Why Jim Webb May Become a Good Senator

For the economic know nothings over at the National Review who are saying Jim Webb will be a conservative in their liking, his WSJ oped will be a bit of a shock:

The most important – and unfortunately the least debated – issue in politics today is our society’s steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America’s top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes.

Read the whole piece as it is quite good. I’m saddened to say I learned about this piece by linking to our favorite troll Patrick R. Sullivan aka Roland Patrick who makes the incredibly stupid mistake of presenting aggregate real GDP growth as if that somehow counters a claim about income distribution. But it gets better in two ways. The first:

But, as the graph at the top makes clear, in the last quarter century (1982-2006, inclusive) there were only two (and short and mild) recessions. Compare that to the previous 25 years (1956-1981) with its six recessions.

William Poole – take note that the Federal Reserve has paid attention to what you wrote back in 1970. But Patrick needs to look at his own graph as it shows a third and rather deep recession in 1982. And why did we get the 1982 recession? It was the Federal Reserve’s overreaction to an ill-advised excessive fiscal stimulus that President Reagan pushed with his 1981 tax cut. You know – the one that the economic know nothings over at the National Review and their ilk (we are talking about you Patrick) incessantly praise. Which brings me to the second:

We seem to have a clear picture of which period ‘working people’ are better off. Does Webb really think that allowing high income earners to pay at lower tax rates (on more reported income) is too high a price for the comparative economic bliss of the last twenty five years?

Supply-side spin again. I guess Patrick thinks the 3.0% real GDP growth under Reagan and Bush41 or the 2.5% real GDP growth under Bush43 trumps the 3.7% real GDP growth under Clinton or the 3.5% real GDP growth from 1947 to 1980. Simply put – fiscal stimulus lowers national savings which lowers long-term growth.

But Patrick was talking about business cycles, which have become less severe now that we actually listen to Bill Poole. Of course, such economic know nothings miss the point that screwing up fiscal policy makes life at the Federal Reserve more difficult. But what can you say about someone who celebrates the life of Milton Friedman by thinking we are all fixed velocity monetarists now (no offense to Brad DeLong as I seriously doubt Patrick actually read what you wrote).

Update: Tailrank links to several blogs who covered Webb’s WSJ oped. Liberals liked it – no surprise. Our friends on the right had two basic reactions: (1) the usual canard about Democrats having no plan; and (2) and the Greg Mankiw line:

Free-market economists like me are typically less concerned about rising inequality

Huh? One can recognize the efficiency benefits of competition and still be concerned about the distribution of income.