Economic Justice Notes
Economic Justice Notes is a periodic email sent about every two weeks by Edie Rasell, JWM's Minister for Economic Justice. Each email briefly reviews an important economic justice topic with links to recent articles or reports on the topic. To subscribe or unsubscribe from Economic Justice Notes or to submit a change of e-address, please send a note. Economic Justice Notes will be archived here.
March 22, 2013
Federal Budget Developments
In the past three days Congress has made a number of decisions about the federal budgets for both fiscal years 2013 (Oct. 2012 - Sept. 2013) and 2014.
The 2013 Budget
Until now, there has been no budget covering the last six months of FY 2013 (April – September). For the first six months of the fiscal year the government operated under a “continuing resolution” that, more or less, extended the 2012 spending levels into 2013. The continuing resolution was scheduled to expire on March 27, at which time the federal government would have no longer been authorized to spend any money and nonessential functions would have halted.
In the face of the looming deadline and threatened government shutdown, this week both houses of Congress approved a budget to cover the rest of this fiscal year. Policymakers did not overturn the sequester, the across-the-board spending cuts that went into effect on March 1 this year. However the new legislation does permit flexibility within some budget categories thus allowing selected programs to undergo less severe cuts. However, smaller cuts in one area of a budget category must be offset by more severe cuts in another. This does allow some needed flexibility but it also opens the door to abuses. For example, meat packing companies complained that reductions in the number of meat inspectors, as required in the across-the-board sequester cuts, would cause hardships. So within the budget for the Department of Agriculture, money was transferred to reduce the cuts in inspectors. But the money came from other D. of A. programs, including the school breakfast program for poor children, and increased the size of their cuts.
The 2014 Budget
There has also been action on the 2014 budget. An early step in the budget process is for Congress to pass a budget resolution, an agreement on spending levels in each of the various budget categories. The House of Representatives approved their budget resolution on March 21. The Senate has yet to act on their Budget Committee’s proposal (see below). The resolution is not final until both houses reach agreement.
The House of Representatives. The resolution passed by the Republican-controlled House was developed under the guidance of House Budget Committee Chair (and former vice-presidential candidate) Paul Ryan. It includes many provisions that have been proposed in previous years but failed to get through the Senate as well as some new items.
Reductions in tax rates. The 10% marginal tax rate for low-income filers would continue and the 15% rate would be reduced to 10%. All the other marginal tax rates (25%, 28%, 33%, 35%, and 39.6%) would be reduced to 25%. Clearly this would most benefit higher-income filers who pay the higher rates. The corporate tax rate would be reduced from 35% to 25%. These reductions in tax rates would reduce revenues by an estimated $6 trillion over 10 years.
- Spending Cuts. Part of the lost revenue would be offset by further cuts in spending totaling $4.6 - $5.2 trillion over 10 years. By comparison, the massive sequester reduced spending by “just” $1 trillion over 10 years.
- Deficits. The proposed $6 trillion in tax cuts would be larger than even the massive spending cuts. Supporters claim the gap would be filled by unspecified revenue increases such as closing tax loopholes and restricting tax deductions. But most people think this is highly unlikely. Instead of eliminating the budget deficit by 2023, as the budget plan claims to do, it would likely increase it.
- Medicare. The federal health insurance program for seniors would be converted into a voucher plan; seniors would be given a specified amount of money to purchase (if they were able) a private insurance plan. The age of eligibility for Medicare would be raised from 65 to 67.
- Health care. Many aspects of the Affordable Care Act (“Obama-care”) would be rolled back including the Medicaid expansions for low-income people, the tax increase that funded some of the program, and funding for the subsidized insurance exchanges that would help moderate-income uninsured people buy insurance.
The Senate. In the Senate, the Budget Committee has put together a budget resolution proposal that will soon be considered by the full body. It reportedly calls for a $1 trillion increase in revenue over the next 10 years as well as $1 trillion increase in spending.
Expect much disagreement over the two very different visions of the federal budget outlined in these House and Senate resolutions.
