Dpi 132: American Presidents, Politics, and Economic Growth: From the New Deal to Barack Obama



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DPI 132: American Presidents, Politics, and Economic Growth:

From the New Deal to Barack Obama
Professor: Richard Parker

Richard_parker@harvard.edu

O: (617) 495-8692

Cell: (617) 216-2752

Course Assistant: George Kynaston

George_Kynaston@hks16.harvard.edu

Course Assistant: Carleigh Beriont

cberiont@g.harvard.edu

Faculty Assistant: Kristina Mastropasqua

Kristina_mastropasqua@harvard.edu

O: (617) 496-3557
Class: Monday and Wednesday, 10:15 – 11:30AM, Land Hall

Note: First class meets on FRIDAY, September 4

Shopping Day: Monday, August 31, 10:15 – 11:30 AM, Land Hall



Mandatory Review Sessions: Every Wednesday, 4:15 – 5:15AM in Land Hall (beginning 9/16)
President Obama took office in January 2009 amidst the greatest economic crisis since the Great Depression. Wall Street and global finance were unraveling. In the fall of 2008, the Bush administration – having supplied billions to large banks and brokerage firms – had launched the TARP program to pump an unprecedented $700 billion into the financial system, and the Federal Reserve was starting to pump in hundreds of billions, eventually trillions, more. (The IMF and central banks around the world were by then doing the same across developed and developing countries alike.) Simultaneously, Washington began taking over the nation’s largest mortgage lenders, the largest insurance company, two of the country’s largest banks, and forcing closure of scores of smaller firms.
Yet the economy kept deteriorating, and so in spring 2009, the Obama administration quickly pushed through its own $780 billion stimulus program (using tax cuts and spending), and – along with the Fed – stepped in to guarantee trillions more of bank and mutual fund deposits.
By late that spring, the federal government (and thus American taxpayers) had assumed potential liability for nearly thirteen trillion dollars – $13,000,000,000,000 – or roughly equal to the nation’s entire Gross Domestic Product. There was no certainty of success (or of repayment), nor clear exit from its role.
How had such a monumental commitment happened? How had The American government – and in particular, America’s president – become so powerful and so directly responsible for the nation’s economy? And how ought we now to judge what he did?
The Constitution makes clear that America’s Founders never imagined presidents having chief responsibility for rescuing the nation from economic collapse, let alone the ongoing challenge of orchestrating economic growth and prosperity. Indeed, for the first 150 years of America’s history, US presidents exercised almost no direct oversight of the economy, and the federal government’s spending as a share of GDP was quite small – roughly 1 - 2% of GDP in 1800, barely 3 - 4% as late as 1900.
Last year, total government spending – federal, state, and local – was 40% of GDP. Much, in other words, has changed. But how and why?
Consider this: by 1900, the US had become the world’s largest economy. Yet, in terms of the White House’s responsibilities for that enormous economy, little had changed in the century since George Washington was president and America’s capital was New York City. By Constitutional design, there was no presidential mandate for economic management, nor the tools to play such a role.
There was, moreover, no concept of GDP, no coherent theory of growth, no unified federal budget, no Federal Reserve to shape monetary policy, no Internal Revenue Service (nor income tax), no Social Security, no Medicare, no unemployment insurance, no anti-poverty programs (in 1900 the Roman Catholic church delivered more social services than any local, state, or federal agency), and no Pentagon – the US military was insignificant and vastly underfunded compared to Britain’s, France’s, Germany’s, Russia’s, even Japan’s.
A half century later – by the end of the Great Depression and World War II – all that had changed. After Franklin Roosevelt, all presidents – liberal and conservative, Democrat and Republican – have been required by law to present Congress with annual budgets underpinned by macroeconomic projections and policies meant to use coordinated fiscal, monetary, credit, trade, and regulatory powers to foster economic growth, maximize employment, prevent inflation and recession, strengthen America’s position in the world economy, and improve the income and security of the American people.
Today, the president’s role as our “Economist-in-Chief” is so well established that polls for the last half-century have consistently shown that voters now simply assume economic leadership – along with guaranteeing national security – is the most important duty of the White House.
But how did such an extraordinary change, without a single constitutional amendment, come about – and how have complex ideas, ideology, interests, and alliances shaped that search for growth?
That’s the subject of this course.
We’ll examine how the concept of economic “growth” and presidents’ (hence government’s) role in it have evolved since Roosevelt. We’ll see how “growth” has come to be defined and quantified, how it serves as the principal metric of how well the country is doing, and how it acts as both the engine that provides our well-being and as the yardstick by which we judge presidents, their parties, and their economic policies.
More important, we’ll probe the political decisions, alliances, and goals behind those policies. How were they made? Who helped presidents make them? If there have been periods when particular sorts of policies were favored, why and what factors determined them – and why were they challenged or replaced by later presidents?
Readings, lectures, and class discussions will focus you on a relatively short list of important presidential decisions during key periods since 1945, to show both the continuities and the shifts in this endless presidential search for growth. We’ll identify how each of those periods produced distinctive policies, based on political alignments, national economic strategies and challenges, global economic and political realities (and perceived realities), as well as the reigning economic theories of the times. The goal is to give you a deeply-grounded understanding of the subtle but powerful interplay among ideas, key actors, policy, and the public that has shaped presidents’– and hence the nation’s (and indirectly the world’s) – quest for growth.
A familiarity with basic macroeconomic concepts as well as modern American political history is helpful, but not required. The course will be especially useful to those who plan to work in White House or Congressional economic policy, as policy analysts in a Washington think-tank, or as political or economic journalists.
Class Basics: Readings, Grading, Office Hours, etc.
What You’ll Read:
Herb Stein, Presidential Economies (Book)

