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June 10, 2007

If A, Then A Goldfish

Brian catches this gem of socio-economic analysis from everyone's favorite conservative Deep Thinker, George Will:

How do you exclaim, as Hillary Clinton does, that today's economy is "like going back to the era of the robber barons" and insist that the nation urgently needs substantial tax increases, in the face of these facts:

In the 102 quarters since Ronald Reagan's tax cuts went into effect more than 25 years ago, there have been 96 quarters of growth. Since the Bush tax cuts and the current expansion began, the economy's growth has averaged 3 percent per quarter, and more than 8 million jobs have been created. The deficit as a percentage of gross domestic product is below the post-World War II average.

Yes, how do you exclaim that we're going back to the days of the robber barons when residents of Iowa still exhibit a healthy appetite for potatoes? Or, put another way, we've now got at least one Republican columnist auditioning for the honor of teaching Mitt Romney what a non sequitur is -- with examples!

Meanwhile, the Gilded Age wasn't defined by an absence of growth -- the robber barons, after all, brought us massive increases in efficiency through heightened energy production, railroad linkage, etc -- but by a lopsided distribution of wealth and income. And as the graph below decisively proves, the current era in no way resembles the Gilded Age's concentrations of cash. In no way. Not even a little bit. Just ignore the red line.

Historical Pre-Tax Income

But hey! The deficit as a percentage of GDP is around its post-WWII average! Of course, that high average is mainly a function of Ronald Reagan, but shush now. Context does nothing but cause trouble...

June 10, 2007 in Charts, Economics | Permalink

Comments

Well, that's what conservatives do ~~ they appeal to the mass ignorance of society. Besides, shouldn't the economy help more people than it hurts?

Posted by: Eliyahu | Jun 10, 2007 1:22:49 PM

I agree that this is a serious problem, but I don't see any easy solution that doesn't have the potential of causing greater problems (soaking the rich) or seems unworkable (limiting compensation of top corporate officers by government regulation of some sort.) I am curious to see the post-tax chart.

Posted by: slickdpdx | Jun 10, 2007 1:25:52 PM

In the past year, food prices have increased 3.7 percent and are on track to jump by as much as 7 percent by year's end. The current increase is more than double the 1.8 percent jump seen the year before, according to the consumer price index. (Source)

Regards, C

Posted by: Cernig | Jun 10, 2007 1:40:59 PM

Two professors — Thomas Piketty of the Paris School of Economics and Emmanuel Saez of the University of California, Berkeley — have found that the share of gross personal income of the top 1 percent of American earners rose to 17.4 percent in 2005 from 8.2 percent in 1980. (Source)

Isn't evidence a wonderful thing, Mr. Will?

Regards, C

Posted by: Cernig | Jun 10, 2007 1:42:44 PM

An important thing about the Robber Barons of the Gilded Age was the robberies, which were mostly well-known to the public, especially as the muckraking of the early Progressive Era gained steam.

Your remark, "the robber barons, after all, brought us massive increases in efficiency through heightened energy production, railroad linkage, etc." reminded me of this.

Very often someone else developed the country, and the Robber Barons came along afterwards, and picked up pieces. The Gilded Age was the end product of a long period of monetary deflation, triggering a series of economic downturns and depressions. During those downturns and depression, banks and businesses went under, and people lost their life savings and investments. The twenty-five year period of rapid settlement and development of the western U.S. after the Civil War ended in 1893. In the Depression that followed the Panic of 1893, almost all of the western banks and railroads, and many other businesses went bankrupt. The people, who "won" and built the West, for the most part, were parted from ownership of what they had built. That was typical of the economic processes, which built the fortunes of the Gilded Age.

The Savings and Loan meltdown, the California Energy Crisis, the scandals of Pentagon spending, the Reagan and Bush tax cuts, and other such episodes might suggest that some parallel.

Posted by: Bruce Wilder | Jun 10, 2007 2:09:17 PM

"I don't see any easy solution that doesn't have the potential of causing greater problems (soaking the rich)."

