by allowing their wage costs to actually go down by one third...the bottom line is, if you cut further from the government support that keeps the bottom 20 percent afloat, already struggling people are going to get poorer.

The Wall Street Journal is definitely still a Murdoch paper: The Inequality Obsession (Wall Street Journal):

Income inequality is a strange obsession, at least to the extent the obsessives focus their policy responses on trying to adjust the condition of the top 1% rather than improving the opportunities of everyone else.

Income inequality could be a sign of real pathology in authoritarian societies where entrenched groups use government-granted privileges to protect themselves from competition. By and large, that's not the case in the U.S., where most see the market actually increasing the competitive advantages of the educated, skilled, hardworking and talented.

...

One can only wonder how much faster progress on tax reform or school choice would have been if the political capital devoted to income inequality had been devoted to fighting entrenched institutional resistance to useful reforms.

...

One factor is a certain human soul-sickness that's impossible to put a constructive gloss on... How society stimulates the creation and distribution of income is an important topic—so important that one could wish it were less infected with the pathology Freud diagnosed as "group spirit" and which he said was ultimately founded on envy.

As Freud put it, "Everyone must be the same and have the same. Social justice means we deny ourselves many things so that others may have to do without them as well."

VIDEO: Chuck Collins on Inequality

Video of Chuck Collins discussing his new book, 99 to 1:



Whaddaya think? A Forbes blogger was impressed...

More video about 99 to 1: The Inequality Death Spiral

Interesting graphic on Tax Rates

From the NY Times:

(click picture for larger version)

One of the key things, here, is what is included:

Change in total federal tax rate - which includes income, payroll, estate, and other taxes

The inclusion of payroll taxes is important. Payroll taxes have risen dramatically as a source of federal income over the period (1960-present). Right-wingers who want to show "how good the poor have it" focus only on income taxes. The infamous "47%" who "pay no [income] taxes" - although most people who cite the statistic drop the "income" part - is derived from the partial offset that the Earned Income Tax Credit (EITC) gives to the much higher payroll taxes working people pay. The graphic above clearly shows how limited the offset has been.

From the Tax Policy Center:

A footnote on Minsky

In "Two Cheers for Minsky," the narration of the sequence of events leading up to the crash of 2008 slipped into the present tense. Which leads to the question: are we in the process of inflating new asset bubbles today?

Answer: not yet. The inequality of incomes and the resulting excess savings and paucity of sound investments is still with us. In other words, the macroeconomic preconditions for a bubble are there. And irrationality has certainly crept into the bond market: it is just not credible that Treasury bond prices can continue to reflect yields less than the expected rate of inflation. And perhaps there is froth in some other markets like high-tech stocks.

But it is too soon for investors to have forgotten the carnage of 2008, and the (temporary) downturn of last summer. They are keeping stock prices generally in the middle range of historical valuations. The price-earnings ratio on the stock market as a whole has historically varied from around 10 in depressed periods to around 20 in euphoric periods; currently it is around 15.

Irrational exuberance of the mid-2000s variety has not returned yet, but one of these days, no doubt it will.

Two Cheers for Minsky

The financial economist Hyman Minsky, who died in 1996, has acquired posthumous fame for his analysis of credit cycles, which provides a compelling account of the recent financial crisis from which we are still struggling to emerge.

Minsky argued that the growing euphoria of lenders during stable financial periods leads eventually to the extension of credit on terms that make it increasingly unlikely that debtors will be able to repay the loans. This leads to "Ponzi" credit, i.e., loans that depend on the debtors having to take out new loans to cover the debt service of old loans. This goes on until – as it did around 2008 -- excessive euphoria gives way to excessive pessimism, the tide of credit recedes and , as Warren Buffett might say, you find out who has been swimming naked.

Minsky deserves a resounding cheer for emphasizing the financial aspect of this kind of crisis. Looking back at the housing market of the 2000s, the explosion of sub-prime lending, and the bust circa 2008, we clearly see Minsky's "Ponzi" dynamic at work.