For an update on budget activities, see the Federal Budget page
More information on these budget actions
March 21, 2013
Inequality -- a great 6-minute video
The rise in inequality in the U.S. and globally is hugely important. And while the general concept is easy to understand, the magnitude of inequality in the U.S. is difficult to depict. This six-minute video, Wealth Inequality in America, already seen by 5 million people on YouTube, does a great job of it. Please watch it and share it with others.
To learn more including how to reverse the trend, see resources on the UCC web pages (especially A Fair Balance: Reducing Inequality in the U.S. and around the World) and the many items posted on Inequality.com. By the way, Forbes estimates the combined net worth (wealth) of the world’s billionaires (all 1,426 of them) hit an all-time high this year of $5.4 trillion, up nearly 20% from $4.6 trillion in 2012.
Thanks to Ann Zerkel and Santiago Leon for sharing the video.
March 7, 2013
Reform and Raise Corporate Income Taxes
In early January, to avoid the “fiscal cliff,” Congress raised income taxes for all workers and higher income households. But policymakers have not raised, or even seriously discussed raising, corporate income taxes. They should.
Revenue from corporate income taxes, measured as a share of national income, has been declining for decades. In the 1950s, corporate taxes totaled 4.8% of national income. The share fell to 3.8% in the 1960s, to 2.7% in the 1970s, and reached a low of 1.7% to 1.9% in the 1980s, 1990s, and 2000s.
Many huge corporations pay little or no tax. A three-year study of 280 Fortune 500 corporations found they paid just 18.5% of their profits in taxes, on average, roughly half the official corporate tax rate of 35%. Thirty corporations, including GE, Boeing, PepsiCo, and others paid no taxes during the three years.
Corporations regularly call for tax reductions saying their tax rates in the U.S. are much higher than in other countries. This is true. But because of the all the legal tax avoidance opportunities (tax loopholes, tax shelters, tax exemptions, etc.) and all the illegal (but usually undetected) methods of tax evasion, corporations actually pay lower taxes in the U.S. than in nearly all other 25 major industrialized countries (Iceland is the only exception). Fundamental reform of the corporate tax system is needed.
Both corporations and individuals move assets offshore into “havens” to avoid taxes. One recent study estimated the value of global private wealth (not just that of U.S.-Americans) held in offshore havens, evading taxes, totaled $21 to $32 trillion. (By comparison, total U.S. national income in 2012 was $13.6 trillion.) To reduce or eliminate tax liabilities over half of the world’s trade passes through tax havens (on paper, not literally) as do over half of all bank assets.
Big business is booming. The stock market has regained its pre-Great Recession high and corporate profits, as a share of national income, are at their highest level since 1950 (check out the graphics) At the same time, the bipartisan Congressional Budget Office expects the unemployment rate to remain above 7½ % through the end of 2014. This will be the sixth consecutive year when it will be this high, a 70-year record.
There are deep-seated problems with our economy that could be helped, somewhat, by reforming the corporate tax code. The government would gain additional revenue and companies would be encouraged to focus on making money the old fashioned way, by actually producing things and hiring workers to do so, instead of through extensive, elaborate tax avoidance and evasion schemes. Congress must reform corporate taxes.
For more information:
Citizens for Tax Justice (full disclosure: I am on the board of CTJ)
Tax Justice Network
Tax Policy Center
February 21, 2013
Inequality and Lack of Opportunity in the U.S.
In Equal Opportunity, Our National Myth, an opinion piece that appeared in this past Sunday’s New York Times (Feb. 17), Nobel prize-winning economist Joseph Stiglitz reviewed the new reality in the United States: social immobility. People growing up in families in the bottom section of the economic ladder seldom move up, those in the middle predominantly stay in the middle, and those on the top stay there, across generations. According to Stiglitz, our vision of the U.S. as a land of opportunity is a myth. Today, there is less social mobility and opportunity here than in nearly every other advanced industrialized country. In the New York Times article Stiglitz reviews various reasons for the social immobility, concludes a key factor is the lack of equality of opportunity in education, and outlines how to begin to address this problem.
