Professor Krugman may very well be correct in his interpretation of the politics: There is little doubt that entrenched business interests, be they banks or sugar planters, have little trouble bending federal policy to their will. That is an argument for less government intervention in the economy, not more, and an argument for simpler, more transparent, and more consistent regulatory practices rather than more complex and opaque rules. Professor Krugman is blind to that conclusion.
Mr. Barro is of course correct to emphasize that there is a world of difference between GDP growth and real-world improvements in the standard of living for most Americans. Stimulus-spending programs, for example, can goose GDP by brute force: The value of government spending is calculated at cost when toting up GDP, which means that a $1 billion contract to Willy Wonka for Everlasting Gobstoppers adds $1 billion to GDP, even if we sink those confections to the bottom of the ocean. Among other things, this means that the massive fraudulent payments made under Medicaid contribute to GDP, though they contribute nothing to the national well-being.The problem is not inequality: The problem is declining or stagnant wages for those Americans who are not thriving in the 21st-century economy. Cannier politicians will note that while they may respond to cheap rhetoric about the new robber barons, Americans are by and large much more concerned about their own paychecks and bank balances than they are those of other people. Republicans would be foolish to adopt the rhetoric of inequality and its implicit class-war thinking, but they would be much more foolish to ignore the underlying economic reality that gives teeth to that critique: Things are not good for the American middle class, and things are bad for the poor. There are signs that economic mobility is in decline, especially at the extremes, and the general environment of economic pessimism, so alien to Americans, is not entirely unjustified.
But if the GOP makes tax cuts its hill to die on once again, or lets martial romance prevent meaningful fiscal adjustments (which must include defense-spending reforms), it will have blown yet another opportunity, the supply of which is not infinite.
Inequality per se is not a problem, but poverty is, and so is the increasingly tenuous position of the middle class. Republicans need to figure out how to get on the right side of that issue. They have the policies.
Kevin Williamson states that “the problem is not inequality: the problem is declining or stagnant wages.” Williamson is another one-factor thinker: LABOR ONLY!––with a focus on wages rather than income, and “full employment” rather than “full production.”
The political maneuvering in Washington is directed at benefiting the wealthy capital ownership class, not the average person on “Main Street.” Such policies as are pursued will further concentrate ownership of wealth-creating, income-producing productive capital assets among the 1 to 5 percent of the American population and further enhance the economic and political power of the wealthy ownership class.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When capital workers (productive capital owners) replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another.
Conventional economist such as Paul Krugman, political leaders and the national media are oblivious to the structural problems that plague our economy, especially with respect to the ways the system further concentrates ownership of wealth-creating, income-producing productive capital assets and growth among the already wealthy ownership class, which represents 1 to 5 percent of the population. With such concentrated economic power, the American majority is barred from participating in the ownership of the non-human factor assets that are doing the bulk of the production of products and services, leaving them with their ONLY income source a job or welfare. Thus they are shut out from a most significant income source to effectively empower them to be “customers with money” and propel economic demand, and thus real growth of the economy.
There is a way out if the Federal Reserve System can be reformed to act as a purveyor of economic growth.
Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.
The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.
Virtually all the economic gains have pertained to the wealthy ownership class within the top 1 to 5 percent of the population, who own the vast wealth-creating, income-generating productive capital assets of American corporations.
Unless we reform the system inequality will expand and the American people will experience far greater competition globally as teams of people and machines compete to produce and sell their products and services. This means that we must look to increasing the productiveness of technological innovation and invention. The system is rigged by the wealthy ownership class to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 to 5 percent ranks.
The reality is that personal and family household income for those who are dependent on a job as their ONLY income source is declining. Wage and salary incomes will continue to decline simultaneously with global competition and, as a result of the necessity to turn to increasingly more productive non-human means of production, destroy jobs that will become unnecessary and devalue the worth of labor.
Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. This will not change with companies realizing that they can operate more efficiently with fewer employees. Therefore, unless the employees are owners, the share of corporate profits going to the employees will continue to decline.
The reality is that more and more people are being squeezed financially, faced with dismal job prospects (their only source of income) and on the blink of having to turn to the government for welfare support funded by tax extraction and national debt. Americans, for the most part, are in a mode of retrenchment even though they have tremendous pent-up demand and unfulfilled dreams for a more affluent life, which they see enjoyed by the wealthy ownership class (without realizing that those people are wealthy because they OWN).
http://m.nationalreview.com/article/366599/inequality-does-not-matter-kevin-d-williamson/page/0/1
We’ve agreed to a coopsmmire, but somehow we still don’t have a deal. (Obama)If he really believes that the pathway to a deal is to coopsmmire with those of bad faith, then we will never have the leadership that we need to get us beyond this mess.