“Billionaires’ Row And Welfare Lines”: It’s A Great Time To Be Rich In America
The stock market is hitting record highs.
Bank profits have reached their highest levels in years.
The market for luxury goods is rebounding.
Bloomberg News reported in August, “Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick.”
A report last week in The New York Times says that developers are turning 57th Street in Manhattan into “Billionaires’ Row,” with apartments selling for north of $90 million each.
And there’s no shortage of billionaires. Forbes’s list of the world’s billionaires has added more than 200 names since 2012 and is now at 1,426. The United States once again leads the list, with 442 billionaires.
It’s a great time to be a rich person in America. The rich are raking it in during this recovery.
But in the shadow of their towering wealth exists a much less rosy recovery, where people are hurting and the pain grows.
This is the slowest post-recession jobs recovery since World War II. The unemployment rate is falling, but for the wrong reason: an increasing number of people may simply be giving up on finding a job. The labor force participation rate — the percentage of people over 16 who either have a job or are actively searching for one — fell in August to its lowest rate in 35 years.
This disconnecting is particularly acute among young people. Measure of America, a project of the Social Science Research Council, recently released a study finding that a staggering 5.8 million young people nationwide — one in seven of those ages 16 to 24 — are disconnected, meaning not employed or in school, “adrift at society’s margins,” as the group put it.
Median household income continues to fall, according to recent data from the Census Bureau. The data showed, “In 2012, real median household income was 8.3 percent lower than in 2007, the year before the most recent recession.”
And according to an April Pew Research Center report, “During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7 percent of the wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.”
The dire statistics take on even more urgency when we consider what they mean for America’s most vulnerable: our children.
According to First Focus, a bipartisan advocacy organization focusing on child and family issues: “The 1,168,354 homeless students enrolled by U.S. preschools and K-12 schools in the 2011-2012 school year is the highest number on record, and a 10 percent increase over the previous school year. The number of homeless children in public schools has increased 72 percent since the beginning of the recession.”
A report last month by the Carsey Institute at the University of New Hampshire bemoaned the stagnation of the child poverty rate in this country, saying, “These new poverty estimates released on Sept. 19, 2013, suggest that child poverty plateaued in the aftermath of the Great Recession, but there is no evidence of any reduction in child poverty even as we enter the fourth year of ‘recovery.’ ”
Nearly one in four American children live in poverty.
A report last year from the National Poverty Center estimated “that the number of households living on $2 or less in income per person per day in a given month increased from about 636,000 in 1996 to about 1.46 million households in early 2011, a percentage growth of 130 percent.”
And yet, the value of aid for those families is shrinking and under threat.
A report this week by the Center on Budget and Policy Priorities found, “Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power in 2013 and are now at least 20 percent below their 1996 levels in 37 states, after adjusting for inflation.”
The number of Americans now enrolled in the Supplemental Nutrition Assistance Program (SNAP) is near record highs, and yet both houses of Congress have passed bills to cut funding to the program. The Senate measure would cut about $4 billion, while the House measure would cut roughly ten times as much, dropping millions of Americans from the program.
Next week, lawmakers will start trying to find a middle ground between the two versions of the farm bills that include these cuts.
There is an inherent tension — and obscenity — in the wildly divergent fortunes of the rich and the poor in this country, especially among our children. The growing imbalance of both wealth and opportunity cannot be sustained. Something has to give.
By: Charles M. Blow, Op-Ed Contributor, The New York Times, October 25, 2013
“The Engine Of American Inequality”: The Consequences Of A Free Wheeling, Unchecked Financial Industry
The past three decades have been a period of explosive growth for Wall Street and the financial industry. Meanwhile, a tiny slice of the population has claimed an ever-bigger share of this country’s economic rewards. The highest-earning one percent of Americans collected roughly 20 percent of total income last year; the top .01 percent – not enough people to fill a football stadium – had 5.5 percent of the income.
Could there be a connection here? Could our booming financial sector, which now generates an astonishing 30 percent of all corporate profits (more than double the figure of thirty years ago), help explain America’s rapid ascent to the highest level of economic inequality since the eve of the Great Depression, and the highest of any of the world’s rich nations? A growing number of economists and other authorities think the first trend may have more than a little something to do with the second.
