Re: Krugman on the Deflation quagmire; reply to Warren's post

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

There is ample historical and current evidence that income inequality is
simply bad economics, morality aside.  The France of Louis XIV became an
economic powerhouse because popular income rose faster than the
privileged classes and the trend eventually led to the French Revolution
when the entrenched privilege tried to roll it back.  The French
Revolution was not about poverty or government finance.  France at the
time of the revolution had a higher per capita income than Great
Britain. The revolution was about equality.  The French bourgeoisie
deliberately created urban riots from the lower classes in Paris over an
artificial shortage of bread, to use such instability as pressure on the
aristocracy. If the Monarch had sided with the bourgeoisie against the
aristocracy, France might be a constitutional monarchy today.

However, equality must be accomplished with rising income, lest we
should fall back into the errors of Soviet Communism. It is true that
inequality dampens the full potential of aggregate demand, particularly
under post-industrial conditions.  There is nothing wrong about
privatization and reducing the public sector, provided there is a
private sector of income equality.  But that is not the conservatives
have in mind.  They advocate only selective privatization and selective
small government, in a regime with tilts the level playing ground in
favor of the already wealthy and the already advantaged and privileged.
 They want to privatize the social services without at the same time
removing government control of labor.  Privatization will work only if
income rises along side or ahead of cost.  But privatization as the term
is current constituted means freezing out large segment of consumers
from participation, thus reducing the size of the economy.

Income is all.

Henry C.K. Liu

Niggle, Christopher wrote:
>  Warren: I agree with the Lerner-Keynes-chartalist views on fiscal policy to
> a certain extent: one very important consideration in designing a tax system
> should be its effect on aggregate demand.  But tax systems also influence
> the post-tax income distribution, and there is much historical evidence (and
> common sense argument and ethical considerations as well) in support of the
> proposition that too much income inequality is bad for society.  Hence,
> reducing the progressivity of our tax structure with the kind of tax changes
> implemented under the Bush regime is probably a bad thing in spite of the
> mild stimulus it might effect with respect to aggregated demand.  And
> reductions in tax revenue support the desire of right wing small government
> nuts to reduce social services and investment in public capital.
>
> I think Keynes made the same argument many times; the "arbitrary and
> excessive inequality" he disapproved of was bad because it reduced aggregate
> demand but also for ethical and political reasons.  At a certain point, more
> inequality encourages more inequality...which is inconsistent with a humane
> and civil society.
>
> Chris
>
> -----Original Message-----
> From: Warren Mosler
> To: pkt@xxxxxxxxxxxxxxxx
> Sent: 5/30/03 10:34 AM
> Subject: Re: Krugman on the Deflation quagmire
> Importance: Low
>
> AGREE, AND WHILE THEY ARE AT IT, OFFER A NATIONAL
> SERVICE JOB TO ANYONE WILLING AND ABLE TO WORK.
> AND DON'T 'PAY FOR IT' WITH A TAX INCREASE OR SPENDING
> CUT!!!  IF THE POPULATION DOESN'T WANT MORE
> PRIVATE GOODS, BUT WANTS TO WORK, LET THEM AT LEAST
> PRODUCE PUBLIC GOODS...
>
> ALSO NOTE:
>
>
> > 	The Bush Administration has also recommended two
> > solutions. First, tax cuts
> > to the rich, which, as Krugman suggests, is likely
> > to be insufficient since it
> > provides additional funds to those"least likely to
> > spend".
>
>
> THIS IS ABSOLUTELY TRUE, BUT BEGS THE QUESTION, WHY
> TAX SOMEONE IF IT WON'T REDUCE HIS SPENDING?  THE
> VERY POINT OF TAXATION IS TO CREATE SELLERS OF REAL
> GOODS AND SERVICES, ETC. SO THE AXE SWINGS BOTH WAYS.
> TAXING SOMEONE WHO WASN'T GOING TO SPEND THE FUNDS
> DOES NOTHING FOR GOVERNMENT OR THE ECONOMY THE SAME AS
> CUTTING TAXES FOR SOMEONE WHO WON'T INCREASE SPENDING
> DOES THE SAME NOTHING.
>
> WARREN
>
>
> =====
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