ASU conferred an honorary degree on dual Nobel Prize winner Joseph Stiglitz a few weeks ago and I had an opportunity to attend the honorary dinner the night before commencement, then I was part of the platform party for the ceremony itself.
Stiglitz is an icon of the left and one of the other dinner guests told me later that he was watching to see my reaction when Stiglitz was introduced. that surprised me for two reasons--the first is that I'm obviously going to be polite to our guests, and the other is that....Stiglitz and I agree on so much.
Every dinner guest received a copy of his book The Price of Inequality and while I disagree with some of his solutions, I certainly think he makes good points about the extent of the problem. And frankly, I'm coming around to some of his solutions.
I had to admit that I was worried that he would say "So you are on the Arizona Board of Regents...what do you think interest rates are going to do?"
Fortunately he didn't open with a joke, so I had the opportunity to ask him a little about economics.
He spends a lot of time in the book discussing "the bankers" who benefited from the bailouts while ordinary Americans bore the brunt of the recession.
How can I disagree with that? My view is that traditional capitalism--to the extent that it has ever really existed has been replaced by crony capitalism. That's why you see so many chambers of commerce that are dominated by banks, utilities, hospitals and insurance companies....whose prosperity depends as much on government policy as it does on their own competitive prowess.
We can argue over which political party is the party of crony capitalism, but let me posit that the answer is...both of them. Stiglitz uses the example of the Obama administration bailing out AIG and --since they obviously couldn't pay "performance" bonuses--the administration reclassified them as "retention" bonuses and paid them anyway. Meanwhile, rank and file workers (not to mention ordinary homeowners) had to take a haircut....after all, contracts are sacred and all that.
So what should the tax rate be when someone derives millions from his effectiveness at government manipulation? Libertarian blogger and law professor Glenn Reynolds says 75%. That seems about right ot me--and it's a rate that Stiglitz looks back to with fondness.
Maybe I could be a purist and say that we should eliminate crony capitalism and keep taxes low...incentives, rising tide, Laffer and all that.....or I could finally realize that crony capitalism is an integral part of the current structure of our government and I should look for another solution.
Maybe Stiglitz and Reynolds are on the right track. Maybe they should call it the 1% solution.