Nel's New Day

February 3, 2014

Conservatives Need to Understand Income Inequality

Filed under: Uncategorized — trp2011 @ 9:01 PM
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Two pieces in today’s newspaper caught my eye because they discussed the growing income inequality throughout the United States. One article described the disappearance of the middle class through the growth of high-end and fast-food restaurants. Those in the middle such as Olive Garden and Red Lobster (that belong to the same company) are losing customers.

John Maxwell, head of global retail and consumer practice at PricewaterhouseCoopers, explained, “You don’t want to be caught in the middle.” And the situation is getting worse. In 2012, the top 5 percent of earners did 38 percent of domestic consumption, up from 28 percent in 1995. That’s a rise of 30 percent in less than 20 years. Between 2009 and 2012, 90 percent of the increase of consumption came from the top 20 percent of households.

Even conservatives are recognizing the inequality, as demonstrated by a column from far-right Robert Samuelson. His rationale for the gap, however, is not the gluttonous rich. “The poor are not poor because the rich are rich. The two conditions are generally unrelated.” According to Samuelson, people are wealthy because they run successful businesses or have professional careers. He argues against raising the minimum wage because the poor are “not in the labor force.”

Samuelson does confess that pretax incomes of the top 1 percent did increase 190 percent between 1980 and 2010. Since 2009, however, the top 1 percent grabbed 95 percent of the post-recession growth at a time when 90 percent of people in the United States grew poorer. Samuelson  blames the bottom 95 percent for borrowing during the 1980s when “income growth slowed.” Because “debt led to a consumption boom that was unsustainable,” people suffered—but it was their fault. Samuelson claims that the rich aren’t to blame for the income gap.

A recent Oxfam report, “Working for the Few,” on global wealth inequality shows the seriousness of the income inequality. Around the world, 85 people own as much as half the world’s population. That’s 3.5 billion people. The richest 1 percent in the world has $110 trillion, 65 times the total wealth of those 3.5 billion people who collectively own about $1.7 trillion—about 0.7 percent of the world’s wealth.

The U.S., with 5 percent of the world’s population and 30 percent of the wealth, is largely responsible for the disparity because the net worth of 30 people in this country equals that of half the U.S. population—157,000,000 people. China, India, and Africa combined have about half the world’s population and just 12% of the wealth.

With its 1.1 percent of the nation’s wealth, that same bottom half of people in the U.S. own a smaller percentage of the country’s wealth than almost all other countries and continents. In Asia, the poorest half of the country owns 1.3 percent of the wealth, in Africa 2.1 percent, in Latin America 3.2 percent, in India 4.5 percent, in the United Kingdom 7.6 percent, and in China 9.6 percent.

People in the United States also have much less chance of moving up to a higher level of income than in any other place in the world. Seven of ten in poverty will stay there. The conservative politicians who lowered the food stamps for the poor while maintaining farm subsidies for the wealthy (including themselves) keep arguing that people are poor because they aren’t willing to work hard. If that were true, many of the poor would climb up the ladder. The Global Wealth Databook reports:

“North America is…less mobile than other regions, especially over longer time horizons. Europe is next in line, followed by the middle group of Asia-Pacific, Latin America and Africa. The most mobile regions are China and India.”

Almost everyone in the United States suffers from the income inequality not seen in this country for almost 100 years. Income inequality is at its highest since 1928, the year before the Great Depression began. The U.S. media of $44,911 is only 15 percent of the $301,140 mean (greatly skewed by the richest 10 percent). That ratio is less than any other of the 27 developed countries in the Databook and far less than the average OECD ratio of 35 percent.

People in the United States do have a growing awareness of the increase in the income gap; 65 percent of them think that this gap has increased in the past 10 years. In the United States, 70 percent of the people want the government to reduce the gap; 43 percent of them say that the government should play a large role in doing this. Another 82 percent say that the government should do “a lot” or “some” to reduce poverty. The minimum wage should be raised to $10.10, according to 73 percent of respondents, and another 63 percent want the emergency unemployment insurance extended for another year. Even 54 percent of the people would raise taxes on the wealthy and corporations.

