Tag Archives: inequality

The Problem with Personality Contests

By James Kwak

This presidential election has come down to a referendum on Donald Trump, the man muppet whatever he is. Tactically speaking, that’s probably a good thing. Trump is an absolutely horrendous life form, and as long as he can’t get more than 43% of the vote, he almost certainly can’t be president. (Gary Johnson just isn’t that appealing.) Of course, focusing on personal attributes has been the Hillary Clinton strategy all along, even dating back to the primaries, when she focused on her experience and seriousness in the face of Sanders’s popular proposals (single payer, free college, etc.). It’s been even more true of the general election, in which Clinton has gone out of her way to portray Trump as a unique, rather than as the culmination of the evolution of the Republican Party.

Ordinarily we bemoan the focus on personalities rather than issues. (How many millions of times have Democrats complained about voters who chose George W. Bush because they would rather have a beer with him than Al Gore or John Kerry?) This time around, we seem happy enough with the personality contest, either because it increases Clinton’s chances of winning, or because Trump is so toxic that, this time, personality really does matter.

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Is Inequality Rising or Falling?

By James Kwak

Last week, Council of Economic Advisers chair Jason Furman took to the Washington Post to announce that President Obama has “narrowed the inequality gap.” Furman’s argument, bolstered by charts and data from a recent CEA report, has won over some of the more perceptive commentators on the Internet, including Derek Thompson, who concludes that Obama “did more to combat [income inequality] than any president in at least 50 years.” In 538, the headline on Ben Casselman’s summary reads, “The Income Gap Began to Narrow Under Obama.”

But is it true?

I already wrote about the key misdirection in Furman’s argument: his measures of reduced inequality compare the current world not against the world of eight years ago, but against a parallel universe in which, essentially, the policies of George W. Bush remained in place. (This is not something either Thompson or Casselman fell for; they both realized what Furman was actually arguing.) Today I want to address the larger question of whether inequality is actually getting worse or better.

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This Chart Does Not Say What You Think It Says

By James Kwak

[Note: Usually I post things here first, then on Medium. This time I did the opposite.]

Jason Furman, chair of the Council of Economic Advisers, is in a celebratory mood:

Looking at that chart, and at Furman’s triumphant tweet, you would think inequality had declined during the Obama administration.

Not so fast.

The first thing to understand is what that chart actually says. It does not say that the top 0.1 percent’s share of national income has gone down by almost one percentage point (rightmost column) since Barack Obama took office, nor does it say that the bottom 20 percent’s income share has gone up by more than half a percentage point (leftmost column).

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Confused About Taxes

By James Kwak

In the Times a couple of days ago, Gregory Mankiw made a half-hearted case for eliminating the estate tax that was so weak I’m not even sure he convinced himself. The core of his argument is that the estate tax violates the principle of horizontal equity, according to which “similar people should face similar burdens.” The problem, on his view, is that between two rich couples that each amass $20 million, the Profligates who consume their wealth before death end up paying lower taxes than the Frugals who maintain a modest lifestyle. “To me, this does not seem right,” Mankiw concludes.

First of all, it’s not even clear why this example violates horizontal equity. The Profligates and the Frugals are not “similar people”—Mankiw specifically constructed the example that way. They may have each earned the same amount of money, but they have vastly different consumption habits.

Second, it’s not clear that the Frugals are paying more tax than the Profligates. Their estate will pay higher taxes, but by then they are dead; the estate tax does not directly limit their personal consumption in the slightest. In fact, the ones whose estate will pay the tax are the ones who apparently are not interested in consumption in the first place. Now, the defense of Mankiw is that the Frugals do care about how much money they can pass on to their children, so the estate tax does affect their utility. But that brings up the third, and most important point . . .

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Tax Policy Revisionism

By James Kwak

In an otherwise unobjectionable article about The Piketty, the generally excellent David Leonhardt wrote this sentence: “In the 1950s, the top rate exceeded 90 percent. Today, it is 39.6 percent, and only because President Obama finally won a yearslong battle with Republicans in early 2013 to increase it from 35 percent.”

Is “yearslong” really a word?

But that’s not what I mean to quibble with. It’s that “yearslong battle with Republicans.”

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Where Do You Want to Be Born?

By James Kwak

That seems like a nonsensical question. Of course, each of us born where he or she was born, and we didn’t have much choice in the matter. But, philosopher John Rawls asked, if you lived behind a veil of ignorance, not knowing what position you would occupy in the socio-economic hierarchy, what rules would you choose to govern society?

Rawls was reasoning from a situation in which people could decide on any set of rules.* In the real world, the set of existing countries gives us a limited set of options to choose from; among those, if you didn’t know if you were going to be rich or poor, where would you choose to be born? On Friday, I was discussing this question with a scholar who is in the United States for a year, and one thing we noted was the instinctive tendency of many Americans to assume that we must be the best at everything and have the best of everything in the world (best health care, best Constitution, best hockey team, etc.).

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The Desperation of the Vanishing Middle Class

By James Kwak

I recently finished reading Pound Foolish, by Helaine Olen, which I discussed earlier (while one-third of the way through). The book is a condemnation of just almost every form of personal financial advice out there, from the personal finance gurus (Suze Orman, Dave Ramsey) to the variable annuity salespeople to the peddlers of real estate get-rich-quick schemes to Sesame Street‘s corporate-sponsored financial education programs. (Of them all, Jane Bryant Quinn is one of the few who generally come off as more good than evil.)

A lot of what’s going on is just semi-sleazy entrepreneurs trying to make a buck, taking “advice” that is equal parts routine, wrong, and contradictory and packaging it into attractive-looking books, TV shows, and in-person events. A lot of the rest is marketing by the real financial industry, which either (a) wants to make a show of promoting financial education so people will think they are good or (b) wants to teach people that they need their products. (You pick.)

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