Nobel Prize Winning Economist Declares New "Gilded Age"

[rollhead]

As we know, any economist is an indisputable arbiter of truth, according to Gordon B. So, a Nobel-Prize Winning economist is the ULTIMATE arbiter of truth and can never be doubted or second guessed.

Well, Nobel Prize Winning Economist, Joseph Stiglitz has declared a new "Gilded Age."

The new gilded age and its discontents
Nobel Prize-winning economist Joseph Stiglitz talks about the corporate looting spree and Bush's woeful mismanagement of the economy.

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By Damien Cave

July 3, 2002 | Joseph Stiglitz began explaining why markets fail long before Enron and WorldCom rose, exploded and crashed. But not many people wanted to listen during the boom-boom '90s; Stiglitz was even fired from his position as chief economist at the World Bank after he repeatedly criticized the organization's free-market obsessions.

Today, Stiglitz's lifetime of work is suddenly all too relevant. Consider, for example, his theory of "asymmetric information." Stiglitz spent years demonstrating that one party in a transaction -- say, the owner of a factory -- often possesses more information than the other about that transaction, and thus has an advantage that allows for market inefficiencies, and potentially, human suffering. His work won Stiglitz the 2001 Nobel Prize in economics, but more to the point, it handily explains why Enron and other companies successfully hid their accounting tricks for so long. Because executives have the power to determine how to arrange their profit-and-loss numbers, the theory holds, they'll always have a leg up on detectives and accountants who are trying to uncover misdoings.

From 1993 to 1997, Stiglitz served as a member and then as the chairman of President Clinton's Council of Economic Advisers. He then went on to become chief economist at the World Bank, where he stayed until 2000. At each step of his career, Stiglitz advocated for a critical look at what he calls "the Washington Consensus" -- the conventional wisdom that holds that everything bad in the economy can be laid at the government's door while everything good stems from the market.

Filled with accessible, on-the-ground examples from Ethiopia, Indonesia, Russia and elsewhere, Stiglitz's new book, "Globalization and Its Discontents," witheringly dismantles that consensus. The villains, Stiglitz argues, are obvious: The International Monetary Fund, Clinton Treasury Secretary Lawrence Summers and Wall Street all come off badly, more concerned with ideology and their own bottom lines than with the facts.

Salon sat down with Stiglitz in New York and discussed accounting trickery, why government is necessary and the present state of the world economy.

The American economy is engulfed in a wave of corporate scandal. WorldCom, Enron, Adelphia, ImClone -- the failures and frauds keep piling up. What's going on?

I think the most important, significant thing that [the scandals] bring home is the importance of regulation. You can't have markets work without good information, and it is not necessarily the case that people have an incentive to provide accurate information; [but] they do have an incentive if there are penalties for providing fraudulent information. So the government plays an absolutely essential role in enabling the markets to work.

Now there were some big mistakes made in the mid-'90s. When I was at the Council of Economic Advisers, FASB -- the Financial Accounting Standards Board -- proposed a change in the way stock options for executives would be treated. The Council of Economic Advisers supported the change, on the grounds that it would improve the quality of [corporate] information. Wall Street and Silicon Valley united to put political pressure to oppose this change. The U.S. Treasury gave in to this political pressure and put pressure on FASB, and FASB backed off.

The reasons it was so important were severalfold. First, the principle that accounting standards ought to be kept out of politics -- that principle was compromised. Secondly, it compromised the quality of information. Thirdly, it provided further incentives for the use of stock options. And that has contributed to the whole problem we're seeing.

Why? Because with stock options, executives have an incentive to get the value of their company up as fast as possible. They found that they'll make more money if you give inaccurate or distorted information rather than honest information. One of the things I've always argued as an economist is that incentives matter, and one of the things we did there was provide incentives to provide stock options, which provided incentives to provide dishonest information.

Is that the root cause of all these accounting irregularities and alleged frauds?

That's right. There are many factors; the go-go atmosphere, the attitude that anything goes. But if there is a single thing that you can say is the root cause, it is that -- the stock option decision and the mania to which it gave rise.

How does the present situation compare to other crises in American capitalism? Are we witnessing excesses on a par with the '20s, the '80s ...?

It's a pattern that we've had frequently, and it's often associated with what I would call deregulation episodes. The savings and loan debacle, for example, where the U.S. government had to bail out [banks] to the tune of several hundred billion dollars, was basically the same thing: misreporting, trying to claim as income things that weren't income. So in fact there is a pattern here, and that pattern continually reminds us of the need to have some kind of oversight, if we're going to make the market economy work.

But the pains of the '80s seemed to disappear relatively quickly. There was a minor recession in the early 90s, but the economy recovered. Will that happen again, or is this problem on a much larger scale?

Eventually, it's going to bounce back. I have absolute confidence in that. The American economy is very, very strong for the long run. But this may, and quite likely will, extend the recovery and slow it down.

The timing couldn't be worse. The fiscal mismanagement of the current administration -- leading to a change in the fiscal position of the United States over the past year -- is absolutely phenomenal; going from huge surpluses to huge deficits and the deficits are probably going to be larger than people anticipated. That means that foreigners are already losing confidence in the United States because the United States had earned a reputation for sound fiscal management -- and now that reputation is being destroyed. The United States had a reputation for the best accounting standards in the world; now people are saying, we don't know.

The last time excessive doubt in the U.S. economy occurred -- during the Depression -- new regulation followed. How will this episode affect the structure of capitalism, here in the U.S. and abroad?

It is an important warning. The view of capitalism in the late '90s was of a particular form; American capitalism was triumphant. The view was that you don't need regulations -- just let it rip. Now people are becoming much, much more cautious. They're looking at what America said at that time with a lot more circumspection. There's a recognition that there's a downside. And just like the lesson of the Reagan era -- the excessive deregulation of banks -- led most countries to recognize the importance of sound financial regulation, I think that this episode is going to lead people to say there ought to be sound accounting regulations, sound regulation on corporate governance, things that were insufficiently talked about before.

It's also going to mean that the premise that American accounting standards are better, say, than European standards, is no longer going to be convincing. People are going to say let's look at alternatives. There isn't one way, there are alternatives. Sometimes the American way is best but sometimes Americans ought to learn from others, and the accounting standards in Europe may in fact be a better system for dealing with the complexities of the current world.

Is that a sign of progress -- moving away from an American-centric economic worldview?

Yes, I think it is.

You mentioned that the Bush deficit isn't helping matters, but in terms of future policy, what needs to be done and do you think that Bush will do it?

What is interesting is how slow they've been to recognize the problems. We're now beginning to recognize the broader set of issues, what you might call conflicts of interest. Merrill Lynch brought those issues out into the open; that if a firm is trying to sell a stock through its brokerage houses, trying to get business through its IPOs, those conflicts of interest can lead to bad decisions.

But if you could name a list of things -- 1, 2, 3 -- that Bush and Congress could do to reinstill confidence in the markets and economy, what would they be?

We need to begin to think much more carefully about these issues of conflicts of interest, which are pervasive. We saw it in the accounting area, where the accountant firms have conflicts of interest between their role as consultants and their role as accountants. In the 1930s, the Glass-Steagall Act was passed, which talked about why we needed to separate out investment banks from commercial banks because of the potential conflicts of interest. I think another mistake that was made in the '90s was the repeal of that. The point was made that people were getting around it, and that was used as an argument against it. Well, there were two strategies: Do you try to limit the ability to get around it, or do you abandon it. I think they made the wrong choice.

Part of the reason they made that choice was because of Wall Street lobbying. Even now, post-Enron, most attempts at reform have been stalled due to opposition from Wall Street. How can anyone who wants to reform the system overcome such a powerful force?

It will be overcome when there is enough popular support, and when the problems begin to rebound seriously enough against the industry. Let me go back to another example. At the end of the 19th century, it was the food industry -- the meat industry -- that asked for government regulation. Why? Because as a result of Upton Sinclair's book "The Jungle," people said we don't trust meat. And they said, we'll trust the government if it starts inspecting the meat. So the industry demanded regulation to restore confidence.

Do you really think that will happen?

Henry Paulson [chairman of Goldman Sachs] has begun talking about the problem and you have to think that it's partly because of a recognition that if investors lose faith in American firms, they're going to put their money elsewhere. And that is going to be very bad for Wall Street. There are going to be two sources of concern: one, voters; secondly, investors.

Do you think that the current corporate implosions will undermine the force of the free-market fundamentalists -- who you identify as the Washington Consensus? Will fears of a lack of U.S. regulation extend to the world of international development?

Well, what we're beginning to understand is that Wall Street is not the font of all wisdom that a lot of people in the '90s tried to sell it as -- especially the people on Wall Street. For instance, in the 1990s Wall Street pushed for capital market liberalization -- opening up companies to speculative money that could come in and out overnight. We now realize that capital market liberalization has contributed a great deal to the instability in the world: to the East Asia crisis, the global financial crisis. At the beginning of that crisis, Wall Street, U.S. Treasury, IMF said, Oh that's not the source of the problem. In fact, they said, speculative money is too small to be possibly a problem. A year later, when Long Term Capital Management was in trouble, the same kinds of people were saying that we need to bail out Long Term Capital Management because if we don't, this one firm -- one firm! -- could bring the whole global financial system down. Now, that kind of inconsistency, that kind of hypocrisy, caused a lot of people concern. Now what we're seeing is that there's a systemic problem; it's not just one company, it's many companies. And I think that breaking of the confidence in Wall Street is leading people to reexamine not only Wall Street but the influence it has had on the IMF, and in turn, the IMF policies and their consequences for the developing world.

Let's talk about those policies. You focus on Russia as an example of a failed IMF country, citing decreased gross domestic product, increased poverty and a widening gap between rich and poor -- most of it caused by a rapid, corrupt privatization process. But when I was reading about the new class of Russian oligarchs, I couldn't help but think that they -- not the IMF -- were the real source of the problem. Why not focus on holding the thieves accountable rather than blaming the IMF?

But incentives matter, and if we don't create the right incentives, we get bad behavior. As we talked about with the case of Enron, we had incentives to overstate profits, to get the stock prices up, and they responded to those incentives. In the case of Russia, the IMF helped create incentives that led to people taking their money out of the country. Let me explain: The IMF pushed these countries to have very rapid privatization, before they had corporate governance, while the economy was still in recession, and they pushed the privatization so rapidly that it was almost inevitably a corrupt privatization. At the same time, they pushed them to open up their capital markets. Think of yourself as one of the oligarchs that have managed to persuade Yeltsin to give you -- for a pittance -- these natural resources worth billions of dollars. Then you're told effectively by the IMF that you can either invest that money in Russia, which was in recession or depression, or take that money to the United States or a secret bank account. If you're smart enough to get Yeltsin to give you a billion dollars, you're smart enough to take your money out. Moreover, you would recognize that if you left your money in Russia, there was a good chance that in a couple years' time, the successor of Yeltsin might say, You got that money illegitimately. We want it back. And if you have your money in the United States or Cyprus bank accounts, they can't get it back. If you have your money in Russia, they can get it back. So it was their own self-preservation that led them to take their money out. But of course, as they all did that, the economy of Russia went further and further down. The culpability lies with setting up incentives that led people to behave that way.

Critics have argued that you underestimate the gains that have come from IMF policy, which you identify as the high-speed "hare" approach, compared to your gradualist "tortoise" approach. Poland, for example, underwent "shock therapy" and came out better than other countries in the region, like Ukraine, which followed a more gradualist approach.

Let me put it in the following way. What is fast and what is slow depends on what you're doing. Poland quickly brought down hyperinflation; that needed to be done fast. It brought down hyperinflation to moderate levels, 18-20 percent. It didn't push it further than that in the first instance. It then began a process of very gradual reform. So it, Hungary, Slovenia -- these were the tortoises. These tortoises have won the race. They are the economies with a GDP that's higher than it was 10 years ago. The hares are further behind. Their GDP is much lower than it was 10 years ago. Now of course there are some that are neither tortoises nor hares -- that aren't doing anything: Belarus, Ukraine. No one said that those are models you ought to follow. The model was, yes, have reforms but have it in a paced, balanced way. And Poland, Slovenia, Hungary show that there were alternatives to the "shock therapy." In fact, the deputy prime minister of Poland in 1993-95, when they were going through these changes, was very explicit that their success was a result of their not following shock therapy policies. It was that they did it with a systematic, gradual policy of structural reform. There are some things that you can do quickly, but changing societies, you can't do overnight. But if you do it in the right way, you actually do it in a reasonable length of time.

What is a reasonable length of time -- particularly when it comes to identifying what's succeeded and failed?

We are never really sure, but what we do know historically is that if Russia's economy is down 30 percent from what it was [in 1989], and let's say they start growing 4 or 5 percent a year, it's going to take them another decade or two just to get back to where they were. In that sense, yes, there will be ups and downs; the race is never over. But the shock therapy has cost the Russian people enormously, not only in terms of GDP. Their life expectancy is down while the rest of the world has life expectancy increasing. These are the kind of consequences that have resulted. Poverty went from 2 percent of the population to over 40 percent in 1998. These are just enormous changes.

You've argued that part of the problem is that the IMF doesn't pay attention to these social costs. Why is that? Why don't they look beyond things like GDP?

There are two or three answers to that question. One of them is that their major responsibility has been macroeconomics. At one point, the head of the IMF even said "we aren't concerned about poverty." They wanted to just look at macroeconomics -- and in fact, they didn't do a very good job of that. Secondly, they believed, a lot of them, in trickle-down economics: If you can succeed in getting [an economy] to grow, everyone would benefit.

In the United States, we've rejected trickle-down economics; you have to have pro-poor growth policies if you're going to succeed. It isn't necessarily true that a rising tide lifts all boats. Some are left behind.

Thirdly, they had a fixation on financial markets. Historically, people with that kind of focus worry more about inflation than they do about unemployment [because inflation does more immediate damage to their investments]. They worry less about poverty than they do about what will happen to the capital markets. In my view, a lot of that has been shortsighted. It is a mistake to ignore the social and political consequences of policies. Even if you don't worry yourself about poverty, it is bad economics. When the IMF cut out the subsidies for the food and fuel to the poorest people in Indonesia, it led to riots. Those riots led capital to flee and that exacerbated the economic downturn, the depression, in the country. So ignoring the social consequences is bad economics.

What do you make of the crisis in Argentina? Two people were killed June 26 in protests, while their economic minister was in Washington asking for the IMF to reinstate an $18 billion credit line. Should the IMF give in?

The issue in Argentina shows that the IMF still hasn't learned a lesson about the risks of contractionary fiscal policy. For 60 years economists have said that when you're in a recession you need expansionary fiscal policy. In the United States, during the much milder recession of 2000-01, both Democrats and Republicans said we need a stimulus. But what was the IMF doing in Argentina? The same thing it did in East Asia, which was insisting on a contraction, making the downturn even worse.

But you argued in your book that less IMF intervention should occur overall because lenders have come to expect and depend on international bailouts; they've been encouraged to loan money to high-risk borrowers because the IMF has acted like an insurance policy. So perhaps the IMF refusal to help is a necessary evil, a way to correct expectations.

The general principle that bailouts have not worked is becoming increasingly recognized. The bailouts did not work in Indonesia, Thailand, Korea, Russia, Brazil and now in Argentina. I don't think that the critical issue facing Argentina today is outside money. Most of the money that Argentina is likely to get will do nothing more than repay already existing loans. What Argentina needs to do is restart their economy. The human resources, the physical resources are still there. What they need is money, not to repay the IMF, not to repay the other loans that are outstanding, but money that can go to corporations that will allow them to buy the inputs, that will allow them to start producing goods that they can then sell and export.

So not a bailout but rather a stimulus ...

They need a stimulus, and that will require some money. But that's very different from a bailout. And what worries me is that if the price of getting a bailout is more contraction, it's going to exacerbate the problems.

