Paul Krugman with Chris Hayes: The GOP Tax Plan

okay thank you everyone thank you out for coming on this winter Sunday night it's great to be here with you Paul great to be with you just a couple of guys on stage with Nobel prizes slightly rounding up they're more accurate to say I think probably that the average of Nobel Prizes to do the two is we each have half a Nobel Prize if you just take the average between the two of us well there's a lot to talk about so I thought we would talk first about taxes yeah I think in many ways the nature of the news cycle and the nature of the president have meant that there has probably been on balance less attention paid to this tax bill than is due the tax bill would you agree with that yeah I mean it's you know in normal well god knows what normal is but in a normal environment this gigantic thing which would hugely restructure lots of people's lives including health care or you know oh it's it's it's an enormous thing it's also an enormous ly bad thing which we'll get into would be top of the news every day instead we've got this constant barrage and you know I I watch it we all if you write for the New York Times you watch the the trending list and know normally actually you always know that that what people are really interested in is mostly food and and health but the your column on how to make the perfect grilled cheese was excellent yes right yes but the but you know people attention is grabbed by you know child molestation and all these and and all these other things so and and and whatever yesterday's tweets were so it is hard to break through and yet this is something the consequences if this thing actually happens which is slightly more likely than not are going to be you know they're gonna be overshadowing our lives for for a very very long time to come so I thought a good thing to start with as we talked about this tax bill before we do talk about the bill itself what's actually to start with some first principles about how we should think about taxation which is in some ways the sort of elemental core function of a government from the very very beginning I mean ancient Babylonia we're talking right this is the first thing the government does is it irrigates to itself the power to reach into your pocket and take some money that's right yeah and how so how should we think about what do we want out of a tax regime what would be a good way to think about the principles we want to pursue if Paul Krugman was the person who was sitting at a table designing something like this okay there there's two different somewhat opposing principles that go on in taxes one is that you want to relate the tax burden to ability to pay generally speaking that you want it whatever it is you want somebody with an income of 100 million a year to be paying more taxes than somebody with an income of ten thousand a year and in fact you probably want that person that the the high income parent be paying a higher fraction of his income in taxes just because it's even so it's gonna matter a lot less so there's there's an element of fairness and on the other hand taxes you know any tax is gonna have some incentive effects and while there are some kinds of taxes that that would actually we like the incentive effects if the tax is on pollution if we could ever do them would be a good thing because they would discourage a bad activity the real-world taxes we have yeah they do have some impact in discouraging maybe sometimes they discourage investment sometimes they discourage work so you well design tax system tries to relate taxes to ability to pay but also tries to minimize the amount of distortion of incentives that the whole thing creates and let me say those are the two principles I would add a third principle which is that all of that that second thing the incentive effects is a much smaller thing than most people imagined so that it's a mean it's real if you dare if you were to go you know there have been times and places where we're topping comes paid a 90% rate of tax in the u.s. under that socialist Dwight Eisenhower the top tax rate was 91% but but generally speaking at the kinds of tax rates we see in the US it matters a lot less than people think but but still there is that balance and everybody any card-carrying economist which I guess I still AM has got to admit that the incentive effects are selling to worry about it you know it's interesting you say that because I was watching by the way I started with taxes which I would not do in my cable news show but I thought that the audience on a Sunday night at the 92nd Street Y would be cool with that or you guys I just want to make sure everyone's like checked in you haven't okay good it wouldn't be my lead if I was programming my show but I thought about that because I saw I forget which nation it was but one of the things that people were talking about and I'm sure people in the audience have familiar already with this which is the you know the charitable tax deduction right and there's a lot of economists who say this is probably not a good idea and but yet it's very popular and you have all these very powerful interests that anytime it's on the chopping block you know universities for instance will be like well don't do that and I saw some I forget which country was maybe was Canada maybe was Australia was it was an english-speaking country where they actually did get rid of the charitable deduction and there was all this sort of sky is falling rhetoric about what's going to happen to terrible giving and then it didn't actually go down that much yeah take a big no we have of this tax everybody is looking at the tax reform reform quotes uh scare quotes around it the tax thing that that that Republicans are trying to pass and contrasting it with the 1986 tax reform because there in 1986 there was a genuine tax reform it was it actually paid for itself it was revenue neutral it lowered the the marginal rate on corporate profits but offset that by taking away a bunch of loopholes so it was actually it was it was fully balanced out it improved incentives it was done through a bipartisan process there was enormous amount of care consideration people really thought through it it's kind of the Camelot of tax reform if you actually look for any evidence that it made any difference whatsoever to us economic performance it cannot find it if if I showed you a time you know the a chart of u.s. GDP unemployment and said show me and you didn't know that there was a tax reform you would never guess that anything happened in 86 that's a good point because it is so you're right like procedurally there's a book about it showdown at Gucci Gulch where people would maybe read there it procedurally it's it's sort of yeah it has this kind of Camelot quality but it turns out that what you're saying is that even when you get it right when you do the best version of it that you could sort of practically do given American institutions it's not like some amazing growth is unlocked that's right and we've seen that there's a bunch of examples from different countries that have done these and it really that mean a small country that has we can get that but you know if you're a small country that has very low corporate taxes then a lot of corporations will find ways to make their profits appear to be earned in your country but that actually doesn't do very much for even for those countries