Tuesday, November 20, 2012

The 1950's and the rich

This section of Paul Krugman's recent column contained some things about the 1950's of which I was not aware:
Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.  ....

Squeezed between high taxes and empowered workers, executives were relatively impoverished by the standards of either earlier or later generations. In 1955 Fortune magazine published an essay, “How top executives live,” which emphasized how modest their lifestyles had become compared with days of yore. The vast mansions, armies of servants, and huge yachts of the 1920s were no more; by 1955 the typical executive, Fortune claimed, lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat. 

The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.

Today, of course, the mansions, armies of servants and yachts are back, bigger than ever — and any hint of policies that might crimp plutocrats’ style is met with cries of “socialism.” Indeed, the whole Romney campaign was based on the premise that President Obama’s threat to modestly raise taxes on top incomes, plus his temerity in suggesting that some bankers had behaved badly, were crippling the economy. Surely, then, the far less plutocrat-friendly environment of the 1950s must have been an economic disaster, right?
Actually, some people thought so at the time. Paul Ryan and many other modern conservatives are devotees of Ayn Rand. Well, the collapsing, moocher-infested nation she portrayed in “Atlas Shrugged,” published in 1957, was basically Dwight Eisenhower’s America. 

Strange to say, however, the oppressed executives Fortune portrayed in 1955 didn’t go Galt and deprive the nation of their talents. On the contrary, if Fortune is to be believed, they were working harder than ever. And the high-tax, strong-union decades after World War II were in fact marked by spectacular, widely shared economic growth: nothing before or since has matched the doubling of median family income between 1947 and 1973.
OK:  I knew about the high tax rate.  I didn't know about the relative modesty of lifestyle that a drop in income meant.  And yet, as Krugman notes, this is the period often thought by people as being the best of times for conservatives.  


TimT said...

Surely there's some conceptual trickery going on here Steve. The cliche is often used about conservatives 'they're taking us back to the 1950s!'; ie, it's a criticism by left-wingers of right-wingers. Now Krugman seems to be taking that left-wing line, and turning it on its head to create a rhetorical effect - that somehow conservatives 'want to take us back to the 1950s' but, contrarily, reject the economic lessons of that time.

And I wonder how selective Krugman is being, too, in his examination of this period (the '50s). If it is the case that the '50s were a time of economic growth, may it not have represented a recovery from the far more exorbitant taxes imposed by the Democratic Party under FJR.

Steve said...

I think one could say that conservatives have nostalgia for the 1950's social and cultural values (stable marriages, less sexual experimentation outside of marriage, less recreational drugs outside of cigarettes and beer, more church going, etc) but some of those things spill over into the economic field as well (people more easily satisfied with their employment "lot", more stable employment via loyalty of employee and employer to each other, etc.)

Thus, I think Krugman can make valid enough points about conservatives wanting to "go back to the 50's" in certain respects but not others, even with regards to economic matters. (For example, in employment, conservatives now value high mobility and flexibility, at the cost of steadier family life.)

And his main point about a drastically changed view about the rich and taxation is very valid, I think.

TimT said...

I still see rhetorical trickery and a willingness to ignore historical context. The high tax rates of the 1950s (accepted) were drastically different from the pre-Roosevelt era, before the imposition of wealth taxes. Maybe the conservatives of the present day are 1900s conservatives rather than 1950s ones? But either way it's just rhetorical trickery; seems to me Krugman just wants to fill column space.