The economic and political establishments long ago settled on a theory of rising inequality: technology and globalization, they told us, were carving a rift through the American labor force between those with and without the right kind of education and know-how. This idea was criticized from the start for ignoring a formidable corporate campaign to rewrite the rules of the U.S. economy at workers’ expense, and over time it has increasingly failed to account for the reality of who is getting ahead and who is falling behind.
In his 1991 book “The Work of Nations,” former (then future) Labor Secretary Robert Reich embraced a version of the “skills-gap” story. But in his recent film “Inequality for All,” Reich has more to say about discrepancies of power than of skill.
The longer this trend continues, in fact, the more it resembles the Occupy Movement’s picture of a soaring 1 percent and a lagging 99 percent. Out of every dollar of income growth between 1976 and 2007, the richest one percent of U.S. households collected 58 cents; and after taking a big hit in the financial crisis, they were soon back on track, capturing an extraordinary 95 percent of all the income gains between 2009 and 2012. To put it more plainly, since the beginning of the current economic “recovery,” the top 1 percent (who make upwards of $400,000 a year in household income) are pretty much the only ones who have recovered.
Within that small subset of Americans, executives, traders, fund managers and others associated with the financial sector loom large, comprising about a seventh of the one-percenters and accounting for about one fourth of their income gains over the past thirty-plus years. That’s not counting the many lawyers and consultants with financial sector clientele, or the growing number of executives of nonfinancial companies who seem to make most of their money these days through stock options and short-term financial plays. Together, corporate executives and financial sector employees account for well over half the post-1980 income growth of the top 1 percent and more than two-thirds of the even more remarkable gains of the top 0.1 percent.
Pinpointing the causes of an economic trend is a hard business. But there is global as well as historical evidence for a link between financial sector expansion and rising inequality. Studies of rich and relatively poor nations alike suggest that inequality goes up when societies tie their fortunes to a free-wheeling financial industry and the easy flow of global capital. There is also substantial research to suggest that much of the financial sector’s recent growth has come by extracting wealth from other areas of the economy, not by spurring innovation and opportunity for the society at large.
Several recent studies trace the industry’s pay-and-profit surge mostly to its success in the political and regulatory arenas. See, for example, this paper by Thomas Philippon and Ariell Reshef of New York University and the University of Virginia, who attribute between 30 and 50 percent of the financial sector’s recent gains to economic “rents.” That’s basically a polite way of describing the ability of many of today’s financial heavyweights to use their market clout, their inside knowledge and various explicit and implicit taxpayer subsidies to make money out of thin air.
Banking and finance were not always a road to fabulous riches in this country. As recently as the early 1980s – and throughout much of the 20th century – there was almost no pay differential between financial and non-financial professionals. Today, by contrast, financial workers make about 1.83 times as much as other white-collar workers. You’d have to go back to the Roaring Twenties, at the tail end of America’s original Gilded Age, to find another period when financial sector incomes and profits reached such conspicuous heights. That should tell us something.
In any case, these are pivotal questions for the country – and unavoidable questions for those seeking a path toward what President Obama has been calling a “middle-out” rather than a top-down economy. Broad prosperity, the president says, calls for greater public investment in education, infrastructure and other long-term needs, and for higher taxes on the wealthy to help pay for such things. That may be a worthy agenda. It has certainly proved to be a politically difficult agenda. But in a country that has let its financial sector become an engine of inequality, more will be required.
If we believe in our founding ideal of America as a land where children should start off on roughly the same footing regardless of history or ancestry, we will all have to screw up our courage and refocus on (among other challenges) the unfinished work of making sure we have a financial economy that serves the real economy, not the other way around.
By: Jim Lardner, U. S. News and World Report, October 11, 2013
“We Just Keep Short-Changing Women”: Same Job, Same Size Budget Equals Less Pay For Women
Hey, married men – wake up! Your working wives are getting shorted on pay and that means your family has less money than it should.
A new report on pay, made public today by Guidestar USA proves discrimination against women is pervasive.
The new report compares men and women with the same positions at similarly sized nonprofit enterprises, so the fact that women often work in lower-paid occupations such as waitressing, retail and clerical work is irrelevant in this study.
While women who become waitresses or retail clerks should expect to make less than lawyers and executives, there is no reason that women executives and lawyers should make less than men doing the same jobs — but they do.
