Thomas Piketty’s Radical Plan to Redistribute Wealth – The New York Times

A BRIEF HISTORY OF EQUALITY
By Thomas Piketty

“Thomas Piketty begins his latest book by genially mentioning the entreaties he gets to write something short — previous books have been around 1,000 pages long — and ends it by expressing the hope that he has given “citizens,” rather than economists, new weapons in the battle against inequality, which is his master subject. This shouldn’t be taken for a sign that “A Brief History of Equality” is consciously simplified. It isn’t centered on a new economic finding, like that in “Capital in the Twentieth Century,” where Piketty reported that the return to capital exceeds the rate of economic growth. But neither is it written in a tone of patient explanation. It’s useful as an opportunity for readers to see Piketty bring his larger argument about the origins of inequality and his program for fighting it into high relief.

Much of the current discussion of inequality focuses on the period since 1980, when the benefits of growth began to go much more narrowly to the rich than they had before. Although Piketty hardly disputes this, he announces here that he has come to tell an optimistic story, of the world’s astounding progress toward equality. He does this by creating a much wider temporal frame, from 1780 to 2020, and by focusing on politics and measures of well-being as well as economics. Life expectancy has gone from 26 to 72 and, with the rise of compulsory state-provided education, the literacy rate from about 10 percent to 85 percent. Slavery and colonialism, once endemic, have been substantially abolished. Perhaps half of the population of the developed world is at least middle class, though before the 20th century there was no middle class to speak of. The right to vote, formerly restricted even in democracies to male property owners, is well on its way to becoming universal.

What caused this progress? Piketty has a straightforward answer: the advent of progressive taxes on income and wealth, and of the comprehensive welfare state. The taxes reduced inequality and paid for the welfare state, which has provided education, health care, old-age pensions and protection against severe deprivation. Our culture’s familiar assertions about how growth, innovation and entrepreneurship are connected with general prosperity stand completely outside Piketty’s account. Instead, he says, property owners have always used their excessive influence over government to create systems of “military and colonial domination” and environmental despoliation that made them even more wealthy than they were already. The idea that growth can solve the world’s economic woes is “totally insane.” Only a substantial weakening of property rights — a process that in the past included the abolition of slavery, but has many more steps to take — can do that.”

Robert J. Shiller | Inflation Is Not a Simple Story About Greedy Corporations – The New York Times

Mr. Shiller, a professor at Yale, won the Nobel in economic science in 2013.

“The word “Bidenflation” appeared in the news last summer, politicizing inflation and assigning blame for it. By December, the Consumer Price Index had risen 7 percent from a year earlier, the largest annual increase since the end of the Great Inflation, the period of entrenched inflation from 1965 to 1982.

On Dec. 14, when asked about the drivers of the recent inflation, Jen Psaki, President Biden’s press secretary, answered with an example: “The president, the secretary of agriculture have both spoken to what we’ve seen as the greed of meat conglomerates.”

Her answer lent support to the idea that the United States is about to enter a “wage-price spiral,” an economic theory that posits a greed-enabled vicious feedback loop between consumer price inflation and cost increases: Greedy businesses raise prices to increase profits, which causes greedy unions to demand higher wages, which causes businesses to raise prices again, and so on. We are now seeing reports of newly assertive union members demanding higher wages and of greedy corporate price setters charging too much.

But feeding fears of a wage-price spiral can be dangerous, especially if Americans view it as something that might continue indefinitely. Once lawmakers, business leaders and consumers come to believe the spiral has really taken hold, that belief can amplify long-term inflation expectations. It can make people angry and rigid in their demands and depress the stock market and consumer confidence.”

Peter Coy | Cash Is Out. Crypto Is In. What’s Happening to Money? – The New York Times

Mr. Coy is a newsletter writer in Opinion.

