Paul Krugman is Wrong About Jobs and Income Inequality

The welfare state perpetuates income inequality

paul krugman

Looking forward to Obama's State of the Union session, New York Times economic court jester Paul Krugman beats his usual drum about the importance of deficit spending (no, that's not a joke, it's what passes for liberal economic wisdom) and then tries to make a case for the left's latest meme of "inequality" over jobs.

The usual suspects on the right will, as always when questions of income distribution comes up, shriek “Class warfare!” But there will also be seemingly more sober voices arguing that he has picked the wrong target, that jobs, not inequality, should be at the top of his agenda.

Here’s why they’re wrong.

First of all, jobs and inequality are closely linked if not identical issues. There’s a pretty good although not ironclad case that soaring inequality helped set the stage for our economic crisis, and that the highly unequal distribution of income since the crisis has perpetuated the slump, especially by making it hard for families in debt to work their way out.

Moreover, there’s an even stronger case to be made that high unemployment — by destroying workers’ bargaining power — has become a major source of rising inequality and stagnating incomes even for those lucky enough to have jobs.

The second point isn't even an argument. Obviously unemployment leads to income inequality. If people don't have jobs, their income falls. But that's a case for focusing on jobs, the cause, not income inequality, the effect.

Paul Krugman turning that into his "stronger case" is a basic failure of logic.

Krugman's first point is even more inverted. Income inequality didn't create the economic crisis, botched attempts to remedy inequality with government subsidies that were monetized by liberal billionaires did.

The roots of the economic crisis lie in the intersection between Wall Street and the welfare state. That same intersection has given us Barack Obama, Paul Krugman and severe unemployment and income inequality.

The drum beaters for endless spending on the welfare state are perpetuating income inequality by pretending to fight it for their own profit.

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