Krugman: Income Inequality and Unemployment Are Linked

Friday, 24 Jan 2014 12:15 PM

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Unemployment and income inequality are closely linked and perhaps even the same issue, argues New York Times columnist Paul Krugman.

People will criticize President Obama if he highlights inequality in his upcoming State of the Union address as expected. Critics on the right will predictably charge class warfare. Others will say jobs must be the top priority.

They're wrong, Krugman argues. Soaring inequality might have helped create the economic crisis and prolong the downturn. And high unemployment has been a major cause of increasing inequality by destroying bargaining power of workers — even those who have jobs.

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"Beyond that, as a political matter, inequality and macroeconomic policy are already inseparably linked," Krugman asserts, saying Obama should focus on inequality out of political realism.

"Like it or not, the simple fact is that Americans 'get' inequality; macroeconomics, not so much."

Pundits think Americans don't care about income inequality. That's a myth, Krugman says, pointing to a new Pew Research Center/USA Today poll that reports most Americans support government action to reduce inequality.

"And this is true even though most Americans don't realize just how unequally wealth really is distributed."

Although Americans understand inequality, they have trouble grasping macroeconomics realities like the need to run government deficits during downturns.

"The point is that of the two great problems facing the U.S. economy, inequality is the one on which Mr. Obama is most likely to connect with voters. And he should seek that connection with a clear conscience: There's no shame in acknowledging political reality, as long as you're trying to do the right thing."

In the Pew/USA Today poll, 90 percent of Democrats and 45 percent of Republicans said the government should do "a lot" or "some" to reduce inequality.

The survey shows that the public "broadly endorses class warfare," writes Michael Yglesias of Slate. People may think the government should do something, but they don't agree that the government can do something, he explains.

Americans are "ideologically conservative and operationally liberal," he says, noting they hate big government but love programs like Medicare and Social Security.

"On inequality you could see the reverse happen, where people favor bold action to tackle inequality but are skeptical that specific programmatic ideas are workable or will be implemented correctly."

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