Feeds:
Posts
Comments

Posts Tagged ‘brookings institute’

United States one dollar bills are curled and inspected.

Today’s post is on income inequality. Since we’re heating up in election season, candidates are pushing forth their economic plans for America.

The dangerous separation of the American upper middle class

click here for the full article

“The American upper middle class is separating, slowly but surely, from the rest of society. This separation is most obvious in terms of income—where the top fifth have been prospering while the majority lags behind. But the separation is not just economic. Gaps are growing on a whole range of dimensions, including family structure, education, lifestyle, and geography. Indeed, these dimensions of advantage appear to be clustering more tightly together, each thereby amplifying the effect of the other.

For many, the most attractive class dividing line is the one between those at the very, very top and everybody else.  It is true that the top 1 percent is pulling away very dramatically from the bottom 99 percent. But the top 1 percent is by definition a small group. It is not plausible to claim that the individual or family in the 95th or 99th percentile are in any way part of mainstream America, even if many of them think so: over a third of the demonstrators on the May Day ‘Occupy’ march in 2011 had annual earnings of more than $100,000.

For others, the most important division is at the other end of the spectrum: the poverty line. The poor have not fallen behind the middle class in recent decades. But they have not caught up either. There is a case to be made that whatever is happening towards the top of the distribution, the gap we should care most about is between families struggling to put food on the table and those with adequate, middling incomes.”

Senator Bernie Sanders has made addressing income inequality one of the principle components of his campaign, and even other populist candidates like Donald Trump have called for raising taxes on the rich, or at least certain groups of wealthy Americans. Most voters, particularly Republican voters, oppose raising taxes on the rich, but here’s the question:

Is income inequality a problem in America?

The answer is, it could be: One of the ways America has been able to become the most powerful nation on earth in such a short period of time is because we are one of the few societies where economic mobility is possible. Someone born poor, even without tremendous musical, athletic, dancing, or tech genius talent can still earn a solid living and move from the bottom 10% to the top 1%. Herman Cain and Ben Carson are two such examples. Abraham Lincoln went from being born in a one-room cabin to President of the United States. That gives people hope that they too can achieve the “American Dream”, however it is defined for them. For some, earning a salary of $250,000 or more per year is unrealistic. But they may find happiness moving from $20,000 a year to $60,000 a year.

However, the American Dream only works if people believe economic mobility is feasible for them. And right now, many Americans do not believe it’s possible, or at least is becoming more difficult. Some Conservatives and “1%ers” will just say those people don’t work hard enough, or make poor decisions which cause them to stumble. Those may be true for some people, but not for all.

And that’s not the point of this discussion. It’s ‘do you believe you can move up the economic ladder’? And if people are answering no, then the question is, ‘why?’ and if people think the system is rigged against them, populist candidates like Sanders and Trump will absolutely win because the “hard work+perseverance=success” mantra will ring hollow to people who believe we are slowly moving away from an economically mobile society to one based primarily on who your parents are or who believe some people are ‘privileged’. That’s part of the reason entrepreneurship activity is down overall. Onerous government does hamper economic activity, but if people do not believe they can succeed, most will not even try.

This is something both major political parties will have to come to terms with. Certainly no productive society can function under Communism, where everyone (except the Party leaders) is equally poor and miserable. But too much inequality fuels populist and radical candidates who promise to fix the problem.

So take a look at the above graphic and try to answer for yourself, “is income inequality a problem in America”?

Read Full Post »

That’s the premise behind an article on CBS news by Aimee Picchi which is based on a book co-written by Sociologist Professor Kathryn Edin of Johns Hopkins University. A sample:

“By one dismal measure, America is joining the likes of Third World countries.

The number of U.S. residents who are struggling to survive on just $2 a day has more than doubled since 1996, placing 1.5 million households and 3 million children in this desperate economic situation. That’s according to “$2.00 a Day: Living on Almost Nothing in America,” a book from publisher Houghton Mifflin Harcourt that will be released on Sept. 1.

The measure of poverty isn’t arbitrary — it’s the threshold the World Bank uses to measure global poverty in the developed world. While it may be the norm to see families in developing countries such as Bangladesh and Ethiopia struggle to survive on such meager income, the growing ranks of America’s ultrapoor may be shocking, given that the U.S. is considered one of the most developed capitalist countries in the world.