Minsky deserves another resounding cheer for perceiving clearly the irrational nature of financial decision-making during the business cycle, particularly during boom periods, which makes the whole financial and economic system unstable.This is what he calls his Financial Instability Hypothesis. It is surprising how difficult it is for economists like former Federal Reserve chairman Alan Greenspan, bewitched by the assumption of "rational expectations," to accept this obvious feature of the economy.

It was not always so. William McChesney Martin, who was the Federal Reserve chairman from 1951 to 1970, famously said it was the job of the Fed "to take away the punch bowl just as the party gets going." The image of Wall Streeters as tipsy party-goers needing adult supervision is a far cry from "rational expectations." It is, however, a plausible characterization of life in the fast lane in the mid-2000s.

But Minsky does not deserve a third cheer. His approach is too exclusively financial, and his theory of booms and busts lacks an adequate macroeconomic foundation. It is our contention in this blog that there is a fundamental imbalance in the economy these days. The income of the poor and middle classes is insufficient to purchase the goods and services produced by the investments, or intended investments, of the rich, whose saving exceeds the need for investment and leads to pressure on financial assets (like bundles of subprime mortgages).

Intended saving exceeds actual investment. But euphoria is still on the rise, and the banks are extending credit, sometimes foolishly. The credit markets look more and more like a massive Ponzi scheme. That is where Minsky comes in.

Inequality? What inequality?!

Just as the right wing was being declared "down-and-out" on the inequality issue, they've gotten a boost from a new white knight! Commence to scuffling!

The right's white knight: Richard Burkhauser, professor of "human ecology" at Cornell

The document in question, "A 'second opinion' on the Economic Health of the American Middle Class" by Richard V. Burkhauser, Jeff Larrimore, Kosali I. Simon, is cruelly imprisoned behind a paywall.

Fortunately, some stout soul has freed it, find the entire paper here: http://www.share-online.biz/dl/H7G3KF2MBB

Does inequality cause cheating?

Does income inequality promote cheating?

 From the linked article:

Lukas Neville, a doctoral student at Queen’s University in Ontario, suggests another reason [ for observed increases in cheating]: Income inequality. In the latest issue of Psychological Science, he says that states in the U.S. where there’s more evidence of academic dishonesty also show a large gap between the rich and the poor. These income gaps lead to less trust among people and, therefore, more cheating.

I come to a similar conclusion, but by way of different reasoning. The way I see it, higher rewards for greater effort promote effort when they apply all the way across the distribution, but "winner-take-all" models actually break the association of "effort=reward" for the majority, and instead promote cheating.

Take a look at the rational expectations for increased effort in the following models. (for the purpose of this argument, we have a perfect meritocracy of equal individuals, where effort translates directly into output). Looking at someone in the middle of the distribution, we can see the radically different reward structure for increased effort:

In the right-hand model, the expected return for hard work is much less for the middle of the distribution, and almost none at the low end of the distribution.

If we assume that cheating operates by a different logic - where the calculation is simply how likely you are to be caught, and the chance that you can capture all or part of the highest returns - the steeper the curve, the greater the relative reward for cheating.

Q.E.D. Extreme inequality leads to greater rewards for cheating relative to hard work.

Think of it this way - if we give a class a test in which all the students fail except for one, only the few students who have a reasonable shot at the top score have a positive incentive to study. The rest are probably better off thinking of ways to steal the answer key.

Isn't this a pretty reasonable conclusion to draw from the last 10 years? Really, what is amazing is that so many people continue to follow the road of hard work.

I'm reminded of a passage in one of my favorite books, Organize!, my life as a union man, by Wyndham Mortimer (one of the founders of the UAW):

About this time, Miss Wooley [editor of the company union paper] had written an editorial...called "The Cost of High Living" in which she said, "There are too many people trying to get rich by their wits, and not enough by hard work."

Mortimer wrote a letter to the paper:

When you speak of people trying to get rich by their wits instead of by hard work, I am sure such people realize the utter impossibility of ever getting rich by work. The simple fact is that hard work does not pay. There is no money in it. I know, because I have been working hard for the past twenty-four years, and I have yet to entertain any hopes whatever of getting rich by it.

 For his letter, he got an invitation to speak to the Production Manager at the company where he worked. Maybe another day I'll relate how that incident went!

