Audit Notes: That’s Rich, Krugman; Munger; Dancing Around Income Inequality

Instaputz points out some real lack of self-awareness in Paul Krugman’s column today attacking the rage of the rich:

You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy.


Fella, I get the Fitzgerald reference, but if you have two three homes (one of which cost $1.7 million) and no kids, you’re rich. And if you also have a Nobel Prize and a column in the Times, you have more influence than any Times readers — i.e., “you” — can possibly imagine.

It’s tone-deaf at best.

It’s nice to see Krugman sort of acknowledge this in a blog post today. Tom “Green Revolution” Friedman, meanwhile, still owns an 11,400 square foot suburban mansion.

— Bloomberg pulls a good news story out of Warren Buffett sidekick Charlie Munger’s appearance at the University of Michigan.

Charles Munger, the billionaire vice chairman of Berkshire Hathaway Inc., defended the U.S. financial-company rescues of 2008 and told students that people in economic distress should “suck it in and cope.”

“You should thank God” for bank bailouts, Munger said in a discussion at the University of Michigan on Sept. 14, according to a video posted on the Internet. “Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.”

It’s true that had we not had bailouts we likely would have seen an economic catastrophe that would have made the current one look like a golden era. The problem is how they were implemented and how nothing happened to those who got bailed out—institutionally or individually. Happily, Bloomberg gets a quote in up high saying much the same thing:

“Charlie Munger is misrepresenting history, and that’s why the public is angry at Wall Street,” said Joshua Rosner, an analyst at research firm Graham Fisher & Co. “We could have wiped out the equity holders before we wiped out the taxpayer.”


— Kevin Drum has a good post on income inequality and the various arguments that dance around the simple, plain fact that most of the gains of the last thirty-plus years have gone to the very top.

There’s long been a cottage industry in efforts to show that income inequality isn’t as bad as the raw numbers say it is. Until recently, the most popular tactic was to insist that we should look at consumption instead of income. This was mostly just an attempt at misdirection, but in any case the great credit bubble and bust has made it plain that a lot of recent middle class consumption was fueled by refi and charge card binges that ended disastrously. If anything, this strengthens the case of those who say that income matters after all, so we don’t hear this argument much anymore.

But there are plenty of others. We’re measuring inflation wrong. Cheap plasma TVs and Chicken McNuggets have made the life of the poor better than you’d think by just looking at their earnings. The whole thing is just a statistical artifact of the 1986 tax reform bill. The composition of households has changed, so household income goes farther than it used to. Income distribution looks better if you count government transfers. Etc. etc. etc…

But regardless of the answers to all these questions, there’s still the raw fact that the flow of money in America has changed dramatically over the past few decades.

Make sure to check out the chart.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.