 Okay good morning. So I'm really, I'm actually delighted that we're having a meeting about the the very rich, which is it's a subject which until very recently and even to some extent now has been kind of hard to broach, at least in my circles. There's been this sort of sense that that when we talk about inequality we should be talking about the top quintile or we should be talking maybe about the top 5% or even about the top 1%. It took a long time before we could get people to do that and the we just had our big workshop at the Stone Center at the Graduate Center on inequality by the numbers and one of the students was asking why do we talk about the 1% that's not actually you know that's not that that doesn't actually that that's like 400,000 a year that's not the that's not the plutocrats we we envision and you know there are historical reasons why it came to be that but but there's there's still I think a sense first of all that's something kind of prurient about talking about extreme wealth that it's it's that there's it's an issue of envy or it's an issue of just plain you know lifestyles of the rich and famous or something like that and also a broad failure on the part I believe of many people to understand just how much money we are talking about we had an event a couple months ago at the Graduate Center where Janet Gornick director of the Stone Center a longtime director of Luxembourg income study just mentioned in passing that the average income of the top 25 hedge fund managers was about 800 million and people in the audience said no that's wrong that can't be right they had no idea no it's right that's not that is a genuine number there really is that much money at the top why do we care so the there there are you know there are multiple issues there are if we're talking about who might be asked to pay somewhat higher taxes to pay for expanded social safety net programs of various kinds investments in children and so on you probably are going to be talking about taxes that are a little bit beyond the 1% something like the the taxes that pay for Obamacare which really hit around 2% of the population if you're talking about people who are in one way or another insulated from many of the concerns that face the typical American family you're already in that range at the 1% but there are some really important issues where a much smaller group plays a critical role and a and as I think every speaker is probably going to argue a a distorting role in our society some of those are more diffuse there are I believe I would argue though without being able to quantify it that there are social costs that there is damages to our sense of ourselves as a society from having people who are just completely in a different material universe from the rest of the population but what I want to focus on for this morning's remarks on are the political implications of having people with with a very very large amount of money and a very small group of people some of you may know I thought I would jot down a few notes for this talk over the weekend then somehow found myself jotting down more and more notes and ended up just posting it as an 1800 word blog post on at the time so so a lot of what I'm about to say has already been previewed but but I think I do want to come back to it so so we there's a group and we don't need to define it too exactly maybe it's the 0.01% which is a is really what people have in mind when they often when they use the phrase the 1% it's really it's really a much smaller group this is a group that is it's elusive and I know that Heather is going to talk some numbers and we do have we have you know the best estimates we can do of of how much money this group has but it's actually pretty hard to do it's the normal survey methods are obviously not going to pick up pick up the the income and wealth of that group the we've tended to use administrative data basically tax returns but what we've been learning recently owing to the work of people like Gabrielle Zuckman is that there's you know tax avoidance and evasion which the difference is one of legality but in terms of the implications not that different that that tax avoidance is a really big deal at the top that that we really have only a very imperfect notion of how much money there is there it's also an elusive group in terms of its role in the political system I've been I'm an avid consumer of quantitative political science and there've been several recent studies particularly as a new relatively new book by by page C right called billionaires and stealth politics which talked about how in fact great wealth is deployed in on behalf of political decisions and groups like the billionaires who just said please tax us are what you hear about and it's great that they do this they're also extremely exceptional and what you have by and large is billionaires spending large sums of money to promote their own self-interest in ways that are mostly below the radar are really quite hard to track this gives this very small group of people a lot of power we have a formally democratic one person one vote system in practice dollars talk quite loudly the reasons they do are themselves a little bit elusive there is a I think if you asked even me five years ago how much raw corruption just plain bribery there is in this system I would have said well that's probably not a big deal and actually I don't think that anymore there's probably a whole lot more of that than we think there is there's a lot of soft corruption which people may not even quite admit themselves that it's corrupt but the revolving door appointments at think tanks the speaking circuit it's a lot more certainly at the worlds I know the opportunities for supplemental income if you are a conservative finance professor are a lot bigger than if you are a professor who's a radical critic of Wall Street there is campaign contributions we talk about a lot which are definitely a big