We Are the 99.9%

http://economistsview.typepad.com/economistsview/2011/11/paul-krugman-we-are-the-999.html

Friday, November 25, 2011

We Are the 99.9%, by Paul Krugman, Commentary, NY Times: “We are the 99 percent” is a great slogan. It correctly defines the issue as being the middle class versus the elite (as opposed to the middle class versus the poor). And it also gets past the common but wrong establishment notion that rising inequality is mainly about the well educated doing better than the less educated; the big winners in this new Gilded Age have been a handful of very wealthy people, not college graduates in general.

If anything, however, the 99 percent slogan aims too low. A large fraction of the top 1 percent’s gains have actually gone to an even smaller group, the top 0.1 percent — the richest one-thousandth of the population.

And while Democrats, by and large, want that super-elite to make at least some contribution to long-term deficit reduction, Republicans want to cut the super-elite’s taxes even as they slash Social Security, Medicare and Medicaid in the name of fiscal discipline. ...

But ... why do Republicans advocate further tax cuts for the very rich even as they warn about deficits and demand drastic cuts in social insurance programs?

Well, aside from shouts of “class warfare!” whenever such questions are raised, the usual answer is that the super-elite are “job creators”... So what you need to know is that this is bad economics. ...

For who are the 0.1 percent? Very few of them are Steve Jobs-type innovators; most of them are corporate bigwigs and financial wheeler-dealers. One recent analysis found that 43 percent of the super-elite are executives at nonfinancial companies, 18 percent are in finance and another 12 percent are lawyers or in real estate. And these are not, to put it mildly, professions in which there is a clear relationship between someone’s income and his economic contribution.

Executive pay ... is famously set by boards of directors appointed by the very people whose pay they determine; poorly performing C.E.O.’s still get lavish paychecks, and even failed and fired executives often receive millions as they go out the door.

Meanwhile, the economic crisis showed that much of the apparent value created by modern finance was a mirage..., seemingly high returns before the crisis simply reflected increased risk-taking — risk that was mostly borne not by the wheeler-dealers themselves but either by naïve investors or by taxpayers, who ended up holding the bag when it all went wrong. ...

So should the 99.9 percent hate the 0.1 percent? No, not at all. But they should ignore all the propaganda about “job creators” and demand that the super-elite pay substantially more in taxes.

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