Nel's New Day

July 26, 2014

The American Dream Is Almost Dead

Back in the 1950s, people believed in the American Dream. Tax rates for the wealthy were at 90 percent, veterans had good benefits, and strong unions had created a healthy middle class. By the 1960s, even the Republicans voted for civil rights, and the country moved forward. Fifty years later, the American Dream is most likely dead. Two-thirds of the people in the United States think that the next generation will not be better off that their own.

An article in USA Today has directed attention toward the disappearance of the dream in the wealthiest nation in the world. According to an analysis of living expenses in the nation, the price tag for the American Dream is $130,357 a year for a family of four. Only 16 million U.S. households earned that much in 2013, according to the U.S. Census Bureau. That means that only one out of 8 people in the U.S.—12 percent—achieve this goal.

The American Dream has always included owning a home. For a home that costs $275,000 (the median price) with 10 percent down and a 4-percent, 30-year mortgage, the family pays $17,062 a year. Groceries would run $12,659, and one car would cost $11,039. Those with other essentials take $58,491. The extras did include restaurant expenses, but only $70 per week—for four people. Taxes—federal, state, local, sales, and property—would run about 30 percent of the $130,000. The article also factored in $22,500 savings each year, $5,000 of that for the children’s college expenses.

Obviously, people could not save, spend less on entertainment and restaurants, and live in a cheaper house. But that’s not the American Dream, and that’s not the way that people lived in the 1950s. Also people live cheaper in places like Oklahoma City and Cleveland than in San Francisco and New York. To make an annual salary of $130,000, a person would require a $65 hourly wage, considered ridiculous. Yet the prices have gone up far faster than workers’ salaries.

With the median household income is $51,000, people are far below a living wage. Almost 50 million people in the country are below the poverty level, an almost 50 percent increase since George W. Bush became president.

Conservatives still promote the belief that people can achieve the American Dream if they just work hard enough. Studies show that they are wrong. A Johns Hopkins University study, documented in The Longest Shadow, followed almost 800 Baltimore schoolchildren for 25 years starting in the early 1980s. The poor stayed poor, and only four percent of urban disadvantaged youth graduated from a four-year college.

Karl Alexander, research professor of sociology at Johns Hopkins University, said that upward mobility is much more limited in the U.S. than in other industrialized countries. In the United States, where people live is as much an indicator of success as how much they work. For example, people are better off in California than in South Carolina. Kids born into the bottom 20 percent of households, for example, have a 12.9 percent chance of reaching the top 20 percent if they live in San Jose (CA) but only a 4.4 percent chance if they live in Charlotte (NC).

SocialMobility

Factors influencing the differences in upward mobility:

  • Race: The larger the black population, the lower the upward mobility. That holds true for all races living in areas that are predominantly black.
  • Segregation: The greater the isolation, the less chance people have to get to good jobs and good schools. The more sprawl, the less willingness on the part of higher-income people to invest in solutions such as public transit.
  • Social Capital: Living near the middle class also brings better institutions with a better safety net and services. For example, Utah’s vast Mormon culture creates better upward mobility.
  • Inequality: The bigger the gap between the poor and rich (as compared to the super rich) the less of a chance that upward mobility can occur.  It’s easier to jump up from the bottom if the top isn’t as far away.
  • Family Structure: Top on the reasons for upward mobility is families. Children have the best chance in stable, two-parent homes.  Notice the word “stable.” That contradicts the conservative theory that women should marry just anyone in order to improve their personal finances.

 

For the past half century, far-right conservatives have worked to destroy unions so that the top 1 percent can get richer. Membership has gone from 25 percent in the private workforce of the 1940s to the current 6.7 percent—and the rate is still moving down.

In two months, United Airlines, the continent’s third largest airline, will outsource 630 of its gate agent jobs at 12 airports to private companies. The union workers who are making up to $50,000, the median wage, will be replaced by non-union workers who will make between $9 and $12.50 per hour. These people will become part of the working poor, needing government aid such as food stamps and Medicaid to survive. The airline makes the money, and the taxpayers fill in the gaps.