Another perspective on inequality and social mobility was presented in a recent article in The Economist. The writers suggest that inequality and restricted social mobility are a consequence of meritocracy. In this view, money flows to those with the greatest ability (“merit”) and because some people are extremely talented, they have – and should have – an extremely large amount of money. So a very unequal distribution of income (that is, a high level of inequality) is the proper and fair outcome if we reward people based on merit. Moreover, since those with the most brains and skills (and the big bucks) also invest hugely in their children, who themselves often become very well paid adults -- all due to their ability and merit, we should not be surprised to see financial advantage passed across generations. While it may appear that an entrenched elite has permanently captured the top rungs of the income/wealth ladder, in fact, this is just the outcome of a well-functioning system properly rewarding the most meritorious.
There are numerous flaws in this thinking but The Economist is correct on one point. Elites do spend more money on their children’s education and enrichment activities (music lessons, visits to museums, etc.) than families in the middle and lower rungs of the income ladder. Our children and the nation need greater equality of opportunity in education.
But there is a more fundamental error in this argument. According to The Economist, “[t]he top 1% have seen their incomes soar because of the premium that a globalized high-tech economy places on brainy people.”
In our country today, the big money is not necessarily going to the most talented and (at some other time) we need to question whether it should. It is definitely true that entertainers and sports figures with great talent are often hugely rewarded. But Wall Street financiers are not more talented or meritorious (and they certainly don’t provide greater benefits to society) than scientists, school teachers, or someone who can bake a good loaf of bread. To flourish, society depends upon many types of workers and they are all meritorious, from the people who grow and harvest our food, sell us our groceries, and clean our office buildings and hotel rooms, to those who care for our sick loved ones, drive our buses, and fix our cars. Which one of these could you do without? All workers perform valuable functions, have merit, and deserve respect and decent pay. God’s abundance is meant to be shared among all God’s people. In the desert, Moses – the “meritorious” leader – got no more manna, and no less, than anyone else.
In the U.S. today, what is most responsible for the concentration of wealth and income in the hands of a very rich few is not talent but “rents.” In an article in Vanity Fair, The 1 Percent’s Problem, Nobel-winner Stiglitz summarized parts of his recent, excellent book, The Price of Inequality:
“[R]ent seeking” defines many of the ways by which our current political process helps the rich at the expense of everyone else, including transfers [of money] and subsidies from the government, laws that make the marketplace less competitive, laws that allow C.E.O.’s to take a disproportionate share of corporate revenue…, and laws that permit corporations to make profits as they degrade the environment. The magnitude of “rent seeking” in our economy, while hard to quantify, is clearly enormous. Individuals and corporations that excel at rent seeking are handsomely rewarded. The financial industry, which now largely functions as a market in speculation rather than a tool for promoting true economic productivity, is the rent-seeking sector par excellence.
The Economist is right. Differences in educational opportunities do contribute to inequality and our lack of social mobility. But the very rich at the top of our income/wealth ladder got there primarily through their rent seeking behavior, not their special talents and skills, and they and their children stay there for the same reason.
The current system is self-perpetuating unless we do at least three things. First, to quote Stiglitz again, we must change the way “our current political process helps the rich as the expense of everyone else.” Second, society must provide greater educational and enrichment opportunities to all God’s children, especially for those whose parents are unable to. And third, once they’re educated, we must be sure everyone has a job.
January 31, 2013
Inequality
To start off the New Year (a bit delayed), here are two excellent articles about inequality.
Inequality and a strong economy. Nobel laureate Joseph E. Stiglitz recently wrote a good overview of inequality including ways to reduce it and reasons why it is critically important to do so. According to Stiglitz, inequality is not only killing the American dream but also making the economic recovery more difficult. We used to be told that an increase in inequality would stimulate the economy and benefit us all. Tax cuts for the rich, so the story went, would create jobs. But this theory of trickle down, practiced for the past 30-plus years, has proved to be a failure. Inequality has grown but incomes for most people have stagnated or fallen and economic instability has increased. Now we know, or should know, that reducing inequality, strengthening the middle class, and shrinking the number of poor are the ways to build a strong economy.
