The Los Angeles Times’ Michael Hiltzik reviews TCF fellow Ed Kleinbard’s new book, We Are Better Than This: How Government Should Spend Our Money. Writes Hiltzik:
Kleinbard’s ability to make the complexities of fiscal policy comprehensible permeates “We Are Better Than This.” So does his impatience, even anger, with the partisan sophistry that passes for much of fiscal and economic discussion in Washington. That’s clear from the very title of his book, as well as chapter headings identifying inequality apologists as “Defenders, Deniers, and Dissemblers,” or providing “A Field Guide to False Fiscal Crises.”
TCF policy associate writes in U.S. News that baseball salaries can tell us a lot about income inequality.
In America, we tend to think of income as a reward for skill and hard work. Those who are rich earned it, while those who are poor are equally deserving of their fates. That’s the beauty of capitalism: You get out what you put in. If you don’t like it, work harder.
But baseball shows us this view of the world is demonstrably flawed. Pay has preciously little to do with performance. Instead, being a top earner means having a good season immediately preceding free agency in a year where desperate, rich teams are willing to award outsized long-term contracts.
Read the full article.
TCF senior fellow Jeff Madrick talks to Lynn Stuart Parramore at Alternet about Jeff’s new book, Seven Bad Ideas. Says Madrick:
Adam Smith’s invisible hand is really the hub of the wheel: the other ideas are all spokes. It argues that if we all follow our self-interest and the government stays out of the market—for instance, it should not regulate prices—then the interaction of buyers and sellers will result in the greatest prosperity for all.
The invisible hand suggests that all wages will be established at fair levels and that regulation of financial markets can be minimized because free markets will lead to the "right" price for securities or commodities or currencies. On and on. But this is only an idea, if a beautiful one. It tells us how a market may work, not how it actually does work. Long after Adam Smith wrote about the invisible hand, as the economics profession became increasingly ideologically conservative, economists came to accept it as a rule, not a hypothesis.
Read the full interview.
Wonkblog’s Puneet Kollipara lists TCF fellow Mark Thoma’sThe Fiscal Times article on economic inequality as the day’s top opinion. Thoma:
So my approach to fighting inequality in the short-run is to use taxation and corrective redistribution to ensure that workers receive the income they deserve, to fix the distributional problems that have allowed those at the top to capture more than their fair share of income, and enact supply-side incentives that have been shown to work as soon as possible. The hope is that the supply-side policies and corrections to the distribution of income will produce the types of jobs and equitable compensation that are needed to solve the inequality problem in the longer run. But there’s a chance that no matter what we do, the inequality problem will persist.
Remember in 2009 when everyone was dodging blame for the financial crisis? Depending on who you asked, it was the bankers, the federal regulators, Fannie Mae, fraudster mortgage companies, the ratings agencies and the sub-prime borrowers themselves. The favorite claim of excuse makers was that no single group was to blame -- it was a cluster-f*** as one journalist friend put it.
If everyone did it, no one could be held accountable. But it wasn't true. Bankers and regulators were the major creators of the crisis, for their neglect and single-minded self-aggrandizement that often involved bending the rules.
But let me single out one group that avoided blame and deserved plenty of it: mainstream economists. The deeply held ideas of the nation's most elite economists from the Right and the Left were direct causes of the crisis, justifying perverse behavior on Wall Street and in Washington, and careless and ignorant behavior at the Federal Open Market Committee of the nation's central bank, the Federal Reserve.
Read the full article.
With the U.S. dollar considerably strengthening against other major currencies in recent months, you might be wondering: Why is this happening?
The value of one currency against another is in large part a function of central bank policies in each country. If a central bank pursues loose policy -- low interest rates that increase the risk of inflation -- a currency will fall in value relative to the currencies of its trading partners. When a central bank tightens policy -- raises interest rates -- then the currency generally strengthens.
Thus, one reason for the dollar's strength lately is the expectation that the U.S. Federal Reserve will begin raising interest rates fairly soon as the U.S. economic recovery gains. Then question then becomes: How will a stronger dollar affect America's economy?
Read the full article.
In recent decades, and especially since 2000, the richest Americans have enjoyed soaring income and wealth while the rest of the population's living standards have stagnated. The Century Foundation was one of the first institutions to raise serious concerns about these trends and propose ideas for improving economic conditions for all Americans- not just the fortunate few.
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