Paul Krugman Surrenders to Washington
Paul Krugman's column last week was depressing. I don't mean depressing in the way some people find Krugman depressing -- "there goes that arrogant such and such saying more stuff." I mean grim and unsettling. It seemed one of our premier economic thinkers was throwing in the towel on the U.S. economy.
Krugman blamed technology for exacerbating inequality before dismissing the commonly espoused remedy -- more education -- as a false god.
Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).
So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.
The argument for a more progressive tax code is pretty straightforward: An aging population, shabby public infrastructure and rampant childhood poverty demand it. But the notion that redistribution is the only arrow left in the quiver is pretty alarming. The golden age of American labor, when factory workers churning out steel and autos were paid enough to send their kids to college and rent a summer cottage by the lake, is over. But is an economy with room for a thriving -- OK, marginally secure -- middle class a 20th century artifact, never to be seen again?
I spoke with a couple of economists whom, I confess, I selected precisely because I thought they might be peeved by Krugman's column (although both stressed their respect for the Princeton economist).
"Is education an individually sound investment? Yes, absolutely," said David Autor of the Massachusetts Institute of Technology, via e-mail. "Would getting more Americans through college decrease inequality? Certainly. Is education an omnibus solution to U.S. inequality? Definitely not. But that's not an argument against education!"
Labor's declining share of the economy, Autor said, argues for more education. The educated, he said, did relatively well in the Great Recession and continue to receive "a large share of the pie." As their incomes grow, they also acquire capital in the form of stock and other holdings.
In other words, if inequality is a runaway train, educated workers aren't the ones tied to the tracks.
Jeff Madrick, a senior fellow at the Roosevelt Institute, isn't so sure. Increased supply inevitably devalues a college education, he said. "You know what would happen if we had more college grads," he said, "they'd be making less." But Madrick also touts a laundry list of other policies to battle inequality -- a minimum-wage hike, unionization, aggressive fiscal policy and revisiting trade policies that he thinks have stranded too many workers.
Yet even if you agree with such prescriptions, politics has rendered them moot; Republicans oppose them all. Even higher-education funding is a near-impossible sell. So maybe Krugman's column was especially depressing because it reeked of accommodation to a narrow political reality. (Is it even necessary to point out that redistribution, too, is currently out of bounds?) If tomorrow some genius discovered a magic cure for inequality, what are the chances Washington would agree to use it?
(Francis Wilkinson is a member of the Bloomberg View editorial board. Follow him on Twitter.)