Inequality and health outcomes. We know the United States spends far more on health care than any other country. But a New York Times article (based on a new Institute of Medicine/National Research Council report) details the many ways that Americans’ health outcomes fall behind people in 17 other major industrialized countries. In addition to looking at the elderly, the report is one of the first to study the population age 50 and below. Among the 17 countries, Americans had the lowest probability of surviving to age 50. (See the charts below.) Car accidents, gun violence and drug overdoses were the major contributors to their loss of life. Among Americans of all ages, the U.S. had the second-highest death rate from coronary artery disease (heart attacks) and the highest rate of diabetes. Even the people most likely to be healthy – those with a college education or high incomes -- fared worse on many health indicators than their privileged counterparts in other countries. Unfortunately, these results are expected in a society with a high rate of poverty (the highest among the 17 countries) and a very high level of inequality. Read more about the impacts of inequality.
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November 28, 2012
The Fiscal Cliff
Last year Congress approved a huge reduction in the federal budget deficit. Starting in January, taxes will rise as tax breaks are ended and federal spending will be drastically cut. The deficit will shrink by over $600 billion. But because the economy is so weak, experts predict these changes will cost millions of jobs and cause a recession. This is the “fiscal cliff.” So Congress is planning to modify the budget and reduce the deficit by a smaller amount. Some tax breaks will be continued, while others will end. Some spending cuts will be eliminated or postponed and others will go forward. But whose tax breaks should be extended and whose taxes should rise? Which spending cuts should be postponed or eliminated, which ones should go forward? Learn more about the fiscal cliff and find advocacy opportunities on the JWM Federal Budget page.
Also see Jackie Calmes in the New York Times: Demystifying the fiscal impasse that is vexing Washington, November 16, 2013.
November 15, 2012
Prosperity Economics
Now that the election is behind us, what is our economic vision for the country? What is a hopeful but realistic expectation for what can be accomplished?
The authors of a recent article in Huffington Post Business identify five key elements of a fair and healthy economy. Lawrence Mishel, president of the progressive Economic Policy Institute, and Deepak Bhargava, executive director of Center for Community Change, an organization that seeks to strengthen, connect and mobilize grassroots groups, describe five goals that must be priorities for everyone who seeks opportunity and economic security for all.
The components of prosperity economics include:
- good jobs with fair wages,
- investment in our crumbling infrastructure,
- strong health care and retirement security,
- first-class public schools from pre-k through college, and
- protection in the workplace to bargain collectively.
Read about prosperity economics in the Huff Post Business article.
Read the full report, titled Prosperity Economics: Building an Economy for All, a two-page summary, or view a briefing and discussion about the report with the authors and Richard Trumka, president of the AFL-CIO, Wade Henderson, president and CEO of the National Urban League, and Janet Murguía, president and CEO of National Council of La Raza.
November 2, 2012
Religious Scholars Confront Real-world Ethical Issue
In Chicago, a workers’ struggle for improved conditions on the job has come into conflict with long-established plans made by two organizations of religious scholars, the American Academy of Religion and the Society of Biblical Literature. Writing in The Christian Century, Rev. Lillian Daniel of First Congregational Church of Glen Ellyn (IL), UCC, describes how these two organizations and their members are responding to a real-world ethical question.
Hard working housekeepers and other workers at Hyatt hotels across the country are seeking a fair labor contract. (More about the housekeepers’ struggle.) In response to management’s resistance, the union called a boycott asking people not to stay, eat, or hold meetings at the Hyatt hotels.
But months ago, long before the boycott was called, both the AAR and SBL scheduled events and booked rooms at the Hyatt, conveniently located near the Chicago convention center where their joint meeting will be held. What should they do now that the boycott is underway?