 

The fast-food industry already takes in $243 billion every year from taxpayers because the companies refuse to pay living wages. Wal-Mart costs taxpayers between $900,000 and $1.75 million per store so that it can make $35,000 profit every minute.

 

Even without unions, there are ways to stop companies from ripping off taxpayers, increase the economy, and move people upward toward the American Dream.

 

Raise the minimum wage: Of the 13 states (Arizona, Connecticut, Colorado, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and Washington) that raised their minimum wage in January, only one, New Jersey, saw a decrease in employment during the first half of this year. The other 12 saw speedier job growth in the first half of 2014 compared to 2013 than states that didn’t raise their wages.

 

Take away corporate tax benefits and breaks from all corporations that have even one full-time employee qualifying for food stamps or Medicaid: Instead of punishing people who get paid a poverty wage, shame the companies that keep their workers in poverty.

 

As for unions, repealing the Taft-Hartley Act would allow workers to unionize and keep taxpayers from having to pay part of workers’ wages through food stamps and Medicaid.

 

 

A new type of union, micro-unions, is growing in popularity, and the National Labor Relations Board (NLRB) is recognizing their formations. The first one was created in 2011 at the rehabilitation center Specialty Healthcare where nursing assistants wanted to organize. This week, the NLRB recognized a small group of Macy’s employees, much to the dismay of industry groups. They claim that chaos will result if companies are forced to bargain with multiple unions at the same work site, but the reason is that employees are finding a way to unionize. Their objection is to what they call “gerrymandering,” a practice satisfactory to conservatives in private education and political voting units.

 

We’ll hear more about micro-unions. In April and June, bills have been introduced in Congress to block micro-unions. Sen. Lindsey Graham (R-SC) plans to introduce an amendment to the appropriations bill to stop them on the premise that they hurt the American worker. Graham represents the state with extremely low economic mobility. The 6th Circuit Court of Appeals has already upheld NLRB’s earlier ruling for micro-unions. It’s the next fight against re-creating the middle class in the United States.

December 25, 2012

Fixing the Economy

The social decline facing the United States made possible by the loss of revenue during the two terms of George W. Bush has steadily moved the country lower and lower among the countries of the world. Both political parties want the American dream for everyone, giving all people the opportunity to escape poverty. According to James Gustave Speth in his new book, American the Possible: Manifesto for a New Economy (Yale University Press, 2012), a fair and equitable society in the U.S. is possible.

Speth uses the definition of “the American dream” from James Truslow Adams  in his 1933 book The Epic of America: “It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

Equality is vital for economic growth, according to the Center for American Progress. As Robert Reich explains in his 2010 book Aftershock: “Unless America’s middle class receives a fair share, it cannot consume nearly what the nation is capable of producing. . . . The inevitable result is slower economic growth and an economy increasingly susceptible to great booms and terrible busts.

Because today’s high productivity and economic growth stem largely from scientific and technological knowledge, most of which is inherited from the past, the greater portion of income and wealth “comes to us through no effort of our own,” as Gar Alperovitz and Lew Daly point out in their book Unjust Desserts.  Herbert Simon observed, “[If] we are very generous with ourselves, I suppose we might claim we ‘earned’ as much as one fifth of [our income].” The major question comes from how to share the wealth that no one living today has created.

In the 20th century, both political parties were concerned with eradicating poverty, creating universal health care, providing high-quality and affordable education for all, guaranteeing meaningful and living-wage employment opportunities, and devising a just and fair tax system. Yet conservatives increasingly increased opportunities for the wealthiest in the nation while eliminating the possibility for the bottom 99 percent through the destruction of unions, lessening of minimum wages, and allowing the costs of health care and education to astronomically increase.

