income inequality

Green Shoots. For Whom?

Eric Lotke — Thu, 05 Nov 2009 09:43:58 -0800

Today’s “Productivity and Costs” data from the Bureau of Labor Statistics contain what looks like good news. Productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the largest gain since 2003.

The Associated Press called it “sizzling.” The New York Times said we “surged.”

It’s good news and I’m happy about it. I especially like the 4.0 percent increase in outputs, led by a 12.4 percent increase in the manufacturing of durable goods. It almost starts to look like green shoots in a gray economy.

But keep the cork in the bottles. The hours worked last quarter dropped by fully 5.0 percent. The productivity gain came from doing more work in fewer hours. In the durable goods sector, the hours worked dropped a full 7.2 percent. The increase in productivity is fundamentally about people working harder.

And people aren’t getting paid for their hard work. Real hourly compensation rose only 0.2 percent last quarter. So if somebody is pocketing the gains from 9.5 percent increase in productivity, it isn’t the people working on the lines. Yes, they’re happy to have jobs. Yes, it’s nice to see any gain at all after a decade of decline in wages and income. But no, we don’t want to recreate the bubble that popped. We need to make sure these gains are widely shared and that the people doing the work reap their fair share of the benefit.

Source: BLS

The Measure of Our Progress

Terrance Heath — Wed, 16 Sep 2009 13:14:37 -0700

In the previous post, I included a quote from Franklin Roosevelt's Second Inaugural Address.

We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful law-abiding group within our borders as superfluous. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.

It was a short quote, only because I couldn't very well quote the entire speech. I wanted to, because so much in it speaks directly to where we stand today, the kind of country we want to be, and the choices that will lead us closer to that goal — or farther from it.

Delivered on January 20, 1937, the speech came after Roosevelt's landslide victory in the 1936 election, and two years after he stared down businessmen and bankers who sought to halt an economic recovery that had not yet trickled down to — as Roosevelt said — one-third of the population.

He was elected President in November 1932, to the first of four terms. By March there were 13,000,000 unemployed, and almost every bank was closed. In his first "hundred days," he proposed, and Congress enacted, a sweeping program to bring recovery to business and agriculture, relief to the unemployed and to those in danger of losing farms and homes, and reform, especially through the establishment of the Tennessee Valley Authority.

By 1935 the Nation had achieved some measure of recovery, but businessmen and bankers were turning more and more against Roosevelt's New Deal program. They feared his experiments, were appalled because he had taken the Nation off the gold standard and allowed deficits in the budget, and disliked the concessions to labor. Roosevelt responded with a new program of reform: Social Security, heavier taxes on the wealthy, new controls over banks and public utilities, and an enormous work relief program for the unemployed.

In 1936 he was re-elected by a top-heavy margin. Feeling he was armed with a popular mandate, he sought legislation to enlarge the Supreme Court, which had been invalidating key New Deal measures. Roosevelt lost the Supreme Court battle, but a revolution in constitutional law took place. Thereafter the Government could legally regulate the economy.

The words of Roosevelt's 1937 inaugural address are particularly relevant, as America and the rest of the world still reels from the worst economic downturn since the Great Depression — a downturn made possible by a 30-year project of rolling back many of the reforms Roosevelt put into place.

Roosevelt's words are relevant today, as bankers and economists declare "Recovery!" — and advise that a second stimulus unnecessary — before lacing up their wingtips for a victory lap. Meanwhile, for many Americans it's a jobless recovery that hasn't held much benefit for them.

Jumbo shrimp. Buy and save. Jobless recovery. Americans are on full oxymoron alert these days, as we read and hear about this "jobless recovery." Recovery for whom?

The unemployment rate is high and growing higher, nearing an official 10 percent - an estimate which is always lower than the reality of impoverished, underemployed and "discouraged workers" who have stopped bothering to officially register. Since this recession began, 7 million Americans have lost their jobs.

Why aren't 7 million of us "too big enough to fail"?

If stimulus packages for corporate sinkholes are good enough for the American taxpayer, why can't we find $5.4 billion to create minimum wage jobs with full health care benefits for the 216,000 Americans who lost their jobs in August?

It is, at best a weak recovery, due to the lack of what economist Joseph Stiglitz called "a recovery of sustained consumption" — which basically means American consumers can't spend the economy back into recovery, because they haven't experienced a recovery yet.