deal although I think maybe less of a big deal than we we think if only because at this point there's so much money floating around in politics that that it probably runs into diminishing returns at some point but the thing that that really motivated me as I start to think about was the extent to which the very wealthy get to define the agenda get to define then the the boundaries to the the Overton window if you like the notions of what is what is considered to be a responsible sensible policy what things do you need to worry about how do we pay for and which things do you not which things are considered to be sound responsible policy and which things are not and that's a that's been I'll talk about a specific instance in in a minute but that's been a really big deal in in on multiple fronts and as you might expect the kinds of things that the 0.01% on average thinks our priorities are different from those that are priorities for most people and some of those are enduring things investments in public goods it depends a little bit on what the public goods are but if we're asking about things like investments in public education well we're talking about a group of people who don't use public education so they're not going to be very afford we're talking about things like investments in childhood nutrition and child care well their children are not going to be underfed and they're going to have health care and they have nannies if we're talking about certain kinds of infrastructure while some things are going to be invested in air traffic control probably but maybe other things not so much so subways are probably not bus service or are not going to be top priorities what we when it comes to the more bigger macro issues what we've learned thanks to things some things I think we suspected but but I now much more confirmed is that there are huge differences in priorities perceptions between the the small wealthy minority and the population at large the I've now seen in the last four days I think four different articles that that used F. Scott Fitzgerald so yes the rich the very rich are different from you and me you see that very clearly on a couple of big issues one of them is is taxes the polling is overwhelmingly the overwhelmingly says that that people believe that the rich don't pay enough in taxes and the taxes on top incomes and corporations should go up and yet an enduring piece of the political agenda has been to cut top tax rates when when when bulls Simpson produced their initial draft PowerPoint cutting marginal tax rates was right at the top of the agenda and what was that doing in a document that was allegedly about fiscal responsibility the and social safety net the public wants to spend more on social security and on health care but we we know from these very difficult to conduct but illuminating surveys that the 0.01% is wants to cut taxes at the top not surprisingly and wants to cut spending on entitlement programs diametrically opposed to public opinion at large all of this the what what you see of course is that to a remarkable extent the policy agenda set in Washington reflects the preferences not of the general public but of this very small wealthy minority and sometime that has extremely not just kind of unfair consequences but extremely deleterious consequences for the conduct of economic policy so the the case in point that where some of my thing interests come together with all of this is trying to get a little old but I think is still relevant which was how did we deal with the aftermath of the great financial crisis how did we we we had a a a severe a really a 1931 level crisis in the financial system in 2008 we had a recession which was not full great depression level but was extremely severe and actually the reason it wasn't full depression level had a lot to do with with automatic stabilizers with big government saved us from a full replay of the of the 1930s but then and for the first few months we had a more or less a response that was at least in the right direction fiscal stimulus monetary easing then a weird thing happened and happened in 2010 2011 which was somehow the agenda changed somehow even though unemployment was still above 9% everyone inside the beltway was talking about the great threat posed by budget deficits and the urgency of entitlement reform and this was not I'd like to say it was debate but didn't even feel like a debate it felt and it was you can actually document this to a remarkable extent both the political establishment and the and the media simply stated as facts that this was what had to be done so there are there was a there was a great article by Ezra Klein at the time about the trouble with Alan Simpson where he quoted various reporters who would ask so will President Obama do the right thing these were not opinion writers these were supposedly reporters and the right thing meant cutting Social Security and Medicare it simply became defined as this was the responsible the right thing to do the what happened what happened very clearly was that oh I'm sorry and I should say that and it was also very clear that this was not the right thing if there was if there was one I mean the peculiar thing about the aftermath you know nobody really saw the financial crisis coming except for except for people who saw five other crazies coming that didn't happen right but once it happened the we all understood we you know people I talked to we we understood what had happened it we you know we understood what what we missed hadn't hadn't quite realized just how much havoc the bursting housing bubble would wreak hadn't realized how much shadow banking had restored old-fashioned financial instability people how many of course you know you know people I know were sort of wandering the holes muttering diamond did big diamond did big but anyway the so but and we knew what to do this was actually we have very clear textbook economics you cut interest rates