Robert Collins’s MORE (Oxford) (Book)

Readings on the Course Page

Charts and graphs also on the Course Page


The Course Work you’ll do:


  1. a short take-home midterm (distributed in class, Wed., Oct. 14; due back in hard copy in class, Wed., Oct. 21);

  2. two short (4-5pp) policy briefing papers The first short paper is due in class in hard copy, Wed., Oct. 7, on a topic and President of your choice from Truman to Nixon; the second is due in class in hard copy, Mon., Nov. 9, selecting a President from Ford to Obama. Plan to write the two briefs as a White House staffer would write an executive decision memo, briefing the President.

  3. a 15pp final paper (due in hard copy, in box outside my office, by 5PM, Wednesday., Dec. 16).


Course Grading System: among the various assignments, I’ll allocate 25% of the overall grade to the midterm, 25% combined to the two briefings, 15% to class participation, and 35% to the final paper. The grading curve will reflect HKS’s advised standard distribution:


A

 A-

B+

B

B- or lower

10-15%

20-25%

30-40%

20-25%

5-10%



Where and When to Find Me:
My office: 256 Taubman (second floor, in the Shorenstein Center)

My office hours: Tuesdays 4-5:30PM. (I’ll arrange other times at your request; email or speak to me after class.)
Academic Honesty: I take academic honesty very seriously. If you have any questions about your responsibilities as students regarding ethics, plagiarism, etc., please review the Student Handbook.

