This Week in Economic Opportunity
There's been a lot of talk lately about income inequality, but the more useful conversation to have is one about economic opportunity. There was a time, in the not-too-distant past, when it was assumed that each American generation would do better than the last. The poor could work their way into the middle class, the middle class could work their way into upper middle class, the upper middle class could become moderately wealthy, and so on. And of course, some people could skip levels altogether, moving from poverty to riches in a generation.
That assumption is no longer viable. As Nobel Prize-winning economist Paul Krugman writes, "Since the late 1970s real wages for the bottom half of the work force have stagnated or fallen, while the incomes of the top 1 percent have nearly quadrupled (and the incomes of the top 0.1 percent have risen even more)."
This graph from the nonpartisan Congressional Budget Office tells the story:
Graph via CBO
The rich are getting much, much richer. The rest of us, not so much.
During essentially the same period, between 1972 and 2011, American productivity rose by 80%. Since wages for most people have been stagnant or sinking, it's clear that the fruits of that productivity have been going only to those people at the top of the wealth spectrum.
This huge gap in the distribution of wealth is not due to some natural law, or of the invisible hand of the free market. It's the result of deliberate policy choices made across the country, at federal and state levels. These choices have resulted in lower taxes for the wealthiest Americans, the diminished influence of labor unions, increasing tuitions and fees for higher education and worsening performance for public education in general. It's been a massive redistribution of wealth, on a scale rarely seen before, shifting resources and income away from the middle class and pushing it toward the already rich.
But it's bad for America. It limits social mobility, so that today a child born into poverty is more likely to spend her whole life there. One born into the lower middle class will have a harder time keeping himself from slipping into poverty, and climbing within the middle class is no longer a foregone conclusion. The loss of economic opportunity slows job growth, because when the middle class can't spend like it once did, businesses that depend on that spending fail, or don't add employees. Middle class spending is the engine of the economy, and the middle class isn't spending.
The last Gilded Age led us into the Great Depression. This current one led us into the Great Recession. The difference is, we got out of the Depression by advancing progressive policies that shifted the distribution of wealth back toward the middle class. This time, there's been talk about the problem but no real action. Without action, we're likely to wind up in another recession, or worse.
A clear majority of Americans--67%--is "dissatisfied with income and wealth distribution" today, according to a new Gallup poll. It's instructive to break it down by political leaning: 45% of Republicans are either satisfied or somewhat satisfied with the current distribution, while for Democrats that number is 24%, and for independents it's 28%. Does that mean that 45% of Republicans are in the top 0.1% of American earners? Of course not--but it means an awful lot of them have bought into the myth of trickle-down economics. One only needs to look at the graph above to know that trickle-down doesn't work. The rich are plenty rich, but there's nothing trickling down to the rest of us. It's time to do more than talk about the problem; we need to act on it and make opportunity for all Americans a national priority.
Side Note 1: This isn't just an American problem. Globally, 85 people have as much wealth as the poorest half of the population. 85 individuals are as rich as the bottom 3.5 billion people. Should you ever wonder why there's terrorism and genocide, keep that statistic in mind. It explains a lot, and if it doesn't get better, neither will those problems.
Oxfam reports: "Extreme economic inequality is damaging and worrying for many reasons: it is morally questionable; it can have negative impacts on economic growth and poverty reduction; and it can multiply social problems. It compounds other inequalities, such as those between women and men. In many countries, extreme economic inequality is worrying 2 because of the pernicious impact that wealth concentrations can have on equal political representation. When wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all. Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’"
Side Note 2: Speaking of unions...
Side Note 3: A new Pew poll shows general agreement with the Gallup one referenced above, showing that most American believe income inequality is growing, though partisan differences remain in how to address the problem. This poll also shows that most Republicans (51%) think if a person is poor, it's because of "lack of effort on his or her part." Which only demonstrates how unaware most Republicans are of the real economic situation in America today.