“I felt two unexpected emotions — pity and guilt — one day recently while I was packing loose pennies, nickels, dimes and quarters into paper rolls to take to the bank. Coins, which were a big part of my childhood, have come to seem like inconvenient relics, as anachronistic as my grandfather’s stamp collection.

All over the world, people are abandoning old forms of money and adopting new ones, like cryptocurrency, faster than our brains and customs can process.

“We are at an interesting juncture,” Eswar Prasad, a Cornell University economist, told me. “It is a period of a great degree of concern about what happens to traditional forms of money and whether these technological developments we see around us are going to benefit us in some way or just create more disruption and turmoil.”

In much of Europe and East Asia you can go for weeks without touching paper money or coins. In 2013, a bank robber in Sweden was thwarted because the bank he targeted didn’t have any money to steal — the branch was a “cashless” location. Five years later, Cecilia Skingsley, then deputy governor of the Sveriges Riksbank, the central bank of Sweden, told The Financial Times, “If you extrapolate current trends, the last note will have been handed back to the Riksbank by 2030.” “

David Lindsay Jr.
Hamden, CT | NYT comment:
I vote against allowing bitcoin or any crypto currency any serious place in our system going forward. Bitcoin should be made illegal, until it reduces its enormous carbon footprint to something closer to zero. That mobsters, thugs and terrorists all like these untraceable systems, that allow the avoidance of any identification or taxation, should be enough to alert sensible people that you can’t run a town, state or country on an untaxable economy.

Paul Krugman | Inflation Headlines Don’t Tell the Whole Story – The New York Times

Opinion Columnist

“Early this year some prominent economists warned that President Biden’s American Rescue Plan — the bill that sent out those $1,400 checks — might be inflationary. People like Larry Summers, who was Barack Obama’s top economist, and Olivier Blanchard, a former chief economist of the International Monetary Fund, aren’t unthinking deficit hawks. On the contrary, before Covid hit, Summers advocated sustained deficit spending to fight economic weakness, and Blanchard was an important critic of fiscal austerity in the aftermath of the 2008 financial crisis.”

Paul Krugman | History Says Don’t Panic About Inflation – The New York Times

Opinion Columnist

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“Back in July the White House’s Council of Economic Advisers posted a thoughtful article to its blog titled, “Historical Parallels to Today’s Inflationary Episode.” The article looked at six surges in inflation since World War II and argued persuasively that current events don’t look anything like the 1970s. Instead, the closest parallel to 2021’s inflation is the first of these surges, the price spike from 1946 to 1948.

Wednesday’s consumer price report was ugly; inflation is running considerably hotter than many people, myself included, expected. But nothing about it contradicted C.E.A.’s analysis — on the contrary, the similarity to early postwar inflation looks stronger than ever. What we’re experiencing now is a lot more like 1947 than like 1979.

And here’s what you need to know about that 1946-48 inflation spike: It was a one-time event, not the start of a protracted wage-price spiral. And the biggest mistake policymakers made in response to that inflation surge was failing to appreciate its transitory nature: They were still fighting inflation even as inflation was ceasing to be a problem, and in so doing helped bring on the recession of 1948-49.”

Stephanie Kelton | Biden Can Go Bigger and Not ‘Pay for It’ the Old Way – The New York Times

” . . .  That’s why to avoid short-run constraints like supply bottlenecks, the U.S. government can look elsewhere for capacity. American businesses can make use of depressed conditions abroad, buying from countries with economies that might be struggling to fully recover from the economic downturn and that will be more than happy to mutually benefit from our boom. There will be no lack of eager foreign producers if we need to relieve some demand pressure on the domestic front.

So it was unfortunate that in his long-awaited infrastructure speech, President Biden promised “not a contract will go out, that I control” that isn’t for “a company that is an American company with American products, all the way down the line, and American workers.”

This “buy American” philosophy is well intentioned but could lead to counterproductive trouble, particularly since the president has promised that “no one making under $400,000 will see their federal taxes go up” — a pledge that takes raising taxes on the middle class, which has a higher marginal propensity to spend, off the table as a potential inflation offset.” . . . . . .

