Kinsley’s right. I totally missed that point, and I wouldn’t have been so pointed in my criticism if I had understood it. I apologize for that. His line asking, “Why are so many actually suffering, losing their houses or their jobs?” should have been a clearer signal of his point.
I’ll note, though that I was hardly alone in missing it: So did many of his commenters over at Politico.
In re-reading it for the fourth or fifth time, I still don’t think the piece really holds together. It’s paragraphs like this one, for instance that led readers astray (emphasis mine):
In other words, if we were willing to earn, spend, save, pay taxes and use government services at the level we did in the fall of 2006, and if there were an easy way to extract the difference between then and now, we would have solved the problem. There obviously is no easy way to replicate the situation in 2006, but I don’t recall it as a time of widespread deprivation. The point is not that we can or should duplicate this exercise to balance the budget; it’s that there is no reason balancing the budget should require heroic sacrifices from anybody.
The problem with this is, of course, that it’s government spending—the deficit—that’s keeping GDP at its current levels. Without all that deficit spending, GDP would be much lower than it is now. There’s the whole stimulus package, which added 1.7 percent to 4.5 percent to GDP this year (on top of what it added in 2009).
Then there are the automatic stabilizer programs like unemployment insurance, food stamps, WIC, etc. The government spends much more money on these things during downturns and that money filters through the economy, boosting GDP. The Congressional Budget Office says they added about $350 billion to the deficit this year (compared to zero in 2007), which is 2.3 percent of GDP. That money filters through the economy. Cutting those automatic stabilizers would require heroic sacrifices from a lot of people.
So, while I get the point that the 2007 GDP provided a decent living standard for a lot of people, our current number catching up is in no small part due to the very deficit spending Kinsley bemoans. Taking that away is no cakewalk. It’s interesting to note that the 2007 economy was also, to a huge degree, debt financed. Going back to 2006 or 2007, to a bubble economy built on stupid amounts of private debt doesn’t sound very appealing to me.
Moreover the numbers in Kinsley’s column don’t really hold together. Take this paragraph on inequality:
A more important reason that $13 trillion doesn’t feel as rich this time as the last time we passed through it is the increasing inequality of wealth and income. In 1984, a family income of $81,365 (2009 dollars this time) put you in the top fifth of all American families. In 2009, it took 23 percent more, an even $100,000. To make the top 5 percent required income of $180,000 in 2009, compared with $68,500 (in 2009 dollars) back in 1984.
First, you can’t really use 1984 figures to talk about why we feel poorer than we did in 2007. Second, it doesn’t make sense that $68,500 gets you into the top five percent in 1984 and $81,365 only gets you into the top twenty percent last year. You need to earn more to get into the higher percentiles.
There’s a place for contrarian angles, of course, (though I think they’re overdone), but I still don’t think this piece was particularly well argued.