The Class Schedule

Week One (Weds. Sept 2 and Fri. Sept 4): The Challenge(s) Confronting Barack Obama: Can He Be – Has He Been – a Transformative President?
In 2008, Barack Obama seemed poised to become one of those rare White House occupants – a president who would help reset fundamental national goals and values, much as Roosevelt, Nixon, and Reagan did in the twentieth century, or Jefferson, Jackson, and Lincoln did in the nineteenth.
But he faced multiple economic challenges: at the beginning of his term it was to stanch the bleeding on Wall Street. Today, the bleeding has stopped, but still remaining are the creation of jobs, turnaround of the housing market, and restarting healthy growth. Ahead are issues we’ll take up later in the course: the “right” size and roles for government; the balance of real goods and financial sectors; income and wealth distribution’s impact on growth, and vice-versa; the germination of a post-carbon “green economy”; and negotiation of a new role for the United States in a swiftly-changing political and economic world.
Yet today, well into Barack Obama’s second term, America’s and the world’s interlocked financial systems are still at best unsteady, their future shape and roles still hotly debated, and the unemployment rate still among the highest since the 1930s. Reordering Wall Street and creating jobs, moreover, still presents a tangled web of difficulties – difficulties that bear striking resemblance to those Roosevelt faced throughout the Great Depression. By looking at these current challenges, we’ll begin to see their roots in the relation of government to the economy nearly 70 years ago.
America’s jobs structure has changed dramatically since the New Deal. International competitors have cut into long-term wage growth and eliminated entire domestic industries, particularly in high-wage manufacturing. Increasingly sophisticated technology (symbolized by the emergence of the Internet) has radically reorganized the retail, wholesale, and manufacturing sectors, altering the demand for types and skill-levels of labor. The shift of the corporate pension system from defined benefits to defined contributions symbolizes the changing role of the corporation in providing non-wage benefits. We’ve seen the decline of unions, the new role of women in the workforce (especially at professional and managerial levels), and the drastically altered shape of the family. The deregulation of industries from transportation to telecommunications (not to mention the financial system) has profoundly restructured the economy, in particular in recent years vastly expanding the financial sector in relationship to the traditional goods sector. The exploding costs of health care have not only made the health care sector larger than the manufacturing sector, but induced a long-term cost crisis in Medicare and Medicaid which threatens the government’s fundamental solvency.
Required Readings: (you must do each reading before the class to which it is assigned.)
By Weds - Robert Kuttner, Obama’s Challenge, Ch 1.

Ron Suskind, Confidence Men, Ch. 19 & 20


By Fri - Review charts and graphs on course page
Secondary Readings: (These are optional, for you to go further as you want.)
Economic Policy Institute, The State of Working America, online at epi.org

Congressional Oversight Panel, Special Report on Regulatory Reform

Justin Fox, The Myth of Rational Markets

Margaret Weir, Politics and Jobs: the Boundaries of Employment Policy in the US

Michael French, The US Economy Since 1945 (esp Ch 2)

Marc Allen Eisner, The State in the American Political Economy

Herbert Stein, The Fiscal Revolution in America

Nicolas Spurbur, Managing the American Economy

Robert Gordon, “Postwar Macroeconomics: The Evolution of Events and Ideas,” (in Martin Feldstein ed., The American Economy in Transition)

________________________________________________________________________


No Class Monday, Sept 7 – Labor Day
Week Two (Weds. Sept 9): The New Deal, World War II and The Post-War Search for Jobs and Growth: How It Defined the Domestic Impetus for “Growthmanship” – and How It Revolutionized the President’s Role in Economics
The trauma of the Depression and the monumental scale of World War II – when government’s wartime spending consumed a record half of GDP – utterly redefined the relationship between the President and the American economy.
From George Washington onward, presidents had often played inadvertent and indirect roles in growth-promotion – especially by enabling America’s geographic expansion westward, beginning with Jefferson’s Louisiana Purchase, then by establishing land distribution policies, excise taxes and tariffs, Post Office subsidies, immigration policy, and by no means least, free public primary education.
During the Civil War, Lincoln advanced that presidential role dramatically for a brief time: he and Congress imposed an income tax, took control of currency and its reserve backing, promoted transportation, fueled manufacturing, expanded government support for education to the college/university level, and by ending slavery finally effectively transformed America’s paid labor market from a regional to a national one. But compared to most nascent industrializers in Europe (especially Germany), federal growth policies were strikingly limited and haphazard; not until the Progressive Era were the outlines of a new “regulatory state” eventually forged.

The Depression and then World War II changed all that, as Franklin Roosevelt expanded both Washington’s regulatory role and its new and much bigger budget by claiming a rationalist macro-managerial role for the federal government. When Truman became president, supporters sought to justify continuing New Deal-style policies, not least through new Keynesian theories (which came, as we shall see, in a variety of liberal and conservative forms). Advocates for this new idea of government-directed “growthmanship” saw it as an intellectual, political, and economic breakthrough in American history. How? Why? And how, after FDR’s death and the war’s end, was this unprecedented expansion maintained, institutionally and intellectually, under Harry Truman?


