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Trumponomist

from David Ruccio

james-glassman-and-kevin-hassetts-1999-book-dow-36000-predicted-that-the-dow-jones-stock-index-would-more-than-triple-in-the-years-ahead-even-now-16-years-later-the-index-is-only-just-halfway-to-36000

 

According to recent news reports, Kevin Hassett, the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (no, I didn’t make that up), will soon be named the head of Donald Trump’s Council of Economic Advisers.

Yes, that Kevin Hassett, the one who in 1999 predicted the Down Jones Industrial Average would rise to 36,000 within a few years.

060214pollock2

Except, of course, it didn’t. Not by a long shot. The average did reach a record high of 11,750.28 in January 2000, but after the bursting of the dot-com bubble, it steadily fell, reaching a low of 7,286 in October 2002. Although it recovered to a new record high of 14,164 in October 2007, it crashed back to the vicinity of 6,500 by the early months of 2009. And, even today, almost two decades later, it’s only just cracked the 20,000 barrier.

But, no matter, mainstream economists and pundits—like Greg Mankiw, Noah Smith, and Tim Worstall—think Hassett is a great choice.

Perhaps, in addition to his Dow book, they want to place the rest of Hassett’s writings on an altar.

Like Hassett’s claim (which I discuss here) that “lowering corporate taxes is the only real cure for wage stagnation among American workers.”

Or his other major claim (which I discuss here), that poverty and inequality in the United States are merely figments of our imagination.

Let’s focus on that last claim. As regular readers of this blog know, income inequality—whether measured in terms of fractiles (e.g., the 1 percent versus everyone else) or classes (e.g., profits and wages)—has been increasing for decades now. But for conservative economists like Hassett (who was an economic adviser to Mitt Romney before being a candidate to join the Trump team), inequality has not been growing and poor people are actually much better off than they and the rest of us normally think. What they do then is substitute consumption for income and argue that consumption inequality has actually not been growing.

So, what’s the big problem?

But even in terms of consumption they’re wrong. As Orazio Attanasio, Erik Hurst, Luigi Pistaferri have shown, once you correct for the measurement errors in the Consumer Expenditure Survey (which Hassett and his coauthor, Aparna Mathur, don’t do), and bring in other sources of consumption information (including the well-regarded Panel Study of Income Dynamics), consumption inequality has increased substantially in recent decades—more or less at the same rate as inequality in the distribution of income.

Overall, our results suggest that there has been a substantial rise in consumption and leisure inequality within the U.S. during the last 30 years. The rise in income inequality translated to an increase in actual well-being inequality during this time period because consumption inequality also increased.

wealth

And, remember, that doesn’t take into account other forms of inequality, such as the increase in the unequal distribution of wealth, which has exploded in recent decades. The poor and pretty much everyone else—the 90 percent—are being left behind.

It’s the spectacular grab for income, consumption, and wealth by the small group at the top that Hassett and the new administration will be trying to protect.

  1. patrick newman
    March 7, 2017 at 3:10 pm

    Another factor is the cuts to public services and welfare. It is not unreasonable to think of free or low cost public services (e.g. education) is the peoples’ wealth even though it does not figure in individuals wealth or income (welfare does in this case) account. Cuts to these entitlements reduces income and wealth of the majority of the population.

  2. marc1seed
    March 8, 2017 at 2:02 am

    Who Says It Can’t Happen Here? author: Harvey Kaye, Feb 28, 2017

    We have endured 40 years of creeping authoritarianism and it now appears that it may run right over democracy. We must resist and act in solidarity.

    to read Harvey Kaye’s article published on February 28, 2017 on Common Dreams, click on

    http://www.commondreams.org/…/who-says-it-cant-happen-here “Weapons that don’t work, against enemies that don’t exist, and with money we don’t have” (Joseph Stiglitz’ diagnosis on America) In case anyone got overly sidetracked by the Russian spy drama, the following bills HAVE been introduced: 1. HR 861 Terminate the Environmental Protection Agency 2. HR 610 Vouchers for Public Education 3. HR 899 Terminate the Department of Education 4. HJR 69 Repeal Rule Protecting Wildlife 5. HR 370 Repeal Affordable Care Act 6. HR 354 Defund Planned Parenthood 7. HR 785 National Right to Work (this one ends unions) 8. HR 83 Mobilizing Against Sanctuary Cities Bill 9. HR 147 Criminalizing Abortion (“Prenatal Nondiscrimination Act”) 10. HR 808 Sanctions against Iran Please copy/paste and share widely. Call your House Representative and ask them to not only vote “NO”…but to speak up for our rights, health & safety, and our beautiful country.

