Tuesday, December 06, 2005

Krugman Shrugged

True, I'm not an economist (how many INOTBB posts have said this?). I didn't even take an Economics class in college, not that I really remember even the college courses I liked, and one focused on numbers wouldn't have made that list. I didn't even take Home Ec in high school, probably because our Catholic high school was worried such a course might weaken us boys and give us "deep seated" tendencies that might become a problem if any of us fell into the priesthood.

True, Paul Krugman has a PhD from MIT, teaches at Princeton, and is a columnist for the New York Times (but so is David Brooks, so that might not be such a big accomplishment).

But Krugman, in the column that ran today in the Santa Barbara News-Press but no doubt ran earlier in parts of the world where news happens sooner, ends a very strong piece on a very weak note, as if he just ran out of column inches, or interest, or brain cells, or chemically-induced inspiration or something. The thrust of the essay is this: the reason average Americans aren't thrilled (he actually uses the word joy, which no doubt would get him kicked out of the Economists union, not that most of them would ever belong to anything vaguely pinkish like a union) about the state of the economy is:

It [2004] should have been a good year for the American family: The economy grew 4.2 percent, its best performance since 1999. Yet most families actually lost economic ground. Real median household income - the income of households in the middle of the income distribution, adjusted for inflation - fell for the fifth year in a row. And one of the key sources of economic insecurity got worse, as the number of Americans without health insurance continued to rise.

(I'd link to the editorial, but it's behind the stupid pay wall at the NYT. So I will just liberate parts of the article in what I see as an act of wealth redistribution.)

Krugman goes on for awhile examining these facts, makes the case that things have been as bad in 2005, not that the final figures are in, and builds to this underwhelming conclusion that threatens the anti-thrilling moment of Geraldo opening Al Capone's safe in the lore of dull thud-dom:

Wages and median family income often lag behind profits in the early stages of an economic expansion, but not this far behind, and not for so long. Nor, I should say, is there any easy way to place more than a small fraction of the blame on Bush administration policies. At this point the joylessness of the economic expansion for most Americans is a mystery.

Excuse me? In what way is cutting taxes over and over for the top 1% helpful to the median wage earners? And what White House champions these endless tax cuts? What party repeatedly insists the economy would fall apart if the minimum wage budged a few quarters? And who is the figurehead of that party? Sure, we can argue whether the true decision-maker is Cheney or Rove, but we know who the figurehead is.

Earlier in the editorial Krugman says, "The growth in corporate profits has, as I said, been spectacular. Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent."

So, how about someone seriously proposes a maximum wage? What would the correct ratio be: a CEO can't make more than 50 times his or her poorest paid employee? Pay your employees at least $10 an hour, you can make $500. That's $20,800 yearly for your employee, $1,040,000 for you. Not enough? And why, exactly? If you want a 19th-century Louis-Philippe commode, go into politics and take bribes for it. Business is for honest people.


Blogger brad said...

I think you've misread Paul...

He understands very well that the labor market is lousy, that salaries have been lagging way behind productivity, and that jobs are hard to find.

What he doesn't understand is why the labor market is lousy.

The way I'd put it is that people are unhappy because we are having a Joyless Expansion. The mystery is why we are having a Joyless Expansion.

7:29 AM  
Anonymous Tessitura said...

I like your idea george...put a salery cap on business just like in sports...neat. Then when I come to work I will think I am playing football and forget that I only make $7.25 an hour.

9:47 AM  

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