Annals of Derp: Bobo's (Political) Party

Louis Wolheim as Sgt. Bulba in Tempest (1928). 

David Brooks is in full campaign mode now, looking for quirky and intellectual-sounding reasons for voting Republican without saying so and supporting policies like means-testing Medicare, supplementing the wages of the working poor with taxpayer money so Walmart and McDonalds can continue to pay slave wages, and shifting immigration from preserving families to draining other countries' brains, because sisters and cousins and aunts are a dime a dozen but we can never have too many English-deficient computer coders and anesthesiologists. And the long-cherished circle-squaring fantasy of a "progressive consumption tax", though he doesn't really believe he'll ever catch that unicorn.

Today's column prompt is an extremely interesting essay by William Galston of the Brookings Institution, "The New Challenge to Market Democracies", which works from the blandest and broadest of analyses (his bothsiderism is international, pitting suprapartisan pictures of statist Europe/Japan and corporatist United States against each other) to rather radical Pikettist prescriptions: in order literally to save liberal democracy from authoritarianism, the US needs to start with

• insisting on truly full employment as a policy goal, taking the inevitable higher wages out of corporations' excess profits, which they can easily afford;
• taxing firms that share the benefits of productivity gains with their workers at a lower rate than firms that don't, because only wage increases across the middle class can promote the needed growth; and
• taxing the income sources of the wealthy (i.e. capital gains) at the same rates as those of the rest of us (i.e. wages), unless they are "the result of transactions that increase the aggregate of productively invested capital" (i.e. as opposed to gambling in the Wall Street casinos, flipping condos, or collecting interest from a trust fund).

(Followed in due course by some other stuff, not all of which a liberal would rejoice in, but these three primary thoughts are pretty strong stuff coming from a deeply establishmented kind of Democrat.)

It is far from clear that Brooks has read Galston's essay up to this point, though. I don't think he'd want us to read it if he knew what it said. In fact I'm pretty sure he hasn't read it, because he doesn't need to; he's already figured out from the first few paragraphs that Galston is wrong:

Galston’s essay is about how economic problems degrade the national spirit and lead to a loss of faith in the whole enterprise. I think the malaise can be pinned down more precisely.

Galston is wrong (chides world-famous authority Professor Brooks, gently but firmly) because he calls it an economic problem, which is such an unpleasant way of looking at things; he should have said it's a moral problem, along lines Brooks has sketched before; that we're suffering from a "spiritual" or emotional "recession":

In our meritocratic culture, satisfying and stretching work has become a psychological necessity. More than ever before, we are defined by what we do. If you are of prime age and you are not in the labor force, or engaged in some deeply stretching activity like parenting, then you will begin to feel drained inside. If you are in a dysfunctional workplace with bad personal relationships and no clear purpose, a core piece of you will begin to degrade. If you are not earning enough money so you can feel respected, and live without desperate stress, you will begin to lose confidence and élan.

And that is what’s happening today.... The country is palpably in the middle of some sort of emotional recession.

Here he's no doubt projecting, because he hasn't "stretched" himself in any way in years and I'm sure that enough of the people he works with have his number by now, down to the interns at the Times and the students at Yale, that any time he shows up at an office he's paid to work at he feels surrounded by a chilly, acid fog of contempt. He's been feeling a bit recessed. I don't want to dwell on how stupid this is.

Unanswered, anyhow, is the question how his problem, should it in any important sense exist, has anything to do with the nostrums he suggests, except that he vaguely believes there should be more jobs (to his credit he favors government deficit spending on infrastructure, too, having evidently forgotten how obsessed he is with getting rid of the deficit, and he's really mystified as to why Democrats and Republicans haven't voted for it already) and better-paying jobs, which he expects can be obtained through education, though he doesn't say where the money for the education is going to come from. How you get that stretching effect is left blank.

And the one percent? What's that?

as economist David Autor has shown, if you took all the wealth gains the top 1 percent made between 1979 and 2012 and spread it to the bottom 99 percent, each household would get a payment of only $7,000. But if you take a two-earner, high-school-educated couple and get them college degrees, their income goes up by $58,000 per year. Inequality is mostly a human capital problem.

Although the magnitude of the college premium is a little unclear given that Autor selects his population in a somewhat strange and special way—

Mary C. Daly and Leila Bengali, "Is it still worth going to college?" These numbers are probably lower than Autor's because Autor includes only full-time, full-year workers in his calculations, but it's impossible to guess how including the unemployed and underemployed would have affected his results.

Autor's chart also uses an imaginary household, consisting of the simple sum of 1 median man plus 1 median woman, as if all the people in the population were married to each other, at exactly the appropriate income ranks, and as if marriage itself had no effect on earnings. I really can't believe he does this, but I think it might be a good example of why I have no respect in general for economists.

—and as Galston notes, the wages of the BA-holders haven't gone up (in inflation-adjusted dollars) in three decades. That $7000 that seems like such a bagatelle to Brooks would mean a lot to most of us. "You really want the boss to have to give up his lovely yacht just so you can get a measly $7000?" "You bet!"

Note that Autor explicitly gets his results by ignoring the one percent, because paying attention to them is too discouraging:

the top 1 percent is important, but focusing on the top 1 percent conveys the message that the game is all rigged, that if you’re not in the elite stratum, there’s nothing to shoot for. And that’s just not the case. 

But that's not all: a primary association, Autor himself finds, of the college premium is the deceleration of growth in supply of college graduates in the US; as you'd expect, when supply grows slower, demand grows faster, and so a relatively smaller pool of fresh graduates gets to ask for more money. Following Brooks's simple program of getting everybody a BA will thus obviously push the wages of the 99% downwards, more equal to each other, and less equal to those at the top of the heap; you can see this effect in the Daly and Bengali chart above, for the high-growth years from 1968 to 1979, when the number of degree holders was growing especially fast and the width of the college premium fell fairly drastically.

Finally, the decades from 1980 to 2012 were decades, as we've been reminded, of conspicuously slow growth in the US economy, and that slow growth is associated according to the Piketty and Saez results with dramatically increased concentration of capital measured by return on investment (r > g). There's three centuries of reasons to suppose that a lower rate of inequality would have been accompanied by a higher rate of growth, as in the 1950s and 1960s, and growth of that kind would have produced much more than that $7000 per person that got bundled into billion-dollar packages for the very rich, if it were shared more equitably among us all.

Or not, if the Piketty-Saez results are no good, but they're the best we have—I don't see how you get a more empirically valid result by omitting pieces of the data the way Autor does. And growth has to be part of the equation. I'm just saying the economy in the good times used to give you a huge amount more than $7000 of gains per person over a 30-year period, and why it didn't provide more than that from 1979 to 2012 (not just why it all went to the one percent) is a real problem for which only Piketty and Saez have proposed a plausible answer. Has Autor, or Brooks, got a hypothesis?

Galston's essay is not, in fact, about "how economic problems degrade the national spirit and lead to a loss of faith in the whole enterprise". It's about how the failure of liberal democracy to overcome inequality can lead populations to reject it for more authoritarian models. Brooks, in distorting this message, is doing yet another favor for his real party, the ones who wouldn't mind such an outcome.