For 99% of Americans, the Obama recovery has been no recovery at all

Posted by on Mar 05, 2012 at 4:58 pm

1. So this isn’t exactly an endorsement of the Obama recovery is it? I mean, for 99% of Americans there has been no recovery, according to Saez. In other news, Wall Street paid its employees more than $40 billion in bonuses the past two years.

2. Saez embraces and promotes the back-to-the-1950s nostalgia economics of Obamanomics and modern liberalism: “A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II – such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality.” Indeed, Saez thinks the top marginal tax rate should more than double to 80%.

Economist Daren Acemoglu explains the forces driving inequality much differently and more persuasively: “One is that technology has become even more biased towards more skilled, higher earning workers than before. So, all else being equal, that will tend to increase inequality. Secondly, we’ve been going through a phase of globalisation. Things such as trading with China – where low-skill labour is much cheaper – are putting pressure on low wages. Third, and possibly most important, is that the US education system has been failing terribly at some level.”

3.  As I have mentioned before, I am dubious of the accuracy of the picture that Saez’s long-term numbers attempt to present.

4. Saez’s analysis seems to suggest the inequality numbers are going to climb all the way to the sky. Isn’t it more likely that we are approaching some sort of a ceiling, especially given a) rising labor costs in China, b) the rebound in U.S. manufacturing jobs, particularly in the energy sector, and c) the decline in labor force participation?

5. Just what is the right level of inequality? And how much economic growth is Saez willing to sacrifice to get it?

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