that's mostly just on paper and all these other things I'd you know go back to that socialist Dwight Eisenhower when we had 91 percent top marginal tax rates when we had and the text the individual tax code in those days was full of crazy stuff there were incentives to you know people would invest in horse farms as a way to make their income disappear and then reappear as capital gains right there were all kinds of people spent more time back to the back then finding ways to avoid taxes than they do now because tax rates were much higher those were also the years of the best economic performance of American history the posting of the generation after World War two so all of this stuff is really taxes can do a lot in terms of shuffling you come around the tax system can can make some people much richer and some people somewhat poor but it's the the the extent to which it matters for the economy is is way way overstated alright so I want to talk about let's look there's two sort of big parts of this there's the corporate tax cut and the estate tax but I want to talk about the estate tax first yeah because it's something you've written about before really does feel to me from a sort of the perspective of political economy just like an insane heist like a quid pro quo I mean Sheldon Adelson spent whatever he spent 30 million 40 million dollars in election and his errors are you know they're gonna make billions of dollars off this it's the ROI on this investment which is elect people that will get rid of essentially or phase-out the estate tax is is pretty damn good for the folks that back that horse by the way for those who are unlike Chris or not technical let's return on investment all right the yeah the the estate getting rid of state tax is an unvarying goal of the modern Republican Party you brought I remember you writing column after column and I call them the Bush years and it's it's one of those and there is no it you know they there's really is no rational economic justification for it the the idea that people don't work as hard as they should because they are afraid that their estate might be taxed especially when the estate tax is you know doesn't kick in until it's five basically for a couple until you have eleven million dollars and that's where it starts so it's not that first eleven right dollars are not taxed the idea that that's important in any economic sense is nothing it's only about about five thousand that stays a year pay any tax but it's a pretty substantial amount of money we're talking something like twenty billion dollars a year and twenty billion dollars a year is more than the entire cost of the children's health insurance program so how on earth can we be how can this even be on the table and but the funny thing is I do know that the polling suggests that that people tend to favor abolishing the estate tax they think of it as something bad which is telling you something either about the credible ability of the right wing messaging machine or the fact that people don't really uh know just a tax right but yeah this is an amazing thing and this is a yeah this is this even even in America in 2017 twenty billion dollars a year is a lot of money the idea that we should take twenty billion dollars and you use that 20 million a year and use that to allow people who have done nothing to receive millions and millions of dollars tax-free is kind of amazing I remember a column you wrote you had the coin this phrase during the Bush years they had to play a similar game and they were also dealing with deficit windows and so they had a phase-out of the state tax over ten years and in the tenth year it was zeroed out and then the next year it resets the full amount which you called the throw mama from the Train scenario yeah because you had produced an incentive to just make sure people kick the bucket wait a second year when it zeros out in fact 2010 in fact that in fact that did happen right it did in fact zero out in 20 yeah and then spring back though Knox yeah the full rate and there is among high income 2010 was an unusually high mortality year for wealthy people ah it's not it statistically is not sure clear house but there may have been a certain number of wealthy people who were put on life support in late 2009 just to make it in and we're taken off life support in late 2007 do matter a little bit of little ardency right um alright so let's talk about the other big part of this this is a corporate tax and then we'll sort of move on to deficits and broaden out you guys are still with us right yeah great so I'll give the I'll give the argument on the corporate tax side right so the argument on the on the side that most of what this is is a big corporate tax cut that's most of what that's rental is and the argument is America has the highest statutory rate of any OECD country I think that's still true or among the highest yeah it's in the 30s all these other countries that we think of as not like you know right-wing low tax places like France and other places have lower corporate rates there's a huge gap between what the rate is statutorily and what's actually paid and there's all this cash that's sitting offshore because our statutory rate is so high and so if we cut the rate that money is going to flow back onto the shores of the US and Apple will like open the Apple Factory in Youngstown Ohio or yeah that that shuddered years ago what do you make an argument yeah so this was someone said this an egg there's no American baby so what professor Einstein has said is not completely stupid this is a the argument that the US Court the high notional US corporate tax rate is a problem is not completely stupid there are some disincentives in there now it's not really that there's cash that's sitting off you know that there's there's not a you know Scrooge McDuck salt full of gold sitting offshore that waiting to be used that when we say cash is offshore that's just a question of how how a company keeps its books so they're just making and it's not really the Apple is not short of cash right and and even companies that that are a little bit you know they can they can borrow against the the money hello yeah I just want but let me just make this crystal clear right so the idea is that like it's not that Apple saying like well we would love to build a new factory in like Rust Belt in Ohio but we have all this money sitting in Ireland we just can't bring it back but that's not what's happened no that's that that's that's a junk argument there is a real argument which says look we're thinking about doing this factory but any profits we earn on it will be taxed above 35% rate and if we built that same factory in lower aslam davia we don't need paying a 25% rate and so actually we're gonna open the factory there instead so that there is this pool of money globally that that has to choose where to go and that one consideration is going to be the corporate tax rate and so there is an argument which has to have at least a grain of truth to it that cutting that notional rate would lead to somewhat more investment in America and then the but of course it also the this is mean it's another example this isn't a sense of fact and you gotta believe there's got there's something there the question is is how big a deal is this how big a priority is it is it worth a trillion dollars which in the end has to come out of something else in order to be