“America’s ‘We’ Problem”: Being Rich In Today’s America Means Not Having To Come Across Anyone Who Isn’t
America has a serious “We” problem — as in “Why should we pay for them?”
The question is popping up all over the place. It underlies the debate over extending unemployment benefits to the long-term unemployed and providing food stamps to the poor.
It’s found in the resistance of some young and healthy people to being required to buy health insurance in order to help pay for people with preexisting health problems.
It can be heard among the residents of upscale neighborhoods who don’t want their tax dollars going to the inhabitants of poorer neighborhoods nearby.
The pronouns “we” and “they” are the most important of all political words. They demarcate who’s within the sphere of mutual responsibility, and who’s not. Someone within that sphere who’s needy is one of “us” — an extension of our family, friends, community, tribe – and deserving of help. But needy people outside that sphere are “them,” presumed undeserving unless proved otherwise.
The central political question faced by any nation or group is where the borders of this sphere of mutual responsibility are drawn.
Why in recent years have so many middle-class and wealthy Americans pulled the borders in closer?
The middle-class and wealthy citizens of East Baton Rouge Parish, Louisiana, for example, are trying to secede from the school district they now share with poorer residents of town, and set up their own district funded by property taxes from their higher-valued homes.
Similar efforts are underway in Memphis, Atlanta, and Dallas. Over the past two years, two wealthy suburbs of Birmingham, Alabama, have left the countywide school system in order to set up their own.
Elsewhere, upscale school districts are voting down state plans to raise their taxes in order to provide more money to poor districts, as they did recently in Colorado.
“Why should we pay for them?” is also reverberating in wealthy places like Oakland County, Michigan, that border devastatingly poor places like Detroit.
“Now, all of a sudden, they’re having problems and they want to give part of the responsibility to the suburbs?” says L. Brooks Paterson, the Oakland County executive. “They’re not gonna talk me into being the good guy. ‘Pick up your share?’ Ha ha.”
But had the official boundary been drawn differently so that it encompassed both Oakland County and Detroit – say, to create a Greater Detroit region – the two places would form a “we” whose problems Oakland’s more affluent citizens would have some responsibility to address.
What’s going on?
One obvious explanation involves race. Detroit is mostly black; Oakland County, mostly white. The secessionist school districts in the South are almost entirely white; the neighborhoods they’re leaving behind, mostly black.
But racisim has been with us from the start. Although some southern school districts are seceding in the wake of the ending of court-ordered desegregation, race alone can’t explain the broader national pattern. According to Census Bureau numbers, two-thirds of Americans below the poverty line at any given point identify themselves as white.
Another culprit is the increasing economic stress felt by most middle-class Americans. Median household incomes are dropping and over three-quarters of Americans report they’re living paycheck to paycheck.
It’s easier to be generous and expansive about the sphere of ”we” when incomes are rising and future prospects seem even better, as during the first three decades after World War II when America declared war on poverty and expanded civil rights. But since the late 1970s, as most paychecks have flattened or declined, adjusted for inflation, many in the stressed middle no longer want to pay for “them.”
Yet this doesn’t explain why so many wealthy America’s are also exiting. They’ve never been richer. Surely they can afford a larger “we.” But most of today’s rich adamantly refuse to pay anything close to the tax rate America’s wealthy accepted forty years ago.
Perhaps it’s because, as inequality has widened and class divisions have hardened, America’s wealthy no longer have any idea how the other half lives.
Being rich in today’s America means not having to come across anyone who isn’t. Exclusive prep schools, elite colleges, private jets, gated communities, tony resorts, symphony halls and opera houses, and vacation homes in the Hamptons and other exclusive vacation sites all insulate them from the rabble.
America’s wealthy increasingly inhabit a different country from the one “they” inhabit, and America’s less fortunate seem as foreign as do the needy inhabitants of another country.
The first step in widening the sphere of “we” is to break down the barriers — not just of race, but also, increasingly, of class, and of geographical segregation by income — that are pushing “we Americans” further and further apart.
By: Robert Reich, The Robert Reich Blog, February 14, 2014
“The Real Tax Threat To American Businesses”: Big Corporations Don’t Pay Their Fair Share
American businesses face some serious challenges from taxes. But it’s not due to America’s tax rates, as many big business CEOs would have you believe. Our corporate tax problems stem from a corporate tax code with so many perks, credits and loopholes in it that many U.S. multinational corporations pay little to no taxes. This starves our national budget and imperils public education, innovative research and infrastructure, the sort of public investments that help make our businesses and economy competitive. And, maybe even worse, it’s unfair.