“Most of us would say we would have trouble understanding how families in the county as rich as ours could live on so little,” said author Kathryn Edin, who spoke on a conference call to discuss the book, which she wrote with Luke Shaefer. Edin is the Bloomberg Distinguished Professor of Sociology at Johns Hopkins University. “These families, contrary to what many would expect, are workers, and their slide into poverty is a failure of the labor market and our safety net, as well as their own personal circumstances.”

Despite questionable statistics from the U.S. Department of Labor, most Americans do not believe the recovering economy has really boosted their well-being. True, there are more jobs now than in 2009 at the bottom of the recession. However, many of these jobs, as CRI has said here and here and, oh what the heck, just read here, are not the kinds of blue-collar jobs which were lost during the Great Recession. By this we mean jobs which paid at the absolute minimum, $35,000 and helped families earn at least a basic standard of living, even on just one income. The jobs we are seeing growth in are jobs in sectors like retail, restaurant, and tourism, which are generally minimum wage jobs.

The exact numbers receive EBT benefits (also known as ‘food stamps’), TANF (Temporary Assistance for Needy Families), Affordable Housing, student loans, etc., varies from month to month. But one thing that has absolutely happened is, more and more Americans are becoming poor, increasing numbers of working and middle class Americans are finding themselves sliding downward and not up, and the future looks bleak, because our deficit is so large there is no real way to ever pay most of it off. That’s why in poll after poll, the majority of Americans believe the so-called “Millennial Generation” will be the first generation to be worse off than their parents.

It should surprise no one that presidential candidates like Donald Trump and Bernie Sanders are stealing the show. The rhetoric each espouses, while different in ideology, basically says the same thing: the ruling class (Berni’s ‘billionaire class’ and Donald’s ‘political class’) has changed America from a free-market oriented society to one that is a combination of socialism and crony capitalism, the exact same system countries such as Canada, Sweden, Germany, France, the UK, Belgium, the Netherlands, Italy, Spain, and Portugal have. The days when a person could confidently and reasonably believe s/he could work hard, save money, invest wisely, and earn a higher standard of living are fading. Yes, there are indeed people who do overcome the odds and become millionaires or billionaires, even from humble beginnings. But for those who lack some superstar athletic, musical, or coding talent, those opportunities seem more and more distant as the majority of Americans work harder and harder for less value per hour.

The question of who to blame for this economic malaise floats around. People who identify as conservatives or libertarians generally put the blame on the government, believing government policies aimed at keeping people dependent on government, discouraging work opportunities for the poor (this post from ZeroHedge explains it, and mind their language), and federal reserve dollars being pumped into the system causing inflation are the main source. Throw in Statist politicians from both parties taxing and spending and pushing a tax code which actually harms people trying to acquire wealth through work rather than the already-rich and people whose income comes from the stock market, and there’s your answer.

People who identify as liberal or socialist will put the blame on Big Business. According to the Brookings Institute, the average age of a business in America is sixteen years- the highest it’s ever been. Despite claims of “new entrepreneurial activity” by our elected officials, fewer people are attempting startups. The biggest reason, besides bureaucratic red tape and high taxes? Business cronyism, where large firms use the government to rig policies in their favor and against their competitors, especially small competitors. As access to capital for small business owners, especially young people and people of color, declines, you will see fewer people taking risks to create jobs. That leaves us more dependent on corporatism for our daily bread.

In our view, both the left and the right make fair points, which then brings us to the next step: the solution. In our view, only a truly fair marketplace, where a person reasonably believes he or she can compete either for a job or in business, will help people climb the economic ladder. The reason Trump and Sanders are hitting cords with a segment of the population is because (and the political pundits miss this, for the most part) the majority of Americans, whose household income is less than $55,000 a year, are becoming frustrated and resentful that opportunities are being taken away and incomes are declining due to government policies which discourage work and entrepreneurship, and corporate entities who raid the treasury for their own gain, depriving would-be entrepreneurs and workers of the funds they need to either start a business, take care of their families, or save for retirement. The economic mobility ladder is slowly but surely being lifted up by those who already “made it” and are using the government to keep everyone else away, or dependent on the government administrators for their basic needs.

We hope the public at large begins putting the pieces together and starts to vote for candidates who will oppose the so-called Ruling Class and their wealthy financiers, and instead turns to candidates with quality solutions that will give people opportunity and real hope. That is change we could believe in.

CRI will continue to conduct research on policies which we believe best help all Delawareans achieve what they can and believe they can move up the economic mobility ladder. If you agree that Delaware needs a real change in how our government does business, then visit caesarrodney.org and learn about what you can do today to help.

Read Full Post »