|Margaret W. Tarrant (1888-1959), Fairy Market, via sprookjeswereld.|
But what if there are no structural flaws? What if the market is working more or less as it’s supposed to?
That’s certainly the evidence from the last two years....
In 2015, median household incomes rose by 5.2 percent. That was the fastest surge in percentage terms since the Census Bureau began keeping records in the 1960s. Women living alone saw their incomes rise by 8.7 percent. Median incomes for Hispanics rose by 6.1 percent. Immigrants’ incomes, excluding naturalized citizens, jumped by over 10 percent.
The news was especially good for the poor. The share of overall income that went to the poorest fifth increased by 3 percent, while the share that went to the affluent groups did not change. In that year, the poverty rate fell by 1.2 percentage points, the steepest decline since 1999.
The numbers for 2016 have just been released by the Census Bureau, and the trends are pretty much the same. Median household income rose another 3.2 percent, after inflation, to its highest level ever. The poverty rate fell some more. The share of national income going to labor is now rising, while the share going to capital is falling.Obviously it was just a coincidence that these reversals of three decades of increasing inequality happened during the Obama administration's lonely effort to repair the structural flaws in the economy, with its work to raise wages starting with 2009 minimum wage hike, imposing minimum wages on federal contractors, spread of overtime payment to workers who had never had it before, and even finding ways to back union organization; or restraining the economic power of the 1% through raise in top marginal tax rates, ACA taxes on high incomes and unearned income, and Dodd-Frank regulation. Or the exhausting work to bring home ownership back within the means of the nonrich after the mortgage crisis, or the freeing of 20 million people from the stress of not having health insurance along with bringing the rate of health care cost inflation to its lowest level in six decades (including inflation in health insurance premiums).
No, it was the market fairies that did it all! But somehow they didn't stop the rate of productivity growth from declining:
The problem of the middle-class squeeze, in short, may not be with how the fruits of productivity are distributed, but the fact that there isn’t much productivity growth at all. It’s not that a rising tide doesn’t lift all boats; it’s that the tide is not rising fast enough....
If productivity itself is the problem, not distribution, radically different politics is demanded than we’re seeing today. If productivity is the problem, we need more dynamism, not less, more openness, not less, more growth-oriented policies, not more dirigiste and redistributive ones.
But if productivity is the problem, what we actually need is a resurgence of the moderates. The moderate-left policies of Barack Obama must have had something to do with the middle-income gains of the last two years. Moderate Democrats can plausibly argue that government should not be interfering in the markets, but it should be addressing the inequalities that are the result of deeper social forces.Instead of addressing inequality, as we allowed the market fairies to do in 2015-16, which failed to improve productivity growth, we should address inequality, as the Obama administration "must have" done in 2015-16, in order to improve productivity growth.
I think a major problem here is that he wrote these later paragraphs all by himself, while the earlier ones are cribbed from some research he hasn't understood (linking to Times articles, here and here), so he literally doesn't know he's contradicting himself.
Beyond that, wrongness is the problem, as Thornton always says. Because Obama is a moderate in the journalists' Roy G. Biv of leftness and rightness, Brooks can't imagine what the Obama administration did, though he wrote columns about it for eight years.
The sad thing is, there's a good case to make that an aggressive approach to inequality (including racial/ethnic inequalities, what Brooks means by "deeper social forces", which he understands "moderate" Democrats are obsessed with to the exclusion of all else) will end up having a positive effect on productivity, on the theory that the productivity crisis is driven by a crisis in demand, and putting more money in the hands of those who don't have any brings demand back, and we may be seeing this effect in action right now, as a result in part of the Obama efforts, but too late for the 2016 elections.