Men holding the top spot at nonprofits averaged between 10 percent and a third more than women in the same jobs, Guidestar found.
In general, the bigger the organization and the bigger the job responsibilities, the greater the gap between what women and men are paid — and the greater the share of top jobs held by men.
Guidestar is a nonprofit organization that compiles data reported to the IRS, and the public, by all nonprofits. The 2010 data cover not just charities that solicit donations, but trade organizations, small mutual insurance operations and social welfare organizations among the 29 types of nonprofits authorized by Congress.
This is Guidestar’s 12th annual Nonprofit Compensation Report and it draws on disclosures by more than 77,000 nonprofits.
The report used names to determine sex. Androgynous names like Pat or Chris were excluded from the analysis, Charles McLean, Guidestar’s research director, told me.
At small nonprofits, those with an annual budget of less than $250,000, men in the top job averaged $53,389. That is 10 percent more than the $45,038 paid to women.
More than half of these small nonprofits, 57 percent, were led by women.
At the top, these gaps grew to chasms.
Among organizations with budgets of $50 million or more, men in the top job averaged $644,375. That is almost a third more than the $488,249 average for women CEOs.
Even more telling, women held just 1 in 6 of the CEO jobs at the biggest nonprofits.
The only CEOs who made more than $1 million a year on average were men at $50 million-plus nonprofits who, at the 90th percentile, averaged almost $1.2 million, compared to less than $924,000 for women at the same percentile of pay.
The pattern is pretty much the same for the top legal and finance jobs at nonprofits. However, pay disparities are smaller for public relations.
The same pattern of men dominating in the highest-paid jobs is found in the latest ORS data on wages reported on income tax returns.
Among people with wages of $10 million or more, just one in 29 was a woman. These 60 highly paid women workers averaged $18.8 million in wages in 2010, IRS data shows.
Men accounted for more than 96 percent of all top wage earners. The 1,664 men were paid on average $20.1 million or almost 7 percent more than the highest-paid women workers, the IRS data shows.
The IRS data also shows that as workers get older, the pay disparities between men and women increase. Among workers under age 26, the average pay of men was $16,000 in 2010, just 22 percent more than women of the same age.
But for workers ages 45 to 60, men averaged about $67,000, which was 70 percent more than women, who averaged slightly less than $40,000.
This may reflect occupational choices, but it may also indicate that as time passes, the gap between what men and women make will narrow.
Guidestar gets its figures from the Form 990 tax returns that all nonprofits must file with the IRS. It then analyzes them in many ways, including pay by gender and size of organization budget.
The data is exceptionally robust because Congress micromanages nonprofit pay, a cause championed by Senator Chuck Grassley of Iowa, a Republican who is the only pig farmer in the Senate and a longtime antagonist of charities and other nonprofits.
One benefit of Grassley’s instinctive suspicion of nonprofits is that he persuaded Congress to require much more complete disclosures on what nonprofits pay than corporations. Profit-making enterprises only have to disclose what their top five executives were paid, and then only if they have publicly traded stock or bonds.
Even more significant, Congress requires rigorous and costly review of pay comparability for nonprofit leaders.
The zone of discretion for paying nonprofit executives under the laws Grassley sponsored and rules the IRS issued is exceedingly narrow, unlike the wide-open rules for profit-making corporations. For nonprofits with budgets of $5 million to $10 million, the zone of discretion is perhaps $10,000 above or below what the Guidestar and other pay studies show, compensation consultants have advised me when I sought their advice because nonprofit boards on which I volunteered assigned me to recommend the top executive’s pay.
Discrimination against women is pervasive and significant. It is also only slightly less severe than it was in Guidestar’s first pay study in 2001.
McLean, the Guidestar research director, said, “There is progress being made, but it is very slow.”
Two ways to speed up that process:
—Women who are married should make sure their spouses know how much money the family loses because of gender discrimination.
—Men should be in the forefront of demanding for equal pay for women, especially the majority of married men with a working wife.
Or we could do nothing, and just keep shortchanging women.
By: David Cay Johnson, The National Memo, September 16, 2013
“Suffering Under The Weight Of Inequality”: Reaching The Point That Endangers Growth Itself, And That Should Concern Everyone
A report released this week by an economist at the University of California, Berkeley, shows that income inequality in the U.S. economy is at a new high. As the economy struggles in the wake of the Great Recession, income inequality broke records going back nearly 100 years.