Even if the IMF is still screwing up in Argentina, there are signs of reform. They've accepted responsibility for the Asian crisis and have enacted many reforms in the past few years. Are you encouraged by the institution's progress?

There have been some very encouraging signs. Now, they are recognizing the importance of poverty and the consequences of their policies for poverty.

What's your take on the anti-globalization protest movement? By trying to abolish the IMF, a stance also favored by Milton Friedman, are they making matters worse? Or are they an important catalyst for change?

I think that globalization -- which is nothing more than the closer integration of the countries of the world, as a result of lowering transportation costs, communication costs, the elimination of artificial barriers -- is something that's going to be with us. As this integration occurs, as we become more interdependent, we need to have rules and regulations. So if anything, today we need international institutions more than ever. The problem is that confidence in these institutions is lower than ever.

So my view is that if we abolished the IMF, we'd end up re-creating it. And the real danger is that we'd re-create it with some of the same blemishes that it has today. So it makes much more sense to me to work on reforming the institution; to return it to its original objective, which was to help countries facing an economic downturn have the resources to stimulate; so that a downturn in one country doesn't stimulate a downturn in its neighbors. Getting it to go back to some of its original mission is the right direction for it to go.

[rollhead]

America's Second Gilded Age
J. Bradford DeLong

The richest Congressional district in the US is the so-called "silk-stocking" district of New York City's Upper East Side, with a per-capita income of $41,151 per year. The poorest Congressional district is a largely Hispanic-immigrant district in Los Angeles, with a per-capita income of $6,997 a year. In 1973 the poorest fifth of America's families had incomes that averaged $13,240 a year (in today's dollars); in 2000 the average incomes of the poorest fifth were the same: $13,320. By contrast, the richest 5% of America's families in 1973 had an average income of $149,150, and in 2000 the richest 5% had an average income of $254,840. The increase in inequality was large enough to give a 2/3 income boost to the well-off over a time when incomes in the middle grew by only 10% and incomes at the bottom not at all.

To outsiders, the most peculiar thing about America's rising inequality is that so few Americans object. Surely a society with a skewed income distribution is worse off than one in which incomes are more equal. An extra $10,000 a year does little to raise the well-being of a multi-millionaire, while a deficiency of $10,000 a year makes a huge impact on how a middle-class family lives.

If you follow Nobel Prize-winner James Buchanan's utilitarian principle that you should evaluate a society's social welfare by imagining that you have an equal chance of being poor and rich, it is easy to judge that the more equal society has a better set of social and economic arrangements. From there it is easy to make the leap to the position that - so long as redistributive taxes don't slow economic growth - when inequality rises, it is the government's duty to tax the rich and transfer money to the poor to offset the rise.

Yet there are no calls in mainstream politics to sharply increase the progressiveness of the income tax. Indeed, even at the left end of mainstream discourse, the boldest call is for the well-off merely to contribute their "fair share" to paying for the costs of government.

One candidate for the Senate in the recent US elections, Erskine Bowles of North Carolina (a former chief of staff to President Clinton) was judged bold and foolhardy not for proposing redistributive tax increases, but simply for placing a higher priority on the federal government paying for prescription medicines than on a further cut in the highest marginal tax rate. What happened? Bowles lost.

Virtually no mainstream American politician seems opposed to eliminating the estate tax - a policy move that will further concentrate wealth for no countervailing supply-side gain. As Clinton's Assistant to the President for Economic Policy Gene Sperling once wrote, staff aides who tell Congressmen that estate tax repeal "...costing tens of billions of dollars... will benefit only a few thousand families" are answered "maybe so, but I think I met every one of them at my last fundraiser."

It's not the case that the striking increase in income inequality was necessary to deliver rapid economic growth. Most of the increase took place, after all, between 1973 and 1995 - a period during which American economic growth was slower than in any other period since

the Great Depression. It's not the case that income gains in the middle have been large enough to make mainstream voters feel generous about what is happening among their merchant princes: save for the past half-decade, income gains away from the top have been so meager that it's hard to argue that people are living much better than their parents did.

So why don't Americans feel more alarm at their country's rising income inequality? Part of the reason that they don't is that most Americans do not recognize what is going on. One poll found that 19% of Americans think their incomes put them in the top 1% of income distribution - and that 20% more hope to reach the top 1% someday.

Deep in the core of American ideology and culture is a constellation of beliefs and attitudes: belief that the future will be brighter than the present; that what you accomplish you make with your own hands; that individuals should rely on themselves, not the state; that people can cross oceans and mountains to make for themselves a better life; and that those who succeed do so not through luck and corruption but through preparation and industry. These are not beliefs conducive to social democracy.

For two generations starting in 1933 America did look a lot like a west European-style social democracy. The shock of the Great Depression and the response of Roosevelt's New Deal probably accounts for the shockingly "un-American" attitude toward redistribution of that era. But somebody ten years old when Franklin Roosevelt was elected is now eighty. Memories of the Great Depression are dying out. So what now seems likely is that the older and more enduring - call it the Gilded Age - pattern of American ideology, culture, and political economy is reasserting itself. Inequality, it seems, is as American as apple pie.

J. Bradford DeLong is professor of economics at the University of California at Berkeley, and former Assistant US Treasury Secretary.

[Gordon B]

Originally Posted by rollhead

As we know, any economist is an indisputable arbiter of truth, according to Gordon B. So, a Nobel-Prize Winning economist is the ULTIMATE arbiter of truth and can never be doubted or second guessed.

Rolly, as long as you have started your own economist thread, I'll add a post. DeLong is one of the signees. I'll read Stiglitz's piece tonight.

Open Letter on Immigration
June 19, 2006

Contents

* Open Letter on Immigration
* American Signatories
* Foreign Signatories
* References

Dear President George W. Bush and All Members of Congress:

People from around the world are drawn to America for its promise of freedom and opportunity. That promise has been fulfilled for the tens of millions of immigrants who came here in the twentieth century.

Throughout our history as an immigrant nation, those who were already here have worried about the impact of newcomers. Yet, over time, immigrants have become part of a richer America, richer both economically and culturally. The current debate over immigration is a healthy part of a democratic society, but as economists and other social scientists we are concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary.

Overall, immigration has been a net gain for American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.

Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.

In recent decades, immigration of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to have been small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.

While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy.

Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system, that enable Americans to be more productive with high-wage skills.

We must not forget that the gains to immigrants coming to the United States are immense. Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries—a form of truly effective foreign aid.

America is a generous and open country and these qualities make America a beacon to the world. We should not let exaggerated fears dim that beacon.