as far as you can but you need fiscal stimulus to take up the slack because the private sector wasn't going to be willing to spend enough even even at zero interest rates and so the the the remedy the way to avoid having an extended period of high unemployment was utterly clear and was rejected we had all around the Western world we had a turn towards austerity that was economically destructive clearly prolonged we should have been back to full employment by 2012 or something we could have been quite easily in fact in fact it went on much much longer than that and the funny thing was again as I say that there was this was not treated as debate doing the the wrong thing was the right thing it was it was simply assumed to be the case that this was what we should be doing and what had happened I I've to admit I don't think I fully appreciate it at the time what had happened was that a lot of the political and media establishment simply internalized the values of the point oh one percent that the the kinds of policy views that come naturally to people of great wealth were just to find the parameters of what was considered responsible the responsible thing to do was what the typical billionaire as opposed to the atypical people who who are supporting what we're doing at this conference tends to think should be done why why that particular point of view why that outlook a lot of it is a narrow self interest or at least some kind of class interest you don't have to be a political Marxist to say that that it's it's kind of understandable that somebody with a great deal of money should should support lower tax rates on high incomes and and low tax rates on inherited wealth it's not hard to understand really why they should support cuts in entitlement programs because the entitlement programs require taxes to support them and and in the end that's you know the even in the US the tax and transfer state even though the US has the weakest welfare state than the OECD it's still considerably redistributive so this is it was natural for them to oppose this I think it's also just that there is a a kind of lack of of identification and there are two there are two I think great gaps in perception in our in our in our society right now on the one hand most people have no idea how rich the rich are I already mentioned that people just have no notion it's the constant I've spent I think 15 years dealing with people who say well you say that that there's a problem with the rich but you know shouldn't sports stars be paid a lot of money shouldn't music stars be they are not paid a lot of money by the standards of Wall Street it's it people have no idea just how high the incomes are at the top and on the other hand I think the being at the top means that you have a very little sense of what life is like for most people the classic example being the constant say demand that we raise the retirement age because after all people are living longer so certain shouldn't Social Security be delayed the answer is well actually higher income people are living longer there's a growing gap in life expectancy based upon social economic status and the bottom half of the of the income distribution who are exactly the people who depend on Social Security most have seen hardly any rise in life expectancy at all fact at this point the last few years declining life expectancy so this is a complete you know basically we're saying that because because highly paid accountants are living longer the janitors should have their their retirement should should lose their their their retirement and it's a and I as far as I can make out there's an honest I mean one of the things that does come with great wealth is in most cases not all is is an insulation of the reality from the realities of life I suspect that very few people and the point oh one percent realize that for the majority of American Social Security is the dominant and in many cases the sole source of support in retirement and so demands that be cut all of this means that it matters a lot that this group has acquired so much power that the concentration of income and wealth at the top has distorted our our society has led us to make bad choices in just in terms of the of the overall state of the economy as well as unjust choices choices that hurt ordinary people even if they may benefit a few people at the top and we need to try to turn this around and maybe miss the most important thing is that we still have this tendency to assume that because people have made a lot of money or inherited a lot of money but anyway what because people have a lot of money that that means that they actually understand the world that they that that that being rich means that you are also wise and that is very very much not true in fact it's I don't want to romanticize the wisdom of the common man but the but the fact of the matter is that that if anything the the top point oh one percent has a worse idea about the realities of life and the and the real impacts of policy than than ordinary voters and anything we can do to curb that influence is going to help make America a better place thanks thank you so much Paul that was wonderful as always we do have time for a couple of questions there will be microphones circulating in the audience please do say your name and keep your question nice and short so we can get a couple in thanks the Institute for Policy Studies thanks for that when you made your comment about people being clueless in the social security debate I was reminded of Larry Fink from Blackstone who said that we should raise the retirement age because people mostly just sit around in their jobs now anyway so they can work longer yeah yes but I wanted to ask you've written some really insightful columns about other economic models and other parts of the world and Denmark for example I wonder if there's anything we can learn about how some other countries have dealt with their 0.1 percent