According to the study, incomes among the top one percent rose by 31.4 percent between 2009 and 2012, while incomes for everyone else grew just 0.4 percent. The top decile of earners in the economy now captures more than half the total income.
Predictably, the debate rages about fairness. Commentators on the left argue that this income distribution couldn’t possibly be fair to workers, while those on the right suggest that any distribution is inherently fair as long as all Americans have the opportunity to compete to make it to the top.
It is difficult to show that any particular distribution of income is the right place to draw the line between fair and unfair. Let’s leave that question to others and focus solely on the question of whether disparities of this magnitude help or hinder the economy as a whole.
Economists have shifted their position on this issue over time. At one point, most economists agreed that inequality probably helps the economy. Inequality spurs people to work harder. In addition, some inequality is needed to create a pool of concentrated wealth that can be invested to finance the early stages of economic development: harvesting timber, building factories and so on.
However, more recent research suggests that while some inequality is necessary, too much inequality undermines growth: The research shows that the U.S. economy is probably at or near the point where the negative effects of inequality outweigh the positive effects.
Now, inequality dampens growth in three ways:
- Wealthy people handle their money differently than the rest. They tend to save a much higher percentage of their incremental income, or invest it in fixed assets like vacation homes. These forms of saving and investment do not trickle down to create significant wage income for others. In contrast, incremental money that flows to the middle class and poor people gets spent much more quickly. It’s spent on food, clothing and basic products that are produced in factories and on farms by people who earn wages. Money that flows to the middle class and poor has a multiplier effect, rippling through the economy to create more jobs and income for others. As a result, a shift in income towards the top results in less overall demand.
- In a nation like ours, where higher education is expensive, greater inequality means that fewer people get the skills they need for well-paying jobs. But as World Bank economist Branko Milanovic writes, “now that human capital is scarcer than machines, widespread education has become the secret to growth.” Facing a less prepared workforce, companies shift research and advanced manufacturing facilities offshore, which further erodes economic growth. The shift increases the chance that the next Facebook will be founded in India or China. Some other country will reap the economic benefit that comes from hosting breakthrough innovation.
- Other factors beyond the hard costs of higher education are important as well, as inequality rises and class lines harden. Consider two children, both with the same innate potential for accomplishment, one born to a family in the top 1 percent and the other to a family in the bottom 20 percent. The first one will have parents who read to them as a pre-schooler, stimulating his or her brain. The second one, probably not. The first one will grow up surrounded by role models whose hard work brought them success; the second one will grow up surrounded by others whose hard work brought them barely-livable incomes. Is it any wonder that the two children will enter adult life with a different readiness to use their intellect, a different level of motivation and confidence and a different awareness of how to build a successful career?
Two economists, Andrew Berg and Jonathan D. Ostry of the International Monetary Fund, have quantified the impact of inequality on economic growth. In a 2011 article, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” they examined why some countries enjoy long years of steady economic growth while other countries see their growth trail off after only a few years.
Berg and Ostry found that income inequality is the single most important factor in determining which countries can keep their economies growing. For example, income distribution is more important than open trading arrangements, favorable exchange rates and the quality of the country’s political institutions.
Berg and Ostry go on to measure the extent to which economic growth falls as inequality rises. They gauge inequality using the GINI coefficient, which ranges for 0 – 100. At one extreme, a society where everyone earns exactly the same would have a GINI score of 0. At the other extreme, a society in which one person owned all the wealth would have a GINI score of 100. For economies with GINI below 45, growth can be robust, but once it crosses above roughly 45, growth slumps. The GINI of the U.S. economy is in the low 40’s currently, so we are dangerously close to the point of decline.
Inequality in the U.S. shows no sign of abating, even as the economy recovers. The decline of unions, the pace of globalization, the abundance of workers in many industries and changes in health care and taxes have combined to staunch the earning power of working Americans, even as the economy grows and productivity increases. There are few options, and none that are consistent with the political climate of the time. But the trend is reaching the point that endangers growth itself, and that should concern everyone, regardless of the size of your paycheck.
