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Home Publications Blogs Beat the Press Robert Samuelson Wants the Government to Stop Trying to Help People Into the Middle Class

Robert Samuelson Wants the Government to Stop Trying to Help People Into the Middle Class

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Monday, 24 September 2012 04:55

His piece today notes that many people who start college don't finish and that many people got themselves into bad mortgages that they could not afford in the housing bubble years. He therefore concludes that government really cannot do much to ensure low income people a path to the middle class:

"What also cannot be wished away are on-the-ground realities that impede middle-class status for more Americans. Only one-third of children born to the poorest fifth of Americans graduate high school with at least a 2.5 grade-point average and without having become a parent or been convicted of a crime, reports a Brookings Institution study. Brookings economist Isabel Sawhill notes that gaps have widened between the children of poor and well-to-do families on school test scores, college attendance and family formation. In his book “Coming Apart,” conservative scholar Charles Murray makes similar points.

Government has only limited power to offset these disadvantages. The appeal of the American Dream is that it’s disconnected from nasty facts and choices."

Of course many of the realities on the ground reflect deliberate government policy to redistribute income upward. In the last three decades the government has done everything possible to remove barriers that obstruct manufactured goods from entering the United States. This policy coupled with the over-valued dollar threw millions of manufacturing workers out of work and put downward pressure on the wages of less-educated workers. Instead the government could have pursued a "free trade" policy that focused on reducing the barriers that prevented foreign professionals (e.g. doctors, lawyers, economists) from training to U.S. standards and working in the United States. This would have had the effect of driving down the wages of U.S. professionals. That would reduce the cost of health care, legal services, university education and many other items, thereby raising real wages and producing large economic gains.

The government could have eliminated the special low tax status that the financial industry enjoys, thereby allowing it to grow as parasite on the rest of the economy. It is also the source of many of the highest incomes in the country.

And, the government need not have strengthened patent and copyright protection. These monopolies redistribute several hundred billion dollars a year from consumers to drug companies, software companies and the entertainment industry. (Yes, this upward redistribution is the topic of my book, The End of Loser Liberalism: Making Markets Progressive.)

In short the government could have done a lot to improve the plight of lower income people just by not pursuing the policies that have worsened their plight. Of course it could have also raised the minimum wage in step with productivity growth, as it had done in the quarter century following World War II. If this had been the policy, the minimum wage would be close to $18 an hour today. That might make a difference to the middle class aspirations of many workers.

Comments (13)Add Comment
Shorter Samuelson..
written by Richard, September 24, 2012 6:19
Suck it poor people
How Two Wrongs Make a Right: The Fallacy of Government Helping Everyone
written by Last Mover, September 24, 2012 7:30
In short the government could have done a lot to improve the plight of lower income people just by not pursuing the policies that have worsened their plight.


Baker just doesn't appreciate how brilliant Samuelson really is, who knows if the government helps everyone then effectively it helps no one in relative terms, which would put the lie to Samuelson's claims that the American Dream for only the middle and lower class is disconnected from nasty facts and choices, because it's disconnected for the upper class as well.

If Samuelson was forced to admit the government redistributes income upward as well as downward, and through the private sector no less, he would be forced as well to admit that two wrongs make a right ... a far right that is, that lies through its teeth about the big government it despises and depends on heavily at the same time, so much that it swamps dependence on government by the lesser classes.

Disconnected by nasty facts and choices indeed.

Samuelson has far more fear that the upper class will be forced to compete for a living than any notion of excessive government, for which he endorses more of for the haves than what he rejects for the have nots.
...
written by liberal, September 24, 2012 7:39
Again Dean misses the 800 lb gorilla: land rent.
Of trade and the costs of college. Are the salaries of lecturers why college costs so much?
written by Rachel, September 24, 2012 8:39

Has the cost of college risen so rapidly recently because the cost of college lecturers has been rising?
Let's look at UC Davis, where he highest paid professor receives $796 k. An associate dean receives $400 k. Many other professors are making over $300 k.

Lecturers' salaries are not in this vicinity. According to one source, they average $47 k.

So competition in supply seems to bring down the salaries of lecturers, without having much impact on the insiders, and without much benefit to students. There are many barriers we need to worry about here, besides the barriers to international trade.