American Signatories top^
Jeffery Abarbanell, University of North Carolina, Chapel Hill
Jason Abrevaya, Purdue University
Richard Adelstein, Wesleyan University
William P. Albrecht, University of Iowa
Michael V. Alexeev, Indiana University
Bruce T. Allen, Michigan State University
Richard A. Almeida, Southeast Missouri State University
Lee J. Alston, University of Colorado, Boulder
Santosh Anagol, Yale University
Gary M. Anderson, California State University, Northridge
Michael Anderson, Washington and Lee University
Robert M. Anderson, University of California, Berkeley
James E. Anderson, Boston College
Robert Warren Anderson, George Mason University
William L. Anderson, Frostburg State University
Dominick T. Armentano, University of Hartford
Richard Arnott, Boston College
Pierre Azoulay, Columbia University
Howard Baetjer, Jr., Towson University
Dean Baim, Pepperdine University
David Balan, Economist
A. Paul Ballantyne, University of Colorado, Colorado Springs
Owen Barder, Center for Global Development
Frank M. Bass, University of Texas, Dallas
Jonathan J. Bean, Southern Illinois University
Peter M. Beattie, Michigan State University
Scott Beaulier, Mercer University
John H. Beck, Gonzaga University
Stacie Beck, University of Delaware
Steven R. Beckman, University of Colorado, Denver
David T. Beito, University of Alabama
Jere R. Behrman, University of Pennsylvania
Donald M. Bellante, University of South Florida
Daniel K. Benjamin, Clemson University
Bruce L. Benson, Florida State University
George S Berger, University of Pittsburgh, Johnstown
Ernst R. Berndt, Massachusetts Institute of Technology
David Berri, California State University, Bakersfield
Alberto Bisin, New York University
Linda J. Bilmes, Harvard University
Greg Blankenship, Illinois Policy Institute
Alan S. Blinder, Princeton University
Barry Boardman, Chief Economist, Kentucky Legislature
Alan E. Boese, Virginia State University
Peter J. Boettke, George Mason University
Elizabeth C. Bogan, Princeton University
Cecil E. Bohanon, Ball State University
Ben W. Bolch, Rhodes College
James E. Bond, Seattle University
Robert A. Book, Independent Economist
Thomas E. Borcherding, Claremont Graduate University
Michael D. Bordo, Rutgers University
Donald Boudreaux, George Mason University
Scott Bradford, Brigham Young University
Ryan R. Brady, United States Naval Academy
Serguey Braguinsky, State University of New York, Buffalo
Jorge Bravo, Duke University
Stephen Eric Bronner, Rutgers University
Taggert J. Brooks, University of Wisconsin, La Crosse
Wayne T. Brough, Freedom Works
Robert K. Buchele, Smith College
Mark Buckley, University of California, Santa Cruz
James B. Burnham, Duquesne University
James L. Butkiewicz, University of Delaware
Bruce Caldwell, University of North Carolina, Greensboro
John E. Calfee, American Enterprise Institute
Anil Caliskan, George Mason University
Charles W. Calomiris, Columbia University
Bryan Caplan, George Mason University
Noel Campbell, North Georgia College and State University
Robert S. Carlsen, University of Colorado, Denver
Bo A. Carlsson, Case Western Reserve University
Robert B. Catlett, Emporia State University
Emily Chamlee-Wright, Beloit College
Henry W. Chappell, Jr., University of South Carolina
Kristine L. Chase, St. Mary's College of California
Carl F. Christ, Johns Hopkins University
Harold Christensen, Centenary College of Louisiana
Lawrence R. Cima, John Carroll University
James E. Clark, Wichita State University
R. Morris Coats, Nicholls State University
Loren Cobb, The Quaker Economist
Mark A. Cohen, Vanderbilt University
Ben Collier, Northwest Missouri State University
William B. Conerly, Conerly Consulting LLC
Patrick Conway, University of North Carolina, Chapel Hill
John E. Coons, University of California, Berkeley
Lee A. Coppock, University of Virginia
Roy E. Cordato, John Locke Foundation
Paul N. Courant, University of Michigan
Tyler Cowen, George Mason University
Dennis J. Coyle, Catholic University of America
Christopher J. Coyne, Hampden-Sydney College
Donald Cox, Boston College
Erik D. Craft, University of Richmond
Peter Cramton, University of Maryland
Maureen S. Crandall, National Defense University
Robert Thomas Crow, Business Economics
David Cuberes, Clemson University
Kirby R. Cundiff, Northeastern State University
Scott Cunningham, University of Georgia
Christopher Curran, Emory University
Hugh M. Curtler, Southwest Minnesota State University
Kirk Dameron, Colorado State University
Jerry W. Dauterive, Loyola University New Orleans
Paul A. David, Stanford University
Antony Davies, Dequesne University
Steven J. Davis, University of Chicago
Alan V. Deardorff, University of Michigan
Alan de Brauw, Williams College
Gregory Delemeester, Marietta College
Bradford DeLong, University of California, Berkeley
Michael Dennis, College of the Redwoods
Arthur T. Denzau, Claremont Graduate University
Arthur M. Diamond, Jr., University of Nebraska, Omaha
John L. Dobra, University of Nevada, Reno
Asif Dowla, St. Mary's College of Maryland
Daniel W. Drezner, University of Chicago
Lloyd Dumas, University of Texas at Dallas
Manoranjan Dutta, Rutgers University
William R. Easterly, New York University
Richard M. Ebeling, Foundation for Economic Education
John C. Edmunds, Babson College
John B. Egger, Towson University
Barry J. Eichengreen, University of California, Berkeley
Eric Eliason, Brigham Young University
Jerome R. Ellig, George Mason University
Randall P. Ellis, Boston University
Sara Fisher Ellison, Massachusetts Institute of Technology
Jeffrey C. Ely, Northwestern University
Ross B. Emmett, Michigan State University
Richard E. Ericson, East Carolina University
Barry S. Fagin, United States Air Force Academy
Frank Falero, Jr., California State University, Bakersfield
Jonathan Falk, NERA Economic Consulting
Eugene F. Fama, University of Chicago
Susan K. Feigenbaum, University of Missouri, St. Louis
Roger D. Feldman, University of Minnesota
J. Peter Ferderer, Macalester College
David N. Figlio, University of Florida
Morris P. Fiorina, Stanford University
Hartmut Fischer, University of San Francisco
Eric Fisher, Ohio State University
Franklin M. Fisher, Massachusetts Institute of Technology
Robert J. Flanagan, Stanford University
Mark C. Foley, Davidson College
Fred E. Foldvary, Santa Clara University
William F. Ford, Middle Tennessee State University
Peter Frank, Wingate University
Robert H. Frank, Cornell University
Michele Fratianni, Indiana University
Jesse M. Fried, University of California,. Berkeley
Lowell E. Gallaway, Ohio University
Gary M. Galles, Pepperdine University
B. Delworth Gardner, Brigham Young University
Judith Gans, University of Arizona
Justin Garosi, North Dakota State University
David E. R. Gay, University of Arkansas
Adam K. Gehr, Jr., DePaul University
Michael Giberson, Independent Economist
Douglas M. Gibler, University of Kentucky
Adam Gifford, Jr., California State University, Northridge
John Gillingham, University of Missouri, St. Louis
William Gissy, Kennesaw State University
Edward L. Glaeser, Harvard University
Nathan Glazer, Harvard University
Brian Goff, Western Kentucky University
Steven M. Goldman, University of California, Berkeley
Deborah Goldsmith, City College of San Francisco
Don Goldstein, Allegheny College
Jack A. Goldstone, George Mason University
Peter Gordon, University of Southern California
Richard L. Gordon, The Pennsylvania State University
Roger H. Gordon, University of California, San Diego
Scott F. Grannis, Western Asset Management
Wayne B. Gray, Clark University
Martin Greenberger, University of California, Los Angeles
Michael Greenstone, Massachusetts Institute of Technology
Gene M. Grossman, Princeton University
Peter Z. Grossman, Butler University
Richard S. Grossman, Wesleyan University
James D. Gwartney, Florida State University
David D. Haddock, Northwestern University
Larry M. Hall, Belmont University
James Halteman, Wheaton College
W. Michael Haneman, University of California, Berkeley
Robin Hanson, George Mason University
Andrew Hanssen, Montana State University
Stephen K. Happel, Arizona State University
W. Penn Hardwerker, University of Connecticut
Donald J. Harris, Stanford University
M. Kabir Hassan, University of New Orleans
Kevin A. Hassett, American Enterprise Institute
Robert H. Haveman, University of Wisconsin
Thomas Hazlett, George Mason University
Cary W. Heath, University of Louisiana, Lafayette
James J. Heckman, Nobel Laureate, University of Chicago
Scott Hein, Texas Tech University
Eric A. Helland, Claremont McKenna College
David R. Henderson, Hoover Institution
Jack High, George Mason University
Robert Higgs, The Independent Institute
P. J. Hill, Wheaton College
Bradley K. Hobbs, Florida Gulf Coast University
Randall G. Holcombe, Florida State University
Harry J. Holzer, Georgetown University
Richard Hooley, University of Pittsburgh
R. Bradley Hoppes, Missouri State University
Steven G. Horwitz, St. Lawrence University
Daniel E. Houser, George Mason University
Douglas A. Houston, University of Kansas
Charles W. Howe, University of Colorado, Boulder
John S. Howe, University of Missouri, Columbia
James E. Howell, Stanford University
Frank Howland, Wabash College
Hilary W. Hoynes, University of California, Davis
James L. Hudson, Northern Illinois University
James L. Huffman, Lewis & Clark College
Jeffrey Rogers Hummel, San Jose State University
David Hummels, Purdue University
Lester H. Hunt, University of Wisconsin, Madison
Christine Hurt, Marquette University
Roxana Idu, SUNY Buffalo
Frederick S. Inaba, Washington State University
Christopher R. Inama, Golden Gate University
Robert P. Inman, University of Pennsylvania
Michael Intriligator, University of California, Los Angeles
Thomas D. Jeitschko, Michigan State University
Bruce K. Johnson, Centre College
Douglas H. Joines, University of Southern California
Seth K. Jolly, Duke University
Garett Jones, Southern Illinois University
Kristin Roti Jones, Hartwick College
Michael Jones-Correa, Cornell University
William H. Kaempfer, University of Colorado, Boulder
Alfred E. Kahn, Cornell University
Joseph P. Kalt, Harvard University
Mark S. Kamlet, Carnegie Mellon University
Theodore C. Kariotis, Towson University
Stephen H. Karlson, Northern Illinois University
Jonathan M. Karpoff, University of Washington
David L. Kaserman, Auburn University
Peter B. Kenen, Princeton University
Miles S. Kimball, University of Michigan
Meelis, Kitsing, University of Massachusetts
Robin Klay, Hope College
Benjamin Klein, University of California, Los Angeles
Daniel Klein, George Mason University
Audrey D. Kline, University of Louisville
Paul R. Koch, Olivet Nazarene University
Maria Minniti Koppl, Babson College
Roger Koppl, Fairleigh Dickinson University
Laurence J. Kotlikoff, Boston University
Melvyn B. Krauss, Hoover Institution
Brent E. Kreider, Iowa State University
Mordechai E. Kreinin, Michigan State University
David W. Kreutzer, James Madison University
Lawrence A. Kudlow, Kudlow & Company
Mukund S. Kulkarni, Penn State University, Harrisburg
Sumner J. La Croix, University of Hawaii
Arthur B. Laffer, A. B. Laffer Associates
Courtney LaFountain, University of Texas, Arlington
Deepak Lal, University of California, Los Angeles
Steven E. Landsburg, University of Rochester
Richard N. Langlois, University of Connecticut
Nicholas A. Lash, Loyola University
Wolfram Latsch, University of Washington
Robert A. Lawson, Capital University
Phillip LeBel, Montclair State University
Don R. Leet, California State University, Fresno
Kenneth M. Lehn, University of Pittsburgh
David K. Levine, University of California, Los Angeles
David M. Levy, George Mason University
Dale B. Light, Independent Economist
P. Mather Lindsay, Mather Economics LLC
Tian Hao Liu, University of Chicago
George Lodge, Harvard University
Robert R. Logan, Northern Economic Research Associates
Edward J. Lopez, San José State University
Franklin A. Lopez, Tulane University
Anthony Loviscek, Seton Hall University
Robert E. Lucas, Jr., Nobel Laureate, University of Chicago
John E. Lunn, Hope College
W. Bentley MacLeod, Columbia University
Robert Main, Butler University
Burton G. Malkiel, Princeton University
Laurence Malone, Hartwick College
Yuri N. Maltsev, Carthage College
N. Gregory Mankiw, Harvard University
Geoffrey A. Manne, Lewis & Clark College
William F. Marina, Florida Atlantic University
Matthew Marlin, Duquesne University
Michael L. Marlow, California Polytechnic State University
Andres Marroquin Gramajo, George Mason University
Giovanni Mastrobuoni, Princeton University
David N. Mayer, Capital University
Carrie Mayne, Utah Department of Workforce Services
Will McBride, George Mason University
Deirdre McCloskey, University of Illinois at Chicago
Paul W. McCracken, University of Michigan
Rachel McCulloch, Brandeis University
Michael J. McCully, High Point University
Daniel L. McFadden, Nobel Laureate, University of California, Berkeley
Joseph A. McKinney, Baylor University
Walter W. McMahon, University of Illinois, Champaign-Urbana
Robert McNown, University of Colorado, Boulder
Matthew Q. McPherson, Gonzaga University
Tom Means, San Jose State University
Roger Meiners, University of Texas, Arlington
John D. Merrifield, University of Texas, San Antonio
Harry Messenheimer, Rio Grande Foundation
Carrie Meyer, George Mason University
Jacob B. Michaelsen, University of California, Santa Cruz
William Milberg, New School for Social Research
Paul R. Milgrom, Stanford University
Demaris Miller, Psychologist
James C. Miller, III, George Mason University
Stephen C. Miller, Western Carolina University
Jeffrey A. Miron, Harvard University
Wilson Mixon, Berry College
Robert Moffitt, Johns Hopkins University
Michael R. Montgomery, University of Maine
Cassandra Chrones Moore, Cato Institute
Thomas Gale Moore, Hoover Institution
John C. Moorhouse, Wake Forest University
Michael A. Morrisey, University of Alabama at Birmingham
Andrew P. Morriss, Case Western Reserve University
Milton L. Mueller, Syracuse University
Robert F. Mulligan, Western Carolina University
Michael C. Munger, Duke University
Ben Muse, Economist
David B. Mustard, University of Georgia
Richard F. Muth, Emory University
Thomas J. Nechyba, Duke University
Robert H. Nelson, University of Maryland
Russell Nelson, Economist
Hugh B. Nicholas Jr., Pittsburgh Supercomputing Center
M. Scott Niederjohn, Lakeland College
Eli M. Noam, Columbia University
Roger G. Noll, Stanford University
Masao Ogaki, Ohio State University
Lee Ohanian, University of California, Los Angeles
David J. O'Hara, Metropolitan State University
Randal O’Toole, Thoreau Institute
Lydia D. Ortega, San Jose State University
Evan Osborne, Wright State University
Randall E. Parker, East Carolina University
Allen M. Parkman, University of New Mexico
Jeffrey S. Parlow, Macomb Community College
Mark V. Pauly, University of Pennsylvania
Sandra J. Peart, Baldwin-Wallace College
William S. Peirce, Case Western Reserve University
Robert L. Pennington, University of Central Florida
Jeffrey M. Perloff, University of California, Berkeley
Timothy Perri, Appalachian State University
Mark J. Perry, University of Michigan, Flint
William H. Peterson, Ludwig von Mises Institute
William S. Peirce, Case Western Reserve University
Owen R. Phillips, University of Wyoming
Robert S. Pindyck, Massachusetts Institute of Technology
Joseph S. Pomykala, Towson University
Steven Postrel, Southern Methodist University
Benjamin Powell, The Independent Institute
John M. Quigley, University of California, Berkeley
Carlos Ramirez, George Mason University
Elizabeth L. Rankin, Centenary College of Louisiana
James B. Ramsey, New York University
Ronald A. Ratti, University of Missouri, Columbia
Salim Rashid, University of Illinois, Champaigne-Urbana
Laura Razzolini, Virginia Commonwealth University
Edward M. Rice, University of Washington
Raymond Riezman, University of Iowa
Luis N. Rivera-Pagan, Princeton University
Richard W. Rahn, Center for Global Economic Growth
Mario J. Rizzo, New York University
Michael J. Rizzo, Centre College
Donald John Roberts, Stanford University
Seth Roberts, University of California, Berkeley
Malcolm Robinson, Thomas More College
James D. Rodgers, Pennsylvania State University
Harvey S. Rosen, Princeton University
Nathan Rosenberg, Stanford University
Philip Rothman, East Carolina University
Ronald D. Rotunda, George Mason University
Brian Rowe, University of Michigan
Charles T. Rubin, Duquesne University
Paul H. Rubin, Emory University
Gerard Russo, University of Hawaii
Andrew R. Rutten, Stanford University
Matt E. Ryan, West Virginia University
Andrew Samwick, Dartmouth College
Steven C. Salop, Georgetown University
Raymond D. Sauer, Jr., Clemson University
Thomas R. Saving, Texas A & M University
W. Charles Sawyer, University of Southern Mississippi
Edward M. Scahill, University of Scranton
D. Eric Schansberg, Indiana University, New Albany
Thomas C. Schelling, Nobel Laureate, University of Maryland
Richard Schmalensee, Massachusetts Institute of Technology
Ken Schoolland, Hawaii Pacific University
Stewart J. Schwab, Cornell University
Anna J. Schwartz, National Bureau of Economic Research
Kenneth E. Scott, Stanford University
Carlos C. Seiglie, Rutgers University
Barry J. Seldon, University of Texas, Dallas
George A. Selgin, University of Georgia
Richard Sennett, Massachusetts Institute of Technology
John F. Shampton, Texas Wesleyan University
Richard Sherlock, Utah State University
Tyler G. Shumway, University of Michigan
Randy L. Simmons, Utah State University
Rita Simon, American University
Charles David Skipton, University of Tampa
Daniel J. Slottje, Southern Methodist University
W. Gene Smiley, Marquette University
Alastair Smith, New York University
Charles Welstead Smith, Ohio State University
James F. Smith, University of North Carolina, Chapel Hill
Jeffrey Smith, University of Michigan
Karl Smith, North Carolina State University
Nathan Smith, World Bank
Robert S. Smith, Cornell University
Vernon L. Smith, Nobel Laureate, George Mason University
Russell S. Sobel, West Virginia University
Ilya Somin, George Mason University
John W. Sommer, Political Economy Research Institute
John C. Soper, John Carroll University
Martin C. Spechler, Indiana University
David B. Spence, University of Texas, Austin
Mark Steckbeck, Hillsdale College
Roland Stephen, North Carolina State University
E. Frank Stephenson, Berry College
Robert M. Stern, University of Michigan
Robert T. Stewart, Fordham University
Hans Stoll, Vanderbilt University
Edward P. Stringham, San Jose State University
Amy H. Sturgis, Belmont University
Paul J. Sullivan, Georgetown University
Anita Summers, University of Pennsylvania
Scott Sumner, Bentley College
William A. Sundstrom, Santa Clara University
Shirley V. Svorny, California State University, Northridge
Aaron M. Swoboda, University of Pittsburgh
Richard E. Sylla, New York University
Alexander Tabarrok, The Independent Institute
John A. Tatom, Indiana State University
Jason E. Taylor, Central Michigan University
David J. Theroux, The Independent Institute
Clifford F. Thies, Shenandoah University
Christopher R. Thomas, University of South Florida
T. Nicolaus Tideman, Virginia Polytechnic Institute and State University
Richard H. Timberlake, Jr., University of Georgia
Robert D. Tollison, Clemson University
Mark Toma, University of Kentucky
John F. Tomer, Manhattan College
Jay L. Tontz, California State University, East Bay
Joel P. Trachtman, Tufts University
Adrian E. Tschoegl, University of Pennsylvania
Kevin K. Tsui, Clemson University
David Tufte, Southern Utah Unhiversity
Frederick Tung, Emory University
Gordon Tullock, George Mason University
Chad S. Turner, Nicholls State University
Nicola C. Tynan, Dickinson College
Michelle A. Vachris, Christopher Newport University
John J. Villarreal, California State University, East Bay
Georg Vanberg, University of North Carolina, Chapel Hill
Mark Van Boening, University of Mississippi
T. Norman Van Cott, Ball State University
Hendrik Van den Berg, University of Nebraska, Lincoln
Alvaro Vargas Llosa, The Independent Institute
Karen I. Vaughn, George Mason University
Richard K. Vedder, Ohio University
Erik Voeten, George Washington University
George Vredeveld, University of Cincinnati
Michael R. Ward, University of Texas, Arlington
John T. Warner, Clemson University
Alan Rufus Waters, California State University, Fresno
Michael J. Webb, Regulatory Economics Group
William Weber, Southeast Missouri State University
Ivo I. Welch, Brown University
David L. Weimer, University of Wisconsin, Madison
John T. Wenders, University of Idaho
J. Fred Weston, University of California, Los Angeles
Robert M. Whaples, Wake Forest University
Lawrence H. White, University of Missouri, St. Louis
Ronald F. White, College of Mount St. Joseph
John Whitehead, Appalachian State University
Marina v. N. Whitman, University of Michigan
Roland Wiederaenders, Austin Capital Management
Christopher Wignall, University of California at San Diego (grad econ student)
James A. Wilcox, University of California, Berkeley
Thomas D. Willett, Claremont Graduate University
Arlington W. Williams, Indiana University, Bloomington
Douglas Wills, University of Washington, Tacoma
Bonnie Wilson, St. Louis University
Larry T. Wimmer, Brigham Young University
Michael K. Wohlgenant, North Carolina State University
Barbara Wolfe, University of Wisconsin, Madison
Justin Wolfers, University of Pennsylvania
Gary Wolfram, Hillsdale College
Arthur Woolf, University of Vermont
Eric C. Woychik, Strategy Integration LLC
Brian Wright, University of California, Berkeley
Joshua D. Wright, George Mason University
Bruce Yandle, Clemson University
David B. Yoffie, Harvard University
DeVon L. Yoho, Ball State University
Derek K. Yonai, Campbell University
Jeffrey T. Young, St. Lawrence University
Asghar Zardkoohi, Texas A & M University
Lei Zhang, Clemson University
Kate Xiao Zhou, University of Hawaii
Zenon X. Zygmont, Western Oregon University


Foreign Signatories top^
Lord Meghnad Desai, London School of Economics, England
Kevin Dowd, University of Nottingham, England
Jose Antonio Fontana, Uruguay
Francisco Javier Aparicio, CIDE, Mexico
Jurgen G. Backhaus, Erfurt University, Germany
Alvaro Bardon, Universidad Finis Terrae, Chile
Alberto Benegas-Lynch, University of Buenos Aires, Argentina
Niclas Berggren, Ratio Institute, Sweden
Andreas Bergh, Lund University, Sweden
Sonja Boehmer-Christiansen, University of Hull, England
Gregor Bush, BMO Economics, Canada
John B. Chilton, American University of Sharjah, United Arab Emirates
Julio H. Cole, Universidad Francisco Marroquin, Guatemala
Janet Coleman, London School of Economics and Political Science, England
Enrico Colombatto, University of Torino, Italy
Daniel Cordova, Peruvian University of Applied Sciences, Peru
Eric Crampton, University of Canterbury, New Zealand
Fredrik Erixon, Timbro, Sweden
Ana Marie Fossati, Agencia Interamericana de Prensa Económica, Uruguay
Angel Solano Garcia, Universitad de Granada, Spain
Ronald Hamowy, University of Alberta, Canada
Steffen Hentrich, German Advisory Council on the Environment, Berlin, Germany
Andrew Leigh, Australian National University
Pierre Lemieux, University of Québec in Outaouais, Canada
Christopher R. Lingle, Francisco Marroquin University, Guatemala
Lance J. Lochner, University of Western Ontario, Canada
Francis T. Lui, Hong Kong University of Science and Technology, China
Robert Nef, Liberales Institut Zurich, Switzerland
Jan Narveson, University of Waterloo, Canada
Maximilian Oberbauer, University of Vienna, Austria
John F. Opie, Feri Rating & Research GmbH, Germany
Mohamed Oudebji, Economics and Social Sciences of Marrakech, Morocco
Tomi Ovaska, University of Regina, Canada
Eduardo Pegurier, Catholic University of Rio de Janeiro, Brazil
Victoria Curzon Price, University of Geneva, Switzerland
Herbert Reginbogin, University of Potsdam, Germany
Friedrich Schneider, Johannes Kepler University of Linz, Austria
Parth J. Shah, Centre for Civil Society, India
Claudio Djissey Shikida, Brazil
Joseph Sinatra, London School of Economics, England
Saul Trejo, Grupo Acex, Mexico
Alex van Gelder, International Policy Network, England
Sam Vermeersch, NPO Fakbar Letteren, Belgium
Anthony M. C. Waterman, University of Manitoba, Canada


Useful References top^

Borjas, George J., and Lawrence F. Katz. 2006. Evolution of the Mexican-Born Workforce in the United States. NBER Working Paper No. 11281. Cambridge, Mass.: National Bureau of Economic Research.