Interview with the authors of Winner-Take-All Politics

Digging around on the web, I happened across this video from Moyers & Company, an interview with Jacob Hacker and Paul Pierson, co-authors of Winner-Take-All Politics. Both the book and the interview are worth checking out.

Linkage

The US has the highest share of workers in low wage work (Economist's View)

Obama develops his election theme:

So at a time like this, we've got to ask ourselves a central, fundamental question as a nation:  What do we have to do to make sure that America is a place where, if you work hard, if you're responsible, that that hard work and that responsibility pays off?  (Applause.)  And the reason it's important to ask this question right now is because there are alternative theories. 

Conservatives try to rally (The Enterprise Blog)

Are we moving beyond "equality of opportunity"?

Much has been made of the speech Obama gave at the Associated Press luncheon last Tuesday. He is definitely in campaign mode, as he singled out Romney by name, although laying enough blame on the entire Republican establishment to keep his options open.

He reserved particular vehemence for his attack on the Ryan budget:

This congressional Republican budget is something different altogether.  It is a Trojan Horse.  Disguised as deficit reduction plans, it is really an attempt to impose a radical vision on our country.  It is thinly veiled social Darwinism.  It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who’s willing to work for it; a place where prosperity doesn’t trickle down from the top, but grows outward from the heart of the middle class.  And by gutting the very things we need to grow an economy that’s built to last  -- education and training, research and development, our infrastructure -- it is a prescription for decline.

What's interesting here is that he seems to be - albeit hesitantly - moving beyond the standard prescription of American politics: "equality of opportunity". Conservatives like to add to this, "but not equality of outcome".

Following on from Obama's speech, Robert Reich quotes from one of the founding texts, William Graham Sumner's What Social Classes Owe Each Other (1883) to flesh out where social Darwinism falls on equality:

Let it be understood that we cannot go outside of this alternative: Liberty, inequality, survival of the fittest; not-liberty, equality, survival of the unfittest. The former carries society forward and favors all its best members; the latter carries society downwards and favors all its worst members.

 This, of course, is the hard-nosed libertarian version of equality, which basically says that equality should be respected only to the degree that it does not interfere in any respect with liberty. Usually, this is limited to "equality under the law" and "equality of conscience".

The American polity has more complex notions of equality. Searching for references to equality in State of the Union Addresses, I found this gem from Warren Harding's 1921 SOTU:

Through the eradication of illiteracy and the diffusion of education mankind has reached a stage where we may fairly say that in the United States equality of opportunity has been attained, though all are not prepared to embrace it.

Of course, the civil rights movement found one or two exceptions to this assertion (though conservatives have never stopped saying it).

By the end of the civil rights movement, at any rate, as a country we were pushing pretty hard against the limits of the "equality of opportunity" argument. Here's LBJ:

You do not take a person who, for years, has been hobbled by chains and liberate him, bring him up to the starting line of a race and then say, "you are free to compete with all the others," and still justly believe that you have been completely fair.

Thus it is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.

This is the next and the more profound stage of the battle for civil rights. We seek not just freedom but opportunity. We seek not just legal equity but human ability, not just equality as a right and a theory but equality as a fact and equality as a result.

The emphasis is mine. Conservatives seize on this phrasing to say that LBJ had moved definitively from equal opportunity to equal outcomes (follow the link to see an example). Reading the entire quote, it doesn't seem so clear-cut, but the tension is definitely there. By the Clinton era, we had moved back so far from this "precipice" that the quota system of equalizing for racial bias was dismantled without great resistance.

Returning for a moment to Obama's formulation, it is in many ways an older notion - that of shared prosperity. In the vision of the Founders, extremes of wealth and poverty were dangerous because of the political influence that the very wealthy could wield, and the manipulations of the demagogue that were possible when there were masses of the dispossessed. To prevent this dystopia, of course, they relied on the notion of a yeoman republic, in which land was available to anyone with the willingness to till it.

In case you didn't notice, that vision is cannot be simply transplanted into today's world. The fear of the unaccountable power of elites transposes well, but when economic independence, first and foremost, revolves around having a job at decent wages, the "self-reliant" prescription of American individualism is utterly insufficient. This is the challenge before us: how do we embrace a real equality, an equality which is more than an equal right to be poor and wretched?