I’m an accountant. I know about taxes. I help my clients take advantage of the deductions and incentives to which they are entitled. But because of accounting tricks my clients cannot use, many giant U.S. corporations pay taxes at effective rates far lower than most small businesses and many middle class families. The average U.S. multinational corporation paid just 12.6 percent of its income in taxes in 2010, according to the Government Accountability Office.
Some of the most unfair corporate tax loopholes for America’s competitive position in the world are the offshore tax loopholes. These loopholes alone cost the U.S. Treasury an estimated $90 billion a year. They also create an unfair playing field between domestic businesses like I serve in my practice, and the large multinational firms, whose high priced tax attorneys and lobbyists have devised ways to shift profits earned in the United States to the world’s tax haven countries where those profits are taxed lightly, if at all.
For instance, some software companies take patents on products developed in the U.S. and register them in a foreign tax haven. When a U.S. customer purchases the product, the company sends a large chunk of the purchase price to the tax haven to pay for the use of the patent. Thus the company reduces its effective corporate tax rate – sometimes even below 10 percent.
My clients don’t have this option. Nor would they want it. They are restaurants and dry cleaners, medical practices, small manufacturers and auto repair shops. They work hard and they expect to pay their fair share of taxes. They are the engines of our local economy, just as similar small companies are the engines of local economies across the country. They provide needed goods and services. They provide needed jobs. And they pay needed taxes.
Their taxes help pay for public investment in schools, roads, courts, public transit, public safety, public health – all of the basic infrastructure that enables all businesses to function and thrive. Since they benefit – as we all do – from those tax investments, it’s only fair that they should pay their share.
But their counterparts at large US multinationals don’t have to. And it’s the tax code that lets them. It’s as if the tax code pretends that they are operating in a third world country with no infrastructure to support. That’s ridiculous, of course. I’m good at accounting and bookkeeping, but I sure wouldn’t want a client trying to operate their entire business in a rural part of a third world country.
Our tax code should be fair and should encourage investment in our shared future. When we invest together we start a virtuous cycle of growth. But when people, whether individuals or business owners, think the tax system is rigged in favor of one group or another – say U.S. multinational companies using overseas tax havens – they rightly feel that they are paying more than their fair share. They lose faith in the system.
And when tax revenues are lower than they would be without such loopholes, policymakers look for ways to cut spending. This starts a vicious cycle of ever-shrinking economic activity and ever reducing tax revenue.
Fixing the tax code is the answer, and a good place to start is with the unfair overseas loopholes that undermine our faith in the tax system and rob our communities and the nation of vital investments in the future.
It makes no sense for our tax code to be hurting domestic job creators and undermining the tax base for our schools, roads, police and other vital services and infrastructure.
The tax reform America needs is one that closes many of the unfair loopholes won by big business lobbyists over the last three decades. We need the extra revenue collected to invest in the 21st century economy that will sustain our families, our communities and our businesses.
By: Brian Setzler, U. S. News and World Report, January 17, 201
“A Diabolical Chicken-And-Egg Conundrum”: Fear Is Why Workers In Red States Vote Against Their Economic Self-Interest
Last week’s massive spill of the toxic chemical MCHM into West Virginia’s Elk River illustrates another benefit to the business class of high unemployment, economic insecurity, and a safety-net shot through with holes. Not only are employees eager to accept whatever job they can get. They are also also unwilling to demand healthy and safe environments.
The spill was the region’s third major chemical accident in five years, coming after two investigations by the federal Chemical Safety Board in the Kanawha Valley, also known as “Chemical Valley,” and repeated recommendations from federal regulators and environmental advocates that the state embrace tougher rules to better safeguard chemicals.
No action was ever taken. State and local officials turned a deaf ear. The storage tank that leaked, owned by Freedom Industries, hadn’t been inspected for decades.
But nobody complained.
Not even now, with the toxins moving down river toward Cincinnati, can the residents of Charleston and the surrounding area be sure their drinking water is safe — partly because the government’s calculation for safe levels is based on a single study by the manufacturer of the toxic chemical, which was never published, and partly because the West Virginia American Water Company, which supplies the drinking water, is a for-profit corporation that may not want to highlight any lingering danger.
So why wasn’t more done to prevent this, and why isn’t there more of any outcry even now?
The answer isn’t hard to find. As Maya Nye, president of People Concerned About Chemical Safety, a citizen’s group formed after a 2008 explosion and fire killed workers at West Virginia’s Bayer CropScience plant in the state, explained to the New York Times: “We are so desperate for jobs in West Virginia we don’t want to do anything that pushes industry out.”
Exactly.