Card, David. 2005. Is the New Immigration Really So Bad? NBER Working Paper No. 11547. Cambridge, Mass.: National Bureau of Economic Research.

Card, David, and Ethan G. Lewis. 2005. The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts. NBER Working Paper No. 11552. Cambridge, Mass.: National Bureau of Economic Research.

Couch, Jim F., Brett A. King, William H. Wells, and Peter M. Williams. June 2001. Nation of Origin Bias and the Enforcement of Immigration Laws by the Immigration and Naturalization Service. Independent Institute Working Paper. Oakland, Calif.: The Independent Institute.

Cowen, Tyler, and Daniel Rothschild. May 15, 2006. Hey, Don't Bad-mouth Unskilled Immigrants: You Don't Have to Be a Computer Genius to Be Good for the U.S. Los Angeles Times.

__________. June 12, 2006. Blending In, Moving Up. Washington Post.

Friedberg, Rachel M. 2001. The Impact of Mass Migration on the Israeli Labor Market. The Quarterly Journal of Economics 116 (4): 1373-1408.

Friedberg, Rachel M., and Jennifer Hunt. 1995. The Impact of Immigrants on Host Country Wages, Employment and Growth, Journal of Economic Perspectives 9 (4): 23-44.

Gallaway, Lowell E., Stephen Moore, and Richard K. Vedder. 2000. The Immigration Problem: Then and Now. The Independent Review 4 (3): 347-364.

Gandal, Neil, Gordon H. Hanson, and Matthew J. Slaughter. 2000. Technology, Trade, and Adjustment to Immigration in Israel. NBER Working Paper No. 7962. Cambridge, Mass.: National Bureau of Economic Research.

Krueger, Alan B. April 6, 2006. Two Labor Economic Issues for the Immigration Debate. Washington, D.C.: Center for American Progress.

Ottaviano, Gianmarco I.P., and Giovanni Peri. 2006. Rethinking the Gains from Immigration: Theory and Evidence from the U.S. NBER Working Paper No. 11672. Cambridge, Mass.: National Bureau of Economic Research.

Powell, Benjamin. April 30, 2005. Immigration, Economic Growth, and the Welfare State. Oakland, Calif.: The Independent institute.

__________. May 18, 2005. Immigration Reform that Both Sides Can Support. San Francisco Business Times.

___________. April 4, 2006. How To Reform Immigration Laws. Atlanta Journal-Constitution.

___________. December 22, 2005. The Pseudo Economic Problems of Immigration. San Diego Union-Tribune.

Powell, Benjamin, and Peter Laufer. September 21, 2005. Immigration Wars: Open or Closed Borders for America? Transcript of Independent Policy Forum. Oakland, Calif.: The Independent Institute.

Simon, Julian. 1999. The Economic Consequences of Immigration, 2nd ed. Ann Arbor, Mich.: University of Michigan Press.

_______. 1990. Population Matters: People, Resources, Environment, and Immigration. New Brunswick, N.J.: Transaction Publishers.

Smith, James P., and Barry Edmonston. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, D.C.: National Academies Press.

Tabarrok, Alexander. 2000. Economic and Moral Factors in Favor of Open Immigration. Oakland, Calif.: The Independent Institute.

Vedder, Richard K., and Lowell E. Gallaway. 1993. Out of Work: Unemployment and Government in Twentieth-Century America, rev. ed. New York: New York University Press for The Independent Institute.

[rollhead]

Paul Krugman, the NYT columnist and PROFESSOR OF ECONOMICS AT PRINCETON, WHO HAS A PHD IN ECONOMICS FROM MIT AND HAS TAUGHT ECONOMICS AT YALE, STANFORD AND MIT AS WELL AS PRINCETON!!!!!!!!!!!!!

DECLARES NEW GILDED AGE!!!!!!!!!!!

I. The Disappearing Middle

When I was a teenager growing up on Long Island, one of my favorite excursions was a trip to see the great Gilded Age mansions of the North Shore. Those mansions weren't just pieces of architectural history. They were monuments to a bygone social era, one in which the rich could afford the armies of servants needed to maintain a house the size of a European palace. By the time I saw them, of course, that era was long past. Almost none of the Long Island mansions were still private residences. Those that hadn't been turned into museums were occupied by nursing homes or private schools.

For the America I grew up in -- the America of the 1950's and 1960's -- was a middle-class society, both in reality and in feel. The vast income and wealth inequalities of the Gilded Age had disappeared. Yes, of course, there was the poverty of the underclass -- but the conventional wisdom of the time viewed that as a social rather than an economic problem. Yes, of course, some wealthy businessmen and heirs to large fortunes lived far better than the average American. But they weren't rich the way the robber barons who built the mansions had been rich, and there weren't that many of them. The days when plutocrats were a force to be reckoned with in American society, economically or politically, seemed long past.

Daily experience confirmed the sense of a fairly equal society. The economic disparities you were conscious of were quite muted. Highly educated professionals -- middle managers, college teachers, even lawyers -- often claimed that they earned less than unionized blue-collar workers. Those considered very well off lived in split-levels, had a housecleaner come in once a week and took summer vacations in Europe. But they sent their kids to public schools and drove themselves to work, just like everyone else.

But that was long ago. The middle-class America of my youth was another country.

We are now living in a new Gilded Age, as extravagant as the original. Mansions have made a comeback. Back in 1999 this magazine profiled Thierry Despont, the ''eminence of excess,'' an architect who specializes in designing houses for the superrich. His creations typically range from 20,000 to 60,000 square feet; houses at the upper end of his range are not much smaller than the White House. Needless to say, the armies of servants are back, too. So are the yachts. Still, even J.P. Morgan didn't have a Gulfstream.

As the story about Despont suggests, it's not fair to say that the fact of widening inequality in America has gone unreported. Yet glimpses of the lifestyles of the rich and tasteless don't necessarily add up in people's minds to a clear picture of the tectonic shifts that have taken place in the distribution of income and wealth in this country. My sense is that few people are aware of just how much the gap between the very rich and the rest has widened over a relatively short period of time. In fact, even bringing up the subject exposes you to charges of ''class warfare,'' the ''politics of envy'' and so on. And very few people indeed are willing to talk about the profound effects -- economic, social and political -- of that widening gap.

Yet you can't understand what's happening in America today without understanding the extent, causes and consequences of the vast increase in inequality that has taken place over the last three decades, and in particular the astonishing concentration of income and wealth in just a few hands. To make sense of the current wave of corporate scandal, you need to understand how the man in the gray flannel suit has been replaced by the imperial C.E.O. The concentration of income at the top is a key reason that the United States, for all its economic achievements, has more poverty and lower life expectancy than any other major advanced nation. Above all, the growing concentration of wealth has reshaped our political system: it is at the root both of a general shift to the right and of an extreme polarization of our politics.

But before we get to all that, let's take a look at who gets what.

II. The New Gilded Age

The Securities and Exchange Commission hath no fury like a woman scorned. The messy divorce proceedings of Jack Welch, the legendary former C.E.O. of General Electric, have had one unintended benefit: they have given us a peek at the perks of the corporate elite, which are normally hidden from public view. For it turns out that when Welch retired, he was granted for life the use of a Manhattan apartment (including food, wine and laundry), access to corporate jets and a variety of other in-kind benefits, worth at least $2 million a year. The perks were revealing: they illustrated the extent to which corporate leaders now expect to be treated like ancien regime royalty. In monetary terms, however, the perks must have meant little to Welch. In 2000, his last full year running G.E., Welch was paid $123 million, mainly in stock and stock options.

Is it news that C.E.O.'s of large American corporations make a lot of money? Actually, it is. They were always well paid compared with the average worker, but there is simply no comparison between what executives got a generation ago and what they are paid today.

Over the past 30 years most people have seen only modest salary increases: the average annual salary in America, expressed in 1998 dollars (that is, adjusted for inflation), rose from $32,522 in 1970 to $35,864 in 1999. That's about a 10 percent increase over 29 years -- progress, but not much. Over the same period, however, according to Fortune magazine, the average real annual compensation of the top 100 C.E.O.'s went from $1.3 million -- 39 times the pay of an average worker -- to $37.5 million, more than 1,000 times the pay of ordinary workers.

The explosion in C.E.O. pay over the past 30 years is an amazing story in its own right, and an important one. But it is only the most spectacular indicator of a broader story, the reconcentration of income and wealth in the U.S. The rich have always been different from you and me, but they are far more different now than they were not long ago -- indeed, they are as different now as they were when F. Scott Fitzgerald made his famous remark.

That's a controversial statement, though it shouldn't be. For at least the past 15 years it has been hard to deny the evidence for growing inequality in the United States. Census data clearly show a rising share of income going to the top 20 percent of families, and within that top 20 percent to the top 5 percent, with a declining share going to families in the middle. Nonetheless, denial of that evidence is a sizable, well-financed industry. Conservative think tanks have produced scores of studies that try to discredit the data, the methodology and, not least, the motives of those who report the obvious. Studies that appear to refute claims of increasing inequality receive prominent endorsements on editorial pages and are eagerly cited by right-leaning government officials. Four years ago Alan Greenspan (why did anyone ever think that he was nonpartisan?) gave a keynote speech at the Federal Reserve's annual Jackson Hole conference that amounted to an attempt to deny that there has been any real increase in inequality in America.

The concerted effort to deny that inequality is increasing is itself a symptom of the growing influence of our emerging plutocracy (more on this later). So is the fierce defense of the backup position, that inequality doesn't matter -- or maybe even that, to use Martha Stewart's signature phrase, it's a good thing. Meanwhile, politically motivated smoke screens aside, the reality of increasing inequality is not in doubt. In fact, the census data understate the case, because for technical reasons those data tend to undercount very high incomes -- for example, it's unlikely that they reflect the explosion in C.E.O. compensation. And other evidence makes it clear not only that inequality is increasing but that the action gets bigger the closer you get to the top. That is, it's not simply that the top 20 percent of families have had bigger percentage gains than families near the middle: the top 5 percent have done better than the next 15, the top 1 percent better than the next 4, and so on up to Bill Gates.

Studies that try to do a better job of tracking high incomes have found startling results. For example, a recent study by the nonpartisan Congressional Budget Office used income tax data and other sources to improve on the census estimates. The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution. Even more startling results come from a new study by Thomas Piketty, at the French research institute Cepremap, and Emmanuel Saez, who is now at the University of California at Berkeley. Using income tax data, Piketty and Saez have produced estimates of the incomes of the well-to-do, the rich and the very rich back to 1913.

The first point you learn from these new estimates is that the middle-class America of my youth is best thought of not as the normal state of our society, but as an interregnum between Gilded Ages. America before 1930 was a society in which a small number of very rich people controlled a large share of the nation's wealth. We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II. The economic historians Claudia Goldin and Robert Margo have dubbed the narrowing of income gaps during those years the Great Compression. Incomes then stayed fairly equally distributed until the 1970's: the rapid rise in incomes during the first postwar generation was very evenly spread across the population.

Since the 1970's, however, income gaps have been rapidly widening. Piketty and Saez confirm what I suspected: by most measures we are, in fact, back to the days of ''The Great Gatsby.'' After 30 years in which the income shares of the top 10 percent of taxpayers, the top 1 percent and so on were far below their levels in the 1920's, all are very nearly back where they were.

And the big winners are the very, very rich. One ploy often used to play down growing inequality is to rely on rather coarse statistical breakdowns -- dividing the population into five ''quintiles,'' each containing 20 percent of families, or at most 10 ''deciles.'' Indeed, Greenspan's speech at Jackson Hole relied mainly on decile data. From there it's a short step to denying that we're really talking about the rich at all. For example, a conservative commentator might concede, grudgingly, that there has been some increase in the share of national income going to the top 10 percent of taxpayers, but then point out that anyone with an income over $81,000 is in that top 10 percent. So we're just talking about shifts within the middle class, right?

Wrong: the top 10 percent contains a lot of people whom we would still consider middle class, but they weren't the big winners. Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million.

A stickler for detail might point out that the Piketty-Saez estimates end in 1998 and that the C.B.O. numbers end a year earlier. Have the trends shown in the data reversed? Almost surely not. In fact, all indications are that the explosion of incomes at the top continued through 2000. Since then the plunge in stock prices must have put some crimp in high incomes -- but census data show inequality continuing to increase in 2001, mainly because of the severe effects of the recession on the working poor and near poor. When the recession ends, we can be sure that we will find ourselves a society in which income inequality is even higher than it was in the late 90's.

So claims that we've entered a second Gilded Age aren't exaggerated. In America's middle-class era, the mansion-building, yacht-owning classes had pretty much disappeared. According to Piketty and Saez, in 1970 the top 0.01 percent of taxpayers had 0.7 percent of total income -- that is, they earned ''only'' 70 times as much as the average, not enough to buy or maintain a mega-residence. But in 1998 the top 0.01 percent received more than 3 percent of all income. That meant that the 13,000 richest families in America had almost as much income as the 20 million poorest households; those 13,000 families had incomes 300 times that of average families.

And let me repeat: this transformation has happened very quickly, and it is still going on. You might think that 1987, the year Tom Wolfe published his novel ''The Bonfire of the Vanities'' and Oliver Stone released his movie ''Wall Street,'' marked the high tide of America's new money culture. But in 1987 the top 0.01 percent earned only about 40 percent of what they do today, and top executives less than a fifth as much. The America of ''Wall Street'' and ''The Bonfire of the Vanities'' was positively egalitarian compared with the country we live in today.

III. Undoing the New Deal

In the middle of the 1980's, as economists became aware that something important was happening to the distribution of income in America, they formulated three main hypotheses about its causes.

The ''globalization'' hypothesis tied America's changing income distribution to the growth of world trade, and especially the growing imports of manufactured goods from the third world. Its basic message was that blue-collar workers -- the sort of people who in my youth often made as much money as college-educated middle managers -- were losing ground in the face of competition from low-wage workers in Asia. A result was stagnation or decline in the wages of ordinary people, with a growing share of national income going to the highly educated.

A second hypothesis, ''skill-biased technological change,'' situated the cause of growing inequality not in foreign trade but in domestic innovation. The torrid pace of progress in information technology, so the story went, had increased the demand for the highly skilled and educated. And so the income distribution increasingly favored brains rather than brawn.

Finally, the ''superstar'' hypothesis -- named by the Chicago economist Sherwin Rosen -- offered a variant on the technological story. It argued that modern technologies of communication often turn competition into a tournament in which the winner is richly rewarded, while the runners-up get far less. The classic example -- which gives the theory its name -- is the entertainment business. As Rosen pointed out, in bygone days there were hundreds of comedians making a modest living at live shows in the borscht belt and other places. Now they are mostly gone; what is left is a handful of superstar TV comedians.

The debates among these hypotheses -- particularly the debate between those who attributed growing inequality to globalization and those who attributed it to technology -- were many and bitter. I was a participant in those debates myself. But I won't dwell on them, because in the last few years there has been a growing sense among economists that none of these hypotheses work.

I don't mean to say that there was nothing to these stories. Yet as more evidence has accumulated, each of the hypotheses has seemed increasingly inadequate. Globalization can explain part of the relative decline in blue-collar wages, but it can't explain the 2,500 percent rise in C.E.O. incomes. Technology may explain why the salary premium associated with a college education has risen, but it's hard to match up with the huge increase in inequality among the college-educated, with little progress for many but gigantic gains at the top. The superstar theory works for Jay Leno, but not for the thousands of people who have become awesomely rich without going on TV.

The Great Compression -- the substantial reduction in inequality during the New Deal and the Second World War -- also seems hard to understand in terms of the usual theories. During World War II Franklin Roosevelt used government control over wages to compress wage gaps. But if the middle-class society that emerged from the war was an artificial creation, why did it persist for another 30 years?

