R>G Revisited

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The Washington Post chose July 4 — a holiday kicking off a three-day weekend — to bury an interesting article, and it’s not hard to see why. Check out Zachary Goldfarb's lede:

After making fighting income inequality an early focus of his second term, President Obama has largely abandoned talk of the subject this election year in a move that highlights the emerging debate within the Democratic Party over economic populism and its limits.

During the first half of this year, Obama shifted from income inequality to the more politically palatable theme of lifting the middle class, focusing on issues such as the minimum wage and the gender pay gap that are thought to resonate with a broader group of voters.

The pivot is striking for a president who identified inequality as one of his top concerns after his reelection, calling it “a fundamental threat to the American Dream, our way of life and what we stand for around the globe.”

The Post is the quintessential establishment newspaper, as in tune with everything DC and its satellite suburbs as it is out of tune with everything else. Generally, the Post house style is to provide justifications for the actions of the powerful and connected, because they must be, on average, wiser and better than the populace — if they weren’t, then how would they have obtained their power and connections?

Imagine a “tax” on power — every year, those in whose hands so much is gathered must surrender a small percentage of it, to be distributed among those who have so little.

With few exceptions, then (notably, the articles on Edward Snowden and national security) you shouldn’t read the Washington Post for intellectual stimulation. Rather, read it for insights into the cramped and contorted psyche of the ruling class — there’s really no better way to place yourself into the sort of mental confines occupied by those who hold federal office.

For instance, to read the paragraphs above, it might seem as if the president is being called out for waffling on a core principle, or worse, betraying a group of people to whom he successfully pandered in the last election. The piece might even be interpreted as a lament for what is “politically palatable” in this country, or for the voters who would put the concerns of the middle class over those of the truly destitute. But the Post would never run even mild criticism without outweighing it with rationalizations or outright praise: thus the focus here is not on the president’s shortcomings, but rather his shrewdness, softening his rhetoric in time for the midterm elections. Where once the president had been determined to bring up inequality, not caring “whether that was a good economic message” (according to that ultimate Beltway insider, the mysterious “person familiar with the process, who spoke on the condition of anonymity in order to discuss private conversations”), he has caved to political reality, and shifted his rhetorical course.

Of course, it must just be a coincidence that this new tack steers the president toward the interests of the DC establishment — and toward Wall Street, to boot. If one thought otherwise, why, there are employees at a whole range of DC-based thinktanks, from the Center for Equitable Grown on the left, to the Heritage Foundation on the right, and plenty more in between, all waiting to give soundbites about how one set of words is so much better than another for this thing called the “American middle class,” which we never actually see in the story, but which must exist given how often these important people discuss it. And of course, even the more radical of Obama’s supporters can delude themselves into thinking that such strategery is necessary so that Obama can devote himself to truly egalitarian reforms in his final two years.

It would be unthinkably gauche for the Post to suggest that Obama’s rhetoric on inequality was never sincere, or to point out that Wall Street has overwhelmingly backed Obama from the start — that’s left for journalists such as Tim Carney and unfavored papers such as the Washington Examiner to do. But all in all, the performance in this article isn’t entirely convincing, as if even the Post was tiring of repeating the talking points of K Street thinktankers and anonymous apparatchiks. Maybe it’s the Snowden files, or maybe it’s the shift to a new generation, or maybe it’s just the unstable position of newspapers with our digital present, but the Post is a little uneasy about just how much the people at the top control. And that means at least some portion of the establishment is uneasy about that as well.

The president might have to stop ordering people locked up or killed without some pretense of due process.

All of this made me revisit the discussion in these pages of Thomas Piketty’s book Capital. Piketty’s massive tome oversimplifies to a single principle, given as r>g, meaning that the rate of return on wealth exceeds the rate of economic growth, at least in Western industrialized nations. Were this true, then income inequality would inexorably increase, and wealth would be concentrated in ever greater amounts in ever fewer hands. Of course, as Mark Skousen and Leland Yeager showed, Piketty’s principle rests on several unsustainable assumptions about the permanence of capital and the assumption of risk.

However, Piketty’s principle makes a lot of sense when viewed as a statement not about wealth, but about political power. Yes, the two are related; in the present day, perhaps fatally so. But that sort of crony capitalism would be impossible without the power consolidation represented by Washington DC — the very arrangement that ensures that power will continue accruing to those already neck deep in it.

Piketty’s preferred solution for his perceived economic problem, a wealth tax, would only increase the flow of money going into, and much more rarely out of, our imperial metropolis. Imagine, however, an equivalent “tax” on power — every year, those in whose hands so much is gathered must surrender a small percentage of it, to be distributed among those who have so little. There are benefits straight off: everyone in office would have to list off all the political powers and assets they think they possess, and these could then be compared to the Constitution to get an idea of how deep the cuts would have to be.

Ideally, the tax would be progressive, so that those with comparatively little scope of power, such as first-year podunk-state congressmen with bottom-tier committee assignments, would only give up, say, a sugar subsidy that helps out a campaign donor. Those at the top, meanwhile, would be expected to turn over much more for the commonweal: the president, for instance, might have to stop ordering people locked up or killed without some pretense of due process.

It would take a while. And realistically, it would never come close to evening things out. But if we had such a mechanism that put power back in the hands of the people — as in, actual control over their own lives, not just as some weak metaphor for voting blocs — we could nonetheless do a great deal to reduce political inequality in the United States. And that would go much farther toward protecting The American Dream, our way of life, and what we stand for around the globe than anything else Obama or any other DC denizen might choose to do.



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