One effect of extreme income inequality is illness. During the past 30 years life expectancy of workers retiring at 65 increased by six years in the top half of income distribution but only 1.3 years in the bottom half. Because poorer communities have fewer health care providers and lack education about health care, people living there are much more likely to have chronic medical conditions such as high blood pressure and diabetes.

Lack of safety is another issue with rising economic inequality. Homicide rates increased at the same rate as the income gap according to studies in 1999 and 2002. The National Bureau of Economic Research reported that “a twenty percent drop in wages leads to a 12 to 18 percent increase in youth crime.”

With higher inequality comes lower levels of representative democracy—and a higher probability of revolution. Poorer citizens believe—sometimes accurately—that government serves only the rich. According to the Huffington Post’s Paul Blumenthal, “The top 0.01 percent of campaign donors—one percent of the one percent–contributed more than 40 percent of all the money spent in the 2012 elections.” In 1980 the political contributions from the top 0.01 percent was under 15 percent. The 17 groups funded by the Koch brothers raised at least $407 million for the 2012 campaign, more than both major parties spend during the 2000 election. The influence from special interest groups causes greater income inequality.

On one winter day in 2012, over 633,000 people were homeless in the United States. Providing shelter at $558 per month, these people could have shelter for a little over $4 billion. Last year, the stock market grew by $4.7 trillion. A wealth tax of just one-tenth of 1 percent (one dollar per thousand) would provide this $4 billion. And the wealthiest people keep getting wealthier.

A huge problem with income inequality is the resulting difficulty to achieve long-term economic growth. The International Monetary Fund concluded that societies like the United States suffering from a huge gap between the wealthy and everyone else “are more vulnerable to both financial crises and political instability.” If hit by external shocks, these societies “often stumble into gridlock rather than agree to tough policies needed to keep growth alive.” It’s a circular situation: gridlock causes greater economic problems, and more economic problems causes more gridlock.

The indictment of former Virginia governor Bob McDonnell and his wife symbolizes the cause of income inequality. Politicians sell out the people who elect them for personal wealth as millionaires and billionaires buy deals, policies, and laws. Tax breaks, bailing out Wall Street, refusal to regulate industrial chemicals that poison drinking water—all these are bought by the wealthy to benefit themselves and impoverish the rest of the population.

After World War II, legislation increased economic opportunity and decreased income inequality through high income and inheritance tax rates for the wealthy, support for labor unions to bargain for living wages, and a culture that does not support a CEO’s wage for an hour equaling a worker’s salary for an entire year. Three decades later, the success of the nation began to disintegrate, and a half century after the success of the mid-twentieth century, millionaire Mitt Romney pays a lower income tax rate than middle-class people.

The wealthy are the cause of the income gap. The question is whether they will change the country’s culture before the bottom 90 percent declares a revolution.

November 13, 2011

Young Readers’ Fantasy Reflect Social Conditions

Although many young people will go to bed hungry tonight and watch their unemployed parents suffer, all young readers can learn about the current class separation between the top 1 percent and the rest of the people in the country through recently published books. Whether the authors meant this message to be in theirs book is not known, but below are three books of fiction that show the problems resulting from extreme wealth and massive poverty. While covering much more than these economic positions, these non-didactic and non-preachy fantasies communicate the importance of equality.

Written over a half century ago by a beloved author and rescued from an old magazine, The Bippolo Seed, a collection of Dr. Seuss tales, begins with a story about a duck, McKluck, who is persuaded by a cat to wish for far more things that they need after McKluck finds a bippolo seed in a small silver box. The cat encourages the duck by saying, “Say! You’ll be the richest young duck in the land.” The duck screams for more and more like the wealthy and corporations  in this country.