Side Note 4: Here's an interesting discussion of the relative merits of the Earned Income Tax Credit vs. raising the minimum wage as options to help the poor. The author suggests: "My view is that the minimum wage and the EITC work best in tandem, and that if we wish to spur hiring during recessions there are much better ways to do it than to allow employers to capture more of the surplus, -- that is, to keep more for themselves by paying workers less. A carefully designed tax credit, for example, or monetary and fiscal policy measures that spur demand would both promote employment without lowering the income of the most vulnerable households. That’s particularly important in a time of rising inequality."
We here at TWiA World Headquarters have a modest proposal of our own--not that anybody comes to us for policy prescriptions. But corporations are parking money overseas in order to avoid paying taxes on it. That's bad for the country in two ways--we don't get the tax revenue we should, even from companies based here at home, and we don't get the stimulative effect of that money being spent in the US. Our proposal is for Congress to create a one-time repatriation exemption for that money--it can be brought back into the country without being taxed--IF it's used to hire the long-term unemployed, train them to bring their skills up to date, and retain them for at least a year. During that time, the stimulative effect of all that hiring would have helped improve the economy and grow GDP, which would then lead to more jobs, etc. We're not saying it would fix the whole economy, but it would address two major issues holding back a more robust recovery.
This Week in Simple Solutions
Last week, we wrote about the city of Phoenix, AZ ending veteran homelessness by providing homeless veterans with homes. This week, we're delighted to report that the state of Utah is solving its homeless problem in similar fashion. The economics are sound: it costs $16,670 to jail and provide ER services for each homeless person, but only $11,000 to put that person in an apartment. We love to see imaginative thinking used to address difficult problems. (Thanks to TWiA special Beehive State correspondent Marcy Rockwell for the tip!)
This Week in Looming Self-made Crisis
Treasury Secretary Jack Lew is warning that we'll hit the debt ceiling earlier than anticipated, on February 7. As usual these days--although not historically, since in the past it's always been treated as the administrative matter it is--House Republicans are expected to treat it as a hostage and present a list of demands that must be met before they'll agree to do their Constitutional duty. Keep an eye on this one, and hope they surprise us all and act like responsible citizens.
This Week in Freedom
We celebrated Martin Luther King Jr.'s birth this week. Most of us know him through diffuse historical lenses as a guy who gave speeches and marched and prodded white society and advocated for civil rights. According to this diarist at Daily Kos, most of us are wrong about his real impact, which was not on how white people thought about black ones, but on how black people thought about themselves, and about whites. "He ended the terror of living as a black person, especially in the south." It's a powerful piece, and for those of us who were never southern blacks in the pre-King, pre-Freedom Marchers, pre-civil rights era, it's important American history. Give it a read.
This Week in Voting
Over these last few years--since President Obama's first election, in fact--Republican officials in various states have been determinedly trying to make it harder for people to vote. The theory seems to be, if you can't win elections by having better ideas and candidates, maybe you can win by making sure the other side's supporters can't vote. The result has been, in too many places, to make a joke of our democracy. The Supreme Court made things worse by defanging a critical part of the Voting Right Act [but, thankfully, a bipartisan effort is underway in Congress to come up with a legislative fix for that, spurred largely by Representative Jim Sensenbrenner (R.WI)].
Things were so bad in 2012 that President Obama appointed a special commission to study the problem and make recommendations to fix it. The commisson did so, and now their report is in. When this blog has questions about election laws and processes, it turns to Rick Hasen's excellent Election Law Blog, and Hasen praises the report. Now the hard part comes--implementing its suggestions in our crazy quilt country, where states run elections (a remnant of the 18th century, when the concept of "United" States was still new and people identified more with their state than with their country), and, as Hasen points out, what used to be a matter of administering them has instead become one more weapon in the partisan quiver.
This Week in Health Care
What happens when entrepreneurs who don't like the president and don't trust the Affordable Care Act also happen to have astronomic medical bills and preexisting conditions? Depends in part upon where they live, but for some, like the folks profiled here, they do much, much better than their $500 a month junk policy that left them basically uninsured.