able to cut this rate so let's zoom out a little bit I think there's a way in which a lot of people watching the two major domestic battles in Congress of this year the ACA repeal and now that the tax bill there's a feeling in which the country feels like in an empirical sense it's under minority rule meaning a president was elected with you know minority of the voters the the total cumulative votes that elected the Senate is probably a minority the voters of Addison in the house it's actually a it is a slim majority of votes and then you've got these two pieces of legislation that pull in the 20s 25% how do you think about the political economy of this moment where it really does feel like things are happening against majority will time and time again well I think if you want to look none of the major none of the tax stuff that Republicans have done for 30 plus years has been wildly popular there were a lot of things people loved about Ronald Reagan where they really was the rikka the Reagan tax cut was never a hugely popular thing and you know he he was you know mourning in America well there was a there was a boom but that in it it wasn't the tax cut per se wasn't wasn't something that people were wildly in favor of the Bush tax cuts were never wildly popular they actually the 2003 tax cut was quite unpopular and basically he was able to push it through because of the illusion of victory in Iraq so this is this so this is not a new phenomenon Republicans have been pushing these things that benefit a small number of people ultimately at the expense of a much larger number of people for a long time now the if you asked I think there's two questions within here one is why do they do it and the answer is money donations but not just political donations also the whole complex of incentives if you are you know a modern Republican member of Congress is not someone who sort of is not you know Jimmy Stewart goes to Washington this is by and large these are people who've made a whole career within this machine there there apparatchik they they've worked their way up they've been employed one way or another in this political machine that is financed by a relative handful of billionaires and that machine provides them with campaign financing provides them with but also provides them with a certain amount of job security if they should happen to lose an election then they they can be a contributor on Fox News they can get a job at a think-tank whatever wing not welfare as the phrase goes and so their individual incentives are very much to to give something there were a couple of excessively frank remarks by Republicans about yeah that's the thing the donors are said though if you don't pass this don't call us again then on then but then the question is how you win elections this way and when that when those are your fundamental policies and they're the story is that that pretty cynically a party whose principle goal at least until recently has been to cut taxes on rich people has been able to exploit other social divisions cultural divisions and above all racial divisions to win elections now that kind of lost control of that half of the of the equation you know it used to be that that it was always we you know you you win your election by I like to say about the 2004 election that you know Bush wanted by by running against gay marry terrorists and it was the and then and then you say and now we're gonna prime security so now that's formula hey you know they've kind of lost control of the crazy aspect that what that was supposed to be managed and with a lid kept on it but it's still the same thing you win the election on one set of issues but the substantive policies were always about serving the donors what's been striking to me though to sort of in line with that right is that you know there's this political science book called the party decides a lot of people wrote about and basically the thesis of it was that even though we have open primaries we have this primary system that the party decides who the nominee is because of something that called the invisible primary which has to do with donors and endorsements and all this stuff and 2016 was a bad year for the party decides because of Donald Trump and yet what's been striking to me about the first year calendar year so far this presidency is how much the party decides how much continuity there is yes with the domestic policy agenda of this extremely heterodox and anomalous figure at the head of it with what they've actually been doing on the ground yeah now it's an interesting question would would this be happening if he were well if he were not an ignoramus if he had any idea what his own policies were what would he be choosing something different do you think he does have any idea no I'm pretty sure II mean no I mean I think it's evident that he doesn't now the I'll tell you where we're where we actually yeah but he doesn't really he doesn't really care I mean if there are anomalous features in the tax bill that don't that are hard to explain except as these are things that are kind of good for the Trump Organization the Trump family right so so that piece he probably knows about where push comes to shove would be some of the trade issues so it's it's been an interesting question to ask you know he was talked very very tough on trade talked about breaking up NAFTA still unclear what's gonna happen and there's a case where the party has decided that you know it likes North American Free Trade Agreement there's an awful lot of corporate money that's invested in the continuation of this open trading system of we we don't have Mexican manufacturing in US manufacturing anymore we have North American manufacturing it's all integrated there's hundreds of billions of dollars at stake so a real break up of NAFTA would be something that that the part that the the big money would be extremely upset about and still waiting to see I mean I think when he was after the election we thought that that something would happen fast on NAFTA and in fact so far nothing much has happened but we don't know but that's the case we're where there's got a real real conflict between loudly expressed Trump II and agenda and what the conventional forces of the Republican Party want so that that brings my next which is that I think for people that are not fans of supporters of the President or his agenda or him personally the way they conceived of him I think runs along a spectrum roughly that goes from harmless doofus to world historical threat and we're in that spectrum museum okay there's a great phrase Benjamin widdy's whose brookings and runs the law fair blog had this great phrase malevolence tempered by incompetence now that up till now I things I think that's still by and large the story that that is certainly not harmless and particularly you know the places that don't require legislative action he has appointed really bad guys to make administrative decisions so the amount of damage that's being done to the environment that's probably in many ways gonna be the most lasting thing that's actually you know the thousands of people are going to die because of pollution being allowed under Pruitt so this is this is a really big deal that is flies mostly under the radar F of our news cycle but hasn't been able to push big legislative agendas now what and what some of us feared what I feared was that it was he was going to