Liberals across the developed world are very concerned by inequality within the United States, as demonstrated by global interest in the Occupy Wall Street movement. This is peculiar because poverty within the United States is less common, and less severe, than it is in most countries around the world. The US does have a high level of inequality for a developed country, but it is not extreme by global standards Unfortunately, this disproportionate concern for Americans leads to attempts to narrow income inequality that may increase poverty and inequality worldwide.  I’ll explain how.
The U.S. trade deficit is the world's biggest and most successful antipoverty program.
Military spending doesn't belong on the list with entitlements. In the first place, investment in the military has given us things like the internet and GPS. In the second, military spending as a portion of the U.S. budget has actually been declining, whereas entitlements are rising.
"Why? One would think that a cut-throat culture and laissez-faire economic system allow the creation of monopolies that live on economic rents."Monopolies, by definition, are the opposite of cut-throat.
"If taxes reduced Bill Gates's profits by 9/10, he would have had the same incentives to do whatever he did."
It isn't about the utility of money, it's about cost/benefit. A fixed expense like taxes alters the risk-reward analysis so that risky endeavors aren't undertaken in the first place. INOW, Microsoft, or any other investor, are less likely to buy the next upstart company and expand it if they're margins are being cut by taxation.
" It's no accident that the capitalists in Texas and similar places are eager to use U.S. military might to drive down living standards in the third world as well as at home."
"...while the US public expenses amount to 22.4% of GDP..."
This is only the national government. Total government spending at all levels last year was $6.2 Trillion, which is about 40% of GDP (~$15 Trillion), which is on the low end, but more or less in line with most European countries spend.
Krugman dances back and forth on this issue depending on the political expediency of the particular issue at hand. The problem with the idea, from his perspective, is that if true, it suggests that inequality might be self-correcting in a healthy market given that the wealthy suffer greater losses during recessions, and that's a narrative he doesn't want to get around.
"Who is "they"? The Americans who don't want universal affordable health care like European nations have?"
They probably don't want the shortages and rationing the Europeans endure (80% of Americans are satisfied with the health care THEY receive).The best system would be dynamic, allowing people to spend what they can afford for the highest quality they want. The wealthy would spend more on low-marginal benefit procedures, driving innovation so that over time those innovations become commonplace and affordable by those in the lower strata. The US health care system's biggest problem is mostly at the low end, where regulatory and licensing restrictions have priced millions out of the market.
Long run economic growth is critical, because even if not distributed evenly, over time even the lower strata will be better off than in a slow growth economy where distribution is more flat.
"Compare the Blue states where there's more regulation and higher taxes to the Red States where there's little."
This lacks historical perspective. The northeast developed industry and capitalism first, and they've led the south and midwest economically ever since. The more recent trend, however, is for jobs and industry to move from blue to red, which coincides with the rise in government control in those blue states.
But the highest among western european countries, which is significant. The Asians are different, since those economies were built up around technology, it makes sense that they would have more patent applications.
"Without unemployment benefits crime would shoot up, as would homelessness"
Unlikely. There's little correlation between the crime rate and the unemployment rate. What little there is has to be factored against the lower unemployment you would have without the benefits.
"That's a global trend: unemployment and working hours keep dropping across the world while production barely suffers from it."
That's also the US trend (weekly hours have been dropping since the 60s), so I'm not sure what your gripe is.
In at least one regard it is. The US has a high corporate tax rate and a low top-marginal rate on personal income. This leads to lots of pass-through corporations, where the income gets counted as personal rather than corporate.
It's not even clear that policies are the problem. Arguably, the Southern European disease is that regulation isn't followed -- govts don't enforce them, people don't follow them.
The key point that Stiglitz and Krugman agree on is that in equality fosters economic crisis.
So do tell us, Robert Wiblin, how economic crisis, which today takes on an international character, benefits Third World countries!
And how, if you haven't considered this obvious point, your post is anything but intellectually irresponsible rightist propaganda.
Here is some of Stiglitz stuff via Krugman: http://krugman.blogs.nytime...
Many people below doubt whether the US is less regulated, and whether regulations do as a general rule stifle innovation. If you doubt these things, at least take away the point that whichever policies you think do stifle innovation, whichever countries they are found in, are much more harmful than they first seem. I will try to research and write up more on this topic of what general kinds of economic models are most innovative in the future.
You may want to consider that innovation has probably diminishing returns.