Sunday, May 17, 2015

Letters We Wish We'd Written - Reaganomics And Income Inequality Edition

The once great Washington Post's Bezos Bugle's non-economist economics writer Robert "Not Paul" J. Samuelson provides a reliably wrong-headed right-wing point of view on op/ed pages once graced by the likes of Walter Lippmann.  Today, two perceptive readers take issue with one of "Not Paul" Samuelson's recent forays into dunderhead economics:
Robert J. Samuelson’s May 11 op-ed column, “Poof goes the big tradeoff,” cited Arthur Okun’s “Equality and Efficiency, The Big Tradeoff,” which theorized that higher growth would come with increased inequality and increased equality would lead to stagnation. But that hasn’t worked out in the real world, and this puzzled Mr. Samuelson.
Mr. Samuelson claimed to have no clue as to why the U.S. economy is stagnating while the richest (after-tax, inflation-adjusted) 1 percent of Americans command nearly half of the nation’s income (almost equal to the lower 80 percent’s total) and how this inequality has occurred.
Hasn’t Mr. Samuelson noticed that the “Reagan revolution” is still going on? Congress’s budgets have given massive tax breaks to the richest while cutting funds for education and making no provision for budget-balancing states and municipalities that have been forced to cut funding for schools, police and other essential services.
President Obama tried to stimulate the economy by proposing measures for necessary repairs and improvements to roads, bridges and other infrastructure, but the Republican Congress turned him down flat.
Mr. Samuelson surely knows that consumer spending drives 70 percent of the U.S. economy’s activity. But skinflint policies have targeted the very people who do most of the consuming. In short, Mr. Okun’s 1975 theories don’t apply today. The billionaires have bought Congress, and the resulting increase in inequality has led to economic stagnation.
Russ Prickett, Austin
Robert J. Samuelson contended that relatively weak U.S. economic growth and widening inequality demonstrate factually that “the big tradeoff has proved unworkable” because “we do not know enough to manipulate economic growth, productivity and income distribution.” Right facts, wrong conclusion. A few years after Arthur Okun’s article, the United States implemented Reaganomics, shifting massive wealth from the public to the private sector. But the “job creators” have not behaved as expected, using a greater portion of these funds to increase their wealth through financial investments (hedge funds, collateralized debt obligations, outsourcing to increase profit margins, executive stock options, etc.) rather than investments in productive equipment and output. With the reduced funds available to the public sector (exacerbated by long wars in Iraq and Afghanistan), we get crumbling infrastructure and limited ability to support bootstrapping efforts. We do know enough now: This 35-year experiment has demonstrably failed to achieve the right set of tradeoffs. The United States needs to recalibrate the public-private balance, not just give up hope.
Len Levitt, McLean
Unfortunately for America, the "Reagan revolution" is still going on, as Mr. Prickett notes.  Thanks to the usual suspects -- an infantile media, plutocrats emboldened by Citizens United,  and an array of spineless "centrist Democrats" -- the rather obvious connection of income inequality to policies that have long-favored the wealthiest 1 per cent ("makers!") is obscured  by people like Samuelson to the detriment of us all.

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