The debate over Piketty’s Capital in the 21st Century continues to rage throughout the blogosphere. Weissmann thinks it will be the millennials’ liberal manifesto:
Conservatives have long had an easy framework for their economic ideas: The free market cures all. Liberals, instead of nebulously arguing that they’re fighting for the middle class, now have a touchstone that clearly argues they’re fighting against the otherwise inevitable rise of the Hiltons.
Capital will change the political conversation in a more subtle way as well, by focusing it on wealth, not income. Discussions about income can become very muddy, in part because Americans don’t like to begrudge a well-earned payday, and in part because it can be tricky to decide what should count as income. If you start adding health insurance and government transfers such as food stamps into the equation, as some do, the top 1 percent don’t dominate quite so severely.
Wealth is a different story. Americans don’t like the idea of aristocrats—there’s a reason campaigning politicians bring up family farms and steel mills, not Shelter Island vacation homes, when they run for office. Moreover, you can’t save food stamps or a health plan, and because wealth only includes what you can save, it’s a measure of who wins in the economy over the long term.
Robert M. Solow supports Piketty’s proposal for a global wealth tax:
Annual revenue of 2 percent of GDP is neither trivial nor enormous. But revenue is not the central purpose of Piketty’s proposal. Its point is that it is the difference between the growth rate and the after-tax return on capital that figures in the rich-get-richer dynamic of increasing inequality. A tax on capital with a rate structure like the one suggested would diminish the gap between the rate of return and the growth rate by perhaps 1.5 percent and would weaken that mechanism perceptibly.
This proposal makes technical sense because it is a natural antidote to the dynamics of inequality that he has uncovered. Keep in mind that the rich-get-richer process is a property of the system as it operates on already accumulated wealth. It does not work through individual incentives to innovate or even to save. Blunting it would not necessarily blunt them. Of course a lower after-tax return on capital might make the accumulation of large fortunes somewhat less attractive, though even that is not at all clear. In any case, it would be a tolerable consequence.
But McArdle doubts it would solve the real problems of the poor and middle class:
If we look at the middle three quintiles, very few of their worst problems come from the gap between their income and the incomes of some random Facebook squillionaire. … Crime is better, lifespans are longer, our material conditions have greatly improved — yes, even among the lower middle class. What hasn’t improved is the sense that you can plan for a decent life filled with love and joy and friendship, then send your children on to a life at least as secure and well-provisioned as your own.
How much of that could be fixed by Piketty’s proposal to tax away some huge fraction of national income from rich people? Some, to be sure. But writing checks to the bottom 70 percent would not fix the social breakdown among those without a college diploma — the pattern of marital breakdown showed up early, and strong, among welfare mothers.
Deploying the more standard attack from the right, Harsanyi calls Piketty a Marxist:
Like many progressives, Piketty doesn’t really believe most people deserve their wealth anyway, so confiscating it presents no real moral dilemma. He also argues that we can measure a person’s productivity and the value of a worker (namely, low-skilled laborers), while at the same time he argues that other groups of workers (namely, the kind of people he doesn’t admire) are bequeathed undeserved “arbitrary” salaries. What tangible benefit does a stockbroker or a Kulak or an explanatory journalist offer society, after all? …
The thing is, some of us still believe that capitalism fosters meritocratic values. Or I should say, we believe that free markets are the best game in town. Not that long ago, this was a nearly universal position. A lot of people used to believe that even the disruptions of capitalism — the “caprices of technology” as Piketty dismisses them— that rattle “social order” also happen to generate mobility, dynamism and growth. Today this probably qualifies as Ayn Rand-style extremism.
Douthat, meanwhile, bets that America will “tax enough, and redistribute enough, to maintain the richest nations’ social peace, and avoid violent labor-capital conflict by making even the relatively poor feel like they have too much to lose from such upheaval.” Among his evidence:
[T]axes on high incomes bottomed out in the mid-1980s (when our Gini coefficient was much lower) and have bounced around, and upward, in the two decades since; taxes on capital went down steadily from the ’80s into the 2000s, but for high incomes they’re now back where they were in the 1990s (with an Obamacare surcharge on top); our corporate tax rates were cut in the 1980s but haven’t much budged since. Meanwhile, the non-defense budget has been on a consistent upward trend (see figure 3 here) since, again, the mid-1980s, and elite-driven causes like entitlement reform and immigration reform have been repeatedly defeated by populist rebellions, left and right. And notwithstanding liberal anxieties that the Bush Republicans had found a way to push the whole political debate “off center,” the post-2000 trend toward stagnant incomes helped drive a leftward swing in public opinion, leading to the election of President Obama, an unprecedented surge of stimulus spending, a large expansion of the federal safety net, a significant increase in upper-bracket taxes, and so on.
Now it’s true that post-2010 budget cuts have counteracted some of these leftward policy shifts, and it’s also true if enacted as written Paul Ryan’s safety net cuts would send U.S. policy swinging in a direction favored by (some Republican) oligarchs. But Ryan was on the ticket that lost the last presidential election, and nobody (the Wisconsin congressman included, I would say) believes that his party is well-positioned to win future elections running on an austerity platform alone.
Earlier coverage of Piketty’s book here, here, here, and here.