Let's start with some tax rates going back to what we had in the 1990s. The rich, though in tatters, managed to eke out an existence in that decade.

Posted by: ThresherK | Jun 10, 2007 2:35:16 PM

Will, like lots of conservatives these days, has lots of WILL!

He WILLS that two unrelated phenomena are related, therefore they ARE.

His porridge in the pot is more than nine days old. He's 66 now, so decency suggests he retire and make way for some new brain matter.

Posted by: JimPortlandOR | Jun 10, 2007 2:44:06 PM

Cherry-pick and spin, cherry-pick and spin. Lather, rinse, repeat.

Ezra, if the current era's distribution of income and wealth resembles that of the Gilded Age, you're going to have to do rather more than present a chart showing the share of pre-tax income held by the highest income 1% to demonstrate that. What about post-tax income? What about non-income sources of wealth--you know, things like those teeny tiny government programs called Medicare and Medicaid? What about the distribution among the other 99%? Why is the share held by the top 1% the relevant number, rather than the share held by the top 10%, or the bottom 1%, or the middle 20%, or some other slice of the demographic pie? You're just cherry-picking a number that is consistent with the story you want to tell, rather than trying to do any serious, comprehensive analysis of the data and seeing where it leads you. This isn't serious economic analysis, it's propaganda.

Posted by: JasonR | Jun 10, 2007 3:03:18 PM

Yes, Ezra, why didn't you use this Sunday morning blog post to do a cross-study analysis of all economic indicators over the past century and a half? I get what you're saying here, JasonR, that there are other relevant data, but the data Will is pointing to are not relevant at all to a comparison of the current economy to that of the Gilded Age. The distinguishing features of the Gilded Age was an accumulation of wealth in a small number of hands, not job growth and deficit as a percentage of GDP.

And I think the top 1% is particularly relevant to the discussion, since the whole point of the Robber Barons is that they were a tiny minority -- if you are looking at the top 20%, you're not really looking at the Barons.

Posted by: Houdini's Ghost | Jun 10, 2007 4:12:29 PM

Go read your Pikkety and Saez, Jason. Or click on the link I offered. I really shouldn't have to do all the work for you.

Posted by: Ezra | Jun 10, 2007 4:21:49 PM

Houdini,

I didn't say anything about Will's column. I'm criticizing Ezra's claim that the statistic he cited implies a distribution of income and wealth today that resembles that of the Gilded Age. In fact, his chart doesn't even cover the Gilded Age. It starts in the Progressive Era. And it's not a meaningful indicator even of true differences in the distribution of income between the top 1% and the bottom 99% anyway, because it fails to account for the effects of taxes and non-income sources of wealth, which have changed dramatically over time.

Your strange statement that "the whole point of the Robber Barons is that they were a tiny minority" to justify focusing on the top 1% is also mystifying. I'm not sure what it's even supposed to mean to say that the "Robber Barons" had a "point." Perhaps you meant to say that you think their most relevant characteristic is that they were a tiny minority. If so, that claim is highly dubious. Given the name of the group, why shouldn't we regard their most relevant characteristic to be that they were "robbers," acquiring their wealth through very unjust means? If you want to try and argue that today's superrich--the Bill Gateses and the Warren Buffetts and the Oprahs and the J.K. Rowlings--acquired their wealth through similar injustice, good luck. I think that would be a hard case to make.

Posted by: JasonR | Jun 10, 2007 4:49:48 PM

Go read your Pikkety and Saez, Jason. Or click on the link I offered.

I did. I'm not sure what point of mine you're addressing here, or what you think there is in the link that addresses it. Perhaps you could elaborate, rather than leaving me to guess at whatever it is you're alluding to.