Harris Poll examines Inequality

From the recent Harris poll:

The key findings of this poll include:

    * Only 10% of adults (and only 19% of Republicans) think that economic inequality is "not a problem at all". Most people think it is either a major problem (57%) or a minor problem (23%);
    * Most people (62%), including 43% of Republicans and 60% of Independents, think it is important that "the government introduce policies to reduce inequality in the U.S.", and 34% think this is very important;
    * Inequality is thought to have many causes including the loss of manufacturing jobs to China, India and other countries (81%), the influence of big business (78%) and the very rich (76%) on government, and the tax system (77%);
    * A 60% majority thinks that taxes on the middle class are too high, while most people think that taxes are too low on the people with incomes of $1 million (62%) and on billionaires (69%); and,
    * Most people think that "increasing taxes on the very rich" would be fair (70%), be the right thing to do (69%), and would help to reduce the budget deficit (64%). Only 32% of all adults think that "it would hurt the economy because they are the ones who create jobs".

In other words, most people agree with positions taken by President Obama and Democrats on the issue of inequality.

However, other findings of this Harris Poll suggest that it may not be easy for the President's camp to turn these feelings into votes. When asked which party would be likely to do a better job of addressing the issue of inequality, the Democrats only lead by 38% to 23%, with fully 39% saying an "other party" or that they are not sure. And, when asked which of the presidential candidates would do the best job of addressing inequality, only 39% choose President Obama, while 36% choose one of the current Republican candidates, and 26% are not sure.

More on Markets & Inequality

Last week, I wrote about sociologist David Grusky's article in the Boston Review, in which he argues that the Occupy movement should focus more on market structures which foster inequality, particularly rent-taking.

I spent the post on what I considered to be the most important contributions of the article: 1) that the message of OWS risks being bundled into a "tax the rich" solution which is not far-reaching enough; and 2) that market failures, particularly in wage-setting, need to be examined more closely.

Sadly, these arguments seem to have gotten lost in the nether-region between economics and journalism: not sensational enough to sustain journalistic interest, not rigorous to challenge economic orthodoxies.

Make no mistake - if taken seriously, threats to the notion "that a worker's compensation...equals her [sic] contribution" would require a radical revision to neo-liberal economic theory. Tell an average person that a CEO contributes 1000 times more to the economy than the workers who work for them, and you might have an argument on your hands. The average economist, on the other hand, is required to swear that that differential is justified on a copy of "Weath of Nations" or risk being tossed out of the profession on their ear!

In fact, economists go a step further. They (by and large) insist that those who do not work at all - who make their income simply by being the possesors of great wealth - are justly rewarded for their great "contributions" to the economy.

And this is no small issue when examining the wealth of the 1%. Realize that capital income makes up the lion's share of the income of the ultra-rich!

So, the real image of the "job creator" is not the visionary entrepreneur or the dynamic CEO, but the heiress who has no occupation but self-pleasure. These are, according to economists, some of the greatest contributors to our system! And their whims must be catered to, or else...

This is the subtle brilliance of the "job creator" moniker which has risen so dramatically in the past 5 years - it actually embraces the pseudo-divine distance of possesors of great wealth from the productive process, and artfully carries the idea that "my god is a jealous god" full capricious malevolence. The way that this notion dovetails with the implied threat of mass unemployment that is such an effective weapon against job-class political independence.

This is where Grusky's criticism of rentiers should really hit home.

The rentier is the most obvious face of the reactionary nature of great wealth. Libertarianism gets its populist lift from the promise that the market eliminates rent-taking. It is the false notion that government involvement is the only protection for rentiers that is the mysteriously un-exploited weakness of most libertarian arguments. (On the contrary, all successful firms try to establish monopolies, the preferred form of rent collection; or, failing that, de facto non-competition between a few large firms).

But, as I mentioned in the earlier post, Grusky's examples of rent - "bottlenecks" in access to higher ed, and failure of market discipline in CEO pay setting - fail to realize the promise. But it is a potentially fertile ground! Hopefully, I'll have time to try to develop the idea in another post...