” . . . Modern Monetary Theory is not alone here. For a historical outlook, we can revisit what John Maynard Keynes proposed in “How to Pay for the War: A Radical Plan for the Chancellor of the Exchequer,” a lesser-known work of his. To the contemporary ear, the title suggests that Keynes was trying to figure out how to come up with the money to finance World War II spending. He wasn’t.

Keynes understood that the British government, which controlled its national currency, could create all the money needed. The purpose of the book was to show the government how to scale up and sustain higher levels of spending while containing inflationary pressures along the way. It noted the soldiers, bombers, tanks, combat gear and more that would be needed to prosecute the war and how the entire economy would need to be reoriented, quickly, to supply those things.

We’ve all grown accustomed to thinking about taxes as an important source of revenue for the federal government. That’s in part because it’s easy to think of the federal government as being like state and local governments, which without sufficient revenue — from income taxes, property taxes, sales taxes and more — could not finance their operations. Yet these entities don’t have the federal government’s currency-issuing powers, which greatly changes the spending capacity of government.

In 1945, a man named Beardsley Ruml delivered a fiery speech before the American Bar Association titled “Taxes for Revenue Are Obsolete.” He wasn’t a crank. He was the chairman of the New York Federal Reserve Bank. As Mr. Ruml explained in that speech, taxes first and foremost help to avoid a situation where too much money chases after too few goods: “The dollars the government spends become purchasing power in the hands of the people who have received them,” he said, while “the dollars the government takes by taxes cannot be spent by the people.”

More recently, economists like L. Randall Wray and Yeva Nersisyan have begun to think about how to pay for a Green New Deal using Keynes’s earlier “radical” framework. And even if one were to accept the terms of the old deficit-oriented budgeting currently favored in Washington, going even bigger on infrastructure, if executed carefully, is still doable: Larry Summers, the former Obama White House senior economist, admitted in 2014 that “public infrastructure investments can pay for themselves” and that “by increasing the economy’s capacity, infrastructure investment increases the ability to handle any given level of debt.”

We face enormous intersecting crises: a climate crisis, jobs crisis, health crisis and housing crisis, among others. It is going to require a lot of money to do what is necessary. As Kate Aronoff recently wrote in The New Republic, “To meet the emissions targets outlined in the Paris Agreement, experts estimate the United States government will need to spend at least $1 trillion annually.” And the White House’s infrastructure proposal, while historically ambitious, still falls far short of the scale of the problem.” . . .

Who Is Ben Harris, the Quiet Architect of Biden’s Economy Plan? – By Jim Tankersley – The New York Times

Penny Pritzker, the billionaire commerce secretary under President Barack Obama, would lead off with an overview of Mr. Biden’s plans. But the worried capitalists always wanted details, and for that, Ms. Pritzker would turn over the video calls to the little-known fulcrum of the Biden campaigns economic policymaking: a 43-year-old tax and budget specialist named Ben Harris.

Mr. Biden has a sprawling and secretive orbit of economists offering him policy advice as he seeks to pacify an insurgent liberal wing of economic thinkers within the Democratic Party and the business leaders who still feel mistreated by the Obama-Biden administration. Mr. Harris, an economist who is relatively anonymous even to other economists, has taken a starring role in both efforts.

A former chief economist for Mr. Biden in the White House, Mr. Harris helped fashion a campaign agenda from the work of a small inner circle and hundreds of outside economists and sell it to the donors, executives, labor unions and activists whom Mr. Biden needs behind him to win the election. He has two other jobs but works up to 50 hours a week for Mr. Biden, unpaid.

Opinion | Who Is Driving Inequality? You Are – by David Brooks – The New York Times

“Who is driving inequality in America? You are. I am. We are.