Posted by: JasonR | Jun 10, 2007 4:53:14 PM

I'm kinda with Jason on this one - you take Will to task for not offering the evidence that responds to Hillary Clinton's claim, but then don't provide the information either - the relevant graph isn't of the cuurent income distribution to the top 1%, it's the graph comparing the current state of affairs to the age of the robber barons (both income and economic growth, I think, to really prove your point). I'm not saying I think Clinton's wrong - I think she's probably right; but neither Will's dismissal nor your support really supply the information needed to know.

Posted by: weboy | Jun 10, 2007 5:27:27 PM

Ezra,

Do you know when the Gilded Age was? It's not on your chart. What your chart does demonstrate is that the highest post WWII levels of your redline were in 1999-2000, before W came to office, and under Clinton. This doesn't seem like strong support for any point you are trying to make about the shocking similarity of W's economy to the 19th Century (which, as another poster notes, is not on your chart at all).

Further, I presume what one cares about as a Rawlsian liberal (which I still am, perhaps you are something else) is not the share of wealth at the top but the basic goods available at the bottom. I don't have the statistics ready to hand about that for the Gilded Age, but I rather imagine things are better now, to the extent they can be legitimately compared.

I do not doubt that W is no Rawlsian, and I do not support his economic policies (to the extent he really has anything worthy of the name). But if you're going to call George Will on his shoddy treatment of the Gilded age, this post doesn't really persuade.

Posted by: Bill | Jun 10, 2007 6:36:50 PM

Further, I presume what one cares about as a Rawlsian liberal (which I still am, perhaps you are something else) is not the share of wealth at the top but the basic goods available at the bottom.

Yes, this is another vital point that is usually ignored by liberals obsessed with distribution. Whatever distributional similarities there may be between the economy today and the economy of the "era of the robber barons" (and I've yet to see any serious attempt to show that they are broadly similar) the absolute standard of living of those classified as poor today is vastly better than it was for the poor of that era. The fundamental tragedy of the "robber baron era" was not that the rich had so much more than the poor, but that the poor lived in conditions of such abject poverty and deprivation.

Of course, the whole point of the "robber baron" rhetoric isn't to try and engage people to think seriously about issues of economic justice but to provoke a crude emotional reaction against one's political opponents. And yes, the right does this sort of thing too, but that doesn't make it any better when Hillary Clinton does it.

Posted by: JasonR | Jun 10, 2007 7:15:02 PM

That's right, Jason. Indeed, I've now read the Will column and it seems clear to me that this is his point--the Clinton quotation comes only the middle of his larger discussion of the differing economic views of Democrats and Republicans at this time.

So, (a) even if Ezra had properly characterized Will's argument (which I don't think he did, but it's a sloppy enough column that one might differ I suppose), it's not really a non-sequitur, just elliptical; and (b) it would be interesting to know whether Ezra thinks Democrats ought to send their tax package to the President or no? Hillary does actually have a job in the Senate, why not get people on record now supporting her plan?

Posted by: Bill | Jun 10, 2007 7:26:56 PM

Why in the world is the post WWI average a meanful comparison. Let's compare decades, the 80's, the 90's and 2000's so far. Reagan's impact runs from about 1983 or 1984 through about 1993 or 1994 give or take. Clinton's runs through the early 2000's, until GWB and the republican congress gave rich folk the surplus plus some more.

Posted by: George | Jun 10, 2007 9:03:51 PM

George,

I was just quoting the article Ezra sent us to, though it was actually since 1929, not just WWII: "The share of total U.S. income that the top one percent of households received in 2004 was greater than the share it received in any prior year since 1929, except for 1999 and 2000."

Why is this relevant? Well, one relevant thing is if Hillary (or Ezra, or you) think Executive policies make the difference, 8 years of Clinton resulted in higher shares of wealth for the rich than anyone else's. Perhaps you think that the chart doesn't tell us much--I'm beginning to think so myself.

Posted by: Bill | Jun 10, 2007 10:18:13 PM

Oh, I DID ignore the red line.

You shouldn't do that.
Us 'slows' do still...sometimes -
Try to figger stuff out.

Posted by: has_te | Jun 11, 2007 3:04:06 PM

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