The Most Unequal Place In America

[dan_bgblue]

http://www.cnn.com/2013/10/29/opinion/sutter-lake-providence-income-inequality/index.html?hpt=hp_c3

Quite a long read, but one that provokes thought about the American Dream and those that seemingly never had a chance to pull themselves up by their bootstraps

[CitizenBBN]

It's a sad situation, but the author, as is typical, draws the wrong conclusion.

Inequality in America has grown in tandem with a host of factors. And things weren't always this way. In the 1950s and '60s, the U.S. was remarkably egalitarian. The economist and former Labor Secretary Robert Reich says he's often asked what society the United States should emulate if it wants to address income inequality.

His answer: the United States.

The '50s, '60s version.

Back then, things were markedly different.

Labor unions gave workers a voice. The minimum wage, adjusted for inflation, was higher than now. College was affordable. And the super-rich were taxed at a higher rate.

Now all of that's changed.


First off he cites the minimum wage but his own chart only goes back to 1963, when the 1962 amendments were made. The reason he cut that graph off is b/c prior to that, the 1950s "egaligarian society" he praises, specifically through 1955, the minimum wage in constant dollars was lower than it is today. Can't have data that undermines his point being presented objectively, so we just lop it off. It was never appreciably higher during that period either, not so much as to explain income disparity. http://www.infoplease.com/ipa/A0774473.html


However the big miss is what else was different in the 50s and 60s, and really explains what has happened to income inequality in the US:

there was no welfare state.

There was no victim society perpetuated by massive government spending that, by law, gives people the choice of either being on the government dole or trying to work their way up. You can't do either b/c if you get a job or save money you lose your benefits. So 10s of millions have chosen to take the benefits.

In the 1950s we had no EPA, no OSHA, we dominated world markets and thus had lots of jobs. Lots of good paying jobs. What did unions have to do with it? well membership was higher then as a percentage of the workforce but that's b/c the number of jobs we had in more union-ready sectors were far higher. You could work a steel job for 30 years. You don't work at Wal-mart for 30 years, thus less demand for unions and of course much lower wages and more income inequality.

He's right maybe about the 50s and 60s. He's very wrong as to why things are so different now. The single biggest changes between now and then have been the initiation of the War on Poverty, The War on Drugs, and the massive expansion of federal regulation of every part of our lives from business operations to health care.

It's not even true taxes were higher on the rich then b/c there were massive loopholes and exceptions. 100% of "business meals" and even clothing could be deducted as expenses, but even among revenues collected that money wasn't being redistributed to the poor.

[Doc]

Only read part of it however I got to here and figured it was a good place to stop:


A dozen or so family members rely on her for financial support. Her daughter, who has three children, lives across the street in a trailer so leaky that, despite her efforts to tar the roof to prevent rain from seeping through, it has mushrooms growing from the ceiling, like something out of "Alice in Wonderland."

Perhaps if you have a hard time financially, it might be wise to NOT HAVE 3 KIDS!. Kids cost money. You have to feed them, cloth them, pay for their activities and education etc...
And perhaps the dozen of so family member who rely on her should find jobs, even ones that pay $8.50 an hour.

[kingcat]

An interesting take here also...

"Our society, like all previous complex societies, is on a rollercoaster. Impersonal social forces bring us to the top; then comes the inevitable plunge. But the descent is not inevitable. Ours is the first society that can perceive how those forces operate, even if dimly. This means that we can avoid the worst — perhaps by switching to a less harrowing track, perhaps by redesigning the rollercoaster altogether.

We are rapidly approaching a historical cusp, at which the US will be particularly vulnerable to violent upheaval. This prediction is not a ‘prophecy’. I don’t believe that disaster is pre-ordained, no matter what we do. On the contrary, if we understand the causes, we have a chance to prevent it from happening. But the first thing we will have to do is reverse the trend of ever-growing inequality"
..Peter Turchin

http://www.aeonmagazine.com/living-together/peter-turchin-wealth-poverty/

"Just one rich family, the six heirs of the brothers Sam and James Walton, founders of Walmart, are worth more than the bottom 40 per cent of the American population combined ($115 billion in 2012)"

[CitizenBBN]

"Just one rich family, the six heirs of the brothers Sam and James Walton, founders of Walmart, are worth more than the bottom 40 per cent of the American population combined ($115 billion in 2012)"

While numerically true, it's also a bit misleading as to what we do with the data.