They are reeling from double-digit unemployment, and some 15 million are "locked into a nightmare of unemployment." Thousands of them are living in hotels, as more families are joining the ranks of the homeless and mortgage defaults soar to record heights. One in five of their children are sinking into poverty, with them. Seventeen percent of their children under five face hunger, with them.

Roosevelt's words have undeniable resonance when the poverty rate hits an 11-year high, and the the suffering of American families increases in kind.

The government's first broad look at the recession's effect on the nation's households in 2008 showed the poverty rate jumped to an 11-year high, incomes sank across the board and the number of people without health insurance rose to 46.3 million.

As bleak as these statistics were from the Census Bureau on Thursday, they captured only part of the devastating effects of the economic downturn that worsened last fall and into this year.

Experts said they expected the official poverty rate, which rose to 13.2% of the nation from 12.5% in 2007, to keep climbing this year and next, reversing the progress made in the 1990s.

With the U.S. unemployment rate averaging 8.9% this year and increasing almost every month, compared with 5.8% in 2008, incomes are likely to deteriorate further as well.

In 1937, with the country only partially out of the woods, Roosevelt rejected those who said recovery had gone far enough.

Shall we pause now and turn our back upon the road that lies ahead? Shall we call this the promised land? Or, shall we continue on our way? For "each age is a dream that is dying, or one that is coming to birth." 16

Many voices are heard as we face a great decision. Comfort says, "Tarry a while." Opportunism says, "This is a good spot." Timidity asks, "How difficult is the road ahead?"

True, we have come far from the days of stagnation and despair. Vitality has been preserved. Courage and confidence have been restored. Mental and moral horizons have been extended.

But our present gains were won under the pressure of more than ordinary circumstances. Advance became imperative under the goad of fear and suffering. The times were on the side of progress.

To hold to progress today, however, is more difficult. Dulled conscience, irresponsibility, and ruthless self-interest already reappear. Such symptoms of prosperity may become portents of disaster! Prosperity already tests the persistence of our progressive purpose.

Let us ask again: Have we reached the goal of our vision of that fourth day of March 1933? Have we found our happy valley?

And he challenged the country to live up to its promise for all Americans.

I see a great nation, upon a great continent, blessed with a great wealth of natural resources. Its hundred and thirty million people are at peace among themselves; they are making their country a good neighbor among the nations. I see a United States which can demonstrate that, under democratic methods of government, national wealth can be translated into a spreading volume of human comforts hitherto unknown, and the lowest standard of living can be raised far above the level of mere subsistence.

But here is the challenge to our democracy: In this nation I see tens of millions of its citizens—a substantial part of its whole population—who at this very moment are denied the greater part of what the very lowest standards of today call the necessities of life.

I see millions of families trying to live on incomes so meager that the pall of family disaster hangs over them day by day.

I see millions whose daily lives in city and on farm continue under conditions labeled indecent by a so-called polite society half a century ago.

I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children.

I see millions lacking the means to buy the products of farm and factory and by their poverty denying work and productiveness to many other millions.

I see one-third of a nation ill-housed, ill-clad, ill-nourished.

It is not in despair that I paint you that picture. I paint it for you in hope—because the Nation, seeing and understanding the injustice in it, proposes to paint it out. We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful law-abiding group within our borders as superfluous. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.

Last year saw a record decline in American families' wealth, as households saw a 9% drop in wealth. Meanwhile the wealthiest one percent saw an increase in their incomes, the wealthiest 10 percent of Americans now have a larger-than-ever share of total income, and American has one of the highest rates of income inequality, surpassed only by Mexico and Turkey.

Much of what was true for those Americans Roosevelt mentioned in his speech is true for far, far too many American families today, as the result of decades spent "adding to the abundance of those who have much." Now, we face the same text of our progress — of our commitment to progress— that Roosevelt recognized in 1937.

Will Americans rise to the challenge? It remains to be seen. In the absence an FRD-like leadership, we will make our leaders rise to the challenge? Will we pass this test of our progress? It remains to be seen.

Gilded Age Taxation

Eric Lotke — Sun, 12 Apr 2009 13:00:09 -0700

» Full report: "Gilded Age Taxation"
» News Release: U.S. Tax Code Widens Gap Between Wealthy and Middle-Class Americans
» Robert Borosage: "Astroturf tea parties" and "peddling bull" on taxes
» Eric Lotke: April 15th — The Issue Is Fairness
» Bernie Horn: A Mad Tea-Party

The problem isn’t taxes. The problem is who pays taxes and who gets the benefits.

