3.24.2006
Letter to the Secretary (NYTimes.com)
By PAUL KRUGMAN
Published: March 24, 2006
Dear John Snow, secretary of the Treasury:
I'm glad that you've started talking about income inequality, which in recent years has reached levels not seen since before World War II. But if you want to be credible on the subject, you need to make some changes in your approach.
First, you shouldn't claim, as you seemed to earlier this week, that there's anything meaningful about the decline in some measures of inequality between 2000 and 2003. Every economist realizes that, as The Washington Post put it, "much of the decline in inequality during that period reflected the popping of the stock market bubble," which led to a large but temporary fall in the incomes of the richest Americans.
We don't have detailed data for more recent years yet, but the available indicators suggest that after 2003, incomes at the top and the overall level of inequality came roaring back. That surge in inequality explains why, despite your best efforts to talk up the economic numbers, most Americans are unhappy with the Bush economy.
I find it helpful to illustrate what's going on with a hypothetical example: say 10 middle-class guys are sitting in a bar. Then the richest guy leaves, and Bill Gates walks in.
Because the richest guy in the bar is now much richer than before, the average income in the bar soars. But the income of the nine men who aren't Bill Gates hasn't increased, and no amount of repeating "But average income is up!" will convince them that they're better off.
(More ... Letter to the Secretary - New York Times) ¶ 18:18
Published: March 24, 2006
Dear John Snow, secretary of the Treasury:
I'm glad that you've started talking about income inequality, which in recent years has reached levels not seen since before World War II. But if you want to be credible on the subject, you need to make some changes in your approach.
First, you shouldn't claim, as you seemed to earlier this week, that there's anything meaningful about the decline in some measures of inequality between 2000 and 2003. Every economist realizes that, as The Washington Post put it, "much of the decline in inequality during that period reflected the popping of the stock market bubble," which led to a large but temporary fall in the incomes of the richest Americans.
We don't have detailed data for more recent years yet, but the available indicators suggest that after 2003, incomes at the top and the overall level of inequality came roaring back. That surge in inequality explains why, despite your best efforts to talk up the economic numbers, most Americans are unhappy with the Bush economy.
I find it helpful to illustrate what's going on with a hypothetical example: say 10 middle-class guys are sitting in a bar. Then the richest guy leaves, and Bill Gates walks in.
Because the richest guy in the bar is now much richer than before, the average income in the bar soars. But the income of the nine men who aren't Bill Gates hasn't increased, and no amount of repeating "But average income is up!" will convince them that they're better off.
(More ... Letter to the Secretary - New York Times) ¶ 18:18
