A Not Totally Clear
Liberal Conscience

A review of Paul Krugman, The Conscience of a Liberal.
W. W. Norton & Co. 296 pp.

December 10, 2007

Economist Paul Krugman, the New York Times op-ed columnist, has written a history book — and a fine one indeed. But a flawed one, too.

The Conscience of a Liberal, by lucidly linking inequality and the insecurity of average working families, reminds us once again why Krugman has emerged as America’s most compelling mainstream media voice for a significantly less top-heavy national distribution of income and wealth.

His theme remains consistent: The more unequal we have become as a nation, the more income and wealth have concentrated, the more difficult daily life has become for low- and middle-income Americans.

The Conscience of a Liberal aims to explain why we have become more unequal, and, in this always readable effort, Krugman does explain far more than he can within the limited confines of an op-ed. He does a masterful job tracing just how “movement conservatives” have seized the Republican Party and fashioned a politics that has gnawed away at America’s equalizing “institutions and norms.”  

But that’s not the whole story. Movement conservatives — from William Buckley to Grover Norquist — have certainly motored the drive to make America safe for plutocracy. But they have had help, at nearly every critical juncture, from leaders and lawmakers that liberals have elected.

Contemporary liberals, to achieve and maintain a clear conscience, need to come to grips with this aid and abetting. Krugman, in The Conscience of a Liberal, never does.

Still, let’s recognize what Krugman does achieve. He has, in The Conscience of a Liberal, synthesized the work of America’s best economic and political historians into a narrative that can help average Americans make progressive sense of our history.

Krugman picks up our national story in 1877, with the end of Reconstruction and the birth pangs of what would eventually be called the Gilded Age, that staggering concentration of wealth that disfigured life and liberty in America’s first post-Civil War generation.

Krugman describes a Gilded Age — “a period defined above all by persistently high levels of economic inequality” — that stretches through the 1920s. His “Long Gilded Age” eventually collapses into the social tragedy of the Great Depression.

Out of this tragedy, a new America appears. A middle class America. An America without a politically dominant wealthy elite. Between the end of the 1920s and the mid 1950s, Krugman relates, America’s richest one-tenth of 1 percent would see their share of the nation’s wealth — over 20 percent in the 1920s — drop by half.

What happened to the rich?

“Basically,” Krugman answers, “the New Deal taxed away much, perhaps most, of their income.”

The New Deal did much more as well. President Franklin D. Roosevelt’s White House years nurtured “institutions and norms” — everything from Social Security to a new legal foundation for active labor movement participation in the nation's everyday economic life — that raised up America’s bottom at the same time progressive taxes were pushing down America’s top.

Republicans, after their Election Day defeat in 1948, would essentially accept these new institutions and norms. They could not do otherwise and politically survive. The top federal income tax rate on America’s super-rich, 91 percent when Republicans regained the White House in 1952, would stick at 91 percent throughout the Eisenhower years.

This era of increasing equality in the United States — the “Great Compression” — would not start eroding until the 1970s, slowly at first, but considerably faster as the 1980s wore on. Economists at first rejected the evidence for growing inequality, then sought to explain this inequality away as the inexorable unfolding of “forces” — like technological change — “beyond our control.”

Krugman’s Conscience of a Liberal demolishes this inequality-as-inevitable storyline. Our current inequality didn’t just happen. A “revived conservative movement” — “whose ultimate goal was to reverse the achievements of the New Deal” — worked relentlessly to make it happen.

And these “movement conservatives” worked dirty, primarily by exploiting “white backlash” to build a popular base. Krugman repeatedly stresses the pivotal historic importance of this “dog-whistle politics,” the dark art of signaling “sympathy for racism without ever saying anything overtly racist.”  

Ronald Reagan would prove to be, as Krugman relates, this dark art’s master teacher. And the lessons he taught, notes Krugman, “went a long way toward turning the politically marginal ‘new conservatives’ of the 1950s into a force to be reckoned with.”