And whatever happened to ideological consistency? The latest Republican move to tear down the ACA and render millions uninsured involves complaining about insurance company "bailouts," which are really called "risk corridors" and which create "a pot of money that takes in funds from insurers who enroll healthier customers and uses it to pay out insurers who enroll sicker customers. It's a safety valve that sunsets after 2016." In attacking this concept, conservative politicians and pundits are attacking the role of private insurance companies in the law--and their need to make a profit. The left gave up on the idea of single-payer, or "Medicare-for-all," early in the health care debate, and the more conservative approach of working within the private insurance market was adopted. Now they don't like the temporary safety net established to help those insurance companies weather the uneven distribution of premiums and payouts that can be expected to occur in the early stages of the law.
You know, folks, if you're willing to take insurance companies out of the equation and discuss single-payer, we're all for it. But if you just want to risk cratering some insurance companies in order to deny Americans health insurance, you're fighting an uphill battle for an unworthy goal.
Side Note 1: Republican governors who have refused the ACA's Medicaid expansion are doing serious damage to mental health treatment in their states. These governors rejected the expansion out of purely partisan spite, and their constituents are paying the price in very real ways.
Side Note 2: No, nobody hacked into the ACA system and accessed 70,000 personal records in four minutes, despite the myth's popularity in the right-wing media.
This Week in Schools
We the taxpayers spend more than $82 million a year on a charter school outfit called Responsive Education Systems. With that money, RES runs schools in Texas, Arkansas, and Indiana that blatantly lie to their students, schools that pretend to educate while intending to indoctrinate. According to this article in Slate:
"When public-school students enrolled in Texas’ largest charter program open their biology workbooks, they will read that the fossil record is 'sketchy.' That evolution is 'dogma' and an 'unproved theory' with no experimental basis. They will be told that leading scientists dispute the mechanisms of evolution and the age of the Earth. These are all lies.
This Week in Poison
Hey, remember when much of the water in West Virginia was poisoned by a company called Freedom Industries, and that poison flowed all the way into Ohio? We do, because we wrote about it last week. This week--12 days into the spill--Freedom Industries announced that, oh yeah, there was a second chemical in the tank, but they can't tell anybody exactly what it was, because that's proprietary information. Now the guy who owns Freedom Industries and that leaking chemical plant is filing for Chapter 11 bankruptcy, trying to shield his assets from anybody who might demand some accountability. At the same time, through yet another corporate entity, he's trying to get the court's permission to loan his own company millions of his own dollars--dollars that will, presumably, be safe from seizure by the state to pay for cleanup, because of the bankruptcy.
We would never say that all corporatist plutocrats are evil. But some surely are.
This Week in Gun Safety
A South Carolina state senator with the inappropriate name of Lee Bright wants Senator Lindsey Graham's Senate seat. But Mr. not-so-Bright demonstrates a serious lack of understanding of the Constitution when he argues that teachers should be allowed to carry machine guns at school. Bright said, "The Second Amendment is pretty clear. It says the right to carry arms should not be infringed."
Yeah, no. What is says is "A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed." Like every other right in the Bill of Rights, that's not an absolute, but is in fact subject to laws and limitations, as Supreme Court Justice Antonin Scalia wrote in the District of Columbia v. Heller decision. Not only could the ownership of "dangerous and unusual" weapons--like machine guns--be regulated, Scalia wrote, but prohibitions could be placed on bringing guns into certain "sensitive places, such as schools and government buildings."
Second Amendment absolutists love DC v Heller because it established once and for all the idea that the Constitution's "well regulated militia" did not refer to an organized, trained force of soldiers, but to the populace at large who, in an emergency, could bond together in such a force if they had guns--and therefore, ruled that private ownership of guns was legal and constituional. But they never seem interested in the decision's other findings, which include definite limitations on that amendment's freedoms. Sorry, Mr. Bright, you don't get to pick and choose here. If you want to live by one part of the decision, you have to live by all of it. There is no absolute right to carry, and the Constitution doesn't say teachers can take machine guns to class.
This Week in Science
You paid for it. Now you can see it.
This Week in How You Can Help
In honor of Dr. Martin Luther King Jr.'s birthday, we'll point you toward the National Urban League. In their words, "The mission of the Urban League movement is to enable African Americans to secure economic self-reliance, parity, power and civil rights." Take a look, check it out, help if you can.
This Week in Bears
The high pressure ridge that's sitting over California, keeping temperatures mild, is also interfering with bear hibernation.