Demanding a federal budget that is fair, responsible, and meets our nation's priorities

Friday, June 15, 2007

Sorry, More on Hamilton

Boy, this Hamilton Project paper is fascinating. Here's another paragraph to examine. It's a window into the values of the centrist economist.

At some point inequality in outcomes becomes so great that the quintessential American promise of equality of opportunity becomes unattainable. As Bradford DeLong (2007) has observed, "The very first thing that any society's wealthy try to buy with their wealth is a head start for their children. And the wealthier they are, the bigger the head start." No one begrudges any parent seeking the best opportunities for his or her children. But our economy and society work best when more opportuni-ties are available to all—a goal that progressive taxation can help serve.

Translation: inequality is not a problem because, well, either equality of opportunity or outcome has any inherent value. Equality is worth something if and only if it makes the economy more efficient.

Finally, extreme inequality threatens to undermine political support for a competitive market economy, the most successful recipe ever found for generating economic growth. Former Federal Reserve chairman Alan Greenspan (2007) has argued that "income inequality is where the capitalist system is most vulnerable. You can't have the capitalist system if an increasing number of people think it is unjust."

It does not occur to them that perhaps inequality is unfair- that those who have gained the most are being compensated for things they have not done, and that those who have not gained are not being compensated for what they do. But isn't that what the decoupling of productivity and median income signifies? Workers are more productive, but only the highest-paid are earning more.

No, that's impossible- the Daddy-market may be stern, but it is always fair.

Anyway, what's at issue here is the perception that the economy is unjust. The public will upset the proper functioning of the economy if they think it is unjust. Who cares if -god forbid- they're right?

So the Hamiltonian elevates GDP growth (AKA efficiency, I think) over all. It doesn't matter who gets what, or why they get it- what matters most is that the economy keeps growing and that the market is left alone.

Perhaps this is another reason why their prescriptions for what ails America are so modest, and why they rule out vigorous government intervention. They don't think there's much of a problem.