Harvard’s Howard Gardner argues that “no single person should be allowed annually to take home more than 100 times as much money as the average worker in a society earns in a year. If the average worker makes $40,000, the top compensated individual may keep $4 million a year. Any income in excess of that amount must be contributed to a charity or returned to the government, either as a general gift, or targeted to a specific line item (ranging from the Department of Veterans Affairs to the National Endowment for the Arts).” He further proposed that no individual would be permitted to pass more than $200 million to his or her heirs, and that any excess must be contributed to charity. “To those who would scream ‘foul’ to such limits on personal wealth,” he concludes, “I would remind them that just 50 years ago, this proposal would have seemed reasonable, even generous.”

Another good idea is a reverse income tax, as recommended in Aftershock. Using the negative income tax idea examined in the 1960s and today’s earned income tax credit, he urges that “full-time workers earning $20,000 or less (this and all subsequent outlays are in 2009 dollars) would receive a wage supplement of $15,000. This supplement would decline incrementally up the income scale, to $10,000 for full-time workers earning $30,000; to $5,000 for full-time workers earning $40,000; and then to zero for full-time workers earning $50,000. The tax rate for full-time workers with incomes between $50,000 and $90,000–whether the source of those incomes is wages, salaries, or capital gains–would be cut to 10 percent of earnings. The taxes for people with incomes of between $90,000 and $160,000 would be 20 percent, whatever the income source.”

Reich also promotes higher taxes for the wealthy. He said, “I propose that people in the top 1 percent, with incomes of more than $410,000, pay a marginal tax of 55 percent; those in the top 2 percent, earning over $260,000, pay a marginal tax of 50 percent; and those earning over $160,000, roughly the top 5 percent, pay 40 percent. These taxes, when added to the modest amounts contributed by taxpayers who earn between $50,000 and $160,000 under my plan, would raise $600 billion more than our current tax system per year.”

Another major step forward should be to implement the important proposal put forward by Bruce Ackerman and Anne Alstott in The Stakeholder Society: “As a citizen of the United States, each American is entitled to a stake in his country: a one-time grant of eighty thousand dollars as he reaches early adulthood. This stake will be financed by an annual 2 percent tax levied on all the nation’s wealth. The tie between wealth-holding and stakeholding expresses a fundamental social responsibility. Every American has an obligation to contribute to a fair starting point for all. Stakeholders are free [to] use their money for any purpose they choose: to start a business or pay for more education, to buy a house or raise a family or save for the future. But they must take responsibility for their choices. Their triumphs and blunders are their own.”

The federal government should spend more on social and jobs programs, environmental protection, and neglected needs abroad while our annual federal budgetary deficits should be brought down to sustainable levels. High growth rates will not provide sufficient revenue to the government. There are many ways to raise new revenues–closing down tax breaks for the rich, shifting taxes from things we want to encourage to things we want to discourage, taxing luxury items, closing corporate tax loopholes, strengthening the estate tax, and moving toward a more progressive tax structure.

A 2009 report by John Cavanagh and his colleagues at the Institute for Policy Studies proposed the following plan that would raise an additional $3 trillion in federal revenues over a five-year period without slowing the economy. That’s over double what President Obama currently proposes.

1. Repeal tax breaks for households with annual incomes over $250,000: $43 billion per year.

2. Tax financial transactions: $100 billion per year.

3. Eliminate the tax preference for capital gains and dividends: $80 billion per year.

4. Levy a progressive estate tax on large fortunes: $40–60 billion per year.

5. Establish a new higher tax rate on extremely high incomes: $60–70 billion.

6. End overseas tax havens: $100 billion per year.

7. Eliminate subsidies for excessive executive compensation: $18 billion per year.

Making sure that the bottom 99 percent of the population has a living wage makes the economy grow. They are the ones who spend the money that they get, not the top 1 percent.

