Paul Krugman shines spotlight on America’s superrich, takes another huge swing at David Brooks

The economist shows how we still don't grasp just how unequal our society has become

Published September 29, 2014 11:33AM (EDT)

Paul Krugman                                                                                                                                                                   (AP/Lai Seng Sin)
Paul Krugman (AP/Lai Seng Sin)

In his column for the New York Times today, Nobel Prize-winning economist Paul Krugman makes a startling assertion: While we once spoke of the “invisible poor,” in 2014 it’s America’s gilded elite who largely go unseen.

It’s not that Americans don't realize that fabulously wealthy people exist. For instance, as Krugman observes, there’s a plethora of reality shows documenting the glitzy lives of our celebrities. But the popularity of such programs doesn’t mean that Americans fully grasp who populates America’s moneyed elite or just how moneyed they are, he writes.

Data illuminate the scope of our ignorance regarding the wealthy and the severity of the inequality plaguing our society. Krugman cites a new Harvard Business School/Chulalongkorn University of Thailand study in which the median respondent estimated that the typical CEO makes 30 times as much as his or her employees. While that number was “roughly true” in the 1960s, Krugman writes, the actual CEO to worker pay ratio is now about 300 to one. As he points out, the newest study comes on top of others demonstrating that Americans don’t realize how much wealth is distributed at the very top.

Before we chalk this ignorance up to the stupidity of the masses, Krugman reminds us that pundits and elected officials rarely talk about income inequality in a way that accurately reflects the scope and scale of the problem. It’s all too common to hear talk of the educated versus the uneducated, for instance. While the Occupy movement’s language of the 99 percent versus the 1 percent comes far closer to shedding light on the cleavages in American society, Krugman emphasizes that most of the income gains accruing to the top 1 percent have actually gone to the top 0.1 percent.

Krugman thinks that the rich being “so removed from ordinary people’s lives” helps explain our ignorance. “We may notice, and feel aggrieved about, college kids driving luxury cars,” Krugman writes, in what once again reads like a jab at fellow Times columnist David Brooks, “but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons.”

Why does the invisibility of the superrich matter? Krugman highlights the political implications:

Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate.

Most Americans say, if asked, that inequality is too high, and something should be done about it — there is overwhelming support for higher minimum wages, and a majority favors higher taxes at the top. But at least so far confronting extreme inequality hasn’t been an election-winning issue. Maybe that would be true even if Americans knew the facts about our new Gilded Age. But we don’t know that. Today’s political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.

It's a persuasive analysis. Even though Americans appear to believe that the CEO-worker pay ratio is roughly where it stood in the 1960s, they still express indignation at the level of income inequality in the country -- and want policymakers to do something about it. A January poll by Gallup found that 67 percent of Americans were dissatisfied with the distribution of wealth and income in the U.S., while a February CNN poll found that 66 percent of Americans want the government to take action to narrow the income gap between rich and poor. But 68 percent favored such action in 1983, and that wasn’t enough to stop four decades of neoliberal economic policy. That sobering statistic stresses the importance of bringing the full extent of income and wealth inequality to light.

By Luke Brinker

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