okay so I mean the Nordics are a really interesting case and sorry just this morning that the post has something about how Democrats are wrong the Nordics are not socialist which no who said they were their social democratic they are you know living refutation of the orthodoxies of you know the saying that that that that high taxes are enormously destructive may get you a presidential Medal of Freedom but it doesn't but but just look at Denmark just look at Sweden these are countries that are have tax far higher taxes than we do and yet they have you know in terms of outcomes things like prime age employment rates they do better than we do what is true about the 0.01 percent the even the Nordics are not that successful at at taxing extreme wealth they're they they they make more of an effort at them we do but they do live in a globalized world and what we've learned actually a lot of it I hope if people follow this stuff Gabriel Zuckman has been doing this amazing stuff on on tax havens and a lot of the data is this kind of as I said that the rich are elusive we we actually know as much as we do which is not as much we should only hear thanks to the accident the Panama papers and then the Panama papers integrated what Gabriel did was he integrated it with with information provided by the the Swedish Ministry of Finance which was willing to supply enough data so they could do matching so that's on the one hand saying that the Swedes clearly have a very different attitude towards this theory they're actually willing to say that high concentration of wealth is a bad thing but it also what it turns up is that there's an awful lot of offshore hidden wealth on the part of Scandinavians so there are there it's not the Scandinavian 0.01 percent is also parking a lot of money in offshore tax havens so it is hard however Denmark used to have a wealth tax it's complicated politics about and it was effective they did manage to collect money it's actually a key part of the of the background behind the Warren tax proposal is that in the few cases where wealth taxes have been applied there was less evasion than you might have have feared so not a perfect answer the it's probably true that there's been a plutocratic trend even in Sweden and Denmark but it's nothing like as bad as it is here and then you know let's just talk about our own history I mean that what what the new deal did it's fine we're you know we're all talking about a new deal now and is Bernie Sanders the true inheritor of the new deal is never mind the but the but the reduction in concentration of income at the top was very dramatic and there's a there's an old fortune article from 1955 about how executives live now in 1955 which says you know they're vastly poorer than they were in the 30s and it's fine they're happy they have good lives and they work as hard as ever and so we should so history says that you don't we don't have to have the society we have now other questions Chuck there you got a couple over there I'm enough of a nerd to enjoy digging data out of the Zuckman Sayaz database and when I do I see two very different chapters in American history from 1945 to 1981 I see a chapter of prosperity capitalism where incomes rose for the entire workforce and from 1981 forward I see a chapter I wouldn't call I would call enrichment capitalism I wonder if that contrast between prosperity capitalism up to Reagan and enrichment capitalism from Reagan forward has caught other people's attention to oh yeah people like me have been talking about that for decades literally the that the I had a 1992 article in the American prospect called the rich the right and the facts about about that transition that you had if you look at it as a as a as a bar graph the the first post war generation is this picket fence and the second generation is a step ladder with the for the first step of it being below ground so in terms of rates of change of income so no there's a there's a total transitions everything changes around 1980 now if you go a little bit further back however and I think this is also relevant that middle-class society the one I grew up in the that that period of broadly shared growth that was that's not the way America always was America was a very unequal society in 1929 and but it's a quite equal society by 1947 and closer up look at the data says that that happened quite suddenly happened really largely during World War 2 it's what is the Chloe Golden calls the great compression so the middle-class society that we had for a generation after World War 2 was created was created by the rise of unions and a favorable political environment by the use of government power to equalize wages by high taxes on top incomes so it's actually telling you that that that the kind of society we have now is a choice and I think that's the point that the what we what we're accustomed to which is that growth is very much concentrated in the hands of a few people is not a necessity and in fact it's it's not and it's not something that's beyond the reach of the political system we we've we've we we we remade ourselves away from a plutocratic society once and we could do it again thank you Paul the question is how does the race question fit in as an overlay to all of this and when we talk about the prosperity society that at least for 20 years was that truly a prosperity society in terms of distribution we can talk about capital accumulation during 200 years of slavery there's a new debate about reparations which is going to permeate a lot of the political discourse how do you play that out in terms of an analysis and then obviously a political program yeah the the truth is that despite a lot of overt racism that post-war period of prosperity was even even blacks you know did benefited from it that doesn't mean that there wasn't also a horrific amount of of of raw racism in the society but it that that's there were benefits for just about everybody and the