One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don't work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)
The Age of Diminished Expectations, 1990, p. 22.
Here's part of what I wrote after Krugman won the Nobel prize in economics:
Indeed, he has even gone the opposite way, blaming the top one percent of the income distribution for how badly (in his estimation) the bottom 90 percent are doing. Only twelve years ago, he thought that pretty much everyone was doing pretty well. In a 1996 Slate column, "The CPI and the Rat Race," Krugman wrote, "[M]ost families in 1950 had a material standard of living no better than that of today's poor and near-poor." He confirmed this with direct measures of how people's living standards had improved: indoor plumbing, telephones, cars, and TVs. If we were to use the Krugman methodology today, as economist Michael Cox and economic journalist Richard Alm have done, we would point to wide-screen televisions and cell phones.
Unfortunately, although his writing in the 1990s was highly educational, Krugman's columns in the New York Times have often been the opposite. He often heaps scorn on and challenges the motives of those who disagree with him. For example, in a September 14, 2003, article titled "The Tax-Cut Con," Krugman took a lot of space to attack the motives of those who advocated tax cuts, but very little to actually analyze the 2001 tax cut. The closest he came was to point out that most of the benefits of the tax cut went to the highest-income people. But he didn't mention two other relevant facts: (1) almost everyone got about the same percent tax cut; and (2) high-income people pay a disproportionate share of taxes. Those two facts together mean, mathematically, that the highest-income people will get a large percent of the benefits of the tax cut. This is the kind of simple arithmetic point that the Krugman of the 1990s would have made. I miss him.