Although the Hyatt is the only hotel within walking distance of the convention center, the AAR moved its bookings from the Hyatt to another hotel 1.9 miles away. The SBL decided to stay at the Hyatt. Read about these decisions and how members of the two organizations are responding.
Regarding another worker struggle: Members of the Coalition of Immokalee Workers, the Florida farm workers who continue to seek dignity and better conditions in the field, have achieved some major victories recently signing Fair Food Agreements with Trader Joe's and Chipotle Mexican Grill. Read more. These workers continue to need our support.
October 17, 2012
Inequality: It is even more destructive than we thought
An important article in today’s New York Times examines the impact of income inequality on the nation’s economic performance.
Inequality is a moral concern. It is bad for those on the bottom of the ladder and, increasingly, for those in the middle as well. Now experts are suggesting that our high level of income inequality is also bad for the economy.
Evidence is building that inequality slows economic growth and causes less stable economic expansions, that is, we can expect slow growth of the economic pie and more recessions and economic crises like the one we are still trying to recover from. Experts even suggest that narrowing the inequality gap may be more economically beneficial than other factors – like boosting trade and foreign investment – that feature prominently on the political agenda.
It is important to note that income inequality is not an inevitable outcome of our economic system. It is the result of policy choices about taxes, deregulation, trade, labor unions, and other matters. According to two prominent political scientists, inequality has been politically engineered.
Today’s New York Times article quotes Nobel laureate Joseph Stiglitz who suggests the concentration of money drives the concentration of political power: “Economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.” In other words, when money is concentrated in the hands of the rich who make political contributions and sway elections in myriad ways, then politicians are less willing and able to make the policy changes needed to reverse inequality.
Stiglitz, a professor at Columbia University and former chief economist and senior vice-president of the World Bank, has written extensively on inequality. He recently published The Price of Inequality describing the causes and impact of inequality as well as what to do about it. Many of the main points in the book are summarized in his recent articles in Vanity Fair:
Also see A Fair Balance: Reducing Inequality in the United States and Around the World, a JWM resource about inequality.
October 4, 2012
Wal-Mart Workers on Strike
I am forwarding information from Jobs with Justice announcing that, for the first time in Wal-Mart’s 50-year history, workers have gone out on strike!
About a year ago, Wal-Mart workers began organizing to gain respect and improve their working conditions. (See Organizing for Respect at Wal-Mart) They also sought to find allies to stand with them in their struggle. (See Making Change at Wal-Mart and the Interfaith Worker Justice Wal-Mart website). As Workers began to speak out and seek fairness in their workplaces, they also encountered retaliation. Now some workers have taken the very bold and risky step of going on strike. Please see the note below for more information. Background information is available on the JWM Wal-Mart webpage.
These ill-treated workers have suffered for years but they are silent no longer. They need our support. Go to the Jobs with Justice Wal-Mart webpage
August 31, 2102
Inequality
It’s Labor Day. With workers and their concerns on our hearts and minds, we also need to be thinking about inequality. In the United States and nearly every country around the world, the rich are getting richer, the poor are getting poorer, and those in the middle are struggling to stay there. Justice and Witness Ministries has just released a new resource on inequality written by myself, Edith Rasell. It is titled A Fair Balance: Reducing Inequality in the United States and Around the World. This Economic Justice Note highlights a few of the main points in that article.
Inequality in the United States. Among the major industrialized countries, the United States has the most unequal income distribution. To illustrate the severity of this problem consider what happened over the last 40 years. Between 1970 and 2010 the economy doubled in size, per person. If this increase had been evenly shared, everyone’s income could have doubled. But that did not happen. Instead, among the bottom 90% of households average income fell by 6% while among the top 1/100th of 1% (some 16,000 households) average annual incomes rose by nearly $20 million (all figures are adjusted for inflation).
Inequality is destructive of people’s lives. The impact of inequality is felt at all income levels: the bottom, the middle, and the top. In a country with a high level of inequality, everyone does less well than if there were more equality. In more unequal societies, people – from rich to poor – have more mental illness, shorter life expectancies, and higher infant mortality compared with people in less unequal ones. They also have more addictions to illicit substances (although they are not more likely to use them) and incarcerate a larger share of the population. Children of all social classes do less well in school than children in more equal societies.