be much more systematic it's clear that he has no these an authoritarian that has no respect for democracy and completely this is he's in the same in terms of ideology or general attitude in the same mold as some thought he like or van and Hungary which Hungary is a former democracy now it's become a one-party state if you you know for all practical purposes and the here is where the fact that Trump is clearly not as smart or organized as we're about makes a big difference and so we we have not yet lost everything but we don't know you know where does this go what what happens as well yeah and and it's kind of stuff that I have no special expertise and I just read the news right but rails yeah I mean I the point about authoritarian like the way that I think I've come to think of it is he's kind of like a bar stool authoritarian and what I mean by that is he doesn't have the knowledge wherewithal or applied determination to convert what are essentially dispositional ii authoritarian impulses into something more menacing in its manifestation of the state that's right that we've the the the lack of him yeah I mean if if you want to if you really want to destroy American democracy in the systematic way you probably shouldn't be watching eight hours of cable right yeah it's like he does it's like he does a lot of whining that's right he does a lot of whining which is not at like what would he but the whining comes from like a sort of hilariously am almost bizarrely in impotent place it's like it's like he's not the president it's he even though he talks about his own administration seems to be the commentary of a person who's still at home watching Fox News yeah which is by the way in terms of why does the economic agenda just look like a conventional economic agenda alive it has to do with that thank you totally he's just he's just out of it and so he's basically delegated all of that to you know to Ryan and McConnell now that doesn't mean that that it's okay it doesn't mean we're safe and when it comes coming back to act the actual policies now when you cope when you look at the at this tax stuff sorry to bring us back to tax it for a second but there you know the these are monumentally incompetent pieces of legislation you know astoundingly astoundingly yeah quite aside from the fact that the you know the intent is bad from my point of view and I think you know that but they're also just they were thrown together and in complete hodgepodge already tax analysts are having a field day and you can just imagine what the accountants and tax lawyers are gonna be able to do in terms of loopholes that turns out that there are some provisions that mean that certain kinds of business owners will marginal tax rates of more than 100 percent there are they they accidentally imposed about 250 billion dollars more in corporate taxes than they meant to yeah you know it's it's literally the next morning they woke up and they're like ah shoot yeah so right so so in this case we actually have malevolence reinforced by incompetence that that we what would have been a bad bill even if they had done it right by their standards is actually a far worse bill you know it's a now maybe it's still possibly defeated still a chance because of that but the but this is this is a you know this is a different story and but and this is all telling us by the way that's not just Trump right I mean the the the old the Republican Party of 15 years ago was capable of putting together you know reverse Robin Hood policies designed to impoverish the poor and make the rich richer in a cunning way in a way that was that that could you know would allow you to try out some families and say look some real people would benefit this at this point they are incapable even of drafting coherent legislation such a great point I mean one of the things that's so bizarre about this is they've they are gonna pass or on the precipice of essentially passing a deficit finance 1.4 trillion dollar tax cut that is not popular and we'll have a bunch of people's taxes go up yeah there's a way if you just are competent and someone says I mean you could do this with a spreadsheet and a lot of people could if someone said here's one point four trillion dollars and what I want you to do is come up with the deficit with the tax cut that does favor the rich but also includes everyone so everyone at the end of it feels like okay I got a little bit like that's a doable thing that they've managed to screw up yeah that's right that's that was the Bush tax cut right had little you know little throw aways - and this this one yeah actually so people in the middle of the income distribution the best estimate is about 2/3 of them will actually see their taxes go up by the end of the window by the yeah let me let me ask you this um you just mentioned sort of thinking about you know the scale of kind of harmless doofus or world threat and things lying outside your expertise but I do want to ask you you know one of the things that economists and I feel like quantitatively minded people think about and and and and is an important thing to think about in this moment it's thinking about the notion of what's called tail risk so the idea of you know you've got a risk distribution of things that might happen in the world and then way way way out here are the one-in-a-million shots right so one in a million that we have say nuclear war and one of the things that's hard about the way we think about tail risks is as human beings we're not particularly equipped to kind of deal with that numerically and so if nuclear war goes from one in a million to one 100,000 it's become orders of magnitude more likely but still is a hard thing for getting us to get our head around like do you think the election of Donald Trump and his comportment in office means that we have seen a significant increase to the risk of like genuine catastrophe oh yeah on every front I mean that's a laugh line people darkly darkly comedic ya know the think about I mean I've oz a nuclear war look a lot higher than one in a million actually the North Korea thing and but just you know in I mean this is right but it's a systemic thing people tend not to pay attention to catastrophic low probability events something which has a 5% chance of happening ever more than a million that would destroy your life tends to be in most cases something that the financial markets ignore that everybody and the thing is that that sometimes it's someone can get through a whole four years or eight years in office without ever having been challenged by anything particularly important requiring a response but by and large what we expect above all for the US president you know and this is America we're still kind of the center of the world order such as it is at this point something is going to happen it could be a it could be a crisis in the Korean Peninsula it could be you know so it could be a foreign policy crisis that with with risk of war it could be a financial crisis of kind it could be who knows what exactly and then you ask alright who is gonna deal with this not not not that guy with a sitting in front of the his Super T foe with with the cable news not we have not you know we have a if we have a finance if it's up if it's up my alley you know imagine if the if the 2008 financial crisis were to happen now when we with with you know we have a comical Treasury secretary with you know