Tag Archives: Obama

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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Barack Obama and Harry Potter

By James Kwak

Helene Cooper of the New York Times wrote a “news analysis” story saying that the challenge for President Obama is this:

“Is he willing to try to administer the disagreeable medicine that could help the economy mend over the long term, even if that means damaging his chances for re-election?”

The problem, she goes on to say in the next paragraph, is that the economy is in bad shape:

“The Federal Reserve’s finding on Tuesday that there is little prospect for rapid economic growth over the next two years was the latest in a summer of bad economic news.”

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The Second Clinton?

On the one hand, last week’s Volcker-fest signaled that the Obama administration wants to get tough on Wall Street. Given that they almost certainly don’t have the votes in the Senate (and probably not the House, either), this may have been a purely political calculation, and it remains to be seen how much substance lies behind the marketing. But even so it was probably smart politics, since it forces Republicans to either go along (which ain’t gonna happen) or come out in favor of hedge funds and proprietary trading.

On the other hand, what the —-? The New York Times reports that Obama is planning to call for a three-year freeze on non-security discretionary spending, which means everything except Medicare, Medicaid, Social Security, the Defense Department, Homeland Security, and the VA–that is, everything except the vast majority of the budget. This at a time when the unemployment rate is at 10%.

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Obama’s First Year

It’s late January and Scott Brown will be the next senator from Massachusetts, which means it’s time for critical retrospectives on Obama’s first year in office. I’m not going to try my own, but simply point you to two I found worthwhile. One, not surprisingly, is by Ezra Klein, who says this is Obama’s problem:

“Obama’s presidency has tried to show, not tell. He’s not given speeches about how government can work. He’s not tried to change minds about the theoretical possibility of government working. He’s tried to make government work. Winning achievements, not arguments, has been at the center of the administration’s agenda.”

Klein realizes the irony, of course; a president who is doing what we say we want presidents to do–govern–is being stonewalled by a right wing intent on winning the next elections, and sniped at by a left wing for compromising too much and for not scoring enough political points. But, as Klein says, whether the fault is Obama’s, Congress’s, or ours, it’s not working.

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Welcome, Barack

So Barack Obama has come around to the idea that big banks need to be made smaller and that smarter regulation (contingent capital, enhanced capital requirements for large banks, resolution authority, etc.) just won’t cut it. Today he proposed limits on market share (measured by a bank’s share of total bank liabilities in the United States) and a prohibition on internal hedge funds, private equity funds, and proprietary trading.

This is great. It means that the administration is moving in the right direction–breaking up big banks–and the president is putting his name behind it. For more on why these are good ideas, see Mike Konczal.

OK, now for the caveats.

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Obama and FDR

Kevin Drum found a great quotation from FDR and what he thought of bankers, monopolists, and speculators. It’s so good he deserves to have you go there and read it.

Drum’s point is that while health care may have required conciliation and moderation, “When it comes to financial regulatory reform, Obama needs to let us know whose side he’s on.” So far Obama has played the peacemaker, the reasonable man in the middle, the man who bridges divides. “My administration is the only thing between you and the pitchforks,” he said last March; note that he brought up the pitchforks, but positioned himself as the center, holding back the crazies.

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