Federal Reserve Chairman Janet Yellen plans to increase interest rates. Can government and households survive the shock? [Credit: Huffington Post]
The American economy is back. After years of tepid growth and a first quarter contraction, GDP grew by a robust 4.6 percent in the third quarter of last year. The unemployment rate remained at 5.8 percent in November, and analysts expect the Labor Department to announce tomorrow that the economy added substantially more than 200,000 jobs in December. Inflation is low, the dollar is strong, oil prices have tumbled, and federal deficits are lower. Nearly six years after the recession ended, the long-awaited recovery appears at last to have arrived.
That recovery has in part been driven by a force that could be its undoing: debt. Nearly $46 trillion of it, or more than 2-1/2 times our annual economic output. Continue reading →
Two icons of the Left — economist Thomas Piketty and Senator Elizabeth Warren (D-MA) — discussing rising inequality during an event last June. But by some measures, inequality is shrinking, not rising. [Credit: National Review]
“The game right now in America is rigged. It is rigged so that those at the top keep doing better and better, and everyone else is under increasing pressure, is under increasing economic strain…And that is the profound danger that we see from great inequality.”Elizabeth Warren (D-MA)
Democrats are still stinging from last month’s epic defeat at the polls. Some of them attribute that unhappy outcome to ideological temperance. The party would do better, some argue, if their candidates took a more strident tone, denouncing the rich, preaching that Washington governs in the service of Wall Street, and calling for more aggressive redistribution of income and wealth to dampen rising inequality.
But a new study published in the Southern Economic Journal pulls at a critical thread of that narrative. It found that, at least according to one measure of income, the gap between rich and poor actually narrowed between 1989 and 2007. Continue reading →
Recent criticism of Thomas Piketty’s Capital in the 21st Century has drawn the ire of the splenetic Paul Krugman. [Credit: National Review]
There is growing concern among people on the Right and Left about income inequality. But you wouldn’t know that from reading Paul Krugman’s latest screed.
What stirred Krugman’s bile this week was criticism of economist Thomas Piketty’s book, Capital in the 21st Century, a work that has attained canonical status among the Left on both sides of the Atlantic. Continue reading →
Vince Young in happier times. His rapid rise and sudden fall tell a cautionary tale. But a new study provides welcome news about economic opportunity and upward mobility. [Credit: Dallas Morning News]
Vince Young is bankrupt. The story of a star college quarterback who rose from humble circumstances to impossible wealth only to plunge into insolvency in the course of eight years is one marked by extravagant spending, foolish investments and, he has argued in court documents, exploitation by agents, business associates, family and friends. His is an extreme example of economic mobility.
Reports of Young’s bankruptcy filing coincided with the release this week of a new study by a group of Harvard and Berkeley economists that reached an unexpected conclusion: upward economic mobility is not the exclusive province of entrepreneurs, entertainers and star athletes like Young. The National Bureau of Economic Research [NBER] report concluded that “children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.” Continue reading →
The 50th anniversary of the President Johnson’s declaration of a War on Poverty has provoked strong views on whether it has succeeded or failed. The truth lies somewhere between. [Credit: Huffington Post]
It’s not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vastly more harm if they had won the 2012 election. Moreover, GOP harshness toward the less fortunate isn’t just a matter of spite (although that’s part of it); it’s deeply rooted in the party’s ideology. Paul Krugman, “Enemies of the Poor,” January 12, 2014
The 50th anniversary of President Johnson’s War on Poverty has occasioned a good deal of moral exhibitionism. Liberals heap praise on the programs and flatter themselves for supporting the transfer of an estimated $20.7 trillion (in 2011 dollars) in cash and non-cash benefits from those who earned it to those who did not. And they are relishing the opportunity to denounce conservatives as enemies of the poor, motivated by ideology and spite.
South Africa’s government in recent years voted to jail people for making unauthorized and inaccurate weather forecasts. Good thing for the Federal Reserve that their bad predictions don’t carry consequences. [Credit: University of MN]
Holding people accountable for their predictions seems a bit harsh in this season of predictions. But the South Africans do have a point: predictions have consequences. That’s as true of predictions about the economy as about the weather, something that the Federal Reserve might do well to ponder. Continue reading →
The Swiss campaign to limit executive pay fell short, but are there good solutions to the problem of income inequality?
We know that people’s frustrations run deeper than these most recent political battles. … They experience in a very personal way the relentless, decades-long trend. … And that is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain — that if you work hard, you have a chance to get ahead. .I believe this is the defining challenge of our time: making sure our economy works for every working American. It’s why I ran for President. It was at the center of last year’s campaign. It drives everything I do in this office. — President Obama
Economic inequality is a politically potent issue. Vanderbilt University professor Larry Bartels believes that it was a critical one in the 2012 Presidential race, adding 2 to 3 percentage points to President Obama’s share of the vote and 1 percent in battleground states. The President’s advantage on this issue, Bartels says, was largely symbolic, having more to do with the perception that his opponent’s great wealth had detached him from the concerns of ordinary voters. People motivated to vote for the President because of this issue did so more because of who they believed Mitt Romney was than because of what the President proposed to do. Continue reading →