Tuesday, December 10, 2013

The ends justify the medians

It doesn't. The link, to a blog post by James Pethokoukis, suggests the president is one of the "smart people" who disagrees for some perverse reason with James Pethokoukis:
So why do so many smart people keep advocating for a higher minimum wage? The best answer I can come up with is that they think it is more politically likely than the better economic answer: wage subsidies. I recently chatted with economist Noah Smith on this very topic, as part of a discussion of what to do if automation seriously depresses wages in the future.
Oops, wrong Jennifer Rubin! Again!

That is, he's aware that some of the most highly esteemed economists in the business agree with the president's call for a raise in the federal minimum wage, while he opposes anything that would force the Masters of the Universe to shell out any more money to their peons than they are willing to shell out. It's the old Nixon-Reagan-Cheney view that government handouts can buy happiness, as long as the money doesn't come from persons of means. "Reagan proved deficits don't matter." But he doesn't say that those other economists are not esteemed.

Because Pethokoukis may be a dishonest worm, but he relies for a living on his reputation as a conservative economist who is not stupid, and he's not going to endanger that by referring to the economists who urge a minimum wage hike as "economic illiterates". That's Rubin's job, since she has no reputation at all.

I got an enriched perspective on the role Pethokoukis plays in the noise machine from yet another blog post on Obama's inequality speech, this one in the National Review and masquerading as an "article":
President Obama’s big speech on inequality last week... described the Reagan revolution as the moment when the postwar “social contract began to unravel” and “trickle-down ideology became more permanent,” leading to decades of dangerously unbalanced economic growth. The rich got even richer as middle-class incomes stagnated. The Age of Inequality had begun.

Actually, middle-class incomes rose roughly 40 percent from 1979 through 2007, and nearly 50 million net new jobs were created. (As President Reagan said on leaving office, “All in all, not bad, not bad at all.”)
Actually, President Reagan left office in 1989, not 2007. As to the income growth, it really depends how you plot the numbers. For example, the simple representation of median incomes based on Census Bureau figures (Economics Without Greed):

Or in inflation-adjusted terms on an index scale where 1979 = 100 (Modeled Behavior):

Or in simple percentage terms on after-tax income (Center on Budget and Policy Priorities, via Cadmus Journal):

All of which suggest that Pethokoukis must be defining "middle-class" in some unusual way, because I don't see any 40% increases going on here. Note how the chosen time period includes the recovery from Nixon-Ford stagflation experienced in the last two years of the Carter administration, but cuts out the catastrophic losses of the last two years of G.W. Bush. It also masks the fact that Reagan is only marginally responsible for any of the gains. This is clearer in the employment numbers for the period—gains for the 1980s only start with the tax hikes forced by Democrats on Reagan in 1983, and then die in the 2000s when young Bush begins applying the Reagan principles more strictly than Reagan himself did (via kat5dotpostfix):

Pethokoukis doesn't reveal where his own numbers come from, or how they're configured; the thing is, he's not really arguing for the position, he's just shouting it out as a sort of tribal identifier, as he might do on Sunday morning TV. The purpose is to get the National Review Readers sputtering in fury, leaving spit gobs of spite in the comment thread, and hopefully writing a check to his overlords at the American Enterprise Institute.

Then it's over to the Land of Pernicious Equality, better known as Foreign:
Sure, Japan has less income inequality. But it also has less dynamism. Over the past two decades, Japan’s per capita GDP has fallen from 85 percent of America’s to 71 percent. Indeed, one of Prime Minister Shinzo Abe’s “three arrows” of economic reform is injecting more competition and churn — creative destruction, really — into the Japanese economy. 
Then there’s France, which continues to sniff at the “Anglo-Saxon” style of capitalism. Taxes there are high and headed higher, unions are strong, and inequality is low. Its per capita GDP is also only a bit more than two-thirds of America’s, and France is hardly anyone’s idea of a dynamic economy pushing the technological frontier.
The tell here is the use of the per capita GDP statistic as a solitary and unexamined index of the country's prosperity. Because the money we have that pushes our mean up so we can lord it over Atsuko across the Pacific and Jean-Alphonse across the Atlantic is money we in fact don't have, you and I. It's the money parked by our billionaires in the Cayman Islands or otherwise creating jobs for nobody (except the ununionized teachers in their pet charter schools and gardeners on their estates). It's not so much that theirs has gone down as that ours has gone up, straight into the pockets of Michael Bloomberg and Paris Hilton.

Also, if France is "hardly anyone's idea of a dynamic economy" in his view that could be because the Wall Street Journal and Forbes and CNBC keep telling them it isn't one.
From these examples, we can reasonably conclude that if America had rejected the Reagan revolution, we might well have less inequality today, but we would probably also have less wealth, entrepreneurship, innovation, and, when you think of it, less fun.
You really cannot reasonably conclude anything of the sort. Not even in a high school debate. No actual premises have been presented.

I am, unlike President Obama, an economic illiterate myself, you know, and I don't let that bother me too much.  As a person with a good deal of experience in social science I allow myself to regard economics as a discipline that is known not to work all that well anyway, and cultivate an unembarrassed disrespect. But you really don't have to be Paul Krugman to see what kind of shit this stuff is full of.

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