Leave it To Krugman

My conservative cousin from New York was no more impressed than Dayfdd ab Hugh and John were by Paul Krugman’s claim that “working families have seen little or no progress over the past 30 years.” My cousin writes:

Krugman claims that adjusted for inflation median family income in the US has stagnated over the last 30 years due to governmental policies favoring the rich. According to him, family income rose only 22% from 1973 to 2003 as compared to the doubling of family income that occurred from 1947 to 1973.
Back in those halcyon years Krugman reminisces the average family reaped the benefits derived from strong labor unions, progressive taxation and social norms that favored equality. Today, he says these same families do not share in the benefits of economic growth and are deprived of economic security.
The good Professor’s lament for the old days reminds me of the habit many senior citizens have of viewing the past through rose tinted glasses. His view of post World War II America bears as much resemblance to reality as does the old sit com “Leave It To Beaver”.
I don’t know what country Krugman was living in, but I seem to remember that it was those labor unions Krugman reveres that often denied jobs to Blacks and other minorities. Indeed, one could probably make the case that the steady rise of a black middle class in this country coincided with the steady decline in membership of the AFL-CIO. Today the family income of blacks in two parent households is on a par with white family income. This was far from the case in Krugman’s good old days.
In New York I know from personal experience that many of these union jobs in industries like telecommunications, utilities and shipping whose disappearance Krugman laments were reserved for the sons of union members. As these industries became less monopolistic, opportunities opened up for a more diverse work force.
The progressive taxation prevalent during this era was characterized by high marginal rates and massive loopholes. Many of those blessed with inherited wealth were able to escape paying taxes by the use of artfully designed shelter schemes. This provided high-paying jobs for some accountants and lawyers but often stifled growth by channeling capital away from its most efficient economic use. The more efficient use of capital encouraged by today’s tax code has fostered the development of myriad new industries that have improved the lives of all Americans.
Krugman may have stumbled into the truth when he notes that social norms prevalent 30 years ago were more favorable to economic progress. The rise in single-parent families acts as a drag on overall family income growth. Perhaps a return to more traditional values would be of more financial benefit than another massive government program.
One might also ask whether the family income figures he cites reflect the tendency of young people to move away from their parents and form their own households before they are married and have children. A family consisting of two parents and two recent high-school graduates with entry-level jobs such as was often the case in the 1950’s would likely have a higher income than a household consisting of a family with two children away in college. Surely an academic like Krugman must believe that it is positive that more Americans have the opportunity to pursue higher education. Do the figures cited by Krugman count college students living away from home as families? If they do, the higher percentages of young people attending college would act to reduce income gains at the lower levels.
Finally, has it ever occurred to Krugman that the high rates of immigration in recent years could have an impact on the figures he cites. Rather than being a sign of economic weakness the ability of our society to attract workers from all over the world reflects the fact that opportunities to advance are perhaps greater here than in most of the world. Of course, the relatively low salaries many of these immigrants earn when they arrive here will temporarily depress family income figures.
Only a liberal economist like Krugman could believe that the standard of living of American workers has not advanced over the last 30 years.

If the Republicans are such a disaster for middle class families, someone more persuasive than Krugman should inform the families. In 2004, President Bush did extremely well with middle class voters. In fact, he didn’t start losing among white voters until their family incomes hit approximately $23,000 per year, if I’m remembering correctly. I guess these folks just don’t know how bad they have it.


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