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Home Publications Blogs Beat the Press Robert Samuelson Tells the Middle Class and Poor that They Should Stop Expecting to Have Decent Lives Because His Rich Friends Want All the Money

Robert Samuelson Tells the Middle Class and Poor that They Should Stop Expecting to Have Decent Lives Because His Rich Friends Want All the Money

Sunday, 28 April 2013 20:47

That is the best way to describe Robert Samuelson's column in Monday's Washington Post. I could go through the piece in detail and offer point by point rebuttals, but what's the point in killing innocent electrons? We've been here before.

Let's just take the first and most obscene of his inaccuracies. He tells readers that the idea that the non-rich could enjoy decent living standards rest on unrealistic assumptions beginning with this one:

"First, that economists knew enough to moderate the business cycle, guaranteeing jobs for most people who wanted them. This seemed true for many years; from 1980 to 2007, the economy created 47 million non-farm jobs. The Great Recession revealed the limits of economic management."

Actually, many economists do know how to restore economic growth (it's simple, spend money), however people like Robert Samuelson and his friends at the Washington Post are doing everything they can to prevent the government from taking the steps needed to restore the economy to full employment. FWIW, they also helped to bury the arguments of those of us warning of this disaster before the housing bubble grew large enough so that its collapse would wreck the economy.

(It is bizarre that Samuelson picks 1980 as the beginning of his era of prosperity. This was actually the beginning of three decades of wage stagnation for most of the population and the end of three decades of broadly shared prosperity.)

The other points in Samuelson's diatribe are equally off the mark, but who cares. He just wants to convince ordinary people that they should get over the idea that they have any claim to the country's wealth; it's all going to the rich.


Okay, I won't be lazy here. Let me correct a couple of Samuelson's other major end of entitlement claims. He tells readers:

"Government could pay for new programs by taking a fixed share of rising incomes. In reality, greater income inequality has dampened middle-class living standards, while existing programs — soaring health costs and the effects of an aging population — have claimed an ever-larger share of taxes.

Actually higher taxes for working people are hardly new. In 1960 the payroll tax was 6.0 percent (combining employee and employer contributions), by 1990 it had increased by 9.35 percentage points to 15.35 percent. Samuelson is probably saying that this tax increase didn't bother people because it was offset by reductions in the corporate income tax. (Actually there were also reductions in excise taxes, mostly tariffs, and the earned income tax offset this increase for many low income families. However, many moderate income families ended up with a substantial net tax increase from this rise in the payroll tax.)

Here's another part of Samuelson's end of entitlement:

"Fourth, that lifestyle choices — to marry, have children or divorce — would expand individual freedom without inflicting adverse social consequences. Wrong. Family breakdown has deepened poverty and worsened children’s prospects. About 30 percent of children live with either one parent or no parent; on average, their life chances are poorer than those in two-parent households."

There are two problems with this one. First the rise of single parent families is largely a 1970s story. There was little increase in the 1980s and there has been some movement in the other direction in the last two decades.

The other problem is a question of causation. Suppose that it's illegal for people to get divorced. This means that in marriages where the husband is an alcoholic, abusive to his spouse and kids, or in other ways harmful to the family, we see that children are being raised by married couples. Now we change divorce law so that many of these families break up and children with unhelpful fathers are now being raised by single mothers.

In this case the data would show an improvement in outcomes for two-parent families and no clear effect on single parent families. This would be true even if getting the father out of the house was beneficial to the kids. In other words, the data in this case would show single parent families leading to worse outcomes for kids even if the children actually benefited from the divorce. (A third point is that many children in countries like Germany and Sweden are raised by single parents with little obvious handicap relative to those raised by two parent families. That suggests the problem is the larger support structure provided by society, not single parents.)

Comments (9)Add Comment
written by TK421, April 28, 2013 10:30
"The Great Recession revealed the limits of economic management"

So if the economy crashes, that means we should give up on trying to manage the economy. For instance, if the US economy cratered in, say, 1929, there would be no chance of figuring out a way to create 47 million jobs in a 27-year period. Am I reading this correctly?
written by joe, April 28, 2013 10:40
If he would have gone back to 1977, he could have said 56.469 million non-farm jobs and had an even 30 year period. Then he would have had to acknowledge the strong job growth under the Carter presidency.
written by jr, April 29, 2013 12:20
No, the great recession revealed the consequences of no economic management.
Samuelson Discovers Scarcity as Basis of Economics: Polio and Unemployment
written by Last Mover, April 29, 2013 8:29
The Great Recession revealed the limits of economic management."

Indeed. For example consider how the polio outbreak of 1952 revealed the limits of managing a killer negative externality with polio vaccine and mass innoculations. It wasn't eliminated in America until 1979 after a final outbreak in Amish communities.

Like the outbreak among Amish that could not be managed then, the current outbreak of unemployment cannot be managed today.

There's no point in trying anymore. Limits are limits as any student of economic scarcity like Samuelson knows.

The Great Recession is sending the same market signal as the Amish communities, where net benefits of government intervention go negative at the margin because no more lifeblood can be squeezed from the turnip of private sector salvation.

Like polio, unemployment is a natural negative externality of a functioning market that must be allowed to run its course. Before things get better they must be allowed to get worse in order for the austerity vaccine multipler to work endogenously from within.
written by skeptonomist, April 29, 2013 10:01
The conclusions in Samuelson's column are mostly drivel as usual, but if his remark about the futility of managing the economy is confined to leaving the management up to the Fed, it makes a lot of sense. The Maestros refused to recognize the housing bubble or their responsibility to control it, as Dean constantly reminds us. This is not surprising given that they did everything they could to create the bubble in the first place, as an antidote to the recession of 2001.

The main thing that has to be done to manage the economy is not to turn it over to Maestros, but to strictly regulate banking and finance, and this kind of management decreased over the last 30 years and more.
expon trend fail
written by In Hell's Kitchen (NYC), April 29, 2013 10:37
econospeak comment on this
written by pjm, April 30, 2013 12:54
written by greg, April 30, 2013 11:49
The top 1% of the population now get 24% of the personal income of the nation. They used to get, in the 1970’s, 9% or so. Let’s say the difference is 15%.

What is that 15%? Well, on the average, we, of the 99%, would each be 15% better off. That works out to $7500 for somebody earning $50,000. $1500 for someone making $10,000, etc. The reader can calculate how much the wealthy have skimmed off of his income, and measure the value of his anger.

See: http://anamecon.blogspot.com/2...st-of.html

That's where the stagnation for the rest of us has come from. The wealthy have managed the economy so as to keep the past 40 year's increase in the nation's wealth to themselves. And Samuelson wants us to just accept this travesty of economic justice.

written by peter b gillis, May 05, 2013 12:50
Of course it shows the limits of economic management: the limit is that if you do the wrong thing you crash the system. It's a pesky limitation, but one which many people have resigned themselves to.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.