Ezra Klein: Have you seen plans from any politicians, or even any think tanks, for addressing income inequality that feel to you equal to the scale of the problem? I feel like you hear politicians rail on income inequality as a defining challenge of our time, and then they want to raise the top marginal tax rate by three percent or something. There's a real gap between the scale of the problem people are describing and the solutions they’re willing to embrace. Do you think this is a problem we actually know how to solve?
Paul Krugman: I think it is, but we know that it takes an extraordinary political environment to change it. The Great Compression took place under FDR. They took a society that was about as unequal as what we have now, maybe more so because of a weaker social safety net, and turned it into a broadly middle-class society that lasted for more than a generation. But that was done through a combination of a dramatic increase in unionization, extremely high rates of progressive taxation, and wage controls during the war that were used to compress the wage distribution.
So we can describe a set of policies that will restore a middle-class society, but they take FDR-sized majorities in Congress, and even then, it took a war to really bring those changes about. Which is why everybody, me included, talks about chipping away at the margins and hopes that, cumulatively, you're going to get something done. ...Vox