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May 2018 posts

Civic Virtue

By Jonathan B. Wight

David Brooks has an interesting article in today’s Times, “The Strange Failure of the Educated Elite.”

It’s actually the failure of our parents to inculcate all of us in the ethical norms of sociability and the civic virtues that follow from that.

In pursuing a society of meritocracy, we glorified a hyper-individualistic career-achievement ethic, to the detriment of a wider conception of human meaning and purpose. My own comparison for this would be George H.W. Bush—the epitome of heroic civic virtue, with George W. Bush—his wayward son. Narcissism glories over sacrifice and harmony.

The result, Brooks argues, is Donald Trump!

Well, that’s perhaps a stretch, but it’s an interesting argument, and points are compelling:

“If you base a society on a conception of self that is about achievement, not character, you will wind up with a society that is demoralized; that puts little emphasis on the sorts of moral systems that create harmony within people, harmony between people and harmony between people and their ultimate purpose.”

“Those dimwitted, stuck up blue bloods in the old establishment had something we meritocrats lack — a civic consciousness, a sense that we live life embedded in community and nation, that we owe a debt to community and nation and that the essence of the admirable life is community before self.”

Why Wages Aren’t Rising

By Jonathan B. Wight

Krugman has an interesting blog today theorizing about why we have little upward wage pressure even though unemployment rates are historically low.

What I like about the blog is that it integrates different strands of theory, one having to do with downward nominal wage rigidity, the other with microeconomic market structure, and uses relevant data sources to tease out what might be going on.

It’s tentative, speculative work, and an interesting romp through history and behavioral economics. His conclusion is that:

“[T]he combination of downward nominal wage rigidity and monopsony power helps explain both why wages didn’t fall during the period of high unemployment and why employers aren’t doing much to raise wages despite tight labor markets now.”

Tax Cuts

By Jonathan B. Wight

It is way too soon to know how a major policy change—in this case taxes—will work out.

Yet the early signs are that Republicans have redistributed wealth to the top without creating any requisite increase in growth that would pay for this redistribution, or that would enable gains to trickle down to those below.

Krugman (not an unbiased observer) writes:

“the effects of the Trump tax cut are already looking like the effects of the Brownback tax cut in Kansas, the Bush tax cut and every other much-hyped tax cut of the past three decades: big talk, big promises, but no results aside from a swollen budget deficit.”

Supply side elixirs can actually work in some conditions to stimulate growth, but similar to real estate only three things matter: context, context, and context.

U.S. growth may be more constrained today by growing inequality than by high marginal personal tax rates. It may be more constrained by a crumbling public infrastructure than by high corporate taxes. Lowering the corporate tax rate was a good idea in theory, but not at the expense of increasing the deficit by more than a trillion dollars, and pushing needed infrastructure improvements to the back burner.