Required:

By Weds – Stein, Presidential Economics, Chs 2 and 3 (BOOK)

Robert Collins, MORE, Prologue and Ch 1 (BOOK)

John Kenneth Galbraith, “How Keynes Came to America,” in A Contemporary Guide to

Economics, Peace and Laughter

Secondary:

Donald Winch, Economics and Policy, chs 9, 11, 12

James Caporaso and David Levine, Theories of Political Economy, preface and Ch.1

Peter Hall, The Political Power of Economic Ideas

Alan Brinkley, “The New Deal and the Idea of the State”

Stephen Skowronek, The Politics Presidents Make

Robert Collins, The Business Response to Keynes

____________________________________________________________________________
Week Three (Sept 14 & 16): From NSC-68 to Sputnik, the Defense Education and Highway Acts, and the Missile Gap: How America’s New International Military and Economic Roles Shaped Growth at Home and Abroad in the 1950s
NSC-68, President Truman’s 1950 top-secret policy directive set in motion the vast expansion of America’s military to face the threat of Communism. But it was also always understood by its authors as an economic growth engine, not just a defense policy – and its adoption meant that over half the federal budget in the 1950s would be spent on defense. We’ll look at how postwar elites saw a new global role for America and how military power fit in that role, how the inherent tensions between Eisenhower’s traditional fiscal conservatism and the challenge of Soviet Communism gave rise to the New Look in military policy, and what’s sometimes called “military Keynesianism” in economic policy – and the implications for America’s pace and patterns of growth.
Required:

Mon – Collins, MORE, Ch 2 (pp. 40-51 only)

Mon – Charles Maier, “The Politics of Productivity”

Weds – Fred Block, “Economic Instability and Military Strength: The Paradoxes of the 1950 Rearmament Decision”
Secondary:

NSC-68 at http://www.fas.org/irp/offdocs/nsc-hst/nsc-68.htm

Ernest May, Strategies of Containment: Interpreting NSC-68

John Lewis Gaddis, Strategies of Containment

Donald Brune, “Guns and Butter,” American Journal of Economics and Sociology, July 1989

Iwan Morgan, Eisenhower Versus “The Spenders”: the Eisenhower Administration, the Democrats, and the Budget, 1953-1960

________________________________________________________________________
Week Four (Sept 21 & 23): The Kennedy-Johnson Tax Cut – and the Impacts of Vietnam, the New Affluence, and the new Multinational Corporation That Derailed Activist Keynesianism
Kennedy’s 1960 election brought to the White House a new generation of self-confident Keynesian economists, convinced that the White House could successfully manage the economy to full employment. If classic Keynesianism had a heroic postwar moment, it came with passage of the 1964 Kennedy-Johnson Tax Cuts and the economy’s swift expansion thereafter. But apogee swiftly became perigee, and within a decade academic Keynesianism, “activist” Keynesian policy, and liberal political leadership generally were all in disarray and retreat. What happened? What were the assumptions behind the tax cut – and what were the criticisms? What stimulative effect did the cuts have, what other stimulative factors were at work, what underlying economic and political shifts were going on domestically and internationally – and what derailed the hopes of liberal Keynesians so completely?
Required:

Mon – Calleo, The Imperious Economy, Chs. 1-3

Weds – Collins, MORE, pgs 51-67 in Ch 2 and all of Ch 3

Weds – Stein, Presidential Economics, Ch 4 (Book)

___________________________________________________________________________________
Week Five (Sept 28 & Sept 30): Nixon, Stagflation, Oil, and the Rise of Economic Deregulation: Dismantling the Keynesian Approach – or Not?
In 1971, Richard Nixon first declared that “we are all Keynesians now,” then promptly imposed wage-and-price controls domestically and repudiated the Bretton Woods currency system by floating the dollar. Two years later, he then abandoned wage-and-price controls, but accepted OPEC’s cartelized pricing of oil and began the modern deregulation of the economy in telecoms (the MCI and ATT cases) and in finance (dropping Regulation Q, deregulating brokerage commissions, and permitting money markets to compete with banks).

The “New Deal coalition” — and the thirty-year-long “Golden Age of Growth” that began in 1945 — was coming to an end. We’ll discuss in particular how Nixon’s preoccupation with foreign policy generated economic consequences at home and abroad. At home, we’ll consider how those processes ultimately advanced the Republican efforts under Reagan to roll back much of the New Deal’s social welfare and business-regulation institutions. Abroad, we’ll weigh how they launched a new era of globalization of trade and finance, and their life-changing reactions in Europe, the Soviet Union, and Asia.