with the this the stock photo images now are always of him with his his expensive wife holding about sheets of dollar bills we have a we you know we we have nobody there who appears to have a grasp on on the financial system on economics now so far we've had a period of almost eerie calm in the markets but what happens if and when something happens and eventually something always does same thing on foreign policy you know we basically dismantled the State Department in a relatively short period of time you know we actually did see you know we had a we had a natural catastrophe and and the response was terrible the you know it's we that where we the times just did this analysis we think that a thousand people in reality were killed by the hurricane in Puerto Rico much of the island still doesn't have power still doesn't have clean water the the response was was it was in fact the response was in fact substantially worse than the Bush's response to Katrina but because it was happening off in an island which where people mostly speak a different language it wasn't noticed as much there's something happening there's something that happens in this era of Trump we're at the one on one hand everything feels unprecedented ly awful just and I think there's there's ways that you can ground that that aren't ridiculous I mean that just the way that the president community Eight's I think is pretty unprecedented and the things he says and the kind of lies that are spewed but then there's also this kind of like relentless a historian that happens in which all of a sudden these sort of people look back on the Bush years and this kind of Halcyon glow right which is you know I mean I've said this before in public and I'll say it again which is that like as of yet knock on wood Donald Trump has done nothing remotely as bad as the Iraq war not even by not even in the ballpark of that war how do you as someone who lived through those Bush years who I think kind of rose to prominence as a commentator in the Bush years how do you think about those two periods and those sort of twin impulses between the unprecedented nature of this president and this sort of a historical desire to sort of transmit backwards a warmer view of that of those years yeah I mean it's someone had nothing as many people have said actually the Republican Party has now developed a talent each successive Republican president manages to make his predecessor look good and now it's true that we haven't had anything like Iraq and it's possible that we won't and that was I mean that and yeah I mean people not forgotten we were lied into war that's I used to think that was the worst thing I could imagine a US president doing now I can imagine worse but it's a which is telling you something about the Trump years now it and it was also true that coming back to bit of what we're saying before that the bush people were were insidious because they were clever they actually were not they did things in a for the most part in a competent fashion it really wasn't until Iraq went to pieces and and then Katrina that people caught on to the fact that he actually didn't actually know what they were doing on important fronts that they were they were much better at creating a pretty good facade so but you know it the I think maybe it maybe it's only we now know in retrospect that much as I thought that Bush was terrible president and did Tara things that he was not he he did in fact in some ways we still respect American principles he you know when after 9/11 he he he actually acted - not a lot lots of people in his party didn't but he actually tried to sort of lean against backlash against Islam against people who look different to you actually rhetorically we should say rhetorically but the point that matters a lot yeah right I mean I would just say that the FBI went along detaining thousands of Muslims or they later had to release and there was a loss yeah but but it wasn't they they yeah and we didn't know that at the time I mean I remember 2002 2003 I was pretty frightened I wasn't sure at that point that we weren't going to be seeing the sort of gradual authoritarian drift in American politics and it it it's only we know with the benefit of hindsight that we know that some of the things that we feared didn't actually happen but my god if you if you yeah if if Trump makes you think the bush was a good president then you really have lost the lost the thread and maybe the way to say is that this is all an ongoing trend I mean and at some level I mean Trump isn't unusually apparent individual but this this movement of the Republican Party away from everything that I thought America was about this really goes you know this goes back decades in fact I would say if you actually began under Reagan which is you know the Reagan has been sanctified by a lot of people not all of them conservative but you know I'm actually in the Reagan administration as a sub political level and there were a lot of goons in policy positions even even in 1982 there's a sense I think in which the American experience is also part of a broader experience to the Western world osed countries you you mentioned Viktor Orban who is a really fascinating and terrifying figure in Hungary who who talks about illiberal democracy in Hungary and sort of using institutions of a democratic state to sort of create something that is punitive ly democratic but illiberal whose institutional power sort of concentrated in one state we've seen the rise of right-wing explicitly racist crypto-fascist movements across Europe we've seen a kind of coalition coalitional arc that stretches from the US across Europe into into Russia of these sort of interests what do you make of the rise of that sort of force in in Western politics right now that's a question a lot of us are asking of course and it's and you'd like to the the easy answer if you like the the answer that the comfortable answer is to say that it's economic anxiety that it's because we've failed the working class that people turn to these movements I don't think that I think that's becoming less and less plausible I don't think it ever really worked even for the United States although there was maybe a little bit here and there but but you look at Poland Poland is one of the star performers of of the economic crisis it within Europe the poles that mostly avoided the big recession they never adopted the euro they managed to stay out of most of the havoc there Poland this is one of your good stories and from a macroeconomic macroeconomic manager and so and then you have torch-lit parades where they demand you know get rid of the the Muslims and the Jews to which I'm you know guys you already did that at least half of it so it's not I think probably what we're seeing is I think these forces were all really always there and what maybe has happened is that the the establishments of all of our countries have managed they've they've lost their grip used there was a lot of stuff that was ruled out of court partly because we still remembered Hitler still remember World War two partly because it appeared that the elites knew what they were doing and we I think we've had a huge loss of in Europe it's the the the euro the European Union the Euro as a currency have been so badly managed that the credibility of the elites is shot and the so that affects things even the countries that didn't suffer very much directly