Piketty's new gilded age which isn't

Progressive hearts are all aflutter this week, riding high on the continued coverage of Thomas Piketty and his new book “Capital in the Twenty-First Century” which continues to fly off the virtual shelves at Amazon. To say that Piketty’s basic premise is flawed is probably too much of a compliment. Ed already looked at one of the fundamental assertions last week – that median household income had only risen 3.2% over the past three decades – and found it to be off by a factor of ten.

But there are other, deeper problems with the Piketty model. One of them is the idea that capitalism itself is flawed at its foundation, leading to some new gilded age where a handful of families always gather in and hoard the wealth for generations, leaving others to starve in the cold. Unfortunately, even people like David Brooks have bought into the concept without examining it fully.

Politically, the global wealth tax is utopian, as even Piketty understands. If the left takes it up, they are marching onto a bridge to nowhere. But, in the current mania, it is being embraced.

This is a moment when progressives have found their worldview and their agenda. This move opens up a huge opportunity for the rest of us in the center and on the right. First, acknowledge that the concentration of wealth is a concern with a beefed up inheritance tax.

We should have seen this one coming from day one. The claims regarding the horrors of income inequality had to lead to a call for a not only renewed, but expanded death tax. This, in addition to steep income taxes which Brooks claims Piketty does not support, but in fact, are part and parcel of his plan.

Mr. Piketty urges an 80% tax rate on incomes starting at “$500,000 or $1 million.” This is not to raise money for education or to increase unemployment benefits. Quite the contrary, he does not expect such a tax to bring in much revenue, because its purpose is simply “to put an end to such incomes.” It will also be necessary to impose a 50%-60% tax rate on incomes as low as $200,000 to develop “the meager US social state.” There must be an annual wealth tax as high as 10% on the largest fortunes and a one-time assessment as high as 20% on much lower levels of existing wealth. He breezily assures us that none of this would reduce economic growth, productivity, entrepreneurship or innovation.

Fortunately, Dr. Joyner takes a look at several studies of the Piketty manifesto and finds that the aforementioned allegation of the new gilded age is also a non-starter. He looks at the work done by Heidi Moore, who claims that these rich capitalist families have already long since hogged up all the wealth and nobody can ever catch up.

Except, as even Krugman readily points out, none of this is true! Indeed, most of the super wealthy class in America at least are in the finance sector. Whatever other criticisms might be made of that group, that they inherited their riches is not among them.

The discussion that Piketty and others have made possible, and that Krugman and others have helped popularize, is worth having. But it’s likely to be steered in the direction of the stupid by the likes of The Guardian. That’s a pity.

Read all of that Joyner article, by the way. There’s a lot of good meat in it. But it also leads us back to the one part of the discussion which Brooks actually gets right in the previously quoted column.

Third, emphasize that the historically proven way to reduce inequality is lifting people from the bottom with human capital reform, not pushing down the top. In short, counter angry progressivism with unifying uplift.

This, in the end, is the fundamental difference between conservative and progressive solutions to income inequality. It’s true that there are many, many people in America who are doing poorly in a struggling middle class or very poorly in poverty. But the progressive solution is to narrow the gap by eating the rich and dragging them down closer to the bottom of the pool. The conservative agenda is to close the space between the tiers by creating more wealthy people through expansion of opportunity and steadying the ladder so those with the drive to succeed can join the successful at the top. It’s a rather stark contrast.

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