Wednesday, November 19, 2008

Middle-class sensibilities

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Mainstream Radicalism

Why Paul Krugman wants us to be a middle-class nation again

Of all the smart and successful people who have written campaign-year books, Paul Krugman is so far the best writer. He gets lots of practice, what with his twice-weekly columns for the New York Times. But sometimes it’s the material. Even I could be a good writer were I to quote Franklin Delano Roosevelt as early, often, and extensively as Krugman does—and to good effect, because it’s hard not to be thrilled by what a smart, glib, and radical man our last patrician president really was.

Krugman published The Conscience of a Liberal (W.W. Norton) last year, before the economic calamities of the mortgage crisis, the credit crisis, and the George W. Bush stock market swoon had hit—and before Krugman was awarded the Nobel Prize in Economics this October.

I like his book and it’s an easy read. It’s economic history for non-mathematicians, and it’s political analysis that is well reasoned and utterly without the smug self-righteousness that sometimes tarnishes most of the arguments I happen to agree with. It’s the book to read if you want to clear the supply-side claptrap out of your head. It’s also a yardstick by which to measure the adequacy of policies that will be coming from our next president and our next Congress.

In broad strokes, that is.

But let’s let FDR do some talking.

When he was first elected in 1932, Roosevelt launched a radically different way of governing. His first 100 days—the subject of a new book by Newsweek senior editor Jonathan Alter—brought America many of the federal programs and agencies that we think of as part of the permanent structure of Washington.

There wasn’t always Social Security. There wasn’t always a law that prevented bankers from gambling your deposits on the stock market—which is the law that in 1999 confused Democrats and anti-government Republicans revoked, and which revocation Bill Clinton signed, and that has been justly blamed for the insane speculation that caused the credit-liquidity crunch currently killing our economy.

Roosevelt stopped the gambling. FDR took on his own social peers and earned their hatred in so doing. His was courage in the face of calamity. Under FDR, America saw the re-birth of governing in the public interest, but in a much more sophisticated form than that practiced by his relative and predecessor Theodore Roosevelt.

When he was running for re-election in 1936, President Franklin Roosevelt was famously straightforward about who his political enemies were: He called them “malefactors of great wealth.”

Roosevelt said that he’d had to struggle with “the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.” Translation: hedge funds, credit-default swaps, Karl Rove, the politics of racial code words, Halliburton…

Before his election, Roosevelt said, these people “had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

“They are,” he said, “unanimous in their hate for me—and I welcome their hatred.”

Holy cow. That was a sitting president, folks.

Cooler rhetoric, but similar policy?

What we don’t yet know is whether electing Barack Obama means that the new president’s Rooseveltian moral sense will ever see enactment by a Congress that remembers 1994 more than it understands 1932. (1994 was the year Democrats went into a crouch after having voted for Bill Clinton’s big tax increase—the tax increase that killed the George Herbert Walker Bush deficit, but which Republicans campaigned successfully against.)

And it’s not just jiggly members of Congress who may lack FDR’s spine. I wonder, I speculate, I hazard, and I guess that Obama is surrounded by folks who have been, well, to be blunt like FDR was, pretty darned comfortable all their lives, and thus not so crystal-clear on what FDR was really up to.

Paul Krugman wrote The Conscience of a Liberal because he wanted to remind folks of how aberrant the recent Republican ideology truly has been—and precisely how FDR’s great achievement, which was the empowerment of folks of modest means, was achieved: through big public spending projects financed with steeply progressive taxation. In short, FDR taxed the rich and spent the money.

But Krugman is not an ideologue. He is not just a newspaper columnist, either. Krugman is a precise analyst of economic issues who is a professor at Princeton, author of many books, and the winner of many prizes bestowed on him by his fellow economists.

So when he writes that America’s next president needs to create a European- or Canadian-style national single-payer healthcare system, it’s because he has done the math. (See his lengthy but very easy-to-understand 2006 argument for a national healthcare plan in The New York Review of Books at

When he writes (as he did in his blog last week) that Obama needs to enact a $600 billion stimulus package, he is proposing policy based on a calculation about what he sees as the dangerous drop-off in consumer demand and, now, in US exports.

Krugman saw great value in the nearly 40 years of FDR’s policies, mainly that they created and sustained a middle-class society. He calls the impact of the New Deal “the great compression,” because the extremes of the very rich and the very poor were compressed toward the middle.

Of course poverty remained in those decades. And of course there were astoundingly wealthy people. There wouldn’t have been a War on Poverty, or Rockefellers, had the “great compression” succeeded universally.

But until the great disruptions of the 1960s, when Republican political operatives undertook the emotional wedge issues—and when Ronald Reagan and his operatives like Pat Buchanan picked up the race card and played it as the ace—economic uplift, and unions, and Social Security, and financial stability, were all part of the fabric of life.

Now, in wanting those pre-Reagan days to come around again, Krugman writes that “[t]o be a liberal is in a sense to be a conservative—it means…wanting us to go back to being a middle-class society.”

But do the kids coming up into power have any sense of this?

Sensibilities, experiences

What troubles me is that the very experience of Washington, New York, Chicago, Boston, and the other sophisticated metros whence many thought leaders hail is an experience of great sophistication, and of very high living.

I just don’t hear young politicos talking about progressive taxation as a key part of the policy agenda. When I read the blogs, I see more about issues of gender and human rights than about economics. I see no fiery advocacy of national healthcare.

But the tax issue especially is lacking. From FDR’s time in the 1930s through Lyndon Johnson’s years in the 1960s, the top marginal tax rate (not the average tax rate, but the rate one pays on the next dollar of income) was well above 70 percent. Estates were taxed heavily, and by design, because we had a consensus in this country that we did not want a permanent, hereditary, moneyed aristocracy. There is a reason why all the old mansions on Delaware Avenue and on Old Lake Shore Road now house not-for-profit agencies—it’s because the rich old families that owned them had to sell them or donate them for taxes.

But today, when everybody with a law degree wants to drive a Lexus, even after the nonsense on Wall Street—even now, could a Krugman’s desire to return America to being a middle-class country come true?

Something has changed since the late 1970s and early 1980s, which was when the cult of money took hold, and when Democrats and even the AFL-CIO did a deal with Ronald Reagan to reduce the top tax rate to half what it was under John F. Kennedy. Democrats got scared by Republican rhetoric about being anti-business—even though the greatest expansion in American prosperity, power and international prestige occurred when taxes on rich people were far, far greater than at any time after Ronald Reagan was elected.

I agree with Krugman’s ethos, but I wonder and I wonder and I wonder.

In Washington these days, everybody white looks rich. Lowly congressional aides now live in restored classic apartment buildings equipped with brand-new workout joints and first-floor grocery stores that have unbelievable selections and prices to match, and with an air of prosperity that makes anyplace else look tired and dim. In the place where our policies will be made, the gulf between young, educated folks and the working poor yawns almost as wide as the gap in experience, outlook and prospects as between nobles and peasants of old.

Barack Obama has personal knowledge from a childhood of food stamps, cheap apartments and bad smells outside. Later, when he worked on the South Side of Chicago, he knew genuinely poor folks who had been lied to by the corporate hit-men at Wisconsin Steel on 95th Street.

But how many blow-dried members of Congress ever grew up without their own bedrooms? How many senior aides to the next Secretary of the Treasury have any experiential connection with a lost job, a missed paycheck, a long wait in a health clinic?

Paul Krugman has a rare insight. I hope that views like his, and not the more cautious tendencies of the permanently comfortable, will shape policy.

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