like Poland it means that that the the racist whatever tendencies are making a comeback some of the same thing is happening I think in the United States so but I we're not really sure but it it's clear that that there is you know this stuff was always there and and somehow or other the upper crust that I'm getting into a metaphor I don't think I walk here but anyway that was kept on it I'm gonna go to these questions let me just ask you a follow-up on that right so there's a guy named Bronco melech who wrote this who has this very famous graph called the the elephant chart Branko Milanovic she's my colleague yes at the stone Center at CUNY's so Branca logic and it's an incredible graph and basically what it shows is it looks at the whole world over sort of 30 year reign of what we might call neoliberalism sort of post 1980 to 2010 and what it finds is basically you've got the the bottom 70 percent of the global income distribution which is to say China India the Philippines - global what we think of as a global South all seeing big and tangible material income gains the top 10% of the global income distribution which is the world's wealthiest seeing huge income gains and then income losses in what would be basically the middle class of the first world right the middle class of France the middle class of us and the argument there just to sort of further this economic anxiety we've created a world order in which the voting power to control most of the world is in the hands of a bunch of people who've been basically hammered with wage stagnation for thirty years and they're losing their mind yeah and so yeah yes the global 1% all the yeah and and and the Chinese middle class right and then there's the basically the Western working classes at the not this is stagnating stagnant yeah and and it's yeah I mean it's it's a it's a powerful mean and by the way I since I actually worked with Bronco I know how much work when is create I know and there's been back and forth but it's but the and that's certainly it tells you something I it's probably true that if we'd actually that if the last generation had been like the post-war generation in terms of income growth for working and middle-class people that we wouldn't be where we are now so this there's certainly something of that and it's a but it that doesn't really explain we you see you you see these nationalist movements happening a lot even in places it's true I don't I don't know of any country where we've had a boom for the working class and the rise of neo-fascism but that's because I don't know of any advanced country where we've had a boom for the working class right all right some questions in the audience dr. Kirkman boring impeachment with conviction in the Senate yeah I'm so surprised is the first question yeah a 92nd Street Y how realistic is defeating President Trump in 2020 put on your Nate Silver hat here what do I know what's your what do what do we know no I mean all of our normal rules about about this stuff that's all right actually let me just say I have a I have a you know in many nightmares these days but one of my nightmare scenarios never mind 2020 that seems impossibly far off giving all the things that are going to happen what if next year we have a huge popular rejection of the Republicans a mass vote and by the the the vote for the House of Representatives is a nine percentage point Democratic lead but because of gerrymandering and the concentration of minority voters in urban districts Republicans still hold the house at that point we will have a fundamentally illegitimate government we will and and by the way this is just a that's pretty much what just happened in Virginia Democratic governor won by 9 percentage points Democrats clearly won the popular vote by a huge margin it's still there are some really there's some stuff that hangs on a 10 vote margin in some of the parts of but but effectively Republicans may hold on to that legislature because of of the same thing so and you know and imagine that that the Trump scandals you know that have come to where we think they will but this that that there there is no impeachment so we will have a fundamentally illegitimate president who is pretty much widely believed to be a foreign agent and a Ana legislature that was it holds office despite the will of the people that's that's where so I I'm worried about you know late next year and I never mind 2020 an article in last week's time is focused on the likelihood of a bubble in the Chinese economy bursting with dire consequences for the world economy please comment ha I have been making that diagnosis China is wildly unbalanced it has crazily high investment very not enough consumption it's clearly unsustainable it's clearly set up for a crash and I've been saying that for six years it keeps not happening so now maybe it's just you know one of these days but yeah China it's and part of the point is maybe maybe Chinese maybe maybe the Chinese economy isn't the numbers there are so are so fictional anyway that who knows really what's really going on but no I mean China's is certainly a prop but you know even now if it's just a China crash we could probably handle that are you in the there's there's two different sort of schools of thoughts I feel like on Chinese economic management Jimmy Galbraith who's a sort of interesting somewhat letter heterodox sort of left economists has this sort of to me fascinating admiration for the economic management of China and there are those who think what they've done is essentially a kind of shell game or a sort of extended Ponzi scheme they're gonna have to pay for later and there's others who say they've actually pulled off something pretty remarkable which they've pulled off something remarkable how much government policy was responsible for that is is another question how much it was just the unleashing you know these are the the world's vastest labor pool the worth fastest labor pool and are pretty well educated yeah that was one of the things you know they in in when dong took power they were a highly educated desperately poor country that's one of you know the kind of like Korea before it did things so now they so the questions are more about you know to belittle to it this this is not the economy is not an illusion the production is real you know try driving around the Pearl River Delta and oh my god that you know the scale of the thing is is is stunning they maybe they do appear to be in a financially very weird position with a huge amount of debt with a huge amount of unprofitable enterprises and just not enough consumer spending right so that it it what it looks like in a lot of ways macro economically China now looks like Japan in 1988 1989 which was also the Japanese economic achievement was nothing to be sneered at they they it was an incredible miracle that Japan became the country it is now but they had an unsustainable financial bubble and so they had a burst and then they had a lost decade and all this stuff so China kinda looks like Japan but without the social cohesion so the question and because the Japanese in the end you know when all is said and done Japan is still there it's still rich it's still stable it doesn't you know Japan used to be a cautionary tale now it looks a little bit like a role model they might have they managed their burst bubble pretty well the Chinese probably wouldn't do that well what is the