The ever increasing concentration of wealth in the U.S. is alarming. Trends such as this don't happen by accident. They are the result of deliberate fiscal policies. PAUL KRUGMAN: GRADUATES VERSUS OLIGARCHS Ben Bernanke's maiden Congressional testimony as chairman of the Federal Reserve was, everyone agrees, superb. He didn't put a foot wrong on monetary or fiscal policy. But Mr. Bernanke did stumble at one point. Responding to a question from Representative Barney Frank about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education." That's a fundamental misreading of what's happening to American society. What we're seeing isn't the rise of a fairly broad class of knowledge workers. Instead, we're seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite. I think of Mr. Bernanke's position, which one hears all the time, as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group — that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don't have these skills. The truth is quite different. Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year. So who are the winners from rising inequality? It's not the top 20 percent, or even the top 10 percent. The big gains have gone to a much smaller, much richer group than that. A new research paper by Ian Dew-Becker and Robert Gordon of Northwestern University, "Where Did the Productivity Growth Go?", gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains. But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that's not a misprint. Just to give you a sense of who we're talking about: the nonpartisan Tax Policy Center estimates that this year the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The center doesn't give a number for the 99.99th percentile, but it's probably well over $6 million a year. Why would someone as smart and well informed as Mr. Bernanke get the nature of growing inequality wrong? Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it's true, but because it's comforting. The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system — and better education is a value to which just about every politician in America pays at least lip service. The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story. Should we be worried about the increasingly oligarchic nature of American society? Yes, and not just because a rising economic tide has failed to lift most boats. Both history and modern experience tell us that highly unequal societies also tend to be highly corrupt. There's an arrow of causation that runs from diverging income trends to Jack Abramoff and the K Street project. And I'm with Alan Greenspan, who — surprisingly, given his libertarian roots — has repeatedly warned that growing inequality poses a threat to "democratic society." It may take some time before we muster the political will to counter that threat. But the first step toward doing something about inequality is to abandon the 80-20 fallacy. It's time to face up to the fact that rising inequality is driven by the giant income gains of a tiny elite, not the modest gains of college graduates. http://freedemocracy.blogspot.com/2006/02/paul-krugman-graduates-versus.html
Paul Krugman critiquing Ben Bernanke's economic analysis is tantamount to gifford1967 critiquing Michael Jordan's jump shot.
Can you explain why? at least he managed to come up with an argument instead of just bashing his character. The failures in your party must really be hurting if all you can spew is hate.
It's really tiresome to hear comments like this from you. If you have a problem with the article or research please tell us. Otherwise keep your insults to yourself.
geez if you guys all wouldn't rush into call him out everytime he says something inflammatory............. take the bait much?
Zero substance, evidence, or research to back up your claim, makes it meaningless to this debate. You have brought nothing to this argument but baseless attacks on Krugman. Back it up with something or don't waste our time.
Why does it matter to the common man if some tiny fraction of the country gets richer at a much faster rate than everyone else. It is not like this is a zero-sum game. The other 99.99% of American's are not getting poorer to cover the difference. If I am working with someone and we both get a raise, but my raise is smaller than theirs, sure I wight be envious of that larger raise, but I would still be happy to be getting my own raise. It would not cast me into a deep depression to know that while I am doing well, someone else is doing better. I don't care about income desparity, lets look at median prosperity instead. Isn't that a better indicator for how the average man is doing than seeing how far ahead Bill Gates can get?
But the poverty rate has increased. Children living in poverty has increased, so it is a case of a widening gap. A few insiders with connections get really great benefites and make a ton of money. They continue to have influence and tip the scales more in their favor. Meanwhile more people are falling below the poverty line. The divide gets bigger. That is where the concern comes in.
Really? Let us look at some facts... Paul Krugman according to wikipedia... http://en.wikipedia.org/wiki/Paul_Krugman He obtained a Ph.D. from MIT in 1977 and taught at Yale, MIT, UC Berkeley and Stanford University before joining the faculty of Princeton University, where he has been since 2000. From 1982 to 1983, he spent a year working at the Reagan White House as a member of the Council of Economic Advisers. Ben Bernanke according to wikipedia... http://en.wikipedia.org/wiki/Ben_Bernanke Born in Augusta, Georgia (to Philip, a pharmacist, and Edna, a schoolteacher), he graduated from high school (with 1590 out of 1600 on his SAT) in Dillon, South Carolina in 1971; from Harvard University (summa c*m laude) in 1975; and earned his Ph.D. at the Massachusetts Institute of Technology in 1979. He taught at Stanford University from 1979 until 1985, and has since then been a professor in the Department of Economics at Princeton University. He chaired that department from 1996 until September 2002, when he went on public service leave. They got their Ph.D.s from the same school two years apart, taught at the same level, and the biggest difference between the two is that Krugman has more public policy experience. I would say instead that "Paul Krugman critiquing Ben Bernanke's economic analysis is tantamount to Larry Bird critiquing Michael Jordan's jump shot." But then again, I have the ability to comprehend the written word and analyze facts.
Are you sure? Federal Reserve says average real income of American families fell 2.3% in 2001-2004; Median income at $43,200 http://www.usatoday.com/money/economy/income/2006-02-23-fed-incomes_x.htm
If the super-rich are the ones who realize virtually all of the gains from the improvements in the economy, then it does make a difference. The indicator that you mention, median prosperity, was mentioned in this piece and they pointed out that college graduates have seen their "prosperity" improve by 1% a year. Even if that accounts for inflation, it is a pittance compared to the nearly 500% that those in the top 0.01% have gotten as a result of their ability to buy massive tax cuts and government handouts.
When the rich get too rich, and the peasants get too poor; then the peasants tend to revolt. The rich in this country should also take note that the peasants own guns in this country. Maybe there is a brightside to the NRA's influence.
Besides winning 5 of the last 7 Presidential elections and currently controlling both houses of Congress?
Since there seems to be high demand for my analysis of this article, I will now provide it. The article is a joke. Krugman chooses to pitch a hissy-fit over the top 0.01% of Americans who are succeeding in building great wealth. Typical liberal demagoguery in which he screams that rich people are evil. Yawn. He grossly misrepresents data to make it looks like one 4 year period in time (which he conveniently starts at the end of the tech bubble) where real income drops is much worse than the 30 year period of rising real income. That is completely irresponsible on his part and meant to rile up the ignorant folks (liberals) looking for a reason to get mad at rich folks. Another yawner. Hey Paul, 30 years of rising real income adds up to a hell of a lot more than your silly 4 year period starting at the tech bubble's peak. To top it off, he has to throw in a political jab at the end of his article. Completely expected. I can't believe so many liberals read this clown. I guess they just don't know any better and like reading about things that bash the US.
Your response doesn't really make too much sense. It is precisely because the 4 year trend is different than the 30 year trend that it is an issue. In those last 4 years there have been policies that favor the wealthiest people. Krugman accurately shows that since those policies have been in enacted just who has gotten the most benefit. If those policies had been in effect all 30 years then that would be relevant. But your analysis actually fits in nicely with the point that Krugman is making.
I think that the fact that the rise in income over the 30 year period was so slight (just over 1% a year) was what he was writing about, not just the last 4 years.
You're assuming that the policies of the last 4 years (actually 2001-2004, not the last 4 years) have increased the top 0.01%'s wealth. Unproven. General macroeconomic climate has changed significantly. The fact that he even chooses to focus on only 0.01% of America is absurd. Talk about having zero perspective.
while it isn't 100% proven to be causual it is true that since the policies have been active the .01% have gone up, while the poverty level has also increased. In other words the poor are getting poorer, and the rich are getting richer.
