There was an event earlier this week, held at the Urban Institute here in Washington, that captured perfectly what is wrong with "This Town." The Tax Policy Center (TPC), a policy group jointly supported by the Urban Institute and the Brookings Institution, hosted a discussion on April 15 (announcement with video here) to mark the release of Thomas Piketty's important new book, Capital in the Twenty-First Century.
This was clearly meant to be an Important Event that should be taken seriously in This Town, so it was predictable that the organizers would invite a liberal policy wonk and a conservative policy wonk to chat with Professor Piketty about his book. TPC Director Len Burman, an economist who is himself a veteran of these dog-and-pony shows, thus hosted Dean Baker of the Center for Economic and Policy Research (The Liberal) and Kevin Hassett of the American Enterprise Institute (The Conservative). Because Piketty's book is being hailed by liberals, and because Burman has advised Democrats over the years (and TPC is thought to be left of center), one might be forgiven for imagining that Hassett was alone in a hostile environment.
When Hassett spoke, however, he made it clear that this was simply a group of old friends talking shop. Hassett began by noting that it was Tax Day, suggesting that people at liberal places like the Urban Institute would celebrate that wonderful day by "bringing out the party hats." Good yucks all around. We're all pals here. He even went out of his way to note that Brookings had given him an early break in his career, and he also mentioned that he and his old friend Burman had sometimes thought that they ultimately disagreed merely about a few empirical estimates, rather than anything fundamental about how to approach economics or tax policy.
Sadly, that is essentially true. As a methodological matter, Hassett and Burman are solidly in the inner circle of orthodox economists who trade places in successive administrations. The conversation on Tuesday, therefore, was peppered with references to "CES production functions" and various insider references to empirical economics papers, with Hassett accusing Piketty (very politely, of course) of cherry-picking from the statistical literature to support his call for higher wealth taxes.
All of which would have been merely annoying and only too predictable, had it stopped there. Hassett, however, did not stop there. He made two further moves that genuinely surprised me, and not in a good way. First, he made a moral claim in the guise of a technical claim, asserting that the current distribution of consumption in the U.S. is acceptable, given the large amount of government transfer payments that allow after-tax-and-transfer inequality to be less extreme than before-tax-and-transfer inequality. I should say that I was not surprised that Hassett tried to change the conversation to consumption from income and wealth, because that is a standard move by conservative economists; but I was disappointed that no one called him on it.
The surprising parts of that claim were the blithe assertion that the current distribution is presumptively acceptable, and the idea that we could continue to maintain that distribution with current levels of transfer payments. No one called him on the former claim, but Piketty effectively (if subtly) responded to the latter claim. After all, when we talk about the "transfer payments" that supposedly make things acceptable, we are talking mostly about Social Security and Medicare. Hassett was one of the top economic advisors to the Romney/Ryan campaign in 2012, and he is generally part of the conservative chorus that claims that those transfer programs are unsustainable. When he said on Tuesday that we can rely on those programs well into the future, so long as they are "funded," he essentially said that the way to keep the current distribution going was to raise taxes to pay for Social Security and Medicare. When Piketty pointed that out, the audience got the joke.
But it was Hassett's second move that simply blew my mind. As I have noted before, there is a tendency among too many people on the right to red-bait their opponents, and especially to attack academics as out-of-touch lefties. This, however, is supposed to the territory of nameless cranks, and the Sarah Palins of the world, not economists at Establishment conservative think-tanks like AEI. Yet there was Hassett on Tuesday, ending his remarks by invoking the conservative economist Joseph Schumpeter, who, Hassett said, "had great respect for Marx's intellectual accomplishments." OK, so why are we talking about Marx and Schumpeter? "So here's the interesting thing, and I found Schumpeter very, very compelling. Schumpeter and Marx agreed that capitalism was going to destroy itself, but for different reasons."
After a slight digression, Hassett got to the point:
"Schumpeter thought that as we got richer and richer, what was gonna happen would be that all of our kids would go to universities, and when they went to universities, they would be more and more over time, presented with a professoriate that was really anti-capitalist. ... He thought that the problem would be that academics would be digging deeper and deeper to try to find flaws in capitalism and would be proselytizing against it all the time."At that moment, Hassett's final PowerPoint slide attributed the following to Schumpeter:
"He argued that the academy would become the focal point of opposition to capitalism and would subsequently breed an intellectual elite that would control the media, and ultimately politicians themselves. The academy would reflexively hate capitalism because it is the job of the intellectual to criticize, and because academics detest people who actually accomplish something. Professors would envy the wealthy, and feel themselves more worthy."Rick Santorum would be proud! This is the litany of grievances from the extreme right, including all of the claims about "intellectual elites" who "hate capitalism" -- and do so "reflexively" -- because their job is to find fault with people who "actually accomplish something." There is nothing in Hassett's remarks (and his attributions to Schumpeter) that we have not heard on Fox News or from Limbaugh or Beck. This is an attack on professors who supposedly think they're better than everyone else, who do nothing but tear things down. But of course, he said all of this while smiling and being friendly. So he must be reasonable when he insinuates that Piketty is helping capitalism destroy itself, right?
Hassett was quick to absolve Piketty himself of such insidious intentions, even while red-baiting unnamed people who like Piketty's book: "I would argue that -- and it's certainly not the case that that is what's going on in this book -- but if you look at some of the discussions of the book, I think that Schumpeter would find that that is an echo of what he thought was going to happen."
So the problem is not Piketty himself, because it is "certainly not the case" that the book under discussion proves that professors accomplish nothing and simply dig deeper and deeper to find flaws in capitalism, or that this an example of proselytizing against capitalism. Perish the thought! But "some of the discussions of the book" are eerily similar to what worries Hassett, allowing him to suggest that capitalism will be destroyed by people who take inspiration from Piketty's book. Piketty might not be anti-capitalist, but he is apparently a fellow traveler or an enabler, aiding and abetting those who are poisoning the minds of our young people.
This was quite a performance. Inside the walls of a respected Washington think-tank, people sat politely while a supposedly non-extreme conservative policy wonk slandered the professoriate and red-baited those who are engaging in "some of the discussions" of Piketty's book. Any remaining doubts about whether there is a "reasonable right" in this country dimmed even further on Tuesday. But in This Town, it is important to smile and applaud, and act like nothing happened.