The lesson for our nation’s greedy elected officials may come from the duck as well as the cat. The bippolo seed falls into the river, and Seuss says, “And the chances are good that this greedy pair never/Will find such a wonderful seed again, ever./But if they should find one, that cat and that duck/Won’t wish for so much. And they’ll have better luck.”

The classic German legend The Pied Piper of Hamelin, newly retold by Michael Morpurgo, has seen many incarnations during the past eight centuries: this one concentrates less on the plague and more on the selfishness of the people of Hamelin. When the rich people of the village ignore the poor and sick, they also build up vast stores of garbage that invite rats to live in their town. A piper offers to rid the town of the pests for only one gold coin and keeps his promise, but the Mayor refuses to pay him. Angry at the betrayal, the piper leads all the children from the town into a crack in a mountain, offering to return them only if the town has been cleaned up in one year and one day.

Much of Morpurgo’s description parallels conditions today: “The rich and the greedy lived like kings and queens behind the walls and gates of their grand houses. And their children grew up—through no fault of their own, I’ve got to say—like spoiled little princes and princesses, with far too much of everything they wanted.”

The financial exchange between the Pied Piper and the Mayor demonstrate the greed of today’s wealthy. After the Piper tells the mayor that he doesn’t need the many gold coins offered, the Mayor says, “I offer you a fortune, and you say one gold coin is enough! What’s the matter with you? Surely you want more than that.” The Piper gives him a reasonable response although it may smack of socialism to conservatives: “I am not a greedy man. Enough is always as good as a feast. When one man becomes rich, ten others become poor. Looking around this town, I think you should know that by now.”

The Mayor’s failure to live up to his bargain also demonstrates the greed of the wealthy and the corporations. After he tells the Piper that he will not pay him, he says, “What can you do? Can you bring the rats back? I don’t think so. What’s done is done, and you cannot undo it. Now off with you!?”

All politicians should read the Piper’s requirement for returning the children. The lame boy on his crutch too late to join the other children in the mountain hideaway is the Pied Piper’s messenger: “Go back to Hamelin and tell the mayor and all the people, from me, that if they want their children back, then they must make their town a fit place for children to live. Children should not have to grow up in a place where there is no honesty, where promises can be broken so easily, and where greed and wastefulness rule. There must be no more beggars, no more poor, ragged children living on the scraps from the rich man’s table. There is enough to go around in Hamelin Town for everyone, and enough is all you need. Every child should have a clean place to live, food on the table, and a warm fire in the winter.

“Instead of garbage heaps, I want to see parks where all the children can play, and schools where all the children can learn. I want to see fairness and kindness. I want to see the happiness that only fairness and kindness can bring.”

Of course, this being a happy legend, the Mayor led the wealthy to clean up the town, the children were returned, and fairness and kindness reigned. That’s the advantage of picture books for children. Would that adults could learn these lessons!

Revolution by Jennifer Donnelly differs from the above picture books in two major ways. First it is a rich, complex novel for teenagers. Second, it points out class difference but does not have a lesson regarding this issue. Yet it clearly defines the result of class differences through the use of the French Revolution in time travel between the experiences of two young women, a twenty-first-century Andi, who goes from her home in New York to Paris, and Alex, who cared for the last dauphin of France after the revolutionaries take over at the end of the eighteenth century.

The problems leading up to the French Revolution parallel those in theUnited States. A rapidly growing number of hungry destitute people, coupled with the enormous cost of previous wars, was worsened by the isolation of the leaders, indifferent to the lower classes. Resentment burgeoned with the privileges of the leaders, the Church’s influence over public policy, and aspirations for social, political, and economic equality.

Today employees of a wealthy Wall Street company ridicule the poor through their “homeless” Halloween costumes. Laws controlling women’s reproductive rights and gays’ and lesbians’ legal relationships come from personal religious beliefs. Church leaders direct voting through providing tracts to parishioners. The current economic inequity has not been as great for almost a century, and the wealthy and corporations are now allowed to provide unlimited funds (which they have because of conservatives’ support) to get their politicians of choice elected.

Conservatives could take lessons from these three books.

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