economic vision the Democratic Party should push post Trump okay yeah I I actually there's a lot of you know what a Democrats stand for but I think it's actually pretty clear I mean it's it is still about extending the social safety net extending the protections the probably going to be a little bit more radical and adventurous if the Democrats we take power because they've you know they have discovered bipartisanship ain't gonna happen with with the modern Republican Party and I think probably the the most natural places to focus now is first of all we have to repair of the Affordable Care Act after whatever damage did what it needed work anyway but now after whatever the Republicans are going to do to it but then I would say probably children is the biggest focus we still we have a credible lack of opportunity lack of decent education still failure to provide for Family Values and in the real sense and that's a place where Democrats could conceivably have a pretty big agenda but basically social democracy right but so here's my question how much how much can government policy do what should government policy do if you came to if I if a candidate got elected president United States and brought in Paul Krugman as their senior economic advisor and brought you in and said I'm concerned with one thing and one thing only I want to see wage gains I want to see genuine wage growth for the vast majority of wage earners in this country when way that we have not seen in 30 years right and you tell me come back in this room and tell me what we should do and I'm gonna push it in Congress what was your answer okay that's actually I mean this is this is a you know a real discussion that that goes on it was it's turned out to be more of a hypothetical discussion than we thought it was going to be but the you because no one's actually pushing this well no because you know all the levers of power in the hands of people who wanted wages right okay and look we what what we think we know is that Mar market forces are less invincible less determinative here then we then lost people imagine want to imagine if you compare you know the United States with Denmark they have a much bigger welfare state than we do and that's a big part of the difference but they also have a lot higher wages for for most their workers than we do they and all of that you asked well what what accounts for that well they have a government policy that is designed if anything to encourage unions not to do not to destroy them that would make a big difference the minimum wage within limits said I mean I even even liberals don't want a thirty dollar minimum wage but but but fifteen is something and that that cascades up the scale it means higher wages further up just generally enhancing the bargaining power of workers and also generally a and a full a genuine full employment policy I mean we have we're starting to see some wage gains now because unemployment is down to four percent but you've got to run that at a long time people come saying you can't do that because inflation but we're not seeing any inflation so you know why not keep that running for a while now in the end is that going to be enough to bring back the relatively equal distribution of income we used to have and probably not I mean we we the only the we saw the only time we've really seen a radical equalization of incomes in the United States was during World War two which stuck the amazing thing is that having used more time controls to make a much more equal distribution of income it somehow or other FDR established new norms that persisted for another thirty years I'm hoping we don't get another you know full-scale war to try that out again all right how can we collectively fight against the attempts to no longer have commonly shared facts yeah this is a big problem and the trouble is I mean there's nothing right you can't you can't pressure Fox News you can't pressure you can't shame Fox News put that way you can't shame Breitbart I know I've tried yeah exactly I think the and and the people who are going to turn to those sources I don't know what you can do is it they're just gonna be living in an alternative universe they the place where I I wrote about this just a few days ago and not in the physical paper but digitally the to the extent that we're going to have mainstream media organizations which now includes things like Facebook that they need to make a commitment to actually doing real fact-checking and that means abandoning false equivalence so what happened right now is is Facebook is looking for fact checkers and they decided and they decided to include the Weekly Standard as one of its sources of face check specifically Steven Hayes right who wrote a book about the connection between al-qaeda and Saddam Brian and they and the weekly standard has been crusading against the fact-checking organizations against PolitiFact and so on on the grounds that look they they declare many more Republican false statements than Democratic false statements because it's inconceivable that Republicans might actually say more false things than Democrats so as long as we have an environment and and you can see all right I think my newspapers gotten better on that but you can see that that a lot of mainstream media organizations still feel that they have to behave as if things were equivalent and you've got to stop that otherwise we're lost let's do a few more here so this is this is an interesting question because it has to do with political economy and there's been a real interesting intellectual move in the last few years around reviving antitrust and monopoly and consolidation so this question is would you comment on the anti-competitive effects of AT&T time warner which is a proposed merger and CVS Aetna which is another proposed merger and you can talk about this broadly if you yeah so I actually haven't figured out either of those yet to be honest I just haven't done the homework I'm really pretty concerned about CVS Aetna it just doesn't sound like there's any obvious gains and the Buckley but but actually we're getting it at was a crucial dilemma here antitrust is one of those things where you cannot just write down a rule you know a mechanical rule and this is how it's going to happen it's it's it things are - you need to use judgment calls the Justice Department has to decide which case is to pursue and the problem with the AT&T thing is that it looks as if the Trump administration which doesn't care a bit about monopoly power has decided to care about it in this case because it feels like it has a media enemy and so how do you possibly even do antitrust when you have a fundamentally you know untrustworthy norm violation government if we can get past that then there's a lot of reason to believe that monopoly power has become a much bigger issue there it just there are a lot of direct measures of how much competition there is in markets they've all gone down there are a lot of indirect indicators I mean we have record corporate profits with relatively weak corporate investment how do you how can that be happening well if the record corporate profits are largely monopoly rents that's exactly what you'd expect to see so the the kind of the it does look like competition you know we dismantled a lot of traditional antitrust going back to the 80s on the belief that well we've gone overboard and now it looks like we're actually