You Just Cannot Be an Honest Neoclassical Economist and Make the Trumpublican Tax "Reform" a Winner for U.S. National Income Growth...

Must-Read: I remember when Martin Wolf was the very smart, very reality based, but very sincere and committed Tory. (He would probably say that he still is such.) Yet now his shrillness is up to 11 on the 10-point Krugman scale... And the owl was once the baker's daughter: Martin Wolf: A Republican tax plan built for plutocrats: "How does a political party dedicated to the material interests of the top 0.1 per cent of the income distribution win and hold power in a universal suffrage democracy?...

...That is the challenge confronting the Republican party. The answer it has found is “pluto-populism”. This is a politically successful, but dangerous, strategy... [that has] brought Donald Trump to the presidency. His failure might bring someone more dangerous, more determined, to power. This matters to the US and, given its power, to the wider world.... About 45 per cent of the tax reductions in 2027 would go to households with incomes above $500,000.... This simply is reform for plutocrats.... The bill might also increase the cumulative fiscal deficit by about $1.5tn over the coming decade.... In all, then, this is a determined effort to shift resources from the bottom, middle and even upper middle of the US income distribution towards the very top, combined with big increases in economic insecurity for the great majority.

How, one must ask, has a party with such objectives successfully gained power?... Find intellectuals who argue that everybody will benefit from policies ostensibly benefiting so few.... Second... abuse the law... give wealth the overriding role in politics... suppress the votes of people likely to vote against plutocratic interests, or even disenfranchise them.... Third... foment cultural and ethnic splits... the “Southern strategy”.... Yet this is too limited a view of the strategy.

More interesting is the echo of the antebellum South itself. The pre-civil war South was extremely unequal, not just in the population as a whole, which included the slaves, but even among free whites.... Peter Lindert and Jeffrey Williamson note, “Any historian looking for the rise of a poor white underclass in the Old South will find it in this evidence.” The 1860 census also shows that the median wealth of the richest 1 per cent of Southerners was more than three times that of the richest 1 per cent of Northerners. Yet the South was also far less dynamic. The South was a plutocracy. In the civil war, whose stated aim was defence of slavery, close to 300,000 Confederate soldiers died. A majority of these men had no slaves. Yet their racial and cultural fears justified the sacrifice. Ultimately, this mobilisation brought death or defeat upon them all. Nothing better reveals the political potency of identity.

A not dissimilar threat arises for today’s plutocrats. The economics and politics of pluto-populism have stoked cultural, ethnic and nationalist anger in the party’s base.... If the current tax bills get through, the tensions within the US are almost certain to get worse. Latin American inequality leads to Latin American politics. The US the world once knew is drowning in a tide of unconscionable and apparently unlimited greed. We are all now doomed to live with the unhappy consequences.

As I said yesterday: Eddie Lazear, Glenn Hubbard, what do you imagine that you are doing?