Researchers find these outcomes are driven by a lower level of trust among members of the society, less social cohesion, a greater focus on materialism, a heightened competition for status, higher levels of stress, and less support for the common good.
Poverty and inequality. High levels of inequality call into question the standard solution to poverty, economic growth. Traditionally, if a country can enlarge the economic pie by producing more things and more income, then there will be enough for all and poverty will decline. But in an age of inequality when most (if not all) additions to national income benefit the rich, not the poor, how can poverty be relieved? In the global South, policies are needed to shape economic growth to benefit the poor. In the global North, growth does not help the poor but it is harming the environment. We must shift our focus from growth toward a more equitable sharing of our resources.
Read more:
August 3, 2012
Capitalism's "Sacrifice Zones"
Bill Moyers and Company, a show that is carried on many PBS stations, recently aired a program titled Capitalism’s Sacrifice Zones. Moyers interviewed journalist Chris Hedges who spoke about “forgotten corners of this country where Americans are trapped in endless cycles of poverty, powerlessness, and despair as a direct result of capitalistic greed.” Hedges calls these places – like Camden, New Jersey; Immokalee, Florida; and parts of West Virginia -- capitalism’s sacrifice zones. People suffer while the corporations that plunder them thrive. You can view the entire show online.
What to do about places like these? Read Tackling Neighborhood Poverty: Developing Strategic Approaches to Community Development [616KB] from the Federal Reserve Bank of San Francisco.
June 29, 2012
Health Care and the Affordable Care Act
Now that the Supreme Court has upheld most components of the Affordable Care Act, it is a good time to review what the Act says and what it will do. This short summary from the Washington Post describes its main provisions and provides answers to frequently asked questions. Also good is a more in-depth, two-page summary of the Act from the Kaiser Family Foundation.
Regarding the Medicaid provisions: the Affordable Care Act will expand Medicaid to cover all non-Medicare eligible individuals under age 65 with incomes up to 133% of the Federal Poverty Level (FPL) plus coverage for people above this level already covered under the existing program. (The next paragraph lists those covered under the current Medicaid program.) To finance the coverage for the newly eligible, states will receive federal funding to pay 100% of the additional costs for 2014 through 2016, 95% of the additional costs in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and subsequent years. What the federal funding does not cover, the states must pay. The Supreme Court ruled that if a state chooses to not participate in this Medicaid expansion, it may not be penalized with the loss of Medicaid dollars it receives from the federal government under the current Medicaid program.
Current Medicaid coverage varies to some degree by state but generally includes:
Children up to age six in families below 133% of the federal poverty line (FPL) and children ages 7 to 18 in families up to 100% of FPL,
Pregnant women up to 185% of FPL, and
Parents below 64% of the FPL.
Adults without dependent children are not eligible regardless of their income level.
No undocumented immigrants are eligible for Medicaid and this does not change under the Affordable Care Act.
The uninsured today -- why the Affordable Care Act is so important:
- Roughly 50 million people are without health insurance, or over one in five (22%) of all under-65 year olds. The huge majority of those age 65 and above are covered by Medicare so nearly all the uninsured are below age 65.
- Most of the nation’s uninsured are low- or moderate-income. Individuals below poverty are at the highest risk of being uninsured, and this group comprises 40% of all the uninsured (the poverty level for a family of four was $23,050 in 2012). In total, nine in ten of the uninsured are in low- or moderate-income families, meaning they are below 400% of poverty. Since the average annual cost of employer-sponsored family coverage in 2010 was $13,770, many cannot afford to buy coverage without sizable employer contributions.
- More than three-quarters of the uninsured are in a working family. Uninsured workers typically are not offered insurance through their own or a family member’s employer.
- The uninsured have significantly higher mortality rates than those with insurance.
