Oct. 25 (Bloomberg) -- Class warfare has never been a big seller with the American voter, and for good reason. In this still young land of opportunity, the next rags-to-riches success story may very well be one of us.

That hasn't stopped politicians, and even some economists, from trying to capitalize on the idea of ``Two Americas,'' one rich, one poor. (Either Democratic presidential candidate John Edwards's 2004 campaign theme is less conspicuous this time around, or else Edwards himself is.)

New York Times columnist Paul Krugman picks up the thread in his new book, ``The Conscience of a Liberal.'' Krugman's America is a place of vast income inequality -- as well as inequality of opportunity. In his America, large groups of voters are still disenfranchised, economic progress feels ``tentative and temporary,'' and median incomes are stagnant.

It will come as no surprise to regular readers of Krugman's twice weekly op-ed column that the root of all this evil is the Republican Party. Over the last 30 years, the GOP has been hijacked by ``movement conservatives'' whose policies (tax cuts, reduced regulation, attacks on labor unions) undermined the fabric of our society by favoring the elite minority at the expense of the middle- and lower-class majority.

How, then, has the GOP managed to win elections in the face of such anti-populist policies? Krugman plays the race card.

``The political success of movement conservatism depends on appealing to whites who resent blacks,'' he writes, even though poor Southern whites would have fared better under the Democrats' income-redistribution policies. Somehow Krugman, a Princeton University economics professor, can grasp this while the average voter has been hoodwinked all these years.

Better Deal

It's one thing to recognize that income inequality is a problem, creating fissures in society that can lead to discontent and unrest. It's quite another to advocate ``averaging down'' as a solution -- punishing the rich rather than helping the poor.

Most mainstream economists (Krugman has passed through to the outer fringes) recommend education and retraining in high- tech skills as a means of lifting the poor out of their misery.

``We Americans strive to provide equality of opportunity,'' said Federal Reserve Chairman Ben Bernanke, Krugman's former Princeton colleague, in a speech earlier this year. ``We do not guarantee equality of outcomes, nor should we.'' To do so would remove the economic incentives that are the foundation of the free-market system.

Soak the Rich

Krugman would just as soon soak the rich. For him, the way forward is the way back -- to the New Deal. Franklin Roosevelt's policies created ``a more equitable distribution of income'' by, among other things, dictating wages to the private sector and taxing the wealthy, creating ``a healthier climate for democracy,'' Krugman writes.

That must be why centrally planned economies, with their promise of a classless society, have been such paragons of democracy!

The New Deal's imposition of all kinds of taxes, its introduction of social welfare and insurance programs and its support for organized labor conspired to equalize incomes for more than 30 years. Of course, many of the policies Krugman lauds exacerbated the Great Depression. Excise taxes on everything from food to soft drinks to alcohol and tobacco fell disproportionately on the lower classes. The government set prices and wages artificially high, discouraging spending and hiring.

``The era of equality was also a time of unprecedented prosperity, which we have never been able to recapture,'' he says.

Classless Society

Unprecedented prosperity? By what measure? Surely not by any of the standard metrics economists use, such as per capita GDP or household net worth. Krugman never says.

The author extols the period from 1947 to 1973 as a kind of economic Nirvana, with income inequality compressed by government policies and the strength of labor unions. Employees with a formal education, such as lawyers and engineers, earned ``less of a premium over manual laborers than they had received in the '20s -- or than they receive today,'' he writes.

Krugman holds this model up as an ideal rather than as the disincentive to higher education that it is. His America finds a bigger and bigger role for government at a time when emerging economies of the former Soviet bloc, China and India are rejecting central planning in favor of the free market.

His failure to acknowledge this reality shows how far to the left he's swung. At times he comes close to espousing a classless society, putting him in the company of the 19th- century's utopian socialists.

Social Utopia

``Middle-class societies don't emerge automatically as an economy matures, they have to be created through political action,'' he writes.

This is neither obvious nor intuitive nor even historically correct. As a nation's economy matures from underdeveloped to developed through trade (Krugman's specialty), foreign investment, education, industrialization and competition, a middle-class society is precisely what emerges, unless political action (think corrupt African dictators) interferes.

If what Krugman claims were true, then Karl Marx would be the model for today's emerging economies, not Adam Smith.

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

Last Updated: October 25, 2007 00:05 EDT