Social Policy in Ontario

The Populist Imperative

Posted on January 24, 2014 in Equality Policy Context

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NYTimes.com – The Opinion Pages
Jan. 23, 2014.   Paul Krugman, Op-Ed Columnist

“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

John Maynard Keynes wrote that in 1936, but it applies to our own time, too. And, in a better world, our leaders would be doing all they could to address both faults.

Unfortunately, the world we actually live in falls far short of that ideal. In fact, we should count ourselves lucky when leaders confront even one of our two great economic failures. If, as has been widely reported, President Obama devotes much of his State of the Union address to inequality, everyone should be cheering him on.

They won’t, of course. Instead, he will face two kinds of sniping. The usual suspects on the right will, as always when questions of income distribution comes up, shriek “Class warfare!” But there will also be seemingly more sober voices arguing that he has picked the wrong target, that jobs, not inequality, should be at the top of his agenda.

Here’s why they’re wrong.

First of all, jobs and inequality are closely linked if not identical issues. There’s a pretty good although not ironclad case that soaring inequality helped set the stage for our economic crisis, and that the highly unequal distribution of income since the crisis has perpetuated the slump, especially by making it hard for families in debt to work their way out.

Moreover, there’s an even stronger case to be made that high unemployment — by destroying workers’ bargaining power — has become a major source of rising inequality and stagnating incomes even for those lucky enough to have jobs.

Beyond that, as a political matter, inequality and macroeconomic policy are already inseparably linked. It has been obvious for a long time that the deficit obsession that has exerted such a destructive effect on policy these past few years isn’t really driven by worries about the federal debt. It is, instead, mainly an effort to use debt fears to scare and bully the nation into slashing social programs — especially programs that help the poor. For example, two-thirds of the spending cuts proposed last year by Representative Paul Ryan, the chairman of the House Budget Committee, would have come at the expense of lower-income families.

The flip side of this attempt to use fiscal scare tactics to worsen inequality is that highlighting concerns about inequality can translate into pushback against job-destroying austerity, too.

But the most important reason for Mr. Obama to focus on inequality is political realism. Like it or not, the simple fact is that Americans “get” inequality; macroeconomics, not so much.

There’s an enduring myth among the punditocracy that populism doesn’t sell, that Americans don’t care about the gap between the rich and everyone else. It’s not true. Yes, we’re a nation that admires rather than resents success, but most people are nonetheless disturbed by the extreme disparities of our Second Gilded Age. A new Pew poll finds an overwhelming majority of Americans — and 45 percent of Republicans! — supporting government action to reduce inequality, with a smaller but still substantial majority favoring taxing the rich to aid the poor. And this is true even though most Americans don’t realize just how unequally wealth really is distributed.

By contrast, it’s very hard to communicate even the most basic truths of macroeconomics, like the need to run deficits to support employment in bad times. You can argue that Mr. Obama should have tried harder to get these ideas across; many economists cringed when he began echoing Republican rhetoric about the need for the federal government to tighten its belt along with America’s families. But, even if he had tried, it’s doubtful that he would have succeeded.

Consider what happened in 1936. F.D.R. had just won a smashing re-election victory, largely because of the success of his deficit-spending policies. It’s often forgotten now, but his first term was marked by rapid economic recovery and sharply falling unemployment. But the public remained wedded to economic orthodoxy: by a more than 2-to-1 majority, voters surveyed by Gallup just after the election called for a balanced budget. And F.D.R., unfortunately, listened; his attempt to balance the budget soon plunged America back into recession.

The point is that of the two great problems facing the U.S. economy, inequality is the one on which Mr. Obama is most likely to connect with voters. And he should seek that connection with a clear conscience: There’s no shame is acknowledging political reality, as long as you’re trying to do the right thing.

So I hope we’ll hear something about jobs Tuesday night, and some pushback against deficit hysteria. But if we mainly hear about inequality and social justice, that’s O.K.

< http://www.nytimes.com/2014/01/24/opinion/krugman-the-populist-imperative.html?ref=paulkrugman >

Tags: budget, economy, ideology, poverty, standard of living, tax

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