More info on the uninsured. Watch the Bill Moyers’ Journal show, Critical Condition, about the uninsured.
While we need much more reform of the health care system, the Affordable Care Act is an important beginning. We may need to be active next year to prevent the repeal or weakening of the Act.
June 8, 2012
Inequality, Unions, and Congress
Worsening inequality – the rich getting richer, the poor getting poorer, and the middle sliding downward – is a sad, shameful, and unnecessary reality in the United States and much of the world. One key factor driving this trend is the decline of unions. Read more about declining union membership and growing inequality in this short, impressive and interesting blog post from the Economic Policy Institute (it also uses some great new tech features).
So what is Congress doing in the face of worsening inequality, when millions live in poverty and millions more continue to be jobless, during a time that Nobel prize-winning economist Paul Krugman calls a depression? The draft 2013 spending plan being put together in the U.S. House of Representatives would do little to help the economy or the suffering millions, but it does help Wall Street, oil companies, and the health care industry. Under the guise of deficit reduction, key funding is being slashed or eliminated for regulating Wall Street, improving energy efficiency in federal building, supporting renewable energy, and implementing the new health care law. The Senate will not go along with some of these plans. But the House proposal will skew any future House-Senate compromise in a harmful direction. Read the New York Times article about the House’s spending proposal.
Read more about the federal budget: The bipartisan Congressional Budget Office predicts a recession next year if current plans for the 2013 federal budget go forward.
May 25, 2012
Congressional Budget Office Foresees Recession due to Planned Deficit Cuts
The bipartisan and highly regarded Congressional Budget Office recently released an important assessment that projects the country will fall back into a recession if massive reductions in the federal government deficit go into effect next year.
Reducing the deficit by over $700 billion, as currently planned, will boost unemployment, reduce incomes, and further weaken an already weak economy. Overall, CBO projects that the economy will shrink in the first half of 2013 and cautiously notes, “such a contraction … would probably be judged to be a recession.” During the second half of the year CBO projects the economy will grow, giving an average growth rate of just 0.5% for the year. (By comparison, in 2010 and 2011 the economy grew by 3.0% and 1.7%, respectively.)
To reduce the harmful short-run impact of a huge reduction in the deficit while also promoting the long-term health of the economy and the nation, CBO suggests a two-part strategy. First, Congress should increase spending (do fewer cuts) and extend (postpone) some tax cuts so the deficit in 2013 does not shrink so drastically. Second, Congress should enact additional policies, and maintain and strengthen those already in place, to ensure substantial deficit reduction later in the decade.
CBO does not recommend which spending cuts should be revoked or tax cuts extended in order to avoid another recession. But the choices are clear for people who care about fairness and seek a world where everyone has abundant life.
Tax cuts that help lower- and middle-income households should be maintained; others benefiting wealthier households should be ended. Following that logic, the payroll tax cut should be extended while income tax cuts benefiting upper-income and wealthy households should be ended. Cuts in spending should focus on the military. Over the past decade, military spending rose by 48%, adjusted for inflation, to over $500 billion per year. The planned 2013 cuts would reduce expenditures just to the level of 2007. These cuts should go forward. But cuts in discretionary spending for social programs and core government functions -- cuts that come on top of similar ones in previous years -- should be delayed or permanently suspended.
By reducing some planned spending cuts and extending some tax cuts, the deficit will be larger in 2013 than under current law. This is good. Hopefully the country will avoid another recession and the economy will continue to gain strength. Creating a robust economy – one where people are working and wages are high – is the best way to shrink the deficit. Additional deficit cutting measures can be enacted to come into effect later in the decade.
For more information see
May 11, 2012
The Voices of Poverty
A new website, The Voices of Poverty, is a vital resource for justice seekers. The Voices of Poverty shares the stories of poor men, women, and children, told in their own voices – the voices of America’s invisible poor.
As described on the website, visitors to the The Voices of Poverty.org can listen to a growing audio archive of interviews. As you listen, visit [the site’s] maps and explore the changing poverty numbers around the country. You can also put your own stories of hardship onto the site. The site is linked to photographic archives documenting poverty, as well as to sites dealing with specific poverty-related policies and networks engaged in working on solutions to some of the country’s deepest hardship-related problems.