Required:

Mon – Calleo, David, The Imperious Economy, Chs. 4-6

Weds – Collins, MORE, Ch 4
Secondary:

Stein, Presidential Economics, Ch 5

Calleo, Imperious Economy, Ch 7

Allen Matusow, Nixon’s Economy

James Reichley, Conservatives in an Age of Change

______________________________________________________________________________


Week Six (Oct 5 & 7):
Ford/Carter, OPEC and the Energy Conundrum, Global Lending and Global Debt – and the Retreat from Growth
Jimmy Carter (like Gerald Ford before him) faced the daunting task of restarting American growth as stagflation overtook the economy, but the political and economic coalitions that had sustained the postwar growth engine were all but dead. That collapse created an unstable and hotly-contested interregnum – for Democrats and Republicans alike, as new alliances, renewed ideologies, and previously weak or marginalized groups came to the fore. How did Carter’s election as a Southerner quite unlike LBJ signal complex alliance and ideology changes for the Democrats, and how did Ford’s defeat open the door to a new – and much more conservative – Republican Party? How, as the new political alliances changed, did the shift begin to affect not only aggregate growth but fundamental distribution of income and wealth?

Required:



Mon – Collins, MORE, Ch 5

Mon – Stein, Presidential Economics, Ch 6

Weds – Calleo, “Inflation and American Power,” Foreign Affairs
Secondary:

Daniel Yergin, The Prize, chs.19-22



Wednesday, October 7, in class – Short Briefing Paper (4-5pp, double spaced) is due in class, on a

topic and President of your choice, from Truman to Nixon. Pick a topic that the President must decide and help him understand his options. You can revisit one of the choices discussed in class or one you’ve come across and want to understand better. Write the brief as a White House staffer would write an executive decision memo, briefing the President. I’ll circulate instructions how.
No Class Mon, Oct 12 – Columbus Day.
Week Seven (Oct 14): The Conservative Intellectual Revolt, Academic and Political – and The Great Risk Shift that accompanied It, and How It Re-Divided America
By the late 1970s, the growing force of conservative ideas and values could be felt throughout American society. White Southern and Northern/Midwestern ethnic voters were abandoning the Democratic Party in droves as inflation’s effect on wages and taxes – combined with a soaring distrust of government – prompted a state and local political revolt that swept the nation like wildfire – and showed up in issues ranging from abortion, religion, and property taxes to fundamental energy, economic, and military policies.
Fueling that wildfire was an unabashedly-confident new conservative intellectual legion that for forty years had stood on history’s sidelines, helplessly watching the power of liberalism and government advance unchecked – at least in their view. Now in the 1970s, suddenly their once-marginal ideas were all the fashion, and as liberals watched, not just conservative ideas but well-financed conservative institutions now invaded Washington.
Simultaneously, beyond these ideological fashions and seasons, something profound was changing in America: risk for ordinary Americans was on the rise. The postwar era had until then been all about creating – or, more controversially (it depended on the perceived beneficiaries) extending – security in all forms (economic, military, community, values) to the American people. Now suddenly manifold signs of insecurity abounded – and would begin to grow rather than recede, and over time would shape Americans’ expectations about everything from what government and markets should do to how individuals and families would fare.
Required:

Weds – Blumenthal, The Rise of the Counter-Establishment, Intro, Chs. 2-3

–Hacker, The Great Risk Shift Ch 2

– Black, Divided America, Ch 1

*Weds., October 14 – Midterm is distributed at end of class.

Week Eight (Oct 19 & 21): How President Reagan Reshaped the Growth Debate – and What Then Happened
President Reagan entered office determined to cut taxes, increase military spending, slash entitlement spending, use monetarism to manage the money supply, and accelerate growth. How well he did each of these – and the consequences – is hotly contested.
Harvard economist Martin Feldstein chaired Reagan’s Council of Economic Advisors, and we’ll use his essay on the Reagan record, particularly comparing his to Stein’s assessment (Stein was Nixon’s CEA chief), as cornerstone for our examination of the competing, often contradictory, achievements.