    • March 8, 2017 at 12:32 pm

      Shows that Republicans are two things. One, efficient. Two, authoritarian to the core. The Republican party has placed the USA into an existential crisis. Which it may not survive.

  3. March 8, 2017 at 9:57 am

    “It’s the spectacular grab for income, consumption, and wealth by the small group at the top that Hassett and the new administration will be trying to protect.”

    You are only partly correct here. This Coup d’état began happening before the ink on the Constitution was dry. And unfortunately, social scientists, most notably economists have helped it along mightily. The error in most discussions of this history is that they get the players all wrong. This is not a struggle between government and individualism, as people like Paul Ryan like to frame it. It is a struggle over how people choose to organize their lives vs. efforts to take those choices from them and vest it in certain economic and social classes. Speaking historically, the US has been organized in terms of communities and economic cooperatives since the beginning. “Historically, worker cooperatives offered a way for people to get out of the “boss” system entirely, and to reorganize their lives on a different basis.” (John Curl, “For All the People”). They still offer that today. In 2008, more than 120 million people in the US were members of 48,000 cooperatives – about 40% of the US population. And since cooperatives weather economic crises better than shareholder companies, that number is increasing. This includes cooperatives for health care, water, electricity, banking, etc. It’s time in my view we reject neoliberals’ dichotomy of “evil” government vs. the “good” selfishness of Ayn Rand and Friedrich Hayek. Community and cooperation have shown themselves historically to be both more effective and fairer ways to organize society. And have been used by millions of Americans for these purposes since before the US was set up. This would I believe resolve most of the income and wealth inequality issues. And ensure equal and fair access to both sustainable incomes and necessary public services. In this scenario, only the 1% lose. But they would still have sufficient income for a worthwhile life and access to all necessary public services.

  4. robert locke
    March 8, 2017 at 2:25 pm

    ” It’s time in my view we reject neoliberals’ dichotomy of “evil” government vs. the “good” selfishness of Ayn Rand and Friedrich Hayek.”

    For me, this dichotomy is false, because it has always pitted society against government, which in America is a non-winner because people think government is inefficiednt and corrupt and never can provide solutions to social problems because ot it. Somewhere along the way I got the idea that the solution to social problems had to be found in the reorganization of civil society, whose institution function in legal and self-governing frameworks, that do not call for large government run bureaucracies.

    • March 10, 2017 at 6:44 am

      Robert, but I wonder why do many people believe that government is inefficient and corrupt when the actual data shows that on average government is more efficient than private businesses, particularly considering the fact that government, unlike business must consider the needs of the entire nation and all its citizens. The data also shows that even with these heavier burdens of responsibility government is less corrupt (defining corrupt as insider dealing, fraud, and systematic lying) on average than private business. It’s also important to note that many people in the USA seem to not know or understand that the USA’s government is self-government. Government from the will and consent of the governed. When the USA was founded this was treated for a least the first 100 years as a remarkable and historic change from the past. Modern governments cannot function without bureaucracies but the functioning of self-government must control these, not the reverse. It’s also essential that governing not be left to “the elected.” Every citizen needs to be involved in government, on meeting the needs of the nation and all its citizens.

      It seems nearly all of these hard won and essential lessons for democracy and self-government have been lost over the last 50 years. This was no accident. It’s the result of a deliberate actions of the opponents of self-government and democracy. After all, no need to attack these if you can convince the people whose freedom and welfare depend on them to do it for you. Cutting their own throats you might say. The Kochs and their network have spent billions to get this result. Funny note here. The election of Donald Trump grew from a populist movement the Kochs unintentionally help create. Shows Bobby Burns was correct.

      The best laid schemes o’ Mice an’ Men,
      Gang aft agley,
      An’ lea’e us nought but grief an’ pain,
      For promis’d joy!

      But the unintended consequences of the Koch’s efforts don’t reduce the damage to democracy and self-government.

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