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2 days ago
EK: You and I spoke shortly before the election for a piece I was doing on Romney’s history as a manager. These folks, too, are purportedly very data focused, very good at assimilating new information. So I find it genuinely scary that neither Romney nor his super-rich backers had any idea he was going to lose. All the polls, all the models, all the betting markets said he was likely to lose. How did a group of people who, in their jobs, have to be willing to read and respond to disappointing data convince themselves to ignore every piece of data we had?
CF: That’s the single most astonishing thing. By his own definition, Romney’s single strongest qualification to become president was analytically based, managerial excellence. And if the election campaign were the test of that, and even if you were ideologically his fan, you should think it right that he lost. Now, how could it happen? My first thought was it was also the case that all the smartest guys in the room managed to lose a lot of money in 2008 and managed to convince themselves of a set of very mistaken beliefs about where the markets where going to go. It was a lot of the same people on the wrong side of both bets.
But I find it truly mystifying. I don’t claim to have particularly unique insight. I think it could be a combination of things. One is a generic belief that in order to run for president you have to think you’re going to win. You can’t do it otherwise. A second thing, and this is not so much about the rich guys as about the Republican Party in America, I think Republicans have felt since the time of Ronald Reagan that they are the party that represents the true America, and that the Democrats might sometimes win, but it’s kind of an aberration. And when it comes to the super-rich guy dimension, and I imagine this has happened to Obama as well, when you’re a rich and powerful guy, it can make it hard to see reality, especially when you’re paying your campaign staff great salaries, as Romney was.
EK: I’d add one dimension to that. From my reporting with the White House, I think the president’s view of the economy is that globalization is here and it’s not going away. The economy rewards high skills more than ever. Automatic and computerization and foreign competition are wiping out many middle class jobs, and while some new ones are created, it’s not at all clear that enough are being created. But in his view, he sees more redistribution as very necessary in this context. He thinks that if the economy is going to grow but the gains won’t be broadly shared, then it’s the government’s role to try and redistribute some, though of course not all, or even most, of those gains.
My experience is that the very rich are open to higher taxes in the context of a deficit deal. They like, or think they like, the Simpson-Bowles plan. They’re very friendly with Mayor Mike Bloomberg, who says he’d let all the Bush tax cuts expire. But they don’t like the idea that their money should be redistributed simply because they have too much of it. They don’t like the idea that, so to speak, they didn’t build all of this, and as such, they need to give back in order to make sure it continues. And so that’s part of the tension: They don’t like why Obama is raising their taxes. And they certainly don’t like the lack of admiration he’s showing while trying to do it. They see it as punishing their success.
CF: I completely agree. I think Obama and the economists around him have a very sophisticated understanding of both globalization and the technology revolution and the impact they’re having on the world economy and they way they’re creating these winner-take-all spirals. The positive scenario, which I think is a bit pollyannaish, is all you need to do is improve the education system and change the skill set and all will be well. And even that takes a lot of investment and a lot of time. But there’s actually the possibility that in order to have a healthy middle class, you’re going to need to have a more redistributive society, at least for awhile. I think that’s something the American super-rich don’t think about much. One guy who’s a liberal Democratic guy, who has worked in Washington for Democrats, who I quote in my book, he said to me, maybe this is how the world is. Maybe the 1950s were an aberration and the way the economy naturally works is this wide difference in distribution.