Some -- by no means all -- economists trying to understand growing inequality have begun to take seriously a hypothesis that would have been considered irredeemably fuzzy-minded not long ago. This view stresses the role of social norms in setting limits to inequality. According to this view, the New Deal had a more profound impact on American society than even its most ardent admirers have suggested: it imposed norms of relative equality in pay that persisted for more than 30 years, creating the broadly middle-class society we came to take for granted. But those norms began to unravel in the 1970's and have done so at an accelerating pace.

Exhibit A for this view is the story of executive compensation. In the 1960's, America's great corporations behaved more like socialist republics than like cutthroat capitalist enterprises, and top executives behaved more like public-spirited bureaucrats than like captains of industry. I'm not exaggerating. Consider the description of executive behavior offered by John Kenneth Galbraith in his 1967 book, ''The New Industrial State'': ''Management does not go out ruthlessly to reward itself -- a sound management is expected to exercise restraint.'' Managerial self-dealing was a thing of the past: ''With the power of decision goes opportunity for making money. . . . Were everyone to seek to do so . . . the corporation would be a chaos of competitive avarice. But these are not the sort of thing that a good company man does; a remarkably effective code bans such behavior. Group decision-making insures, moreover, that almost everyone's actions and even thoughts are known to others. This acts to enforce the code and, more than incidentally, a high standard of personal honesty as well.''

Thirty-five years on, a cover article in Fortune is titled ''You Bought. They Sold.'' ''All over corporate America,'' reads the blurb, ''top execs were cashing in stocks even as their companies were tanking. Who was left holding the bag? You.'' As I said, we've become a different country.

Let's leave actual malfeasance on one side for a moment, and ask how the relatively modest salaries of top executives 30 years ago became the gigantic pay packages of today. There are two main stories, both of which emphasize changing norms rather than pure economics. The more optimistic story draws an analogy between the explosion of C.E.O. pay and the explosion of baseball salaries with the introduction of free agency. According to this story, highly paid C.E.O.'s really are worth it, because having the right man in that job makes a huge difference. The more pessimistic view -- which I find more plausible -- is that competition for talent is a minor factor. Yes, a great executive can make a big difference -- but those huge pay packages have been going as often as not to executives whose performance is mediocre at best. The key reason executives are paid so much now is that they appoint the members of the corporate board that determines their compensation and control many of the perks that board members count on. So it's not the invisible hand of the market that leads to those monumental executive incomes; it's the invisible handshake in the boardroom.

But then why weren't executives paid lavishly 30 years ago? Again, it's a matter of corporate culture. For a generation after World War II, fear of outrage kept executive salaries in check. Now the outrage is gone. That is, the explosion of executive pay represents a social change rather than the purely economic forces of supply and demand. We should think of it not as a market trend like the rising value of waterfront property, but as something more like the sexual revolution of the 1960's -- a relaxation of old strictures, a new permissiveness, but in this case the permissiveness is financial rather than sexual. Sure enough, John Kenneth Galbraith described the honest executive of 1967 as being one who ''eschews the lovely, available and even naked woman by whom he is intimately surrounded.'' By the end of the 1990's, the executive motto might as well have been ''If it feels good, do it.''

How did this change in corporate culture happen? Economists and management theorists are only beginning to explore that question, but it's easy to suggest a few factors. One was the changing structure of financial markets. In his new book, ''Searching for a Corporate Savior,'' Rakesh Khurana of Harvard Business School suggests that during the 1980's and 1990's, ''managerial capitalism'' -- the world of the man in the gray flannel suit -- was replaced by ''investor capitalism.'' Institutional investors weren't willing to let a C.E.O. choose his own successor from inside the corporation; they wanted heroic leaders, often outsiders, and were willing to pay immense sums to get them. The subtitle of Khurana's book, by the way, is ''The Irrational Quest for Charismatic C.E.O.'s.''

But fashionable management theorists didn't think it was irrational. Since the 1980's there has been ever more emphasis on the importance of ''leadership'' -- meaning personal, charismatic leadership. When Lee Iacocca of Chrysler became a business celebrity in the early 1980's, he was practically alone: Khurana reports that in 1980 only one issue of Business Week featured a C.E.O. on its cover. By 1999 the number was up to 19. And once it was considered normal, even necessary, for a C.E.O. to be famous, it also became easier to make him rich.

Economists also did their bit to legitimize previously unthinkable levels of executive pay. During the 1980's and 1990's a torrent of academic papers -- popularized in business magazines and incorporated into consultants' recommendations -- argued that Gordon Gekko was right: greed is good; greed works. In order to get the best performance out of executives, these papers argued, it was necessary to align their interests with those of stockholders. And the way to do that was with large grants of stock or stock options.

It's hard to escape the suspicion that these new intellectual justifications for soaring executive pay were as much effect as cause. I'm not suggesting that management theorists and economists were personally corrupt. It would have been a subtle, unconscious process: the ideas that were taken up by business schools, that led to nice speaking and consulting fees, tended to be the ones that ratified an existing trend, and thereby gave it legitimacy.

What economists like Piketty and Saez are now suggesting is that the story of executive compensation is representative of a broader story. Much more than economists and free-market advocates like to imagine, wages -- particularly at the top -- are determined by social norms. What happened during the 1930's and 1940's was that new norms of equality were established, largely through the political process. What happened in the 1980's and 1990's was that those norms unraveled, replaced by an ethos of ''anything goes.'' And a result was an explosion of income at the top of the scale.

IV. The Price of Inequality

It was one of those revealing moments. Responding to an e-mail message from a Canadian viewer, Robert Novak of ''Crossfire'' delivered a little speech: ''Marg, like most Canadians, you're ill informed and wrong. The U.S. has the longest standard of living -- longest life expectancy of any country in the world, including Canada. That's the truth.''

But it was Novak who had his facts wrong. Canadians can expect to live about two years longer than Americans. In fact, life expectancy in the U.S. is well below that in Canada, Japan and every major nation in Western Europe. On average, we can expect lives a bit shorter than those of Greeks, a bit longer than those of Portuguese. Male life expectancy is lower in the U.S. than it is in Costa Rica.

Still, you can understand why Novak assumed that we were No. 1. After all, we really are the richest major nation, with real G.D.P. per capita about 20 percent higher than Canada's. And it has been an article of faith in this country that a rising tide lifts all boats. Doesn't our high and rising national wealth translate into a high standard of living -- including good medical care -- for all Americans?

Well, no. Although America has higher per capita income than other advanced countries, it turns out that that's mainly because our rich are much richer. And here's a radical thought: if the rich get more, that leaves less for everyone else.

That statement -- which is simply a matter of arithmetic -- is guaranteed to bring accusations of ''class warfare.'' If the accuser gets more specific, he'll probably offer two reasons that it's foolish to make a fuss over the high incomes of a few people at the top of the income distribution. First, he'll tell you that what the elite get may look like a lot of money, but it's still a small share of the total -- that is, when all is said and done the rich aren't getting that big a piece of the pie. Second, he'll tell you that trying to do anything to reduce incomes at the top will hurt, not help, people further down the distribution, because attempts to redistribute income damage incentives.

These arguments for lack of concern are plausible. And they were entirely correct, once upon a time -- namely, back when we had a middle-class society. But there's a lot less truth to them now.

First, the share of the rich in total income is no longer trivial. These days 1 percent of families receive about 16 percent of total pretax income, and have about 14 percent of after-tax income. That share has roughly doubled over the past 30 years, and is now about as large as the share of the bottom 40 percent of the population. That's a big shift of income to the top; as a matter of pure arithmetic, it must mean that the incomes of less well off families grew considerably more slowly than average income. And they did. Adjusting for inflation, average family income -- total income divided by the number of families -- grew 28 percent from 1979 to 1997. But median family income -- the income of a family in the middle of the distribution, a better indicator of how typical American families are doing -- grew only 10 percent. And the incomes of the bottom fifth of families actually fell slightly.

Let me belabor this point for a bit. We pride ourselves, with considerable justification, on our record of economic growth. But over the last few decades it's remarkable how little of that growth has trickled down to ordinary families. Median family income has risen only about 0.5 percent per year -- and as far as we can tell from somewhat unreliable data, just about all of that increase was due to wives working longer hours, with little or no gain in real wages. Furthermore, numbers about income don't reflect the growing riskiness of life for ordinary workers. In the days when General Motors was known in-house as Generous Motors, many workers felt that they had considerable job security -- the company wouldn't fire them except in extremis. Many had contracts that guaranteed health insurance, even if they were laid off; they had pension benefits that did not depend on the stock market. Now mass firings from long-established companies are commonplace; losing your job means losing your insurance; and as millions of people have been learning, a 401(k) plan is no guarantee of a comfortable retirement.

Still, many people will say that while the U.S. economic system may generate a lot of inequality, it also generates much higher incomes than any alternative, so that everyone is better off. That was the moral Business Week tried to convey in its recent special issue with ''25 Ideas for a Changing World.'' One of those ideas was ''the rich get richer, and that's O.K.'' High incomes at the top, the conventional wisdom declares, are the result of a free-market system that provides huge incentives for performance. And the system delivers that performance, which means that wealth at the top doesn't come at the expense of the rest of us.

A skeptic might point out that the explosion in executive compensation seems at best loosely related to actual performance. Jack Welch was one of the 10 highest-paid executives in the United States in 2000, and you could argue that he earned it. But did Dennis Kozlowski of Tyco, or Gerald Levin of Time Warner, who were also in the top 10? A skeptic might also point out that even during the economic boom of the late 1990's, U.S. productivity growth was no better than it was during the great postwar expansion, which corresponds to the era when America was truly middle class and C.E.O.'s were modestly paid technocrats.

But can we produce any direct evidence about the effects of inequality? We can't rerun our own history and ask what would have happened if the social norms of middle-class America had continued to limit incomes at the top, and if government policy had leaned against rising inequality instead of reinforcing it, which is what actually happened. But we can compare ourselves with other advanced countries. And the results are somewhat surprising.

Many Americans assume that because we are the richest country in the world, with real G.D.P. per capita higher than that of other major advanced countries, Americans must be better off across the board -- that it's not just our rich who are richer than their counterparts abroad, but that the typical American family is much better off than the typical family elsewhere, and that even our poor are well off by foreign standards.

But it's not true. Let me use the example of Sweden, that great conservative bete noire.

A few months ago the conservative cyberpundit Glenn Reynolds made a splash when he pointed out that Sweden's G.D.P. per capita is roughly comparable with that of Mississippi -- see, those foolish believers in the welfare state have impoverished themselves! Presumably he assumed that this means that the typical Swede is as poor as the typical resident of Mississippi, and therefore much worse off than the typical American.

But life expectancy in Sweden is about three years higher than that of the U.S. Infant mortality is half the U.S. level, and less than a third the rate in Mississippi. Functional illiteracy is much less common than in the U.S.

How is this possible? One answer is that G.D.P. per capita is in some ways a misleading measure. Swedes take longer vacations than Americans, so they work fewer hours per year. That's a choice, not a failure of economic performance. Real G.D.P. per hour worked is 16 percent lower than in the United States, which makes Swedish productivity about the same as Canada's.

But the main point is that though Sweden may have lower average income than the United States, that's mainly because our rich are so much richer. The median Swedish family has a standard of living roughly comparable with that of the median U.S. family: wages are if anything higher in Sweden, and a higher tax burden is offset by public provision of health care and generally better public services. And as you move further down the income distribution, Swedish living standards are way ahead of those in the U.S. Swedish families with children that are at the 10th percentile -- poorer than 90 percent of the population -- have incomes 60 percent higher than their U.S. counterparts. And very few people in Sweden experience the deep poverty that is all too common in the United States. One measure: in 1994 only 6 percent of Swedes lived on less than $11 per day, compared with 14 percent in the U.S.

The moral of this comparison is that even if you think that America's high levels of inequality are the price of our high level of national income, it's not at all clear that this price is worth paying. The reason conservatives engage in bouts of Sweden-bashing is that they want to convince us that there is no tradeoff between economic efficiency and equity -- that if you try to take from the rich and give to the poor, you actually make everyone worse off. But the comparison between the U.S. and other advanced countries doesn't support this conclusion at all. Yes, we are the richest major nation. But because so much of our national income is concentrated in relatively few hands, large numbers of Americans are worse off economically than their counterparts in other advanced countries. And we might even offer a challenge from the other side: inequality in the United States has arguably reached levels where it is counterproductive. That is, you can make a case that our society would be richer if its richest members didn't get quite so much.

I could make this argument on historical grounds. The most impressive economic growth in U.S. history coincided with the middle-class interregnum, the post-World War II generation, when incomes were most evenly distributed. But let's focus on a specific case, the extraordinary pay packages of today's top executives. Are these good for the economy?

Until recently it was almost unchallenged conventional wisdom that, whatever else you might say, the new imperial C.E.O.'s had delivered results that dwarfed the expense of their compensation. But now that the stock bubble has burst, it has become increasingly clear that there was a price to those big pay packages, after all. In fact, the price paid by shareholders and society at large may have been many times larger than the amount actually paid to the executives.

It's easy to get boggled by the details of corporate scandal -- insider loans, stock options, special-purpose entities, mark-to-market, round-tripping. But there's a simple reason that the details are so complicated. All of these schemes were designed to benefit corporate insiders -- to inflate the pay of the C.E.O. and his inner circle. That is, they were all about the ''chaos of competitive avarice'' that, according to John Kenneth Galbraith, had been ruled out in the corporation of the 1960's. But while all restraint has vanished within the American corporation, the outside world -- including stockholders -- is still prudish, and open looting by executives is still not acceptable. So the looting has to be camouflaged, taking place through complicated schemes that can be rationalized to outsiders as clever corporate strategies.

Economists who study crime tell us that crime is inefficient -- that is, the costs of crime to the economy are much larger than the amount stolen. Crime, and the fear of crime, divert resources away from productive uses: criminals spend their time stealing rather than producing, and potential victims spend time and money trying to protect their property. Also, the things people do to avoid becoming victims -- like avoiding dangerous districts -- have a cost even if they succeed in averting an actual crime.

The same holds true of corporate malfeasance, whether or not it actually involves breaking the law. Executives who devote their time to creating innovative ways to divert shareholder money into their own pockets probably aren't running the real business very well (think Enron, WorldCom, Tyco, Global Crossing, Adelphia . . . ). Investments chosen because they create the illusion of profitability while insiders cash in their stock options are a waste of scarce resources. And if the supply of funds from lenders and shareholders dries up because of a lack of trust, the economy as a whole suffers. Just ask Indonesia.

The argument for a system in which some people get very rich has always been that the lure of wealth provides powerful incentives. But the question is, incentives to do what? As we learn more about what has actually been going on in corporate America, it's becoming less and less clear whether those incentives have actually made executives work on behalf of the rest of us.

V. Inequality and Politics

In September the Senate debated a proposed measure that would impose a one-time capital gains tax on Americans who renounce their citizenship in order to avoid paying U.S. taxes. Senator Phil Gramm was not pleased, declaring that the proposal was ''right out of Nazi Germany.'' Pretty strong language, but no stronger than the metaphor Daniel Mitchell of the Heritage Foundation used, in an op-ed article in The Washington Times, to describe a bill designed to prevent corporations from rechartering abroad for tax purposes: Mitchell described this legislation as the ''Dred Scott tax bill,'' referring to the infamous 1857 Supreme Court ruling that required free states to return escaped slaves.

Twenty years ago, would a prominent senator have likened those who want wealthy people to pay taxes to Nazis? Would a member of a think tank with close ties to the administration have drawn a parallel between corporate taxation and slavery? I don't think so. The remarks by Gramm and Mitchell, while stronger than usual, were indicators of two huge changes in American politics. One is the growing polarization of our politics -- our politicians are less and less inclined to offer even the appearance of moderation. The other is the growing tendency of policy and policy makers to cater to the interests of the wealthy. And I mean the wealthy, not the merely well-off: only someone with a net worth of at least several million dollars is likely to find it worthwhile to become a tax exile.