The federal tax code becomes less fair every year. Thirty years ago, the tax code was broadly progressive, reflecting shared contributions to public investments and our common good. Loopholes were fewer and covered such items as home mortgages that everyone could understand and appreciate.

Now the tax code is a scam. Billionaire hedge fund managers pay taxes at lower rates than their receptionists. Corporations get tax breaks for moving jobs overseas. Oil companies with the largest profits in corporate history receive annual tax breaks worth $14 billion, roughly twice the budget of the Environmental Protection Agency.

While rich people reap tax breaks, working people struggle just to keep even. Adjusted for inflation, weekly wages were lower in 2007 than they were in 1979.

This inequality is no accident. It is not the result of market forces, globalization or technology. It is the result of policy decisions that could have been made differently.

Income inequality is rising — measured by the ratio of after-tax income of the top one percent (1.1 million people) to after-tax income of the whole middle 60 percent (68.3 million people). Top-end taxes are declining — measured as the average effective tax rate of the top one percent. The trend lines for top-end tax cuts and income inequality since 1980 form the X in the chart on this page and in the report.

Our report explains the X. Inequality rose 144 percent; top-end taxes dropped 15 percent.

We also explain what to do about it, and how to make the code more progressive. Additional detail can be found at Reversing the Great Tax Shift by the Institute for Policy Studies.

Finally, our report explains what taxes are for. From schools to roads to hospitals. Our government performs these functions. It isn't free. And paying for our needs is the essence of responsible leadership.

Schwartz Center for Economic Policy Analysis

OurFuture.org Staff — Fri, 31 Oct 2008 12:17:40 -0700

New U.S. Census Data: Same Reality

Alex Carter — Tue, 26 Aug 2008 11:27:42 -0700

Newly released data by the United States Census Bureau continues to show how much President George W. Bush has ravaged the American economic landscape.

Since 2000, median income has decreased 1 percent. That decline is magnified by the higher costs for energy, food and other items during that period; what families could buy for a dollar in 2000 now costs $1.25.

For some racial and ethnic groups, the burden is even heavier. In 2007, the median income for white people was $54,920; the median income for African Americans was more than $21,000 less. Median income for Hispanics was more than $16,000 less. Since 2000, white median income has decreased $12; for African Americans it has decreased $1,804, for Hispanics it has decreased $1,256, and for Asians it has decreased $1,030. Those are huge disparities that continue to lay bare the racial and ethnic inequality of America. There is no way around it.

Poverty follows a similar pattern. Since 2000, the number of people in poverty has increased by 5.7 million; the number of families in poverty has increased by 1.2 million, and the number of children in poverty has increased by 1.7 million. In 2007; 37.3 million people are suffering in poverty.

Almost 25 percent of African Americans and 22 percent of Hispanics lived in poverty in 2007. They do not want to be told the fundamentals of the economy are strong—or only have poverty addressed when a hurricane slams into poor and underrepresented communities and their faces, names, and stories become fodder for the 24-hour cable news channels. They want the American consciousness and political system to recognize their plight and put forth real policies to remedy this evil.

On health care, it's more of the same. Since 2000, the number of uninsured in America has increased by 7.3 million and those not covered equal 15.3 percent of the population. The percentages of Hispanics and African Americans without health care are well above the national average.

Nationally, the economy and the conditions for working people are worse since President Bush took office. Haven’t we learned that trickle-down economics does not work? We must revive our economy, take back our industries, and promote economic opportunity for all. Bush is definitely leaving us with a bang: In his last year; our economy is in a recession (even though the administration doesn’t want to admit it), families are poorer, people are losing their homes, energy costs are sky high and we continue to put billions and billions of dollars into the Iraq War—when we need strong investment here in the United States.

Be ready for the United States Census Bureau to release its 2008 data in August 2009. The data will continue to paint a very bleak picture: the poor will be poorer, the number of uninsured will be higher, and America will try to rebuild itself after eight years of economic terror. At that time, the progressive movement must be ready to reassure working-class families that the rescue—investments in our people, our common property and in the green energy that will power the fuure; economic policies that end the upward redistribution of wealth; the end of billions of dollars being sent to Iraq; and the empowerment of workers—is on its way.

