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Wednesday, July 18, 2012

Decoupled and Divided

Paul Krugman:

Decoupled and Divided, by Paul Krugman: And so, predictably, Romney is accusing Obama of “attacking capitalism” and “dividing America” by raising questions about Bain and those hidden tax returns. This is all par for the course; many of us remember how any criticism of Bush was unpatriotic, and if I recall correctly, during the dotcom bubble the Wall Street Journal argued that any skepticism about stock market valuations showed a lack of faith in free markets.
The special Romney twist– aside from the willful misrepresentation of what Obama actually said about business success — is Mitt’s desire to have it both ways. He’s proud of his business record and his success, he says, but at the same time wants us to believe that he had nothing to do with Bain’s actions over a three-year period when he was still its CEO, and is completely unwilling to let us see the tax returns that would tell us something about exactly how he achieved his current wealth. ...
Anyway, just a reminder about what’s really dividing America: the fact that a rising tide no longer raises all boats,... there has been a dramatic decoupling between overall economic growth and the fortunes of the typical family:

 

It’s not an “attack on capitalism” to suggest that growing income disparities and the corresponding failure of most Americans to benefit from rising productivity are problems. Still, what can be done? Well, you can ask the rich to pay somewhat higher taxes, and you can strengthen the safety net — which is what Obama actually advocates. But Romney wants to do the reverse.
So Romney wants us to celebrate the success of people like him, even though their success doesn’t seem to have benefited ordinary families, and even though he stands for policies that would aggravate the gap between a fortunate few and everyone else. And then he accuses Obama of dividing America.

As I've argued many times, the idea that those at the top of the income distribution, particularly the people involved in finance, were paid according to their contribution to national GDP (i.e. their marginal product) is hard to swallow (no matter how often the right tries to jam it down our throats). I understand why those who benefit the most from the way things work now are defending the system tooth and nail, but it seems clear to me that the mechanism that allocates income to various strata of society is broken and in need of repair.

More from Paul Krugman here: Finance Capitalism and here: Thirty Troubling Years.

    Posted by on Wednesday, July 18, 2012 at 06:48 AM in Economics, Income Distribution, Politics | Permalink  Comments (32)


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