IDENTIFYING THE BARRIERS TO FREEDOM FROM POVERTY AND INCOME INEQUALITY

We have begun a series of blogs discussing the subjects of poverty and income inequality in  America.  We think that the

subjects are important because freedom from poverty or to change one’s income status is fundamental to American democratic values.  We live in a constitutional democracy where, in theory, every person has a legal right to move through the classifications of the poor, middle class, upper middle class, super rich, and back again.  In other words, we do not operate within a caste system. 

 

While we are a democracy, the system that governs our economic activity is capitalism, and it impacts democratic principles and process.  In America, capitalism has often been tempered with socialism.  Democracy does not guarantee poverty will not exist.  Poverty may occur as a result of a lack of an economic inheritance or the failure to accumulate wealth for a variety of reasons.  Economic inequality can result from a failure to exploit available resources or through a denial of access to such resources.

As we indicated in our earlier blog, Poverty in America:  Where Do We Start and Who Should Address It? income inequality and poverty negatively affect the lives of millions of Americans.  Here we offer two visions that shed some light on the challenges that must be overcome if Americans are to solve this problem.  For those who have visited the countryside, this first vision will likely resonate.  For city dwellers or those who are unfamiliar with the countryside, it might be less effective.  

Imagine for a moment that there exists a beautiful meadow.  In this meadow, the terrain is generally level and the sod is dense and soft.  There are fruit trees and a variety of other

plants and vegetation that serve its inhabitants.  The sun shines on every corner of this meadow, except when it is shielded by the clouds that moderate the sun’s heat.  The wind blows, but not too strongly.  Here Americans work and play and each has a fair opportunity to take advantage of the benefits of this meadow.  Beautiful homes are constructed with well-manicured lawns and safe places of worship.  There are rules governing the behavior of its occupants, but the rules apply equally to all who live there.  In this meadow one lives the American dream.

We now move to a second vision, a jungle.  Many Americans

must traverse this jungle before accessing the meadow.  The

jungle consists of thick underbrush, large trees with low hanging limbs often inhabited by threating reptiles and holes often deceptively dangerous terrain waiting to trip-up the unwary traveler.  In this underbrush are snakes of all varieties and other dangerous animals.  This jungle lacks access to medical services and job training.  There are waters to cross, some navigable others not, and in some locations, rapids.  In other locations, one finds marshes.  For the untrained, unguided, reckless, foolish or poorly equipped, the passage is life threatening.

The second version is intended to highlight the real-life obstacles that one must overcome to reach the meadow, unless, of course, one is born in the meadow.  Those born in the jungle begin in poverty as the descendants of slaves and the heirs of slavery’s legacy.  Those inhabitants were  not

allowed to accumulate wealth, thanks to redlining, sexual discrimination and other barriers.  African Americans were denied the right to vote and deprived of government programs from which other Americans benefited.  Many in this jungle were born with or contracted a disease or suffered a debilitating defeat.  A poor neighborhood with poorly equipped schools and parents who were themselves powerless, due to ignorance and poverty, stopped others.  In this jungle are people reduced to poverty because of calamitous medical bills, from unanticipated illness.  

For some, the jungle was navigable until the jobs left due to globalization, i.e., companies that  once provided jobs left

because of cheap labor in Viet Nam, Pakistan, China, or India.  For others, the companies did not leave the jungle, but many of the jobs did, lost to mechanization and technology.  Fewer workers were needed for the few remaining jobs, because technological advancement reduced the demand for manpower.  For others, the jobs in the jungle remained but wages stagnated because unions were stripped of their capacity to demand of employers a living wage or even an increase in the minimum wage.  Yes, there are people who find themselves in this jungle, though, they did not elect to be there and would leave if shown a way out and the barriers to their exit were removed.

We want every person who wants to reach the meadow to have every opportunity to do so.  In the days and weeks ahead, we will share with you our views on how access to the meadow can be gained i.e., how these barriers might first be identified and then removed.  We hope that you will share with us your views.  We believe America’s life depends on us finding a way through.