Riding the Bush Roller-Coaster

Isaiah J. Poole — Wed, 04 Jun 2008 07:57:03 -0700

Just as amusement parks build roller-coaster rides with ever more dramatic dips and twists, the Bush administration and conservative lawmakers have succeeded in building a roller-coaster economy where family incomes are exposed to sharper drops and turns. It's no fun.

That reality is exposed in a new briefing paper by the Economic Policy Institute, in which economists Jacob S. Hacker and Elisabeth Jacobs look at 30 years of income instability among families. What they've found:

The instability of family incomes has risen substantially over the last three decades. Although the precise magnitude of the increase depends on the approach to measuring income variance that is used, we estimate that short-term family income variance essentially doubled from 1969-2004. Much of the rise in income volatility occurred prior to 1985, and volatility dropped substantially in the late 1990s. It has, however, risen in recent years to exceed its 1980s peak.

| View | Upload your own

What this means is that even though the recessions in the early 1980s and in the early 2000s were relatively shallow ones when looked at in a historical context, families found their finances buffeted around much more. In fact, the percentage of working-age individuals who within a year experienced a greater than 50 percent decrease in their income within a year has doubled since the 1970s, from 4 percent to 8 percent.

It is noteworthy that the times of greatest income volatility were also the times that the conservative grip on the economy's reins were the firmest. It is also clear from the data that the conservative dismissals of the trend—that income volatility is really a factor of women cruising in and out of the workforce as they have children or change their interests, for example—just don't wash. In fact, the greatest income volatility is occurring among men, not women, according to the EPI study.

This is more proof that the economic anxiety that working-class families feel is not a figment of the liberal imagination; it is based on reality. And it has serious implications. When breadwinners find their incomes fluctuating, they more often than not use credit as a means of softening the blows. They don't have much else in an environment in which their earnings have not kept up with their cost of living and they have therefore have not been able to save significant amounts for times such as these. But relying on credit is dangerous when banks and other credit issuers operate in a deregulated, low-disclosure environment in which lenders are free to raid borrower wallets in increasingly venal ways.

Conservatives would just as soon either pretend that the problem doesn't exist at all or just say that people should figure out how to adjust. But the experience of the past seven years under conservative economic policies proves that is not working. But news this week that some Democrats in Congress are prepared to abandon a proposal to extend unemployment benefits an additional 13 weeks is a bad sign that the unwillingness to forthrightly address the economic struggles of working families is not the sole preserve of the radical right. It's a sign that the progressive movement has work to do to force policy change on the long-term solutions to income volatility, including fair trade policies, jobs that pay living wages and government investments in human capital and infrastructure.

CEO Pay Helped Fuel Subprime Crisis, AFL-CIO Says

Alex Carter — Tue, 15 Apr 2008 08:17:05 -0700

Pay plans for chief executive officers helped create the subprime-mortgage crisis by encouraging companies to take on too much risk for short-term gains, the AFL-CIO said in an analysis.

Studies show housing crisis disproportionately affects women

Alex Carter — Mon, 14 Apr 2008 09:43:42 -0700

Women on average were already in a more precarious economic position than men, and they appear to be taking much of the housing crisis hit. Sales and prices are down. Foreclosures have spiked in Georgia and across the nation. No one yet has a breakdown of the damage by gender. But studies show that women accounted for more than their share of the risky loans at the crest of the lending and buying boom.

Tax Rates for Middle Class Increases; Tax Rates for Rich Decreases

Alex Carter — Fri, 11 Apr 2008 07:19:52 -0700

Between 1960 and 2004, the average tax rate fell by nearly 14 percentage points for the top 1% of earners, while it has increased slightly (from 15.9% to 16.1%) for earners in the middle 20%.

Middle Class Left Behind

Alex Carter — Wed, 12 Mar 2008 09:38:40 -0700

Voters have specific bad actors in mind. “It’s about big business, not the little guy,” said one member of that Greenberg focus group. 40% of Americans believe big business get whatever they want in Washington; 38% believe leaders have forgotten the middle class; 35% believe America is doing nothing about problems at home.

People see big business getting what it wants, and the middle class getting left behind. That sentiment outscores declining morals or even terrorism. Only 9% of Americans believe terrorism is having the country go in the wrong direction.