Poverty and Income Inequality Don’t Just Happen

November 12, 2013

Now, here’s an interesting fact to chew over. If the wealth in this country were evenly distributed among adults, each of us would have $301,000.

By this measure, we’re not the wealthiest country in the world. That distinction goes to tiny Switzerland, according to the latest Global Wealth report from Credit Suisse.

But we’ve got, by far and away, the highest percent of millionaires (42%) — and an even larger share (46.5%) of all the people with more than $50 million in the 19 countries the Credit Suisse analysts could compile data far.

At the same time, we’ve got 15% of the population — 46.5 million people — so poor as to fall below the Census Bureau’s very low poverty thresholds.

Blogger Matt Bruenig crunched some numbers and found that it would take $175.3 billion to lift every one of them out of poverty, as officially defined.

That may seem like a great deal of money. But it’s only a bit over 1% of the value of the goods and services our country produced last year — and according to my number-crunching, only about $3,770 per person.

Now, I don’t want to lend credibility to the troll who alleges that I’m a “commie terrorist,” but these numbers do get the mind churning.

On the one hand, the Credit Suisse figures underscore how unevenly wealth is distributed. On the other hand, Bruenig’s indicate how relatively little we’d have to redistribute to end poverty — well, not really, but at least according to the measure we use.

As Bruenig says, we have mechanisms to do this. We could, for example, expand the refundable Child Tax Credit and Earned Income Tax Credit. We could expand SNAP (the food stamp program), instead of arguing over how much to cut it.

We could, Bruenig adds, establish a “mild basic income and a negative income tax.” These aren’t radically leftist notions.

Economist Milton Friedman, whom no one would call a leftist, proposed a negative income tax back in 1962. As he described it, people would file tax returns and get a refund of sorts for some portion of however much their income fell below the threshold at which they would owe anything.

This ultimately became the basis for the EITC, but the tax credit helps only people who work and their dependents. And it does very little for parents who earn very little and for those who are childless, even if their earnings are fairly decent.

Though Friedman viewed the NIT as an alternative to existing welfare programs, it wouldn’t have to be. On the other hand, it could replace them if the refunds were big enough to pay for basic needs.

I know economists have concerns about disincentives to work — as, of course, do policymakers. Comfortable hammock and all that.

And perhaps there’s something to this, though I note that we don’t seem to have these concerns when the issue is what are effectively income supports for people who are already well-off, e.g., the various tax benefits to homeowners.

These alone would pay for more than half the cost of lifting everybody out of poverty, according to Joint Taxation Committee estimates that Bruenig cites.

The basic point here, which Bruenig makes well, is that poverty is a function of policies that distribute income unevenly, not a spontaneous phenomenon. Wealth likewise, I’d add.

Policies built into the federal tax code are an obvious example — not only so-called tax expenditures in the individual income tax system, but the tax treatment of assets that are passed on to heirs.

State and local tax policies also enter into the picture, since, on average, they collect the highest percent of income from residents in the bottom fifth of the income scale and the lowest percent of all for the top 1%.

Less obvious, but surely important are school financing policies, which tend to provide significantly more resources for the schools wealthy kids can attend and shortchange the schools for the poorest, who arguably need more.

Insofar as a good education increases future earnings, the uneven distribution of tax dollars contributes to uneven income distribution in successive generations.

Diverse labor policies also affect earnings, of course. These have generally tended to depress wage growth for the vast majority of workers.  And the savings they enable businesses to achieve go to owners, who may be shareholders — and in many large corporations, to CEOs.

Housing, transportation and urban development policies have also played a part by concentrating poor people in pockets of poverty, with limited access to jobs and, as aforementioned, good schools.

I’m sure some of you can think of others.

In short (after what perhaps should have been shorter), poverty and income inequality don’t just happen. We’ve created them — or at the very least, made decisions that foster them.

By the same token, we could make decisions to reduce them. We’ve got the wealth and a wealth of ideas. Not, however, the political will that can come only from a broad consensus that creating the conditions for shared prosperity is a must-do.