I often heard the same refrain when I headed the U.S. Department of Labor. When we sought to impose a large fine on the Bridgestone-Firestone Tire Company for flagrantly disregarding workplace safety rules and causing workers at one of its plants in Oklahoma to be maimed and killed, for example, the community was solidly behind us — that is, until Bridgestone-Firestone threatened to close the plant if we didn’t back down.
The threat was enough to ignite a storm of opposition to the proposed penalty from the very workers and families we were trying to protect. (We didn’t back down and Bridgestone-Firestone didn’t carry out its threat, but the political fallout was intense.)
For years political scientists have wondered why so many working class and poor citizens of so-called “red” states vote against their economic self-interest. The usual explanation is that, for these voters, economic issues are trumped by social and cultural issues like guns, abortion, and race.
I’m not so sure. The wages of production workers have been dropping for thirty years, adjusted for inflation, and their economic security has disappeared. Companies can and do shut down, sometimes literally overnight. A smaller share of working-age Americans hold jobs today than at any time in more than three decades.
People are so desperate for jobs they don’t want to rock the boat. They don’t want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious — sometimes even more precious than a safe workplace or safe drinking water.
This is especially true in poorer regions of the country like West Virginia and through much of the South and rural America — so-called “red” states where the old working class has been voting Republican. Guns, abortion, and race are part of the explanation. But don’t overlook economic anxieties that translate into a willingness to vote for whatever it is that industry wants.
This may explain why Republican officials who have been casting their votes against unions, against expanding Medicaid, against raising the minimum wage, against extended unemployment insurance, and against jobs bills that would put people to work, continue to be elected and re-elected. They obviously have the support of corporate patrons who want to keep unemployment high and workers insecure because a pliant working class helps their bottom lines. But they also, paradoxically, get the votes of many workers who are clinging so desperately to their jobs that they’re afraid of change and too cowed to make a ruckus.
The best bulwark against corporate irresponsibility is a strong and growing middle class. But in order to summon the political will to achieve it, we have to overcome the timidity that flows from economic desperation. It’s a diabolical chicken-and-egg conundrum at a the core of American politics today.
By: Robert Reich, The Robert Reich Blog, January 15, 2014
“The Vicious Circle Of Income Inequality”: New Forces Are Causing Inequality To Feed On Itself
Almost every culture has some variation on the saying, “rags to rags in three generations.” Whether it’s “clogs to clogs” or “rice paddy to rice paddy,” the message is essentially the same: Starting with nothing, the first generation builds a successful enterprise, which its profligate offspring then manage poorly, so that by the time the grandchildren take over, little value remains.
Much of society’s wealth is created by new enterprises, so the apparent implication of this folk wisdom is that economic inequality should be self-limiting. And for most of the early history of industrial society, it was.
But no longer. Inequality in the United States has been increasing sharply for more than four decades and shows no signs of retreat. In varying degrees, it’s been the same pattern in other countries.
The economy has been changing, and new forces are causing inequality to feed on itself.
One is that the higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners. Because the wealthy have just about every possession anyone might need, they tend to spend their extra income in pursuit of something special. And, often, what makes goods special today is that they’re produced by people or organizations whose talents can’t be duplicated easily.
Wealthy people don’t choose just any architects, artists, lawyers, plastic surgeons, heart specialists or cosmetic dentists. They seek out the best, and the most expensive, practitioners in each category. The information revolution has greatly increased their ability to find those practitioners and transact with them. So as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.
More recently, rising inequality has had much impact on the political process. Greater income and wealth in the hands of top earners gives them greater access to legislators. And it confers more ability to influence public opinion through contributions to research organizations and political action committees. The results have included long-term reductions in income and estate taxes, as well as relaxed business regulation. Those changes, in turn, have caused further concentrations of income and wealth at the top, creating even more political influence.
By enabling the best performers in almost every arena to extend their reach, technology has also been a major driver of income inequality. The best athletes and musicians once entertained hundreds, sometimes thousands of people at one time, but they can now serve audiences of hundreds of millions. In other fields, it was once enough to be the best producer in a relatively small region. But because of falling transportation costs and trade barriers in the information economy, many fields are now dominated by only a handful of the best suppliers worldwide.
Income concentration has changed spending patterns in other ways that widen the income gap. The wealthy have been spending more on gifts, clothing, housing, celebrations and other things simply because they have more money. Their extra spending has shifted the frames of reference that shape demand by others just below them, so these less wealthy people have been spending more, and so on, all the way down the income ladder. But because incomes below the top have been stagnant, the resulting expenditure cascades have made it harder for middle- and low-income families to make ends meet. Despite taking on huge amounts of debt, they’ve been unable to keep pace with community standards. Interest payments impoverish them while enriching their wealthy creditors.