 

October 14, 2012

Conservatives Erase the American Dream

Filed under: Uncategorized — trp2011 @ 7:36 PM
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One of the most important times of my days is “tea-time,” an occasion that my partner and I set aside before dinner when we talk about the past 24 hours. (“Tea-time” might be a misnomer because our “tea” varies from juice to the harder stuff, but it’s symbolic of sharing and focus.) Part of our conversation surrounds what makes us feel good about recent events and what makes us feel grateful. As always, I’m grateful for my partner, our pets, our home, and our security, however temporary it might be.

Yesterday one of the topics was the “American Dream”—what it is now, what it used to be, and why it changed. When I grew up, the dream was owning one’s own house, however small it might be, and having a secure job. But today more and more people are far away from this dream because the wealthy wants to possess the country’s entire resources even if it eradicates the dream for the majority of people in the United States.

How much money is enough? The Koch brothers are worth $62,000,000,000. The Walton family was worth $89.5 billion in 2010, the same as the bottom 41.5 percent of all U.S. families combined. That’s 48.8 million American households. That means that these eight people are worth more than the 47 percent that Mitt Romney says are mooching freeloaders. Yet these eight people aren’t satisfied with how much money they make. They’re working to elect Republicans who will lower their taxes to give them billions more.

Romney is much poorer at only $250,000,000, but he’s working to get more. With his tax shelters and his covert participation in Bain Capital, he gets more and more millions every year. He supposedly lives modestly (if you discount all his huge homes with the car elevators). If so, why does he need that much more money? When presented with these statistics, conservatives say that these people deserve this money because they work hard. But do they truly put in millions and billions of extra effort?

As most people know, the separation between the wealthy and the other 90 percent increases each year. The average net worth of a member of the Forbes 400 hit $4.2 billion, the highest level it’s been in at least a decade and up from $3.8 billion last year. After taking the government to the brink of shutdown and default in 2011, the House GOP voted to give the rich and corporations more than $3 trillion in tax breaks in its budget this year. If Republicans take over the Senate and presidency, they will succeed in doing this.

Income for the top fifth of American households rose by 1.6 percent last year, driven by even larger increases for the top 5 percent of households, said David Johnson, a Census Bureau official.  Yet median household income after inflation fell to $50,054, a level that was 8 percent lower than in 2007, the year before the recession took hold. There were 46.2 million people, 15 percent of the population, in poverty in the United States last year. That’s because most of the country’s resources go to the top 5 percent, wealthy people who do nothing to create jobs for those in poverty.

A major reason that the wealthy get wealthier is that they get the vast majority of tax breaks in this country. Romney criticizes the 47 percent because they are freeloaders on the other 53 percent. In fact, the other 53 percent receive their own form of government assistance in disproportionately benefiting from the federal government’s $1.08 trillion annual allocation for tax breaks. 

The top 1 percent of tax filers earning over $400,000 collected 23.9 percent (about $258 billion) in reduced taxes through deductions and exclusions. The top 10 percent of filers took in 40.3 percent (more than $435 billion). On the other hand, the bottom 60 percent of tax filers got just 20.1 percent of the tax reductions from deductions and exclusions, $217 billion or half of what was claimed by far fewer top earners in the U.S.

Between 1989 and 2010, the top 1 percent of the population went from holding 30.1 percent of the wealth to 34.5 percent, while the bottom 50 percent went from having 3 percent of the wealth to having just 1.1 percent. The share of wealth held by the next 40 percent of people, up to the 90th percentile, had also dropped, from 29.9 percent to 24.3 percent. Ten percent of people have 74.5 percent of the wealth.

And that’s why many people live like the ones in these photographs by Ann Hubard. And they will be joined by many more if people like Mitt Romney and Paul Ryan get their way.

Every afternoon when my partner and I have tea-time, I say how grateful that I am for achieving my American dream. Conservatives may also be grateful, but they want to take away the dreams from other people in the country.

This quote of the week comes from Janis Lane, president of the Central Mississippi Tea Party: “Our country might have been better off if it was still just men voting. There is nothing worse than a bunch of mean, hateful women. They are diabolical in how than can skewer a person.”

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