You don't need a political scientist to tell you that modern American politics is bitterly polarized. But wasn't it always thus? No, it wasn't. From World War II until the 1970's -- the same era during which income inequality was historically low -- political partisanship was much more muted than it is today. That's not just a subjective assessment. My Princeton political science colleagues Nolan McCarty and Howard Rosenthal, together with Keith Poole at the University of Houston, have done a statistical analysis showing that the voting behavior of a congressman is much better predicted by his party affiliation today than it was 25 years ago. In fact, the division between the parties is sharper now than it has been since the 1920's.

What are the parties divided about? The answer is simple: economics. McCarty, Rosenthal and Poole write that ''voting in Congress is highly ideological -- one-dimensional left/right, liberal versus conservative.'' It may sound simplistic to describe Democrats as the party that wants to tax the rich and help the poor, and Republicans as the party that wants to keep taxes and social spending as low as possible. And during the era of middle-class America that would indeed have been simplistic: politics wasn't defined by economic issues. But that was a different country; as McCarty, Rosenthal and Poole put it, ''If income and wealth are distributed in a fairly equitable way, little is to be gained for politicians to organize politics around nonexistent conflicts.'' Now the conflicts are real, and our politics is organized around them. In other words, the growing inequality of our incomes probably lies behind the growing divisiveness of our politics.

But the politics of rich and poor hasn't played out the way you might think. Since the incomes of America's wealthy have soared while ordinary families have seen at best small gains, you might have expected politicians to seek votes by proposing to soak the rich. In fact, however, the polarization of politics has occurred because the Republicans have moved to the right, not because the Democrats have moved to the left. And actual economic policy has moved steadily in favor of the wealthy. The major tax cuts of the past 25 years, the Reagan cuts in the 1980's and the recent Bush cuts, were both heavily tilted toward the very well off. (Despite obfuscations, it remains true that more than half the Bush tax cut will eventually go to the top 1 percent of families.) The major tax increase over that period, the increase in payroll taxes in the 1980's, fell most heavily on working-class families.

The most remarkable example of how politics has shifted in favor of the wealthy -- an example that helps us understand why economic policy has reinforced, not countered, the movement toward greater inequality -- is the drive to repeal the estate tax. The estate tax is, overwhelmingly, a tax on the wealthy. In 1999, only the top 2 percent of estates paid any tax at all, and half the estate tax was paid by only 3,300 estates, 0.16 percent of the total, with a minimum value of $5 million and an average value of $17 million. A quarter of the tax was paid by just 467 estates worth more than $20 million. Tales of family farms and businesses broken up to pay the estate tax are basically rural legends; hardly any real examples have been found, despite diligent searching.

You might have thought that a tax that falls on so few people yet yields a significant amount of revenue would be politically popular; you certainly wouldn't expect widespread opposition. Moreover, there has long been an argument that the estate tax promotes democratic values, precisely because it limits the ability of the wealthy to form dynasties. So why has there been a powerful political drive to repeal the estate tax, and why was such a repeal a centerpiece of the Bush tax cut?

There is an economic argument for repealing the estate tax, but it's hard to believe that many people take it seriously. More significant for members of Congress, surely, is the question of who would benefit from repeal: while those who will actually benefit from estate tax repeal are few in number, they have a lot of money and control even more (corporate C.E.O.'s can now count on leaving taxable estates behind). That is, they are the sort of people who command the attention of politicians in search of campaign funds.

But it's not just about campaign contributions: much of the general public has been convinced that the estate tax is a bad thing. If you try talking about the tax to a group of moderately prosperous retirees, you get some interesting reactions. They refer to it as the ''death tax''; many of them believe that their estates will face punitive taxation, even though most of them will pay little or nothing; they are convinced that small businesses and family farms bear the brunt of the tax.

These misconceptions don't arise by accident. They have, instead, been deliberately promoted. For example, a Heritage Foundation document titled ''Time to Repeal Federal Death Taxes: The Nightmare of the American Dream'' emphasizes stories that rarely, if ever, happen in real life: ''Small-business owners, particularly minority owners, suffer anxious moments wondering whether the businesses they hope to hand down to their children will be destroyed by the death tax bill, . . . Women whose children are grown struggle to find ways to re-enter the work force without upsetting the family's estate tax avoidance plan.'' And who finances the Heritage Foundation? Why, foundations created by wealthy families, of course.

The point is that it is no accident that strongly conservative views, views that militate against taxes on the rich, have spread even as the rich get richer compared with the rest of us: in addition to directly buying influence, money can be used to shape public perceptions. The liberal group People for the American Way's report on how conservative foundations have deployed vast sums to support think tanks, friendly media and other institutions that promote right-wing causes is titled ''Buying a Movement.''

Not to put too fine a point on it: as the rich get richer, they can buy a lot of things besides goods and services. Money buys political influence; used cleverly, it also buys intellectual influence. A result is that growing income disparities in the United States, far from leading to demands to soak the rich, have been accompanied by a growing movement to let them keep more of their earnings and to pass their wealth on to their children.

This obviously raises the possibility of a self-reinforcing process. As the gap between the rich and the rest of the population grows, economic policy increasingly caters to the interests of the elite, while public services for the population at large -- above all, public education -- are starved of resources. As policy increasingly favors the interests of the rich and neglects the interests of the general population, income disparities grow even wider.

VI. Plutocracy?

In 1924, the mansions of Long Island's North Shore were still in their full glory, as was the political power of the class that owned them. When Gov. Al Smith of New York proposed building a system of parks on Long Island, the mansion owners were bitterly opposed. One baron -- Horace Havemeyer, the ''sultan of sugar'' -- warned that North Shore towns would be ''overrun with rabble from the city.'' ''Rabble?'' Smith said. ''That's me you're talking about.'' In the end New Yorkers got their parks, but it was close: the interests of a few hundred wealthy families nearly prevailed over those of New York City's middle class.

America in the 1920's wasn't a feudal society. But it was a nation in which vast privilege -- often inherited privilege -- stood in contrast to vast misery. It was also a nation in which the government, more often than not, served the interests of the privileged and ignored the aspirations of ordinary people.

Those days are past -- or are they? Income inequality in America has now returned to the levels of the 1920's. Inherited wealth doesn't yet play a big part in our society, but given time -- and the repeal of the estate tax -- we will grow ourselves a hereditary elite just as set apart from the concerns of ordinary Americans as old Horace Havemeyer. And the new elite, like the old, will have enormous political power.

Kevin Phillips concludes his book ''Wealth and Democracy'' with a grim warning: ''Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name.'' It's a pretty extreme line, but we live in extreme times. Even if the forms of democracy remain, they may become meaningless. It's all too easy to see how we may become a country in which the big rewards are reserved for people with the right connections; in which ordinary people see little hope of advancement; in which political involvement seems pointless, because in the end the interests of the elite always get served.

Am I being too pessimistic? Even my liberal friends tell me not to worry, that our system has great resilience, that the center will hold. I hope they're right, but they may be looking in the rearview mirror. Our optimism about America, our belief that in the end our nation always finds its way, comes from the past -- a past in which we were a middle-class society. But that was another country.

[Gordon B]

Rolly, have you read any of the articles you've posted or are you just tallying the results of your google search for "new gilded age"?

[rollhead]

Estate Tax Pyramid Scheme
Robert B. Reich
June 06, 2006
Robert Reich is professor of public policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. He was secretary of labor in the Clinton administration.

Before your good senator pulls the plug on the estate tax—and keep an eye on him or her this week and next—consider this: the earnings of nearly everyone used to rise with rising productivity. That’s no longer true. Today’s workers are 24 percent more productive than they were five years ago but their median real earnings have barely budged.

What’s happened to all this extra value? A big chunk has gone to people earning over $1 million a year—mostly CEOs, investment bankers and hedge fund managers. This past year, 25 hedge fund managers each took home at least $130 million. Henry Paulson, our about-to-be Treasury Secretary, pocketed over $30 million. Average CEO pay back in 1966 was 60 times that of the typical American worker. Now it’s 400 times. Exxon’s former chairman just got a thoughtful retirement package of close to $400 million.

Wealth is even more lopsided than income. Henry Paulson’s net worth of more than $700 million doesn’t even earn him a place among Forbes richest 400 Americans. You have to have at least $900 million to get there. Most are billionaires.

What does this mean for the nation? Thirty years ago, the richest 1 percent owned less than a fifth of America’s wealth. Now, according to a recent report by the Fed Reserve Board, they own more than a third. Not since the days of the robber barons of the 19th century have we seen this much wealth concentrated in so few hands.
Super-rich couples can now pass on $4 million to their heirs tax-free. Anything over $4 million is taxed at a 45 percent rate. Why, exactly, is it so important to repeal the estate tax altogether? Repeal will cost the Treasury nearly a trillion dollars in its first 10 years—more than the entire shortfall in Social Security. That means more federal debt or higher taxes on the middle class.

Those who argue for repeal say the estate tax discourages entrepreneurs. What? Passing on $4 million tax free to your kids is not enough incentive?

Talk about discouraging entrepreneurship. Repeal the estate tax and within a few decades control over America’s productive assets will be in the hands of non-productive Americans who never lifted a finger in their lives except to speed-dial their financial advisors.

People who inherit great wealth just because they’re lucky enough to have super-rich parents don’t have any particular incentive to be entrepreneurial. They don’t have any particular incentive to do anything. Giving them control over the American economy is like giving control over a Boeing 777 to teenagers with joysticks.

According to a new report from United for a Fair Economy, 18 families worth a total of $185 billion have financed and coordinated the repeal campaign. They’ve underwritten the massive PR drive that fooled most Americans into thinking the estate tax was a "death" tax that would fall on them. They posed as small businesses and family farmers, saying their livelihoods would be threatened unless the tax were repealed. In fact it’s hard to find a small business or family farm with an estate valued at more than $4 million.

Most of these 18 families have been wealthy for decades. Only five of them include any of the people who first earned the family fortune. If they succeed in their repeal campaign, they’ll save a total of $71 billion on their tax bills. That’s a healthy return on their investment in politics. Maybe you call this entrepreneurship. I call it further proof of the danger of concentrated wealth.

Editor's Note: This piece originally aired on the public radio program Marketplace on June 7, 2006.

[rollhead]

The Politics of Unemployment and Uninsurance
The New Robber Barons
By PETER ROST

The U.S. Department of Labor claims we have an unemployment rate of 4.9% [1]. According to "the Economist, however, the true unemployment rate in the U.S. is over 8%, or 12.6 million Americans [2]. The difference is due to the fact that the U.S. Government doesn,t count people as unemployed after six months without a job [3].

I recently joined the ranks of our many unemployed citizens. The termination of my employment as a Vice President at Pfizer was subject to intense media interest [4], partly due to the fact that Pfizer notified the press before they informed me.

Contrary to press reports, however, I have received no severance payments and for the first time in my life I am eligible for unemployment benefits; $13,078 [5]. At this annual income level my family of four would actually fall below the federal poverty level [6]; quite a difference from a year ago when my salary was over half a million [7].

I,m also uninsured for the first time in my life and I have to pay the full price for drugs, just like 67 million other uninsured Americans [8]. Contrary to many others, however, I do have a choice. In accordance with federal COBRA law, I was offered the opportunity to continue my health care coverage for 18 months. There was only one hitch; I had to pay $15,269 per year to receive this benefit [9]. I decided that with an income of $13,078 that didn,t make sense.

Clearly the system we have today isn,t just broke. The system is utterly and completely sick and our weakest citizens are paying the price, every day. And while I have belatedly been forced to share some of the experiences of our poor, uninsured, and unemployed, my situation doesn,t even start to compare with people with no resources, no voice, nowhere to go and no one who listens to them. For those citizens we have something that,s called the Government; a government that is supposed to look out for the people who can,t look out for themselves, but instead focuses on "pay to play money.

Today,s system is built on greed. Greed is defined as an excessive desire to acquire or possess more than someone needs or deserves. Greed is not a corporate executive who builds an organization such as Microsoft, creates a lot of jobs, and happens to get rich. Greed is to become CEO for a drug company such as Pfizer, be responsible for a stock price drop of 40% over his five year tenure, twice as much as the AMEX Pharmaceutical Index [10], secure a $100 million retirement package [11] while firing 16,385 Pharmacia and Pfizer employees [12], and get a 72% pay increase to $16.6 million as his reward [13].

According to the New York Times average worker pay has remained flat since 1990 at around $27,000, after adjusting for inflation, while CEO compensation has quadrupled, from $2.82 million to $11.8 million [14]. Our CEO,s are in a position in which they can basically use public companies as personal piggy banks. And this is perfectly legal as long as they get someone else to sign their check. Meanwhile, the federal minimum wage has remained at $5.15 an hour since September 1, 1997. In fact, after adjusting for inflation, the value of the minimum wage is at its second lowest level since 1955 [15].

At the same time, the pharmaceutical industry spends over $100 million on lobbying activities to stop lower drug prices, according to the Center for Public Integrity. There are 1,274 registered pharmaceutical lobbyists in Washington, D.C. and during the 2004 election cycle, the drug industry contributed $1 million to President Bush [16]. For an industry that makes $500 billion on a global basis [17], spending one million on a president or $100 million on lobbying is pocket change.

This money was well spent. It stopped legalized import of cheaper drugs and instead we got a new Medicare drug program. This $720 billion law includes $139 billion in profits to drug manufactures and $46 billion in subsidies to HMOs and private insurance plans [18]. The program has been such a disaster for our poor that at least twenty-four states have enacted emergency measures to ensure access to medications in the last couple of weeks [19]. That,s what a million dollars buys in Washington.

So how could this happen? The answer is simple. The American democracy has been stolen by our new class of Robber Barons"the CEO,s of our big corporations. A political system dependent on charity from rich men in hand-tailored suits with $100 million retirement packages is no democracy. It is a kleptocracy [20]. It is not what our founding fathers envisioned.

But we have the power to change this; to free our corporations from sticky-fingered CEO,s, to free our elected representatives from "pay to play money and to free our people from all these tyrants. We have the power to be free, at last.

Peter Rost, M.D., is a former Vice President for the drug company Pfizer. He first became well known in 2004 when he started to speak out in favor of reimportation of drugs and lower drug price. His e-mail is rostpeter@hotmail.com.

[walto]

I confess to not having gotten through all the articles posted here yet, but I think the new gilded age theory is right. As I mentioned to the folks I met in Washington, what struck me about the main contents of the National Assoc. of Insurance Commissioners meeting I went to this year compared to those of a decade or more ago was the extent to which distributional and discrimination issues are no longer of much interest. (Years ago they were fought about quite loudly.) Now, it's all end-of-the-world stuff. Partly, of course, this is a function of increased use of catastrophe models. But I think it also reflects a reduced concern for the poor and middle classes and a heightened desire to protect large piles of cash and the management teams that are their main beneficiaries. I'm not certain of there being a clear connection between this change of focus of insurance regulation and "the new gilded age" but I've got an intuition....

[rollhead]

Originally Posted by walto

I confess to not having gotten through all the articles posted here yet, but I think the new gilded age theory is right. As I mentioned to the folks I met in Washington, what struck me about the main contents of the National Assoc. of Insurance Commissioners meeting I went to this year compared to those of a decade or more ago was the extent to which distributional and discrimination issues are no longer of much interest. (Years ago they were fought about quite loudly.) Now, it's all end-of-the-world stuff. Partly, of course, this is a function of increased use of catastrophe models. But I think it also reflects a reduced concern for the poor and middle classes and a heightened desire to protect large piles of cash and the management teams that are their main beneficiaries. I'm not certain of there being a clear connection between this change of focus of insurance regulation and "the new gilded age" but I've got an intuition....