We’ll look at the initial Reagan tax cuts (and his later, less-discussed tax increases) in light of subsequent growth as well as the “twin deficits” (in the federal budget and export/imports) concern for which came to occupy center stage, with Congress and the White House continually challenging one another on the means to stanch the flow of red ink in both the federal budget and the balance of trade. We’ll also then look at the impact of Reaganomics on income and wealth distribution, and the size of and means for household savings – and the new challenges they posed.


Required:

Mon – Collins, MORE, Ch 6

Mon – Stein, Presidential Economics, Chs 7 and 8

Weds – Feldstein, American Economic Policy in the 1980s, Ch 1
Secondary:

Thomas Edsall, The New Politics of Inequality, Intro, Ch. 6

Jacob Hacker, The Great Risk Shift

Sean Wilentz, The Age of Reagan

_______________________________________________________________________________
*Weds., October 21 – Midterm is due in class.

________________________________________________________________________________


Week Nine (Oct 26 & 28): The Domestic Political and Economic Aftermath of the Reagan Revolution: Bush 41, Clinton, The “New Red Menace”, Entitlement Reform, Financial Deregulation – and the Damage They’ve Done (and/or Haven’t)
Bill Clinton wasn’t Ronald Reagan but he wasn’t Franklin Roosevelt either: as a New Democrat, he believed that the growth of the middle class, the decline of unions and manufacturing, the accelerating pace of globalization, and the budget and trade deficits (dubbed “New Red Menace” after the Soviet threat collapsed) required a tough new policy pragmatism that, while not as anti-statist as Reagan’s, was anathema to many older Democrats who saw the FDR/JFK/LBJ tradition as the heart and soul of, not to mention the path to electoral victory for, the in party. We’ll look at key policy shifts Clinton made on trade (NAFTA, WTO), on entitlements (Welfare Reform) and financial deregulation as paradigmatic of the search for a stable new Democratic governing coalition. We’ll also take a closer look at how economic policy-making in the White House had changed over the years, and the innovations that Clinton brought to the process.
Required:

Mon – Collins, MORE, Ch 7

– Sloan, John, “Burden of Reagan Legacy”



Weds – Stiglitz, “The Roaring Nineties,” Atlantic Monthly

– Edsall, “Introduction” in New Politics of Inequality


Secondary:

Iwan Morgan, Seeing Red: The Budget Deficit – Past, Present, and Future

Jeff Frankel, ed., American Economic Policy in the 1990s

________________________________________________________________________________


Week Ten (Nov 2 & 4): Globalization, the Washington Consensus, the Cold War’s End, the Shock of 9/11– and Second (and Third) Thoughts

As the Cold War ended, the role and cost of the US as globe-girdling military power came up for debate –with sharp divergences over the nature of future threats, and the military’s force structure, technology, deployment, and budget. Simultaneously, a decade-long experiment called The Washington Consensus – which had aimed at restructuring developing economies along neoclassical economic lines – also came up for review, as the quite mixed consequences became clearer.

We’ll look at both the issue of America’s global military power and its role in the shape and pace of global economic development, and their complex interaction as America adjusted to its newly-imagined role as “the world’s only superpower” – and how fast-paced economic development (especially in East Asia) and global market integration redefined the terms of that claim.
Required:

Mon – Bacevich, New American Militarism (Ch. 1 + 2)

– Heritage Foundation, “2012 Defense Budget Proposal”

– Council on Foreign Relations, “Trends in US Military Spending”

Weds – Mead, “The US and The World Economy”

– Naim, “Fads and Fashions: Washington Consensus or Washington Confusion?”

Secondary:

Dept of Defense, Military Strategy of the USA, 2011

____________________________________________________________________________________
No Class Wednesday, November 11 – Veteran’s Day
Week Eleven (Nov 9): George Bush, and the Flowering (and Deflowering) of Wall Street and Rational Market Theory
The presidency of George W. Bush began and ended with financial crashes – in 2000, when the tech bubble burst, in 2008 when Wall Street collapsed amidst the housing meltdown. Has “bubble economics” somehow replaced “growth economics”? Over the past thirty years, the number and frequency of financial crises has risen dramatically – but why?
The future shape and role of Wall Street and of the global financial system will be key drivers for US (and global) growth in the coming years – a time when the US’s role as global policeman seems destined to be tied to Islamic radicalism as surely as it was once tied to Communism.

