Thursday, October 25, 2018

Interview from the Archive: J. Bradford DeLong says to revive America's economy, replicate "Germany's policies"

Editor's note: This interview was originally published on March 16, 2017.

This is the second of three articles spanning my discussion with J. Bradford DeLong. The first piece is available here. 
Story by Joseph Ford Cotto
"A strong majority of Americans say the U.S. economy is running strong, and most believe the upward trend will continue under President Trump, according to a Harvard-Harris poll," The Hill's Jonathan Easley wrote last month. 
He went on to mention that this "survey found that 61 percent view the economy as strong, against 39 percent who say it is weak.
"A plurality, 42 percent, said they believe the economy is on the right track, versus 39 percent who said it is on the wrong track." 
The economy was viewed largely along partisan lines; with Trump voters optimistic about it and Clinton supporters feeling quite different. Regardless of whichever side one should fall on, or perhaps neither, it is difficult to deny that great discord over our nation's economic future led to our present political quagmire.
Support for Bernie Sanders and the Donald did not rise out of nowhere, after all.In such turbulent waters as these, it is important to seek the guidance of a wise, seasoned captain. Insofar as the sea of dollars and cents is concerned, J. Bradford DeLong is just that fellow.
He is "a professor of economics at UC Berkeley, a weblogger for the Washington Center for Equitable Growth, a research associate of the National Bureau of Economic Research, and former deputy assistant secretary of the U.S. Treasury in the Clinton administration .... He also writes the weblog "Grasping Reality":," as DeLong's U.C.B. biography explains. 
Dr. DeLong recently spoke with me about many topics relative to our nation's economy. Some of our conversation is included below.

Joseph Ford Cotto: One reason the American economy fails to meet standards set by its postwar halcyon era is that it produces a decreasing number of material goods. What would you say could be done to reinvigorate our manufacturing sector?

Dr. J. Bradford DeLong: Look what Germany does:

1. Much more support for apprenticeship programs.
2. Labor-capital codetermination in industrial management.
3. The opposite of the U.S.'s "strong currency" policy--an appropriate-value currency policy sensitive to the needs of exporters.
4. Budget surpluses so that foreigners take what they earn by selling us imports and use them to buy our exports rather than the stock of government bonds we have issued.
5. A government that nurtures communities of engineering practice rather than looking the other way while the world market sends our communities of engineering practice false signals that they are not wanted and are not valuable.

Copy Germany's policies.

Cotto: Progressive income taxation is far from popular, but having been instituted on Capitol Hill over a century ago, is embedded not only in our politics, but American culture. Some, though, want change. Certain voices say that income ought to be taxed at a flat rate. Do you believe this is a feasible idea?

DeLong: It's feasible. Is it a smart thing to do? Only if you think that one of America's biggest problems is that the after-tax distribution of income in America today is too equal. Back in 1975 the top 1% took home 8%--were about 9 times as prosperous as the average of the 99%. Today the top 1% takes home 22%--are about 26 times as prosperous as the average of the 99%. Back in 1975 the top 0.01% took home 1%--were about  110 times as prosperous as the average of the 99%. Today that top 0.01%--that's 14,000 households nationwide, about 1000 of them in Greater San Francisco--take home 5%, and are doubt 625 times as prosperous as the average of the 99%. If you think that progressive income taxation is a bad idea, then either (a) you are in the top 0.01% or top 0.1% and are confident your children will be in the top 1%, or (b) you have been grifted.

Cotto: Many have heard about the fair tax, but fewer know much about it. In a summary sense, what are your views on the concept?

DeLong: The Fair Tax has two big effects. The first is that it takes some investment-income money that recipients have already paid capital gains taxes on and taxes it again--thus subjecting a slice of the rich to surprise double taxation. The second is that, even with this, it makes America a more unequal place. I have never understood why this is supposed to be attractive.

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