Beyond Poverty Reduction to Resetting the Whole Debate

November 4, 2013

Two years ago, Half in Ten relaunched its campaign to cut poverty in half in 10 years. At the same time, it broadened the goal to reflect a vision of shared prosperity.

Now it’s published its second annual update. Like the last, the update reports progress (or lack thereof) according to 21 numeric indicators in four broad categories — poverty today, more good jobs, strengthening families and communities and economic security.

But this doesn’t begin to do justice to what Half in Ten has produced. Each of the four major chapters begins with a lengthy analytic narrative, with lots of data sprinkled in the text and in graphics. Category-specific policy recommendations follow.

Then come the indicators themselves. These are amplified by graphs and tables, many of which provide race/ethnicity breakouts and/or lengthier timeframes than the indicators proper.

So we actually have many more indicators than just the 21 the campaign established as benchmarks. We also have a higher-level policy framework for the to-dos in the chapters that address them.

A forward by Sister Simone Campbell, a leading voice in the progressive faith-based community, and a concluding call to action by top executives of Half in Ten’s parent organizations give meaning to the title of the report — “Resetting the Poverty Debate.”

Both take off from the 50th anniversary of the declaration of the War on Poverty that we’ll observe in January. We’re also reminded of the 50th anniversary of the March on Washington that we recently celebrated — in particular, of the inclusiveness that Dr. Martin Luther King, Jr. called for.

There’s no way I can summarize all this in a blog post. Even a bare account of the indicators themselves would run on too long. Let’s just say, we see some year-over-year progress on a handful of measures, more backsliding and a lot of stasis.

I may return to some of the specifics. At this point, I’ll try to pull out what I see as the major messages.

The first is that increasing income inequality is a major threat — not only to progress on the benchmarks, but to the social cohesion that would generate the political will for that.

The second is that our policymakers in Congress are having the wrong conversation — a “tone deaf debate,” as co-author Erik Stegman terms it. They’re at odds over how to replace sequestration, which they agree (for different reasons) is harmful.

Where they aren’t so far apart is on the need to keep whittling down the near-term deficit, though it’s much lower than it was when we got into all this budget-slashing business.

Results from the Census Bureau’s Supplemental Poverty Measure show that major safety net programs and others that benefit low-income Americans have lifted millions out of poverty.

They’re threatened now, as the debate over SNAP (the food stamp program) and the renewed calls for curbs on Social Security benefits indicate.

Beyond this, we see nothing to suggest that Congress will make the investments needed to create more jobs — unless and until something resets its priorities.

Nor does it seem inclined to enact policies that would ensure that such jobs as do exist are “good,” e.g., pay enough to at least cover the costs of basic necessities and offer critical protections and benefits like paid sick leave.

Nor to invest more in education and training that would enable more low-income people to qualify for good jobs. Or to make high-quality child care affordable for those who’d still have to pay a big chunk of their wages for care at market rates.

Third, the War on Poverty reminds us that poverty reduction and a considerable degree of shared prosperity are possible.

Between 1964 and 1973, the poverty dropped by 43% to an historically low 11.1%. And “the numbers and incomes of the middle class grew steadily,” the report says — though we still had (and have) marked disparities by race, ethnicity and gender.

Fourth, we need a strategy for these times, not a War on Poverty II. The report cites changes not only in our economy, but in our workforce and demographics.

Besides, says Sister Simone, “war is the wrong metaphor” now — most importantly, because “poverty is not a foreign enemy.” It’s “woven into the fabric of our economy” as a result of developments that our policies have enabled — and the ideology that’s sustained them.

We need to reject the false notion that “our nation is rooted in individualism,” she says, and look instead to the “communal relationship” expressed in the preamble to our Constitution.

Widening wealth and income gaps generate fear. In the face of it, we the people need to “reweave society” through “conversations about our shared values and the fact that we all do better when disparities are diminished.”

We need to “reframe the national debate.” This, as I earlier noted, reaches further and deeper than the specific measures the report recommends.

And it’s finally what the report seeks to achieve. It certainly gives us a lot to converse about — and a common fact base to start from.

Highly recommended.