Did you read to your kids before bed when they were young? If you did, you gave them an advantage over kids whose parents were working the evening shift at 7-Eleven. Did you spend extra on tutoring or music lessons? Since 1996, affluent families have spent almost 300 percent more educating their young while everybody else’s spending has been mostly flat.

Did you marry before having kids and raise your kids in a two-parent home? The children of the well educated are now much more likely to grow up in stable families, and those differences in family structure explain 32 percent of the growth of family income inequality since 1979.

If you did these things, you did nothing wrong. You invested in your children’s flourishing as any decent parent would.

But here’s the situation: The information economy rains money on highly trained professionals — doctors, lawyers, corporate managers, engineers and so on.

Daniel Markovits, author of “The Meritocracy Trap,” estimates there are about one million of these workers in America today. They work really hard, are really productive and earn a lot more. In the mid-1960s, profits per partner at elite law firms were less than five times a secretary’s salary. Now, Markovits notes, they are over 40 times.”

Opinion | Our Irrational Anxiety About ‘Slow’ Growth – by Ruchir Sharma – The New York Times

“Germany is one of at least five major economies on the verge of a recession, which is typically defined as two consecutive quarters of negative growth. But the real issue is whether that definition still makes sense in a country with a shrinking labor force like Germany’s.

Its working population has been declining for years and is expected to fall to 47 million from 54 million by 2039. And it’s not alone in this. Forty-six countries around the world — including major powers like Japan, Russia and China — now have shrinking populations.

Demographics are usually the main driver of economic growth, so it is basically inevitable that these countries will now grow at a much slower pace. And we are not talking about minor population declines. Projections for 2040 show China’s working-age population falling by 114 million, Japan’s by 14 million. With a shrinking labor force, these economies will inevitably slow and, at times, contract. To keep calling two negative quarters in a row a “recession” implies that this outcome is somehow abnormal or unhealthy. That will no longer be the case.

To avoid overreacting, the discussion about economic health needs to shift to measures that better capture satisfaction and contentment, like per capita income growth. In countries with shrinking populations, per capita incomes can continue to grow so long as the economy is shrinking less rapidly than the population. This helps explain why, for example, Japan isn’t facing more social unrest. Its economy has grown much more slowly than that of the United States in this decade, but because the population is shrinking its per capita income has grown just as fast as America’s — around 1.5 percent per year.”

National Income Accounting for the Washington Post and Robert Samuelson | Beat the Press | CEPR

Written by Dean Baker
Published: 25 August 2011
0 Comments
“National income accounting is really basic stuff. It is taught in every intro economics class. It would be a really great thing if only the people who wrote about and implemented economic policy understand it.

Today Beat the Press features a quick lesson in national income accounting for folks who clearly do not know it: the Washington Post editorial board and its columnist Robert Samuelson.

Starting at the beginning, we know that we can add up GDP on the output side by summing its components, consumption, investment, government, and net exports. This must be equal to the incomes generated in production. This gives us a basic identity that:

1) C+I+G+(X-M) = Y

where Y stands for income. This identity must always hold, it is true by definition.

We can then divide Y into disposable income, which is total income, minus taxes. This gives us:

2) Y = YD + T

We can then divide disposable income into savings and consumption, since by definition any income that is not consumed is saved. This gives us:

3) YD = C+S

since we now know that Y = C+S+T, we can rewrite equation 1 as,

4) C+I+G+ (X-M) = C+S+T

we then eliminate consumption from both sides and we get:

5) I+G+(X-M) = S+T, rearranging terms gives:

6) (X-M) = (S-I)+(T-G)

This one actually has a clear meaning. X-M is exports minus imports, or the trade surplus, S-I is private saving minus private investment, and T-G is taxes minus government spending, or the budget surplus. This identity means that the trade surplus is equal to the sum of the surplus of private savings over investment and the government budget surplus. Remember, this is an accounting identity, it must be true.”

Source: National Income Accounting for the Washington Post and Robert Samuelson | Beat the Press | CEPR