(I mention UC Davis, because Dean recently was on the radio to discuss social inequality. His fellow radio-guest was from UC Davis. In my humble opinion, this person gave evidence of being seriously overpaid, and a burden on the poor students and tax-payers who are obliged to pay this person's extremely comfortable salary. Needless to say, this person raised no inconvenient doubts about professors' salaries, or doctors' or lawyers'.)
ambiguity
written by Nassim Sabba, September 24, 2012 8:43
"The government could have eliminated the special low tax status that the financial industry enjoys, thereby allowing it to grow as parasite on the rest of the economy. It is also the source of many of the highest incomes in the country."

Also there is a danger of others honestly quoting you with malintent.

I am sure smart readers can read this sentence one and get the intended meaning, but pedants like me get stuck. So, a bit o nit-picking. The correct sentence would be much more powerful at the first read than when corrected in the mind.

I think I understand the meaning, but it suggests that by eliminating the special low tax it would allow the financial industry to grow... I believe the intended meaning is "thereby NOT allowing it to grow...". That is, while the tax was in place, it did grow parasitically.

...
written by skeptonomist, September 24, 2012 8:48
There is no reason to assume that tax policy is irrelevant. If financiers and CEO's could only take home a few hundred $K/year instead of many millions their objectives might be very different, oriented toward the long- instead of the short-term. Maybe the big gamblers would be forced to gamble in casinos instead of running corporations and banks.
...
written by liberal, September 24, 2012 9:10
Rachel wrote,
Has the cost of college risen so rapidly recently because the cost of college lecturers has been rising?


I don't know for sure, but my conjecture is that college costs are rising rapidly because (apart from declining state support) colleges behave like a collectibles market: the supply is fixed, at least in the medium run. Thus, as demand increases, price will increase, regardless of the actual costs of "servicing" the "good".

Same thing as with land or any other asset that produces economic rents.
I stumbled over that sentence too.
written by Ethan, September 24, 2012 10:08
Nassim Saba. I would have written the sentence as this: "... the special low tax status that the financial industry enjoys, and which allows it to grow as parasite on the rest of the economy.
Not all professor salaries are created equal
written by David M, September 24, 2012 11:50
Rachel, I assume you were refering to the data here, http://www.collegiatetimes.com...davis-2008. But if you look at the position info, the "insiders" who are making big salaries are almost entirely in the Med school, with a few lawyers and business school profs in the mix and almost no one in the humanities or social sciences.

The high salaries aren't the result of anything endogenous to academia, but rather a reflection of the cartel pricing of doctors and lawyers that Dean so often laments.
Too many lawyers
written by matthew, September 24, 2012 1:47
"
That would reduce the cost of health care, legal services . . . ."


Since we now have a glut of lawyers, why haven't the cost of legal services come down in any appreciable way? Or have they?
the declining middle class, how long before it is an extinct species?
written by mel in oregon, September 24, 2012 2:09
not very long. does samuelson really believe that the housing bubble was all caused by people getting into homes with mortgages they couldn't afford? he knows that the decline in home equity & the millions of underwater homes were caused by the bundling of loans into CDOs, CLOs, & CDs. they came about mostly as a repeal of glass-steagall which led to the securitization by wallstreet. samuelson is very aware of all this, he simply doesn't want to pay higher taxes or see any regulation & reenactments that remove the gravy train for the very well off. you cannot bring back the manufacturing jobs that have been lost because of automation & outsourcing, particularly when new free trade agreements such as the tran-pacific agreement will soon go through spelling the end of environmental safeguards, & the final removal of any union power in the united states. strange that issues like this aren't even discussed in the corporate media, but not surprising. the difference between obama & romney is simple. romney will accelerate the pace of moving money from the poor & middle class to the very wealthy. obama will still be a reverse robin hood, just at a slower pace.
Bankrupt
written by CRS, September 25, 2012 11:15
I was not interested in parsing Mr. Samuelson's perceived political agenda as much as I was pleased that he called attention to why that term, "The American Dream", has been bankrupted - "It's a slogan that shouldn't survive -- but will endure precisely because it's an exercise in make-believe." Enabling the utopian vision of that expression is a good thing as long as we accept that it can only be exercised within responsible government budget management that is unfortunately for us, unattainable in the current atmosphere of hyper-partisanship in congress and a subject more worthy of debate.
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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.

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