For the record, I don't think Stiglitz actually used the term "new gilded age," but that was the interpretation of what he said by the headline writers at Salon.

[rollhead]

Taming Predatory Capitalism

JAMES K. GALBRAITH

In 1899 Thorstein Veblen described predation as a phase in the evolution of culture, "attained only when the predatory attitude has become the habitual and accredited spiritual attitude...when the fight has become the dominant note in the current theory of life." After an entire century's struggle to escape from this phase, we've suffered a relapse. The predators are everywhere unleashed; and the institutions built to contain them, from the United Nations to the AFL-CIO to the SEC, are everywhere under siege. Predation has again become the defining feature of economic life. Our first problem is to grasp this reality in full.

Postwar prosperity was built on a vast cut in the cost of security and the achievement of peace in Europe and much of Asia. The American role in the cold war system was to provide security; for this the dollar's role as anchor of the world trading system was our reward. But now, with Iraq, we are seen worldwide as the leading predator state, promoting war as a solution rather than as the ultimate economic and human horror. For this, many would like to see our privileges revoked.

Corporate and financial fraud and political corruption form the second great domain of predatory capitalism. DeLay, Frist and Abramoff are the names in the news, but the tone is set by the leadership--Cheney of Halliburton and Bush of Harken Energy--a large predator and a small scavenger, specialists in cronyism and expert in nothing else. When predation becomes the dominant business and political form, the foundation of capitalism crumbles. Markets lose legitimacy, investors fly to safety in bonds, and authentic innovation and shared growth both become unattainable. The solution must be not just a change of parties but a new political class, including a new media not under corrupt control.

Then there is the predatory attack on unions and labor, in which many economists are complicit. This is far advanced in America and most visible today in Europe, as reflected by the doctrine of flexible labor markets, which claims that the conquest of unemployment requires cutting the pay of the working poor. But there is no history of unemployment ever being conquered this way--certainly not in the United States of the 1940s, 1960s or 1990s. Modern Europe also affords counterexamples of equalizing growth, from Norway and Denmark to recent gains in Spain, as well as object lessons, most recently in France, of the catastrophe of designed exclusion.

The way forward is a program for growth and justice built on the needs of the working population and the middle class. To begin with, in the United States there must be a powerful demolition of the old political order: We need elections where all votes are cast and counted. The campaign against voter repression is the essential civil rights struggle of our time, even though most progressives don't seem to realize it yet. Prevailing will require fundamental reform such as the introduction of nationwide vote-by-mail (the Oregon system). Without that, and also many relentless prosecutions, nothing else will be achieved.

The economic commitment, in turn, must be to full employment here, to egalitarian growth in Europe and Japan, and to a worldwide development strategy favoring civil infrastructure and the poor. Public capital investment, stronger unions and a high minimum wage should frame the domestic agenda. Overseas, crackdowns on tax havens and the arms trade, a stabilizing financial system and an end to the debt peonage of poor countries should be among the priorities of a new structure.

The truths are that egalitarian growth is efficient, that speculation must be regulated, that crime starts at the top and that peace is the primary public good. These truths are poison to predators and are the reason predators have fostered and subsidized an entire cynical intellectual movement devoted to "free" markets made up of a class of professor-courtiers now everywhere in view. Taming predatory capitalism could start with breaking this econo-corporate analytical axis, and reviving the concept of countervailing power, first formulated by John Kenneth Galbraith in 1952.

James K. Galbraith, chair of the board of Economists for Peace and Security, teaches at the University of Texas and is senior scholar with the Levy Economics Institute.

[Gordon B]

Originally Posted by walto

[B][FONT=Courier New]I confess to not having gotten through all the articles posted here yet

Rollie, let's here your views on DeLong, Krugman, Stiglitz,Galbreath, etc.

Which pieces are the strongest and weakest and why?

Is there another point of view that doesn't think we are in a new gilded age and if so, what arguments are made to the contrary? Maybe you need Willy to get into an ideological pasting war with you.

[rollhead]

Originally Posted by Gordon B

Rollie, let's here your views on DeLong, Krugman, Stiglitz,Galbreath, etc.

Which pieces are the strongest and weakest and why?

Is there another point of view that doesn't think we are in a new gilded age and if so, what arguments are made to the contrary? Maybe you need Willy to get into an ideological pasting war with you.

Gordon, it is manifestly clear that we are in a second gilded age, but crackpots such as yourself will continue denying reality. However, since you put so much stock in what "economists" have to say, I thought I would post some of the things that honest economists are saying.

I realize you only accept the credibility of economists who suggest that it is a good idea to destroy the middle class and replace the ideal of a commonwealth with a rightwing plutocracy and neofeudalism.

You are incapable of marshaling any facts that might dispute this notion, other than trotting out silly attacks on the working class.

And your backhanded way of attacking me for "pasting" articles is hypocricial in the face of your endless postings of Greg Mankiw rightwing nonsense --

But I know that doesn't carry any water with you because you think it is good if all middle class jobs are outsourced.

You are, indeed, a vile human being.

[Al in NYC]

What took them so long? The emergence of an unfettered capitalism, free of the social and economic reforms that took place from the 1890s to the 1970s, has been THE driving force of every Republican administration since Reagan (and Clinton did little or nothing to blunt it). This would allow for a large scale recentralization of wealth in the hands of their prime financial supporters (and the growing impovrishment of much of their opposition). In other words, a drive to bring back the era of the robber barons, and the era of cheap pliable labor, and a frightened and cowed populace.

The fact that this gross negative redistribution of wealth, the giving away of the public patrimony, and removal of the hard-won social safety net was justified by an ideology masquerading as indisputable "facts" seems to have served to fool (or at least make overly cautious) many in the scholarly community until this moment -- when the late 19th century robber baron nature of the society and economy these policies have begotten has become undeniably and abundantly clear.

Still Rollie, you have to watch who you quote. Not all economists are equal in the eyes of the "free" market right. And some, like Galbraith and Krugman, no matter their accomplishments, are widely perceived as apostates and class traitors for daring to challenge the orthodoxy of the neo-classical "greed is good, more greed is better" creed.

[Gordon B]

Waggoner, if you earn your IQ * 1000 , then you are financially poor, even in Chad.
I know you are just a troll, an idiotic one at that so go ahead come back with you best insult, I don't care a twit what you say.

[rollhead]

U.S. Losing Its Middle-Class Neighborhoods
From 1970 to 2000, Metro Areas Showed Widening Gap Between Rich, Poor Sections

By Blaine Harden
Washington Post Staff Writer
Thursday, June 22, 2006; A03

INDIANAPOLIS -- Middle-class neighborhoods, long regarded as incubators for the American dream, are losing ground in cities across the country, shrinking at more than twice the rate of the middle class itself.

In their place, poor and rich neighborhoods are both on the rise, as cities and suburbs have become increasingly segregated by income, according to a Brookings Institution study released Thursday. It found that as a share of all urban and suburban neighborhoods, middle-income neighborhoods in the nation's 100 largest metro areas have declined from 58 percent in 1970 to 41 percent in 2000.

Widening income inequality in the United States has been well documented in recent years, but the Brookings analysis of census data uncovered a much more accelerated decline in communities that house the middle class. It far outpaced the decline of seven percentage points between 1970 and 2000 in the proportion of middle-income families living in and around cities.

Middle-income neighborhoods -- where families earn 80 to 120 percent of the local median income -- have plunged by more than 20 percent as a share of all neighborhoods in Baltimore, Chicago, Los Angeles and Philadelphia. They are down 10 percent in the Washington area.

It's happening, too, in this prosperous, mostly white middle-income Midwestern city where unemployment is low and a vibrant downtown has been preserved. As poor and rich neighborhoods proliferate, the share of middle-income neighborhoods in greater Indianapolis has dropped by 21 percent since 1970.

"No city in America has gotten more integrated by income in the last 30 years," said Alan Berube, an urban demographer at Brookings who worked on the report.

"It means that if you are not living in one of the well-off areas, you are not going to have access to the same amenities -- good schools and safe environment -- that you could find 30 years ago," he said.

The decline of middle-income neighborhoods may also be a consequence of increased economic opportunity and residential mobility, especially for upper-income minorities, said Joel Kotkin, an urban historian and senior fellow at the New America Foundation.

"This is about upward mobility and class. Until the 1970s, middle-class blacks and other minorities often had little choice about where they could live," said Kotkin, the author of "The City: A Global History." He added: "They usually had to live close to lower-income people of their own race. Now, if they can afford it, they can move to higher-income neighborhoods. Dollars trump race. Many choose not to live around poor people."

The Brookings study says that much more research is needed to better understand why middle-income neighborhoods are vanishing faster than middle-income families. But it speculates that a sorting-out process is underway in the nation's suburbs and inner cities, with many previously middle-income neighborhoods now tipping rich or poor.

Several urban scholars who had no role in the Brookings study said that its findings are consistent with what they have seen in cities from Los Angeles to Cleveland, as the middle class hollows out and as an economic chasm widens between rich and poor neighborhoods.

"We are increasingly being bifurcated on an economic basis," said Paul Ong, a professor of public affairs at the University of California at Los Angeles. "It has taken a big chunk out of the middle."

In Los Angeles -- the most hollowed-out metropolitan area in the country over the past three decades -- the share of poor neighborhoods is up 10 percent, rich neighborhoods are up 14 percent and middle-income areas are down by 24 percent.

The Brookings study says that increased residential segregation by income can remove a fundamental rung from the nation's ladder for social mobility: moderate-income neighborhoods with decent schools, nearby jobs, low crime and reliable services.

Alice McCray used to live in just that kind of neighborhood, a postwar suburb on the far east side of Indianapolis. She has not moved since 1971. It's the middle-class character of her neighborhood that has moved away and left her three-bedroom ranch house behind. With higher-income residents gone, McCray's neighborhood has tipped poor in the past decade. A third of the incoming population lives below the poverty line. Crime is up, and schools have deteriorated.

"I had nine block captains on our neighborhood watch group, and seven of them have moved, said McCray, 61, who owns a cleaning business. "They said they were not going to put up with this."

For people who do not want to put up with aging, troubled neighborhoods and have the means to do something about it, escape is remarkably easy -- in Indianapolis and across much of the country.

The housing industry in the Midwest and the Northeast routinely floods local markets with new, ever-larger houses. In greater Indianapolis, more than 27,500 houses were constructed between 2000 and 2004, even though the population grew by only 3,000.

In the process, older houses and many older neighborhoods -- such as McCray's -- have become as disposable as used cars.

Such overbuilding is rampant across the Midwest and Northeast, where the number of new houses -- almost always at the edge of metro areas -- swamped the number of new households by more than 30 percent between 1980 and 2000, according to a study co-written by Thomas Bier, executive in residence at the Center for Housing Research and Policy at Cleveland State University.

"As upper-income Americans are drawn to the new houses, neighborhoods become more homogenous," he said. Echoing the Brookings study, he said: "The zoning is such that it prevents anything other than a certain income range from living there. It is our latest method of discrimination."

In a pattern that is the mirror opposite of what is happening in the Midwest and Northeast, there is a chronic undersupply of housing in many cities on the West Coast. But it, too, has contributed to a decline of middle-income neighborhoods, said Berube, the Brookings demographer.

He said rapid population growth in cities such as Los Angeles and Seattle combines with rigid geographic and legal restraints on construction to limit housing supply. In Los Angeles, for example, the population grew by 11 percent between 1990 and 2002, but the number of housing units increased by just 5 percent.

That has pushed up the price of housing in mixed-income neighborhoods. Gentrification often pushes the poor away to less-desirable suburbs.

In Indianapolis, it is an abundance of housing that lures the middle class out of established neighborhoods.

Until last month, Jim and Lynn Russell lived with their 1-year-old son, Adam, in a middle-income neighborhood called Irvington on the city's near east side. The area of restored historic houses is 20 minutes by car from downtown, where they both work as bank executives.

But the Russells, who have another baby due in the fall, were worried about mediocre test scores at nearby public schools. They were also concerned about safety. A mass killing -- seven people shot in their home -- took place this month not far from their former house.

"Things like that don't happen in Carmel," said Lynn Russell, 31, who grew up in Indianapolis, as did her husband.

Carmel, where the Russells just bought a house, is not a close-in suburb. About 45 minutes north of downtown at rush hour, it is one of the fastest-growing communities in greater Indianapolis. Schools are among the best in Indiana, and housing is abundant and, by national standards, extremely affordable for professional couples. The Russells bought their four-bedroom house on half an acre for $230,000.

Urban planners complain that exurbs such as Carmel are bleeding cities of the middle class. But Jim Russell said he and his wife have made "the logical choice" by moving to a upper-income neighborhood that is safe, comfortable and better for their growing family.

© 2006 The Washington Post Company

[rollhead]

I finished both my BA and MA with the help of the GI bill, which is probably the most successful economic development initiative in U.S. history.

It is exactly the kind of program that the rightwing would never let see the light of day today.

from Writer's Almanac:

It was on this day in 1944 that President Franklin D. Roosevelt signed into law the GI Bill of Rights. It was one of the most important and influential pieces of legislation ever signed by an American president, but the newspapers barely covered the story at the time. They were too busy reporting on the Allied invasion of Europe.

The law was passed in part because of the experience of veterans of the First World War. Many of them had lost their jobs during the Great Depression and became homeless. They had been promised a veteran's bonus when they reached the age of retirement, but many worried they'd never live that long, since they were sleeping under bridges and starving on the street. A group of veterans went to Washington, D.C., to demand their bonuses early, and they had to be driven out of the city with tanks and tear gas.

Legislators in Congress didn't want that to happen again, especially since there would be so many veterans coming home from World War II. Economists at the time were predicting a post-war depression, and politicians were terrified of the idea of nine million unemployed former soldiers wandering the country. The first version of the GI Bill just guaranteed unemployment benefits for a year. A congressional committee threw in the idea that veterans should get money to go to college if they wanted to.

The presidents of many of the most prestigious universities around the country thought the GI Bill was a terrible idea. They argued that flooding the universities with veterans who might not have the same level of education as traditional college students would ruin the whole university system. Other critics said that the GI Bill would encourage laziness, helping veterans avoid real jobs. But the Congress and the president went ahead and passed the GI Bill anyway.

Even the supporters of the bill didn't think very many GIs would really want to go to college. In fact, about a million veterans applied for the money within the first year after the war, and ultimately 2.2 million veterans used the money to obtain higher education, many of them becoming the first members of their families to receive a college diploma. Before the war, about 10 percent of Americans attended college. After the war, that figure rose to about 50 percent.

The surge in enrollment was difficult for many college campuses. New students set up Quonset huts and surplus barracks on campus lawns. A college in Ohio set up a dormitory in a Coast Guard boat on the Muskingum River. Stanford converted a military hospital into a set of apartments.

And contrary to most expectations, the grade-point averages at most colleges went up with the influx of veterans, and dropout rates went way down. Professors at the time said that the veterans were the most serious and disciplined students they'd ever seen. The cost to taxpayers of the GI Bill was about 5.5 billion dollars, but the result was 450,000 engineers, 240,000 accountants, 238,000 teachers, 91,000 scientists, 67,000 doctors, 22,000 dentists, 17,000 writers and editors, and thousands of other professionals. It helped spur one of the greatest economic booms in American history.

[rollhead]

Originally Posted by Al in NYC

What took them so long? The emergence of an unfettered capitalism, free of the social and economic reforms that took place from the 1890s to the 1970s, has been THE driving force of every Republican administration since Reagan (and Clinton did little or nothing to blunt it). This would allow for a large scale recentralization of wealth in the hands of their prime financial supporters (and the growing impovrishment of much of their opposition). In other words, a drive to bring back the era of the robber barons, and the era of cheap pliable labor, and a frightened and cowed populace.