This “empowerment of the hard right,” Krugman sums up in one potent passage, “emboldened business to launch an all-out attack on the union movement, dramatically reducing workers' bargaining power; freed business executives from the political and social constraints that had previously placed limits on runaway executive paychecks; sharply reduced tax rates on high incomes; and in a variety of other ways promoted rising inequality.”

The movement conservatives of the past 30 years, in short, have succeeded far beyond what “new conservatives” like William Buckley could possibly have fantasized back at Yale in the early 1950s. But they did not succeed alone.

Let's start with the attack on New Deal tax rates on the rich. Ronald Reagan did cut the top tax rate on the rich — from 70 to 50 percent in 1981. But Reagan was only following a tax-the-rich-less path already blazed by a Democratic President. John F. Kennedy actually delivered the first heavy blow to New Deal tax-the-rich policy. In 1963, he asked Congress to slice the top tax rate from 91 to 65 percent.

The we-must-stimulate-private-investment rhetoric Kennedy used to justify that cut — “a rising tide lifts all boats,” he would pronounce — would resurface, nearly two decades later, in the talking points of the Reagan revolutionaries.

A Democratic-majority Congress, full of liberals, would buy the Kennedy administration's rhetoric almost whole hog. In 1964, lawmakers recalibrated the top tax rate on the rich down to 70 percent.

Let's move to that other key bulwark of the New Deal-inspired Great Compression: the presence of a strong, vital labor movement. The Conscience of a Liberal quite accurately describes Ronald Reagan’s 1981 busting of the air controllers union as “the signal for a broad assault on unions throughout the economy.”

But Reagan didn’t pioneer the hiring of “permanent replacements” for striking workers. Katharine Graham’s Washington Post holds that dishonor. In 1975, the Post, fresh off its celebrated Watergate victory over Richard Nixon, became the first reputable major employer in the post-war era to give the jobs of strikers to scabs. And liberal leaders in Washington raised no objections.

Another example? Let's consider deregulation, that public policy about-face that has shifted hundreds of billions of dollars out of consumer pockets into America’s executive suites. The deregulation wave that has swept over industries from banking to cable TV began in the 1970s with the airline industry. A Democratic Congress deregulated aviation, several years before Ronald Reagan ever opened a single desk drawer in the Oval Office.

The champion of this airline deregulation: the liberal’s liberal, Senator Edward Kennedy.

Ted Kennedy, to his credit, did oppose Reagan’s tax cut for the wealthy in 1981. But enough other Democrats fell silently in the tax-cut line. Democrats could have threatened to filibuster the Reagan tax giveaway in the Senate and stopped it dead, in the same way that Senate Republicans today — despite their minority status — routinely squelch bills they don’t like.

But Senate Democrats did no such thing. Reagan won the day, and his 1981 tax cuts would turbocharge our new Gilded Age.

Fast-forward to 2007. Little seems to have changed. In the Senate, just this year, several leading Democrats have joined Republicans to scuttle a move to shut the tax loophole that lets private investment fund billionaires each save tens of millions off their taxes.

In The Conscience of a Liberal, Paul Krugman does note this incident — as a “spectacular example” of how “the influence of money has grotesquely distorted U.S. government policy.” But this sorry episode amounts to much more than that. We see revealed in it a Democratic Party still deeply fixed in anti-New Deal mode, a Democratic Party that refuses to treat the concentration of wealth and power as a cancer on the American body politic.

Paul Krugman sees that cancer and believes we can overcome it. He believes we can triumph over our current inequality — what he labels the “Great Divergence” — if we take pains to analyze what we’re up against.

“To understand the Great Divergence,” Krugman notes at one point, “we need to understand how it was that movement conservatism became such a powerful factor in American political life.”

— Sam Pizzigati

Sam Pizzigati edits Too Much, the weekly online newsletter on excess and inequality. For updates on inequality-related trends, stats, and books, just check here for a free weekly Too Much subscription.