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2014 Will Be The Year of "Economic Populism." Then What?

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One (unequal) world

Klein's comments sparked a mini-firestorm in the economic blogosphere. A Who's Who of commentators weighed in, including Paul Krugman, Jared Bernstein, and Dean Baker. The intensity of the ensuing debate contrasted sharply with the wobbliness of Klein's central thesis, a weakness which stems from the notion that "a world in which inequality is the top concern" is somehow different from "a world in which growth and unemployment are top concerns."

They are, in fact, the same world. Measures which stimulate growth and reduce unemployment are also likely to increase competition for workers, driving up lower-end wages. And measures which reduce inequality by returning more of our nation's income to the "99 percent" will also increase consumer demand, stimulating growth and reducing unemployment.

In reality, you can't do one without the other. It's a distinction without a difference.

Real-world implications

But the response to Klein was a measure of the changes now taking place in the political zeitgeist. Krugman devoted first one, and then a second blog post to the topic, strenuously defending the idea that inequality "isn't a diversion. It's the right way to move this discussion." Jared Bernstein offered what he called a "unifying theory" linking both positions. (That comes closest to my own position.)

So far this all falls into the category of theoretical discussion. But this is a debate with very concrete real-world consequences. If Ezra's school of thought predominates, we could hear more people arguing, as he does, that we should promote stimulus spending and job creation without worrying about higher taxes on the rich.

In fact, Klein never gets around to explaining where the money for that stimulus spending is going to come from. Wouldn't taxes be involved? He mentions the tax rates for the wealthy are apparently the highest they've been since 1979, but doesn't mention how much higher they were just a few short years earlier.

Also unmentioned is the fact that the wealthy and the ultra-wealthy are capturing much more of the national income than they did in the 1990s. That means that 1979-era levels still leave the rich much richer, and public coffers much poorer, than they did back then. And he doesn't mention corporate taxation, which is at or near 60 year lows. That's why we were such a low-tax country in 2011, relatively speaking, and will remain so after the changes which Klein describes.

Ezra did a good thing by starting this debate. What's needed now is greater clarity.

Populism's future

The ultra-wealthy and corporate interests will want to take a leading role in shaping this debate. In a development which is perhaps not coincidental, a World Economic Forum survey of nearly 1,600 elite decision-makers showed that they consider "widening income disparities" the second-most pressing problem the world faces today. (The Forum is the same group which organizes the elite Davos conference; see Lynn Parramore for more on the survey.)

That is not to suggest that the same decision-makers are likely to support highly redistributive economic policies. In fact, that's highly unlikely. There are undoubtedly many among them who would prefer to contain the kind of populist movement which the Elizabeth Warren wing of the Democratic Party represents.

One way to do that is with the strategy Bill Clinton employed so successfully -- using the Democratic Party to articulate populist frustrations, while at the same time ensuring that no specific problems or policies are articulated which threaten entrenched interests. There are likely to be substantial differences of opinion between, say, the former president's thoughts on economic populism and those represented by Sen. Warren and like-minded colleagues.

There's a danger that populist and egalitarian ideas might be used to limit the scope of debate, by redefining the leftmost parameters of discussion within bounds that are considered safe for the status quo.

But the benefits of having this conversation are likely to outweigh the risks. It's a good thing when the President of the United States discusses income inequality, or Democratic thought leaders begin to argue among themselves about income inequality and unemployment. And it's excellent news when more resources are being invested in these areas of economic research.

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http://www.huffingtonpost.com/rj-eskow/the-dumbest-bipartisa

Host of 'The Breakdown,' Writer, and Senior Fellow, Campaign for America's Future

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