race played a crucial role in the political transition to ask why did why did politics turn so suddenly right words in the United States and the answer is basically it's the delayed effects of the Civil Rights Act I in the the New Deal coalition start sad to say was a coalition between a pretty liberal social and racial as well group in the north and and southern segregationists who were willing to sign on to a bigger government as long as it didn't end the danger white supremacy because they they were at that point the south was still quite poor and so what's happened now is the the the racial issue is the racial issue is critical to everything races races why the United States doesn't look like other advanced countries in terms of a social safety net races why you know it's it's central to everything and but maybe maybe we can send that I don't that's that's a that's one of the big unanswered questions in American politics actually my my puzzle slightly is why what there aren't a significant number of politicians who are willing to take a racist populist position you know not faux populist like Trump you know who's who's an economic agenda is pure orthodox Republican but actual some people say why we're we're are the advocates of a heron folk welfare state and the welfare state for whites only and it's an interesting fact that there doesn't seem to be anybody willing to play that role and if there does emerge somebody willing to play that role that person is going to be a very very dangerous time for one more maybe back two more Ben Iorio student at the University of Michigan Dr. Krugman you talked about the response to the financial crisis and perhaps not enough deficit spending as a response my question is our deficit spending and increased taxes on the rich tools that should be used in conjunction or are they should just want can you talk about their applications and their uses are together or alone okay let me give you I've been trying to figure out what how should we pay for a progressive agenda put it that way how to how it's posed there's a bunch of things we should be doing we should be clearly spending quite a lot more on especially on child on children and we need to be spending on infrastructure and there's a whole bunch of things in there we're talking significant amounts of money some of that and I would say that basically anything that can be reasonably considered to be an investment in the future it's okay to finance with deficits real interest costs for the US are very very low interest rate is below the growth rate of the economy their debt is just that there's a me if you've got people like Olivier Blanchard and Larry Summers saying that you know deficit fears have been vastly overblown I think we're in a situation where we shouldn't be worrying much about deficits however that doesn't mean that you can completely blow it away and so pieces of that program that would require sustained spending and are really more about social justice than about that are I mean there was quite a lot of stuff that's both investment and social justice but there's also a fair bit of stuff that's just social justice and I would say that you want to pay for the social justice parts by higher taxes on the rich so that so that the two do go in conjunction I would say that both some increase in or better targeted deficit spending because we're doing a lot of deficit spending right now but it's we're running deficits to pay for stock buybacks but the the but but a combination of deficit spending on investment and taxing the wealthy to pay for social programs is the way I would go Erica you get the last question Erica Payne from the Patriotic Millionaires will you talk about the intersection of trade and corporate taxes and tax avoidance it seems like we are in an endless game of whack-a-mole with a very inadequate hammer and I want to understand what the whole what the whole picture needs to look like if you could design it okay the corporate tax thing is a corporate tax avoidance profit shifting to tax havens is a is a it's a significant thing although it's it it's not a hundred percent because if if the ability to to globalize where profits are reported was unlimited then we wouldn't have seen a 31% decline in corporate tax receipts after the Trump tax cut right so obviously corporate taxes were collecting a significant amount of money despite all of that but to the extent that it is an issue look there they're really it's a it's a handful of small countries where this stuff is being where profits are realized the we really are talking Ireland Luxembourg and then financial industry is is where the British Virgin Islands that sort of thing the major economies have got plenty of leverage to force those tax havens to shut down if we had a coordinated move on the part of the G 7 to say this this must stop it would it would not be at all hard to do it so you just need an agreement you need to have progressive governments in enough of the major economies actually to a large extent I think basically if if if the British and and ourselves would I think the Germans and the French would go along we're to say we're gonna have a crackdown on on the tax havens that would do it it's we were even starting to move a little bit in that direction the OECD was was taking some real action so I don't think it's it's one of those problems that is not hard technically it's it's a political thing if if widespread tax avoidance through international tax havens persists it's because interest groups within the advanced countries want them to persist and the moment we decide that that's not gonna happen it will stop happening it's it's just it's just an easy problem to solve with the right leadership for if we're about to have a world in which the two major financial centers are are led respectively by Donald Trump and Boris Johnson then it's gonna be a little bit of a while before it happens but it will happen eventually