Robert Samuelson has a really serious problem of projecting his own conceptual confusions on others. In his column this morning he repeatedly uses "we" when he actually means "I."

"We overestimated our ability to control the economic environment. What we have learned is that outside events — here, the financial crisis and Great Recession — can overwhelm collective protections and discredit conventional beliefs. The economy is more random, unstable and insecure than we imagined. It is less susceptible to policy engineering."

Of course "we" did not overestimate the government's ability to control the economy. Some of us were completely aware of the dangers posed by the housing bubble and the amount of stimulus that would be needed to bring the economy back to full employment. As we pointed out, the Fed should have taken steps to burst the housing bubble, starting with public warnings like the ones that Federal Reserve Board Chair Janet Yellen made last summer in reference to junk bonds and social media company stocks. The Fed also could have used its regulatory power to crack down on fraudulent mortgages that were being securitized in huge numbers.

This is not the only error in Samuelson's piece. He also mistaken argues that because most government benefits go to the poor and middle class:

"it is not possible to pretend that the whole superstructure of government has somehow been turned against the middle class. This is not just a distortion of reality; it is the converse of reality."

In fact the government has structured the market over the last three decades in ways that cause most income to flow upward. For example its trade deals have been focused on putting less educated workers in direct competition with the lowest paid workers in the world. This has the predicted and actual effect of driving down their wages. At the same time, highly paid professionals, like doctors and lawyers, are largely protected from international competition. The government has also had longer and stronger patent protection, causing middle class people and the government to pay hundreds of billions more for prescription drugs than would be the case in a free market. The benefits from these forms of protectionism disproportionately go to the wealthy.

The government also has adopted more anti-union policies in the last three decades, substantially reducing the ability of workers to organize effective unions. It also gives huge subsidies to the high six and seven figure salaries of top officials at non-profits like the Gates Foundation.

And the government gives free too big to fail insurance and special low tax status to the financial industry. It also gives them special exemption from criminal law, giving special meaning to Samuelson's comment:

"The fact that the upper classes can better shield themselves against its [the economy's] upsets naturally breeds resentment."

Of course the public is angry because the upper class were able to use their political and economic power to not only gain the huge subsidies in the form of below market loans from the Fed and Treasury, they were also able to shield themselves from criminal prosecution for fraudulent activity in the housing bubble. This fact does breed resentment.

 

Addendum:

Larry made a good point in comments that deserves mention. Samuelson based his claim that the government serves the middle class on the fact that the United States is "a democracy in which politicians compete more for votes than for dollars." While politicians do need votes, they get them with dollars. If Samuelson thinks that a politician could win even a seat in the House, much less a Senate seat or presidential race, without the support of a substantial number of one percenters then he is even more out of touch than I realized.

Essentially we have a two phase election process. Candidates must convince a substantial number of rich people that they share their views and/or will serve their interests. If they can get enough money from the rich then they get to contest for votes, but no one is going to be able to run a race on the contributions of $20-$50 that they can expect from the bottom 90 percent.

 

Typo corrected, thanks ltr.