First, their wealth is largely in Walmart stock. Walmart employees hundreds of thousands and created vast consumer surplus that helped bring more dollar value to the entire nation. That $115 billion is not just benefitting the Walton family, it's out there being invested and reinvested every day and benefitting us all. They technically control it, but unless they pull it all out in cash and bury it it's not like "the haves" and "have nots", b/c their wealth is actually working to help the have nots, in this case far more than it helps the haves.

When "wealth" participates in the markets, it's really "our wealth" and not just the Waltons. It's what opens new stores and hires new people and buys new product to put on shelves. It's working for us all even if the interest payments are under their control.

Second, it's generally misleading IMO to look at sheer capital worth to compare equality or quality of life in general. Almost all of the poor in the US have indoor plumbing, access to transportation, lots of things the rest of the world doesn't have. A friend of mine just came back from India, stayed with relatives who are upper middle class for part of the trip and they had to time their showers, using a bucket, to when the water was turned on b/c they don't have 24/7 running water. They are considered wealthy in India. A large percentage of families in the US considered "in poverty" live better than they do if we measure by having a home, water, food, electricity, entertainment, transportation. Those folks may have more "wealth" in that they have savings, but if 24/7 running water requires you put in your own pumping system I'm not sure their "wealth" puts them ahead of me. They are worth more than most in my family, but my family lives better in terms of luxury items and daily basics.

FWIW there was a great study on this in the 80s comparing US and Japanese auto workers. While Michael Moore was lamenting their plight, if you compared the two American workers enjoyed a far better "standard of living" if you measure by leisure time and luxuries. Things like owning a boat and going boating on the weekend would be unheard of for a Japanese line worker, it's practically a blue collar American tradition to load up the RV or boat and go away for the weekend, it's common place. Their "wealth" being higher, the Japanese at that time in particular saved FAR more than US workers and thus has more "wealth", didn't capture the reality of life.

The better measure is to look at the gap in services and basics. Sure the Waltons have private jets, but is that so markedly better when 75% of Americans have flown on planes and thus have access to that transportation system at relatively low cost? Id' love to have my own jet, don't get me wrong, but in terms of social equity when I can fly to DC for relatively little money is their gap over the middle class so big? Not really. I'd trade bank accounts with them, but my quality of life isn't somehow "bad" just b/c they have even that extra level of luxury living.

last and most important, the welfare state has all but insured the gap in capital wealth by forbidding savings. There are numerous stories of people who got on welfare of one kind or another and worked and saved and build up savings, and then the government found out and took the money and cut their benefits b/c it's ILLEGAL to be on government aid and then save money.

For example, when an elderly person goes into a nursing home the law says Medicare will first take all their existing wealth and use that before the government starts paying. So what do families do? They have the elderly person gift out everything, the house, car, chattel, so they are penniless. Then Medicare picks up 100% of the tab and the family doesn't have to pay anything. Of course these people now count in the government statistics as "in poverty". That person HAD wealth, it was just removed from them and accumulated in their children and heirs so they could qualify for government aid. This is common with medical care, housing, food stamps, you name it.

So those people cannot afford to have any wealth accumulated. They can't save up and buy a house and get off the government dole b/c they'd lose their benefits, so they rent, they don't save up, anything extra gets spent b/c having a new TV doesn't end your benefits but putting it in the bank does. (not saying everyone on welfare is buying TVs, but a lot are b/c there's a lot of fraud in the system). They do work for cash and don't report it and can't put it anywhere.

Then, without that ability to save they of course can't get credit, can't save up for a deposit on a home or a nicer apartment out of the slums, they can't get loans on vehicles, so they are at the mercy of slum lords and loan sharks, and end up paying 200% interest that helps to keep them in poverty. Combined with poor education so they don't even know what they are paying, and the circle is complete.