Moving Beyond Trayvon Martin to Issues of Economic (In)Justice

September 23, 2013

Professor Gary Gutting has written one of the most thoughtful, far-reaching analyses of the Trayvon Martin case that I’ve seen.

On the one hand, he says, blacks responded to Trayvon as a symbol of the groundless, racist suspicions familiar to black males, e.g., whites crossing streets to avoid them, stop-and-frisks, the car door locks clicking that President Obama mentioned.

So, I should add, did some non-blacks.

But for others, Gutting says, Trayvon symbolized “disturbing realities” about all too many young black men, e.g., that they’re likely to drop out of school, commit violent crimes and engage in other anti-social behaviors.

So we’ve got two opposing moral judgments, but neither reaches the “deeper issue” — the fact of “a fundamental injustice in our economic system.”

Dr. Martin Luther King opened his famous March on Washington speech by proclaiming that “the Negro is still not free…. [He] lives on a lonely island of poverty in the midst of a vast sea of material prosperity.”

This is still true 50 years later for 28% of blacks, Gutting says, citing last year’s official poverty figure. And the root cause is the way our free enterprise system works.

It’s geared primarily toward enabling individuals to amass personal wealth. And them’s what has gets, at the expense of them’s what don’t.

The end result is “a socioeconomic underclass deprived of the basic goods necessary for a fulfilling human life: adequate food, housing, health care and education, as well as meaningful and secure employment.”

Gutting asserts that “people should be free to pursue their happiness in the competitive market” — an odd conflation of happiness and riches.

But, he continues, “it makes no sense to require people to compete in the market for basic goods” because if they don’t have them, they’ve “little chance of gaining them in competition” with those that do.

We’ve got scads of evidence for this. For example, we’ve got research showing that more than 40% of children raised in the bottom fifth of the income scale stay there as adults — and more than half if they’re black.

And other studies showing that children of wealthy parents start kindergarten ahead of the pack — and stay there, while a very large number of poor children start with disadvantages that cause them to fall further and further behind.

And data showing that even the poor kids who make it through high school are far less likely to go on to college — and less likely to graduate if they do. Costs and other financial pressures are, for blacks, the single most important reason, according to yet other research. And probably not for them only.

These differences carry over into competition in the labor market, of course.

Last month, only 3.5% of workers with a bachelors degree or higher were jobless and actively looking, as compared to 7.6% with a high school diploma or the equivalent and 11.3% with less.

The wage premium of a college degree is similarly marked — and due partly to the fact that more highly educated people are far more likely to be working, as Catherine Rampall at The New York Times notes.

Last year, the median earnings of men with a bachelors degree were nearly twice those of men with a high school degree or the equivalent — and more than two and two-thirds times those of men with less.

Even more marked disparities for women. The median for those without a high school diploma or the equivalent was a mere $14,867 — well under the federal poverty line for a two-person family.

And so income inequality replicates itself from generation to generation, with the rich getting richer and the poor, if not actually poorer, at least increasingly disadvantaged.

Gutting says that “[w]e need to move from outrage … to serious policy discussions about economic justice, with the first issue being whether our capitalist system is inevitably unjust.”

If it is, can we feasibly reform or even replace it? If it isn’t, what methods does it offer for rectifying the injustice represented by the continuing existence of an “underclass” — one that “given our history, will almost surely be racially defined?”

These are good questions — and the kind a philosophy professor can pose.

I’ve got a hard time imagining our policymakers and those who seek to influence them sitting down to discuss whether we should overhaul our basic economic system.

But we surely should have some productive discussion about leveling the playing field.

The recent Census report tells us that the top fifth of households got more than half of all income, while the bottom fifth got 3.2%. But this may actually understate income inequality because the Bureau doesn’t count capital gains.

A new analysis by economists Emmanuel Saez and Thomas Piketty estimates that the top 1% captured 95% of the income gains during the first three years of what’s supposedly our recovery. The share of income that flowed to the top tenth of that percent last year is the highest on a record dating back to 1917.

We don’t have to favor a post-capitalist system to know that there’s something wrong when the wealthiest families — the top 0.1% — had incomes over $10.2 million, while 46.5 million people lived in poverty.