An American Political Agenda for 2018 and 2020: Six Suggestions for the Upcoming Election Cycles: Part 3

In the first two parts of our series of six suggestions for a political message for the coming election cycles—restoring the dignity of the Presidency compromised by Trump’s bad behavior and healing the racial and cultural fractures Trump created or exacerbated.  Our third suggestion – addressing income inequality and economic dislocation caused by globalization, inequitable tax policy, and other factors – requires more detailed policy exploration and development than we could ever do in a thousand words (the usual length of our posts).  But we can lay out a skeleton, to which we and others can attach meat in the coming months.

First, we must explode a myth. Trump’s campaign didn’t address income inequality. His government, staffed as it is by millionaires from business, hasn’t attacked the structurally created problem of the top one per cent of income earners getting 40% more in one week than the bottom fifth gets in a year.  His tax plan will likely give wealthy Americans most of the breaks.  Trump made a lot of noise about bringing back manufacturing and coal mining jobs.  The media spun the fact working class people attracted to that message also suffered the effects of income inequality into a narrative that made Trump appear the income inequality candidate.  That wasn’t true in the campaign and it’s not true now.

Income inequality results from a myriad of factors, including failures of the educational system, the inability of some groups to adapt to globalization, government tax and wage policies, and what economists call “rent seeking” by individuals at the top.  Rent seeking occurs when those at the top use their wealth and influence to promote governmental policies that keep the largest share of economic assets in their hands and prevent others from getting a bigger slice, in part by keeping the overall pie smaller.  Attacking income inequality requires action on at least three broad fronts.

Education   
America needs a vibrant, effective public school system.  Trump’s Education Department promotes so-called charter schools to the detriment of public schools, a shortsighted and immoral policy.  Promoting charter schools drains student and faculty talent from public schools, leaving low-income communities most dependent on a robust public education system with fewer educational resources when they need more.  Improved economic opportunity and, therefore, less income inequality, also requires strong technical schools and community colleges that prepare people for jobs that exist now and will exist in coming years.  Finally, the federal government must address student debt for traditional college students.  Americans will still need college educations; the difference in income over time for college and non-college graduates remains undeniable.  Reasonable minds can differ about the wisdom of free college, as Bernie Sanders proposed in 2016, but we can’t differ about needing to make college affordable for low income and middle class families.   

Tax and Wage Policies   
Trump’s tax reform proposal remains murky.  The details that have emerged suggest wealthy tax payers will benefit unfairly.  Republicans spin the proposal as a cut in corporate taxes that will spur business creation and, therefore, job growth.  Early indications, however, suggest tax payers in higher brackets and business owners will get large breaks.  We don’t think that will reduce income inequality and amounts to no more than the trickledown theory discredited by our experiences in the Reagan and George W. Bush years.  A tax plan aimed at alleviating income inequality would raise taxes in upper income brackets and reduce or eliminate taxes on middle and low-income individuals.

Attacking income inequality also requires a minimum wage increase to $15 an hour in the quest for a “livable wage” that helps working people get off public assistance.  The current system subsidizes corporate interests by forcing tax payers to make up wages corporations won’t pay in the form of public assistance for which low wage earners remain eligible.

Rent-Seeking   
We’ve heard stories about how, following the 2007-08 recession, Wall Street bankers, hedge fund managers, and other corporate executives continued raking in huge bonuses, even after banks got government bailouts.  This happened for a reason. Economists call it “rent-seeking” – rigging the system for a favored few. Rent-seeking, for example, includes making large campaign contributions so lobbyists employed to influence legislators will find a receptive audience.  Why isn’t the tax system fairer?  In part because special interests have so much influence in writing tax laws.  Campaign contributions from rent seekers eager to keep tax laws in their favor grease the skids for lobbyists.  Why does the federal minimum wage remain at $7.25?  In part because rent seeking business executives successfully advance their argument that raising it will cost jobs.  Despite flimsy evidence for that proposition, legislators – especially Republicans – accept it, in part, because of campaign contributions from individuals and corporations wanting to keep their incomes and profits up.

We’ve only scratched the surface of what it will take to fix income inequality in America.  It won’t happen by promising to bring back jobs to sectors of the economy that saw their peak in the 1950s and may never reach such heights again.  Eradicating income inequality requires rolling up our sleeves and getting our hands dirty on policy questions many don’t want to face.  We have to face them.  If we don’t, those at the bottom, as in other countries, will take their complaints to the streets.  It won’t be pleasant.  We don’t really want that, do we?