Poverty is more permanent now than it ever was in the 50s and 60s, and that's b/c government stepped in and created massive incentives to stay poor and even more massive barriers to getting out of poverty. Of course they dont' save money in banks, and thus they are never going to create wealth and close that gap.

The War on Poverty was in fact the War on the Poor and it has been very effective. Rather than focus on how to get people out of poverty by focusing on jobs and education, we've made it tougher and more expensive to hire people, undermined education quality in innumerable ways, and then created a victim society of millions who think they can't do anything to help themselves out of the situation so they need to just give up and accept government help and dependence. Heck, the government pays people to go around and convince people of that premise, gutting them of their humanity and pride and hope.

I'd love to go back to the 1950s economically. Disband the EPA and OSHA, make the social safety net for people who are trying hard and just need some temporary help, re open the steel mills and coal mines and get to whipping the Chinese butts making actual things. I could cure poverty by making the cost of labor less costly and thus bring back labor intensive industry that has been driven out of America, and simultaneously I'd make sure you dont' get a free cell phone for not taking the job at the steel plant b/c with the job you'd be able to afford your own. The return of the American blue collar class would solve the problem, but we're too busy listening to Leftists and Safety Nazis to do that. they want everyone to have a job, as long as it doesn't require too much work and pays lots of money. That wasn't how the 50s managed to have a more egalitarian society.

[CitizenBBN]

Oh, re the college cost thing, which is in that article, I can fix that too, and Mike Rowe of Dirty Jobs nailed it: not everyone needs to go to college. WE've created this notion that a liberal arts degree is somehow something every American should go get, and it's bunk. College isn't all its made out to be, and it now saddles people with debt they don't need for learning in areas they'll never use.

Again, in the 1950s, his bellweather time of American egalitarianism, far fewer Americans went to college. We had things called "vocational schools" too, where you learned to do useful things like weld or work on machinery. Of course many graduated high school and worked on farms. Many others didn't graduate high school.

I'm all for education, I'm a huge believer in it, but colleges are set up along grand visions of well roundedness, when let's face it very few Americans care much about Victorian England. They SHOULD, but they don't, and not everyone has the time or money to put that on the "to do" list.

It would be far better for them in terms of quality of life to graduate with a more focused degree, either from high school or vocational school or with a more narrow college level program, and without the $100,000 in debt to pay off.

[dan_bgblue]

CBBN I do agree, but not having that diploma sure does close a lot of doors in today's job searches. Similar to not having a high school diploma 30 years ago closed the same doors. A huge percentage of the folks that do the hiring for clerical jobs will give preference to the sheepskin over people with actual experience. Of course that does not hold true if they are looking for a machinist or a welder, but there are only so many of those type jobs to go around anymore in our information economy.

[CitizenBBN]

CBBN I do agree, but not having that diploma sure does close a lot of doors in today's job searches. Similar to not having a high school diploma 30 years ago closed the same doors. A huge percentage of the folks that do the hiring for clerical jobs will give preference to the sheepskin over people with actual experience. Of course that does not hold true if they are looking for a machinist or a welder, but there are only so many of those type jobs to go around anymore in our information economy.

I agree, and that's the culture that has to change. Ideally there would be a larger selection of respected vocational degrees, like secretarial, IT, etc. It's a self fulfilling circle no doubt, so I'm not suggesting people just stop going to college, I'm suggesting we need culturally to shift to a different kind of secondary education structure.

I despise ignorance, but when college grads still can't find the US on a map or knows the difference between the French and Europeans it's not like they're getting much for their money anyway, at least not some percentage of them. How smart can college inherently make you when most people who teach in colleges are tree hugging hippies anyway? ;)

[MickintheHam]

Only read part of it however I got to here and figured it was a good place to stop:



Perhaps if you have a hard time financially, it might be wise to NOT HAVE 3 KIDS!. Kids cost money. You have to feed them, cloth them, pay for their activities and education etc...
And perhaps the dozen of so family member who rely on her should find jobs, even ones that pay $8.50 an hour.

"Go ask Alice when she's 10 feet tall" She's popping mushrooms not growing them on her ceiling.