Early Investments Can Give Low-Income Kids a Better Chance for a Better Life

June 5, 2013

The research I recently wrote about makes a persuasive case for lifetime income inequalities that begin when children are very, very young.

But, as the title of this post suggests, we can choose to mitigate the disadvantages low-income children are born to. President Obama has proposed a multi-part initiative that would give a boost to some programs that do.

Rich and Poor Beginnings

Unequal life opportunities begin even before children are born. Studies tell us that poor mothers are less likely to get good prenatal care or enough of the right kinds of foods.

For these and other reasons, e.g., high levels of stress, they’re more likely to give birth to babies who weigh very little. These babies are at high risk for physical and learning disabilities — and ultimately chronic illnesses.

Other seeds for long-term economic disadvantage are also health-related, as the Academic Pediatrician Association’s summary of the “life-altering effects” of child poverty shows.

Still others have to do with how parents raise their kids — how much time they spend talking to them, answering their questions, playing with them, reading to them, etc. Or if not they, then other caregivers.

Highly-educated parents — mainly mothers — make a greater investment of time in such activities than mothers with less than a high school degree, even though they’re more likely to be employed.

One pay-off, according to an oft-cited study, is that young children of well-off parents hear about three and a half times as many words per hour as those of poor parents.

The more words the children heard, the better their performance when they got to the fourth grade.

A Better Start for Low-Income Kids, But Not Enough of Them

Early childhood education programs — for both parents and their kids — can help compensate for some of the disadvantages that cause poor children to get left behind, even before they start first grade.

Voluntary home visiting programs, for example, help low-income parents raise children who will enter kindergarten healthy and with the skills their well-off peers usually have.

A recent Washington Post article focuses on a fine example of one of these. “Preschool in its earliest form,” the writer calls them.

High-quality child care can make an important difference as well. But it’s inordinately costly for low-income parents who don’t have vouchers to subsidize it, as most apparently don’t.

And even if they could get a voucher, they might not find a suitable slot. In the District of Columbia, for example we’ve got waiting lists because providers don’t get reimbursed for their costs.

The Early Head Start program offers an alternative for low-income children under three. And like regular Head Start, it addresses their health and nutrition needs, as well as their social and intellectual development.

But in 2010, it served fewer than 4% of eligible children. And this was a year when the program had an infusion of money from the Recovery Act.

Head Start itself reached only about two-fifths of the children eligible, according to the National Women’s Law Center’s estimate.

In fact, only 65% of four year olds in the lowest income bracket go to preschool at all, as the Commission on Equity and Excellence in Education recently reported. And it’s often low quality, the Commission adds.

The participation rate is even lower for the poorest three year olds — about 42%.

But states are spending less on pre-K. Total funding dropped by more than $548 million in the 2011-12 school year alone.

And, as you’ve undoubtedly read, an estimated 70,000 low-income preschoolers will get fewer — and in some cases, no — services from Head Start, thanks to sequestration.

President’s Early Childhood Initiative

President Obama’s proposed Fiscal Year 2014 budget includes an initiative billed as an Early Education for All Americans plan.

As CLASP reports:

  • Most of the money — $75 billion over 10 years — would go to states that agree to expand preschool slots for four year olds whose families are at or below 200% of the federal poverty line.
  • A $1.4 billion investment would expand child care slots for infants and toddlers. These would provide full-day care in programs that agree to meet the quality standards set for Early Head Start.
  • Another $750 million would fund competitive grants aimed at giving states incentives — and some help — to expand their preschool programs and, if needed, beef up quality.
  • And $15 billion would expand home visiting programs for at-risk children.

To fund the preschool part, the President wants Congress to increase the federal tax on tobacco products.

You can imagine the pushback — from the tobacco companies, corner stores and, of course, Republicans in Congress who oppose all tax increases (except for low-income families).

So the President’s proposals face an uphill battle, as they would even if the funding source were different.

They’re no magic bullet. But they’d do a good bit to help ensure that, in his words, “none of our children start the race of life already behind,” as so many poor kids do now.


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