The View From 1776

The Sunday, December 16, 2007, edition of the New York Times carries a review of Robert Kuttner’s The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity.

The reviewer, Harry Hurt III, summarizes the author’s views:

"The potential of our economy to underwrite a society of broad prosperity is being sacrificed to financial speculation,” Mr. Kuttner declares in his new book’s opening chapter. “The winnings are going to a narrow elite, jeopardizing not only our broad prosperity but our solvency. In less than a decade, our government budget, gutted by tax cuts, has shifted from endless projected federal surpluses to infinite deficits. Our trade imbalances and financial debt to the rest of the world have grown from a modest concern to levels that could produce a crash.”

Mr. Kuttner cites numerous studies and statistics that show a staggeringly disproportionate distribution of wealth in America. Among the most telling is the fact that the median income of working-age families has actually fallen by 5.4 percent over the last seven years, adjusted for inflation, even as the gross domestic product has grown by 18 percent.

Let’s give Mr. Kuttner his due.  He is certainly correct that, “Our trade imbalances and financial debt to the rest of the world have grown from a modest concern to levels that could produce a crash.” But ultimate responsibility for that lies with one of Mr. Kuttner’s heroes, Franklin Roosevelt, who started the socialistic policies of debasing the dollar and massive Federal deficit spending.  Republicans have done very little to reverse those policies and must shoulder a good share of the blame for the severity of today’s problem.

“A society of broad prosperity” means what liberals call social justice: equality of income and equal access to all of society’s goods and services, without a merit hurdle. 

With regard to Mr. Kuttner’s fulminations about a growing income gap, see Income Gap Statistics.

What then is Mr. Kuttner’s liberal-progressive-socialist analysis of the purported economic disintegration of the United States?

Mr. Kuttner attributes the squandering of America’s economic health mainly to what he describes as the systematic dismantling of the government-managed economy that was created under Franklin D. Roosevelt and Harry S. Truman.

WE can start to realize these goals, he says, by imposing progressive taxes on the wealthiest 1 percent of the population, and by instituting trade policies that are protectionist only to the extent that they are based on long-term interests of the country as a whole, rather than on the short-term profit goals of the financial elite.

It’s ironic that Mr. Kuttner finds that “labor unions have become marginalized, pension funds are hijacked as vehicles for speculation.” Labor unions repeatedly have been revealed as corrupt, with union officials running afoul of the laws for enriching themselves out of union pension assets.  For many years the Mafia-controlled Teamsters Union central district out of Chicago was the only entity in the country that would finance Mafia-controlled gambling casinos in Las Vegas.

To be sure that we understand the source of Mr. Kuttner’s analysis and prescription for the United States, Mr. Hurt also informs us, Mr. Kuttner is a self-proclaimed liberal Democrat and heterodox economist who founded The American Prospect magazine and wrote a column in BusinessWeek for 20 years. He is also the author of several books critiquing laissez-faire capitalism and unregulated markets.

Business Week Magazine has long been a liberal editorial screed, rather than a knowledgeable commentary on the realities of business and finance, in glaring contrast to the Wall Street Journal and Forbes Magazine.  With writers like Mr. Kuttner, it’s no wonder. 

The American Prospect is politically and socially about as far left as any publication in the United States.  One of its founders and regular contributors is Robert Reich, President Clinton’s Labor Secretary.  Mr. Reich strikes me as a more rational thinker than Mr. Kuttner, and he is personally a decent man, but he has never met a Federal regulatory measure or a pro-labor union policy that seemed to him to be unworthy.

For a less sympathetic assessment of Mr. Kuttner’s book, read the review in Commentary by Daniel Seligman.

Mr. Seligman notes that, Robert Kuttner is a non-mainstream economist with deep, deep doubts about free markets, free trade, unregulated industries, and nonunion workers. He may also be the only economist who still speaks positively of Richard Nixon’s 1971 decision to impose wage and price controls.

Visit MoveOff Network Members