But perhaps the most important new feedback loop shows up in higher education. Tighter budgets in middle-class families make it harder for them to afford the special tutors and other environmental advantages that help more affluent students win admission to elite universities. Financial aid helps alleviate these problems, but the children of affluent families graduate debt-free and move quickly into top-paying jobs, while the children of other families face lesser job prospects and heavy loads of student debt. All too often, the less affluent experience the miracle of compound interest in reverse.
More than anything else, what’s transformed the “rags to rags in three generations” story is the reduced importance of inherited wealth relative to other forms of inherited advantage. Monetary bequests are far more easily squandered than early childhood advantage and elite educational credentials. As Americans, we once pointed with pride to our country’s high level of economic and social mobility, but we’ve now become one of the world’s most rigidly stratified industrial democracies.
Given the grave threats to the social order that extreme inequality has posed in other countries, it’s easy to see why the growing income gap is poised to become the signature political issue of 2014. Low- and middle-income Americans don’t appear to be on the threshold of revolt. But the middle-class squeeze continues to tighten, and it would be imprudent to consider ourselves immune. So if growing inequality has become a self-reinforcing process, we’ll want to think more creatively about public policies that might contain it.
In the meantime, the proportion of our citizens who never make it out of rags will continue to grow.
By: Robert H. Frank, Economics Professor, The Johnson Graduate School of Management at Cornell University; The New York Times, January 11, 2014
“At The Top, There Is No Crisis”: Why A Never-Ending Disaster For 90 Percent Of America Doesn’t Worry The GOP
We’re in the middle of the worst economic disaster in modern history and we’re doing almost nothing about it, warns UC Berkeley Economist J. Bradford DeLong.
“So unless something — and it will need to be something major — returns the U.S. to its pre-2008 growth trajectory, future economic historians will not regard the Great Depression as the worst business-cycle disaster of the industrial age,” he writes. “It is we who are living in their worst case.”
The former Clinton administration official wonders why a disaster that “robs the average American family of four of $36,000 per year in useful goods and services, and that threatens to keep Americans poorer than they might have been for decades,” isn’t motivating policymakers to act.
“One would think that America’s leaders would be clambering to formulate policies aimed at returning the economy to its pre-2008 growth path: putting people back to work, cleaning up underwater mortgages, restoring financial markets’ risk-bearing capacity, and boosting investment,” he says.
Instead, Congress is debating about how much our investments should be reduced, how few weeks we should help the unemployed, how much food stamps should be cut.
The reason why we aren’t acting is clear to DeLong: “…at the top, there is no crisis.” While the incomes of the bottom 90 percent have stagnated for decades, the top has flourished. “The incomes of America’s top 10 percent are two-thirds higher than those of their counterparts 20 years ago, while the incomes of the top 1 percent have more than doubled,” he writes.
This inequality isn’t an accident of history or the result of rapid technological advancement, as conservatives like to pretend.
It’s the result of the class war the right has been waging for decades.
“Among developed countries, the U.S. does have the most unequal distribution of disposable income after taxes and transfer payments,” writes economist Laura Tyson, former chair of the President’s Council of Economic Advisers.
Our tax system is more progressive than most European countries that rely on a value-added tax but we spend far less on programs that help families and keep inequality low.
This is the victory of a conservative movement that caters to the richest Americans and seems to have no problem with a recovery that is only benefiting the richest 10 percent. Actually, it seeks to maintain the advantage for the richest by opposing policies like Medicaid expansion and assailing the labor movement.
The Republican Party doesn’t even feel the need to bother with solutions to problems that plague the lower 90 percent, like unemployment, says New York magazine’s Jonathan Chait.
“Republican thought on mass unemployment is a restaurant with tiny portions that taste terrible,” he writes.
The problem for the left is that Republicans can run and win on policies that directly increase income inequality. They can resist Democratic initiatives — even wildly popular ideas like raising the minimum wage, which would reduce poverty and increase consumer spending — and still be on track to hold the House of Representatives, while possibly even wining the Senate.
Why doesn’t the Republican Party act to reverse the greatest economic disaster in at least half a century, a disaster they could prevent?
Rep. Paul Ryan (R-WI) can reveal his secret passion for alleviating poverty over and over again while promoting policies that increase it. And still be taken seriously.
Republicans don’t care about improving the economy for the bottom 90 percent for one simple reason.
They don’t have to.
By: Jason Sattler, The National Memo, January 1, 2014
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