By: David Brodwin, U. S. News and World Report, September 12, 2013
“Getting Past The Outrage On Race”: Unless We Work For Fundamental Justice, Our Society Will Have A Permanent Underclass
George Yancy’s recent passionate response in The Stone to Trayvon Martin’s killing — and the equally passionate comments on his response — vividly present the seemingly intractable conflict such cases always evoke. There seems to be a sense in which each side is right, but no way to find common ground on which to move discussion forward. This is because, quite apart from the facts of the case, Trayvon Martin immediately became a symbol for two apparently opposing moral judgments. I will suggest, however, that both these judgments derive from the same underlying injustice — one at the heart of the historic March on Washington 50 years ago and highlighted in the Rev. Dr. Martin Luther King Jr.’s speech on that occasion.
Trayvon Martin was, for the black community, a symbol of every young black male, each with vivid memories of averted faces, abrupt street crossings, clicking car locks and insulting police searches. As we move up the socioeconomic scale, the memories extend to attractive job openings that suddenly disappear when a black man applies, to blacks interviewed just to prove that a company tried, and even to a president some still hate for his color. It’s understandable that Trayvon Martin serves as a concrete emblem of the utterly unacceptable abuse, even today, of young black men.
But for others this young black man became a symbol of other disturbing realities; that, for example, those most likely to drop out of school, belong to gangs and commit violent crimes are those who “look like” Trayvon Martin. For them — however mistakenly — his case evokes the disturbing amount of antisocial behavior among young black males.
Trayvon Martin’s killing focused our national discussion because Americans made him a concrete model of opposing moral judgments about the plight of young black men. Is it because of their own lack of values and self-discipline, or to the vicious prejudice against them? Given either of these judgments, many conclude that we need more laws — against discrimination if you are in one camp, and against violent crime if you are in the other — and stronger penalties to solve our racial problems.
There may be some sense to more legislation, but after many years of both “getting tough on crime” and passing civil rights acts, we may be scraping the bottom of the legal barrel. In any case, underlying the partial truths of the two moral pictures, there is a deeper issue. We need to recognize that our continuing problems about race are essentially rooted in a fundamental injustice of our economic system.
This is a point that Martin Luther King Jr. made in his “I Have a Dream” speech, one rightly emphasized by a number of commentators on the anniversary of that speech, including President Obama and Joseph Stiglitz. Dr. King made the point in a striking image at the beginning of his speech. “The Negro is not free,” he said, because he “lives on a lonely island of poverty in the midst of a vast sea of material prosperity.” In 2011, for 28 percent of African-Americans, the island was still there, the source of both images of Trayvon Martin.
The poverty is not an accident. Our free-enterprise system generates enough wealth to eliminate Dr. King’s island. But we primarily direct the system toward individuals’ freedom to amass personal wealth. Big winners beget big losers, and a result is a socioeconomic underclass deprived of the basic goods necessary for a fulfilling human life: adequate food, housing, health care and education, as well as meaningful and secure employment. (Another Opinionator series, The Great Divide, examines such inequalities in detail each week.)
People should be allowed to pursue their happiness in the competitive market. But it makes no sense to require people to compete in the market for basic goods. Those who lack such goods have little chance of winning them in competition with those who already have them. This is what leads to an underclass exhibiting the antisocial behavior condemned by one picture of young black men and the object of the prejudice condemned by the other picture.
We need to move from outrage over the existence of an underclass to serious policy discussions about economic justice, with the first issue being whether our current capitalist system is inevitably unjust. If it is, is there a feasible way of reforming or even replacing it? If it is not, what methods does it offer for eliminating the injustice?
It is easy — and true — to say that a society as wealthy as ours should be able to keep people from being unhappy because they do not have enough to eat, have no safe place to live, have no access to good education and medical care, or cannot find a job. But this doesn’t tell us how — if at all — to do what needs to be done. My point here is just that saying it can’t be done expresses not realism but despair. Unless we work for this fundamental justice, then we must reconcile ourselves to a society with a permanent underclass, a class that, given our history, will almost surely be racially defined. Then the bitter conflict between the two pictures of this class will never end, because the injustice that creates it will last forever. Dr. King’s island will never disappear, and there will always be another Trayvon Martin.
By: Gary Gutting, The New York Time, September 11, 2013
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 