The fact that this gross negative redistribution of wealth, the giving away of the public patrimony, and removal of the hard-won social safety net was justified by an ideology masquerading as indisputable "facts" seems to have served to fool (or at least make overly cautious) many in the scholarly community until this moment -- when the late 19th century robber baron nature of the society and economy these policies have begotten has become undeniably and abundantly clear.

Still Rollie, you have to watch who you quote. Not all economists are equal in the eyes of the "free" market right. And some, like Galbraith and Krugman, no matter their accomplishments, are widely perceived as apostates and class traitors for daring to challenge the orthodoxy of the neo-classical "greed is good, more greed is better" creed.

Eloquent!

[rollhead]

http://www.techsunite.org/news/displ...D_Content=5060

[walto]

Debating the spoiled-brat tax

By Ellen Goodman | June 16, 2006

NOW let us praise Paris Hilton.
This is not a phrase I ever expected to fall from my lips or my laptop. The high school dropout and celebutante is the heiress whom America loves to ridicule. Nevertheless, I raise a glass to Paris, the young and the spoiled, the rich and rhymes-with-rich, after the near-death experience of the estate tax.

Paris may yet become the unwitting icon who pulls us from the brink of policy madness.
Last week, the Senate almost permanently eliminated the inheritance tax and the billions it raises every year. Now Republican leaders have vowed to bring the fight against this tax back to the Senate floor and onto the campaign trail.
So while we are in this brief intermission, let us take a moment to see how the debate plays out against two of the most powerful, ongoing narratives in our country: the Self-Made American and the Spoiled Brat.
Remember when eliminating the estate tax first got on the conservative dance card? The choreographers labeled it the ``death tax." According to this spin, the long arm of the government reached into the grave in order to snatch dollars, family farms, and small businesses.
This was only gradually and belatedly countered by the reality that it was really the Waltons, Marses, Campbells, and other family oligarchs behind this policy. There is a growing, if still vague, recognition that this isn't a tax on the dead but on their heirs whose only heavy lifting may be carrying their parents' DNA.
Two Yale professors first suggested that if the estate tax is labeled the death tax by its opponents, the attempt to get rid of it should be called the ``Paris Hilton Tax Relief Act." Since then, we've had ads with Paris look-alikes and tag lines saying: ``The last thing a rich heiress needs is a $1 trillion raise in her allowance."
So here we are. The central myth of the America the Beautiful Meritocracy is that we can all pick ourselves up by our bootstraps, go from rags to riches, garage to Googledom. It's long been noted that Americans aren't jealous of the rich because we all hope to become rich. We may oppose estate taxes on the very, very, very wealthy because we dream of leaving that sort of wealth to our own kids.
On the other hand, Americans have long regarded heirs and heiresses with envy and scorn. Yes, the cream may rise to the top of the Fortune 500 list, but money easily curdles their kids into spoiled brats.
Chalk it up to the growing gap between the rich and the poor, or the class structure we're not supposed to talk about, but there have been an awful lot of cultural entries into the spoiled brat genre. We've had a parade of movies and MTV series and novels from ``My Super Sweet 16" to ``Laguna Beach" to ``Keeping Up with the Steins." That doesn't even include the ongoing docudrama of Paris, the perfume, the sex tape, the book, and now the song.
Paris may be little more than every mogul's worst nightmare. Parents who do well often have kids who do good. But millionaires also worry that their kids feel indolently entitled. Imagine the conversation that middle-class parents have about allowances -- ``money doesn't grow on trees, you know" -- in homes where money drops like leaves from the family arboretum.
Andrew Carnegie famously said, ``I would as soon leave to my son a curse as the almighty dollar." He then added, ``It is not the welfare of the children, but family pride, which inspires these enormous legacies." This brings us back to the Self-Made American and the Spoiled Brat, to death and Paris and the estate tax.
The Death Tax? In 2009, only estates worth more than $3.5 million (or $7 million for a couple) would be taxed. That's three out of every 1,000 estates. After exemptions and deductions, the effective tax rate on average is estimated to be 17 percent. Why exactly should the money handed down to super-rich heirs be tax-free while the money earned by your children be taxable income?
The Paris Hilton Tax Relief Act? Billionaire Warren Buffett has said that the right inheritance for children is ``enough money so that they feel they could do anything but not so much that they could do nothing." Paris, already a trust-fund baby, is enterprising enough to make money off of being an heiress. But she's due to inherit a chunk of the hotel fortune worth well over $1 billion. If we retain an estate tax, she might have to scrimp by on less than her estimated share of about $50 million.
Ah, poor little rich icon. No wonder she stars in ``The Simple Life."
Ellen Goodman's e-mail address is ellengoodman@globe.com.
© Copyright 2006 Globe Newspaper Company.

[rollhead]

the problem is that in the eyes of many Americans there is little difference between the Spoild Brat, the latest lottery winner and the self-made American.

In fact, if -- using Clinton's infamous words -- you "work hard, and play by the rules," you are more likely -- under the Republicans -- to end up on the short end of the stick.

just one example: how many working Americans aren't covered by health insurance?

Yet we have Republican 'economists" who suggest if Americans aren't starving to death like displaced Sudanese, everyone should be grateful.

[walto]

"The Conservative, who has had any idea of the meaning of the name which he carries, wishes, I suppose, to maintain the differences and the distances which separate the highly placed from their lower brethren. He thinks that God has divided the world as he finds it divided, and that he may best do his duty by making the inferior man happy and contented in his position, teaching him that the place which he holds is his by God's ordinance...."

"Equality would be a heaven, if we could attain it. How can we, to whom so much has been given, dare to think otherwise? How can you look at the bowed back and bent legs and abject face of that poor ploughman, who, winter and summer, has to drag his rheumatic limbs to his work, while you go a-hunting or sit in pride of place among the foremost few of your country, and say that it is all as it ought to be? You are a Liberal because you know that it is not all as it ought to be...."

Anthony Trollope, The Prime Minister

[Gary Sisco]

Actually, the Gilded Age was a much more socially-mobile society than today's. For decades, social mobility in the US has been on the downslide, class inheritance for life on the up. In the Gilded Age, this wasn't so to any such extent as today.

[rollhead]

August 28, 2006
Real Wages Fail to Match a Rise in Productivity
By STEVEN GREENHOUSE and DAVID LEONHARDT
With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.

That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years.

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data.

At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising.

In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.”

Political analysts are divided over how much the wage trends will help Democrats this fall in their effort to take control of the House and, in a bigger stretch, the Senate. Some see parallels to watershed political years like 1980, 1992 and 1994, when wage growth fell behind inflation, party alignments shifted and dozens of incumbents were thrown out of office.

“It’s a dangerous time for any party to have control of the federal government — the presidency, the Senate and the House,” said Charles Cook, who publishes a nonpartisan political newsletter. “It all feeds into ‘it’s a time for a change’ sentiment. It’s a highly combustible mixture.”

But others say that war in Iraq and terrorism, not the economy, will dominate the campaign and that Democrats have yet to offer an economic vision that appeals to voters.

“National economic policies are more clearly in focus in presidential campaigns,” said Richard T. Curtin, director of the University of Michigan’s consumer surveys. “When you’re electing your local House members, you don’t debate that on those issues as much.”

Moreover, polls show that Americans are less dissatisfied with the economy than they were in the early 1980’s or early 90’s. Rising house and stock values have lifted the net worth of many families over the last few years, and interest rates remain fairly low.

But polls show that Americans disapprove of President Bush’s handling of the economy by wide margins and that anxiety about the future is growing. Earlier this month, the University of Michigan reported that consumer confidence had fallen sharply in recent months, with people’s expectations for the future now as downbeat as they were in 1992 and 1993, when the job market had not yet recovered from a recession.

“Some people who aren’t partisans say, ‘Yes, the economy’s pretty good, so why are people so agitated and anxious?’ ” said Frank Luntz, a Republican campaign consultant. “The answer is they don’t feel it in their weekly paychecks.”

But Mr. Luntz predicted that the economic mood would not do significant damage to Republicans this fall because voters blamed corporate America, not the government, for their problems.

Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration, layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power.

Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages.

Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks. In the first quarter of 2006, wages and salaries represented 45 percent of gross domestic product, down from almost 50 percent in the first quarter of 2001 and a record 53.6 percent in the first quarter of 1970, according to the Commerce Department. Each percentage point now equals about $132 billion.

Total employee compensation — wages plus benefits — has fared a little better. Its share was briefly lower than its current level of 56.1 percent in the mid-1990’s and otherwise has not been so low since 1966.

Over the last year, the value of employee benefits has risen only 3.4 percent, while inflation has exceeded 4 percent, according to the Labor Department.

In Europe and Japan, the profit share of economic output is also at or near record levels, noted Larry Hatheway, chief economist for UBS Investment Bank, who said that this highlighted the pressures of globalization on wages. Many Americans, be they apparel workers or software programmers, are facing more comptition from China and India.

In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months.

For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together, increasing rapidly through the 1950’s and 60’s and far more slowly in the 1970’s and 80’s.

But in recent years, the productivity gains have continued while the pay increases have not kept up. Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.

“If I had to sum it up,” said Jared Bernstein, a senior economist at the institute, “it comes down to bargaining power and the lack of ability of many in the work force to claim their fair share of growth.”

Nominal wages have accelerated in the last year, but the spike in oil costs has eaten up the gains. Now the job market appears to be weakening, after a protracted series of interest-rate increases by the Federal Reserve.

Unless these trends reverse, the current expansion may lack even an extended period of modest wage growth like one that occurred in the mid-1980’s.

The most recent recession ended in late 2001. Hourly wages continued to rise in 2002 and peaked in early 2003, largely on the lingering strength of the 1990’s boom.

Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy. But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”

In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.

With the midterm campaign expected to heat up after Labor Day, Democrats are saying that they will help workers by making health care more affordable and lifting the minimum wage. Democrats have criticized Republicans for passing tax cuts mainly benefiting high-income families at a time when most families are failing to keep up.

Republicans counter that the tax cuts passed during Mr. Bush’s first term helped lifted the economy out of recession. Unless the cuts are extended, a move many Democrats oppose, the economy will suffer, and so will wages, Republicans say.

But in a sign that Republicans may be growing concerned about the public’s mood, the new Treasury secretary, Henry M. Paulson Jr., adopted a somewhat different tone from Mr. Bush in his first major speech, delivered early this month.

“Many aren’t seeing significant increases in their take-home pay,” Mr. Paulson said. “Their increases in wages are being eaten up by high energy prices and rising health care costs, among others.”

At the same time, he said that the Bush administration was not responsible for the situation, pointing out that inequality had been increasing for many years. “It is neither fair nor useful,” Mr. Paulson said, “to blame any political party.”

[rollhead]

August 30, 2006
New York Times Editorial
Downward Mobility
If you’re still harboring the notion that the economy is “good,” prepare to be disabused.

Even the best number from yesterday’s Census Bureau report for 2005 is bad news for most Americans. It shows that median income rose 1.1 percent last year, to $46,326, the first increase since it peaked in 1999. But the entire increase is attributable to the 23 million households headed by someone over age 65. So the gain is likely from investment income and Social Security, not wages and salaries.

For the other 91 million households, the median dropped, by half a percent, or $275. Incomes for the under-65 crowd were hurt by a decline in wages and salaries among full-time working men for the second year in a row, and among full-time working women for the third straight year. In all, median income for the under-65 group was $2,000 lower in 2005 than in 2001, when the last recession bottomed out.

Despite the Bush-era expansion, the number of Americans living in poverty in 2005 — 37 million — was the same as in 2004. This is the first time the number has not risen since 2000. But the share of the population now in poverty — 12.6 percent — is still higher than at the trough of the last recession, when it was 11.7 percent. And among the poor, 43 percent were living below half the poverty line in 2005 — $7,800 for a family of three. That’s the highest percentage of people in “deep poverty” since the government started keeping track of those numbers in 1975.

As for the uninsured, their ranks grew in 2005 by 1.3 million people, to a record 46.6 million, or 15.9 percent. That’s also worse than the recession year 2001, reflecting the rising costs of health coverage and a dearth of initiatives to help families and companies cope with the burden. For the first time since 1998, the percentage of uninsured children increased in 2005.

The Census findings are yet another indication that growth alone is not the answer to the economic and social ills of poverty, income inequality and lack of insurance. Economic growth was strong in 2005, and productivity growth was impressive. What have been missing are government policies that help to ensure that the benefits of growth are broadly shared — like strong support for public education, a progressive income tax, affordable health care, a higher minimum wage and other labor protections.

President Bush is unlikely to push for those changes, wed as he is to tax cuts that mainly benefit the wealthy. But the economic agenda for the next president couldn’t be clearer.

[walto]

As I've said elsewhere, it's a great time to be a Dem. speechwriter. Like shooting ducks in a barrel.

[Gordon B]

Originally Posted by walto

As I've said elsewhere, it's a great time to be a Dem. speechwriter. Like shooting ducks in a barrel.

I don't know about that. There's been a fascinating exchange by brilliant economists in the blogs discussing the increase in the inequality of wealth in the U.S. Links can be found from either DeLong's or Mankiw's websites. I've read pieces by 6-8 economists. It's a complicated question. The lightening rod for the discussion is Krugman's recent column on the subject.

DeLong is stridently anti-Bush but he is writing for smart people of all persuasions unlike Krugman, who's writing for NYT readers. He won't pull punches when he thinks his friend is wrong.

[Brian Olewnick]

Rollie, I remain confused by one thing. The Left regularly castigates the US for owning too high a portion of the world's wealth, for creating a vastly unequal global playing field, for gorging ourselves everything from food to oil to high tech, yes? (btw, I'm not necessarily arguing with this). So why are you upset about trends like those enumerated in the editorial you clipped from the NYT? Aren't all these good things? Shouldn't you be rooting for the US economy to, however slowly, come more in line with the rest of the world? I thought the whole point is that we have too much. Even if the dollars lost are evaporated away rather than redistributed, the net result is a more level playing field. Not sure why you aren't praising Bush's progressive policies (if indeed his policies are entirely responsible, which I doubt) as they're effecting the sort of results, at least in small part, that the Left finds desirable.

[walto]

Rollie's an America First guy. The world is not his village....

[walto]

Quote:
Originally Posted by walto
As I've said elsewhere, it's a great time to be a Dem. speechwriter. Like shooting ducks in a barrel.

Originally Posted by gordon

I don't know about that. There's been a fascinating exchange by brilliant economists in the blogs discussing the increase in the inequality of wealth in the U.S. Links can be found from either DeLong's or Mankiw's websites. I've read pieces by 6-8 economists. It's a complicated question.

I don't think speechwriters are, or need to be, terribly concerned about any such complexities.

[rollhead]

Originally Posted by Brian Olewnick

Rollie, I remain confused by one thing. The Left regularly castigates the US for owning too high a portion of the world's wealth, for creating a vastly unequal global playing field, for gorging ourselves everything from food to oil to high tech, yes? (btw, I'm not necessarily arguing with this). So why are you upset about trends like those enumerated in the editorial you clipped from the NYT? Aren't all these good things? Shouldn't you be rooting for the US economy to, however slowly, come more in line with the rest of the world? I thought the whole point is that we have too much. Even if the dollars lost are evaporated away rather than redistributed, the net result is a more level playing field. Not sure why you aren't praising Bush's progressive policies (if indeed his policies are entirely responsible, which I doubt) as they're effecting the sort of results, at least in small part, that the Left finds desirable.

Brian,

I don't doubt that you are asking an honest question -- but I don't comprehend it at all. Are you suggesting that it is a good idea to impoverish Americans because so much of the rest of the world lives in poverty?


The fact is that *America* -- in the abstract -- is getting richer. It is just that *most* Amercians are getting poorer.



Walto,

Why are we spending a half trillion dollars annually in our tax dollars if we aren't trying to defend prosperity for the majority of Americans?