issues
when it comes to the more bigger macro issues, what we’ve learned thanks to some things I think we suspected but are now much more confirmed is that there are huge differences in priorities, perceptions between the small wealthy minority and the population at large. I’ve now seen in the last four days, I think, four different articles that used F. Scott Fitzgerald. So yes, the very rich are different from you and me. You see that very clearly on a couple of big issues. One of them is taxes. The polling overwhelmingly says that people believe that the rich don’t pay enough in taxes and that taxes on top incomes and corporations should go up. And yet an enduring piece of their political agenda has been to cut top tax rates. When Bowles-Simpson produced their initial draft PowerPoint, cutting marginal tax rates was right at the top of the agenda. And what was that doing in a document that was allegedly about fiscal responsibility and social safety net? The public wants to spend more on social security and on healthcare, but we know from these it’s very difficult to conduct. But illuminating surveys that the point of 1% wants to cut taxes at the tops, not surprisingly, and wants to cut spending on entitlement programs. Diametrically opposed to public opinion at large.
What you see, of course, is that to a remarkable extent, the policy agenda set in Washington reflects the preferences not of the general public but of this very small, wealthy minority. And sometimes that has extremely, not just this kind of unfair consequences, but extremely deleterious consequences for the conduct of economic policy. So the case in point that some of my thing interest come together with all of this is how did we deal with the aftermath of the great financial crisis. For the first few months, we had more or less a response that was at least in the right direction, fiscal stimulus, monetary easing. Then a weird thing happened. Even though unemployment was still above 9%, everyone inside the Beltway was talking about the great threat posed by budget deficits and the urgency of entitlement reform. And this was not– I’d like to say it was debate, but it didn’t even feel like a debate. You can actually document this. To a remarkable extent, both the political establishment and the media simply stated as facts that this was what had to be done. So there was a great article by Ezra Klein at the time about the trouble with Alan Simpson where he quoted various reporters who would ask, “So will President Obama do the right thing?” These were not opinion writers. These were supposedly reporters. And the right thing meant cutting social security and medicare. It simply became defined as this was the responsible, the right thing to do. So what happened?
What happened very clearly was that– oh, I’m sorry. And then I should say that– and it was also very clear that this was not the right thing. If there was one– I mean, the peculiar thing about the aftermath, nobody really saw the financial crisis coming except for people who saw five other crises coming that didn’t happen, right? But once it happened, we all understood. Hadn’t quite realized just how much havoc the bursting housing bubble would wreak with– hadn’t realized how much shadow banking had restored