Required:


Mon. Frankel, “Bush’s Spectacular Failure”

Kuttner, Squandering of America, Chs 1, 3

Krugman, “How Did Economists Get It So Wrong” NYT Magazine
Secondary:

Caballero, “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome”

Bell, ed., The Crisis in Economic Theory, ch.1

__________________________________________________________________________________


Monday, November 9, in class – Short Briefing Paper (4-5pp, double spaced) is due in class on a topic and President of your choice, from Ford to Obama. Pick a topic that the President must decide with and help him understand his options. You can revisit one of the choices discussed in class or one you’ve come across and want to understand better. Write the brief as a White House staffer would write an executive decision memo, briefing the President.


Week Twelve (Nov 16 & 18): Who is Thomas Piketty—and why should we care?
When Piketty’s Capitalism in the 21st Century arrived in 2014, it was greeted with an enthusiasm comparable to the reception of Keynes’s General Theory in 1936—with both books hailed as “revolutionary” in their intellectual scope and depth.
Across more than 600 pages, Piketty had meticulously plotted nearly 200 years of shifting income and wealth distribution in the industrial West to reach a stark conclusion: that the sharp decline of inequality after World War II was not a “new norm” but an aberration—and that the rising inequalities of the past 40 years mark “return to the old norm”, with today’s inequality set to grow even more across the 21st century (absent major shifts in public policies in most nations).
If true, the very idea of “growth”—whose appearance, development, and adaptations we’ve scrutinized all semester—face an extraordinary challenge. If “rising tides don’t lift all boats”, what will the politics of coming century likely become? How can democratic governments, already gripped by gridlock between parties and voter disillusionment, survive if the distance between citizens grows constantly farther apart?
Monday, we’ll look at a major review (the book itself is too long), a conservative critique, and a rejoinder; Wednesday, we’ll look at the global problem of offshoring on measurement, taxation, and democratic control of income and wealth distribution.
Primary Readings:
Mon Branko Milanovic review, MPRA:

http://mpra.ub.unimuenchen.de/52384/1/MPRA_paper_52384.pdf

Jonah Goldberg review, Commentary: http://www.commentarymagazine.com/article/mr-pikettys-big-book-of-marxiness/

Kathleen Greir comment, Baffler: http://www.thebaffler.com/blog/what-pikettys-conservative-critics-get-wrong/



Wed: Gabriel Zucman, JEL, http://gabriel-zucman.eu/files/Zucman2014JEP.pdf

S&P Report, How Increasing Income Inequality is Dampening U.S. Economic Growth: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1351366&SctArtId=255732&from=CM&nsl_code=LIME&sourceObjectId=8741033&sourceRevId=1&fee_ind=N&exp_date=20240804-19:41:13


Secondary reading:

Thomas Piketty, Capitalism in the 21st Century

Timothy Noah, The Great Divergence

Economic Policy Institute, State of Working America: http://stateofworkingamerica.org/



NY Times, “American Middle Class No Longer World’s Richest,” http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html?rref=upshot&_r=0

Jeff Madrick blog (links to various Piketty reviews): http://tcf.org/blog/detail/piketty-review-roundup-capital-in-the-21st-century




No Class Wednesday, November 25 – Thanksgiving Recess
Week Thirteen (Nov 23) Obama and Beyond: Options and Directions
The challenge facing Barack Obama – and the presidents who follow him as master and mediator of economic growth – hinges on the scope and speed of the economic recovery, and the lasting institutions and ideas he (and they) ultimately generate.
Required:

Mon New America Foundation, “The Way Forward”

UNCTAD, “The Global Economic Crisis: Systemic Failures and Multilateral Responses”


Secondary:

Michael Spence, “Evolving US Economy and Jobs”



________________________________________________________________________
Week Fourteen (Nov 30 & 2): Review and Discussion
We’ll open up a class discussion of options ahead for America. Students are expected to come to class prepared to debate options based on the course and their own evaluations and perspectives. These two days will be important to the “class participation” portion of your grade, so come prepared.

__________________________________________________________________________________


Wednesday, December 16 by 5 pm – the Final Paper is due at my office, 256 Taubman, in printed form. Do not submit electronically.


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