starting to pay a serious price for it oh this is a fun one what is your opinion on Bitcoin yeah I'm gonna just say I've taken between 10 and 20 runs that really trying to get my head around Bitcoin a blockchain and have been defeated every time and I can give you a spiel about it that is essentially a kind of like recited wrote Wikipedia entry but I still don't understand what the hell's going on neither through the people buying that no I mean it this has got to be a bubble now I mean I I thought I thought I have been of the view that John McAfee said it's mathematically impossible for it to be a book yes he probably doesn't remember alan greenspan explaining that it was impossible to have a housing bubble the the the thing about Bitcoin I to a large extent it's a it's a solution to search of a problem right the blockchain which supposedly makes it possible to you know keep track of ownership without any central authority whatever it is is apparently technologically very sweet the people who is uit think that it's very clever why you need a currency that is based on this product is not you know if you say well let's you transfer funds electronically yeah I can do that with wire transfer I can do that with my credit card we know this is we already have a system for doing that and that the thing about regular currency is ultimately although it's true that there's no intrinsic value in on the green pieces of paper in my wallet and even less so you know in in the stuff in my bank account ultimately that stuff is grounded in reality by the fact that can be used to be to pay taxes so you have a government which which has real power which says this stuff is worth something and that bitcoin is grounded nothing and just sitting in there and and so why too many no money is a collective consensual hallucination always we don't you know that we're we're always using stuff that because we believe other people will accept it but at some level you got to think that there has to be an anchor that prevents it people from just one day deciding oh I'm not sure that this is worth anything and and it disappearing and Bitcoin doesn't have that anchor and certainly at whatever it is now 18 that not even you keeping track of the price it doesn't it doesn't make sense now the thing about Bitcoin is it turns out that it was partly technological we've got we've got a fancy solution there must be a problem to which it applies but it's also turns out to have an ideological thing Bitcoin is very much people it's tied in with libertarianism it's actually turned people who've been keeping track of you know Bitcoin Twitter say there's an awful lot of the old right now is the Bitcoin actually there are people who are accumulating Bitcoin in anticipation of of the apocalypse which has got to be the stupidest thing ever right it's just you know it's it's we're in a Mad Max wasteland but my digitally distributed RNC so and I it's got I mean it's it's it's it's gonna be brief and the good news is apparently a very large part of his own by only a like a thousand people yes so yeah so if as I believe it will the thing eventually just implodes it'll actually be a happy occasion right all right two more questions I'm gonna ask this one and then I'll ask one so any practical suggestions for what we can do beyond protests and calling our representatives for people that feel alienated from the levers of government no I I would say well alright I would say those two things and plus I think right email pressure the news media as well I think it is really there are several groups of people that are much more sensitive to criticism than you would imagine you'd be amazed at how much it really bothers politicians when they start to get nasty own calls right or when their demonstrations that there are though those townhall meetings with people yelling at their representatives really made a huge difference in the healthcare fight they need to keep that up you know volunteering and elections matters a lot but the news media also it's it's a and we've had a long part of this whole false equivalence thing comes from the fact that for a very long time the right was very organized to put pressure on to harass her ass is not what I'm actually advocating but to send lots and lots of letters and to and emails to to criticize journalists accusing them of having liberal bias and the other side was not equivalent and not and journalists some of them I know are shocked and angry to find out that hey I can be criticized from the left - but that's important they need to know that that can happen so that that's so it's not just the the political system but also the the media ecosystem needs to have an active public that is saying you'll do your job and you know ask me again you know if and when Trump firefighers Mueller and you know we have a constitutional crisis then I'm not sure a book quite but there'll be something more that we'll want to think about final question so if you can get in a time machine go back and and sort of you know Christmas Carol Scrooge ghost of Christmas past style visit yourself paul krugman on election night a year ago as a time traveler from the future what would you say what would you transmit from this first year that would surprise that paul krugman sitting there making sense of that election night oh I think I was not I mean I was shocked and surprised but not baffled by the election result I mean I in some ways you could see it I mean I didn't see it coming but you could see the force that were being it coming the the wildly unfair asymmetric media coverage that you know nonsense the the the polls were not that overwhelming young on election eve and and so when it happened it was it was more a know he'll it says this is what I was afraid that was going to happen not how can this be happening the message I would have sent back to myself was you're gonna feel better than you think right now on on that night it seemed like the end of the world and may well have been it turns out you know right yeah who knows but it but in the interim but but the the I okay I I actually followed the Hungaria the collapse of Hungarian democracy fairly closely for peculiar reasons my my next-door office neighbor at Princeton is a constitutional lawyer who who speaks magyar and was actually working on that and following the whole thing so I and I was very much fearing that we would implode the way that the opposition imploded in Hungary that that America would not that that the good people of America would would not rise to the challenge so far the American public has been much better from right from from inauguration day right from the the you know the the the pink hat protests we've just seen that that there's much more resilience resistance in the public people are not giving up and that has been you know relative to where you know one year and and and what you know fifty three weeks ago relative to where we I thought we'd be it's in conceivably bad but relative to that election night it looks like I have much more hope we've we we you know the the American people have been the the positive surprise since that election and you know we'll find out whether that's enough [Music] you

Channel: The 92nd Street Y, New York

Views: 48,906

Keywords: 92Y, 92nd Street Y, Chris Hayes, Paul Krugman, taxes, politics, economics

Id: FjNOf66kT_c

Length: 65min 58sec (3958 seconds)

Published: Mon Nov 11 2019