Poverty is, in many ways, the American story of our time. Its reach is huge, and getting more so by the day. Its impact is corrosive in the extreme. In an era of mass unemployment, plummeting living standards for the working poor, collapsing pension systems, a stubbornly broken housing market, and frayed local, state and federal safety nets, blaming the poor for their poverty demonstrates a staggering moral blind spot.
Understanding modern poverty as a product of specific policies and specific failings of political will sets the stage for change; not the superficial changes embodied by soaring sound bites, but the kind of change that alters generations’ aspirations, that shifts a nation’s political priorities. That is the challenge, and the hope, embodied in these stories.
All of us need to act to end poverty. The new Voices of Poverty website can be an important educational resource.
Also see Justice and Witness Ministries’ Poverty webpage.
May 4, 2012
What to do About Low-wage Jobs
In the U.S. today about one-fourth of all workers are in jobs that pay poverty-level wages, that is, the pay is below what is needed by a full-time worker to live above the federal poverty line for a family of four. In 2011, this was $23,005 per year, or $11.06 per hour. Female, young, and minority workers are over-represented in the ranks of these low-wage workers.
How can these jobs be improved? How can the wages be increased?
Surprisingly, getting more education is not the answer. While additional schooling may help an individual avoid a low-wage future, it will not help society as a whole. This is because the share of all jobs requiring education beyond high school is expected to rise very little. Despite much talk about the growing need for more educated workers, the U.S. Bureau of Labor Statistics projects very little upgrading of educational requirements in the jobs of the future. Between 2010 and 2020, the share of jobs requiring education beyond a high school diploma will change as follows:
- Jobs requiring an Associate's degree will rise from 5.6% of jobs in 2010 to 5.8% of jobs in 2020,
- Bachelor's degree: from 15.5% to 15.8%,
- Master's degree: from 1.4% to 1.5%, and
- Doctoral or professional degree: from 3.1% to 3.2%.
Simply increasing the share of workers with an associate’s, bachelor’s, or more advanced degree will not ensure better pay. Since there will be little increase in jobs requiring higher education levels, rising numbers of more educated workers will primarily mean more people will be unable to find a job that uses (and pays for) their advanced knowledge and skills.
Low-wage workers of the future will experience rising living standards only if the nation makes the right policy choices: increasing the value of the minimum wage, strengthening workers’ ability to form or join unions, expanding health and retirement benefits through public programs, and making a real commitment to full employment (providing a job for virtually all willing workers). Otherwise the outlook for workers of the future will be much like the present: too many jobs with very low pay and few benefits, economic insecurity, and rising inequality.
For more information see the recent paper from the Economic Policy Institute, The future of work: Trends and challenges for low-wage workers.
April 20, 2012
Taxes, Economic Recovery, and the Top 1%
The Occupy Movement has, thankfully, pushed income inequality into the center of our public conversation. But just how skewed is our income? Has the recent downturn moved the country toward greater fairness?
Two award-winning economists, Thomas Piketty and Emmanuel Saez, have analyzed data from the IRS to examine shifts in the distribution of income since 1917. Their work shows that over the last three decades, top income recipients in the United States have received a steadily growing share of total national income. Before the economic downturn in 2008, the top 10% received essentially half of all income (49.7%), a larger share than in any other year since 1917 (their earliest data), even surpassing the peak before the Great Depression of 1929. Since 2008, the top 10% have lost income but they have already regained much of their loss.
Here are some additional findings.
- In 2010, the top 10% of families (with incomes above $108,000 in 2010) received 47.9% of all national income, close to the 2008 peak of 49.7%. The bottom 90% shared the remaining 52.1%.
- The top 1% (with family incomes above $352,000 in 2010) got 20% of all national income in 2010.
- In 2010 as the U.S. economy began to recover, the top 1% captured 93% of the income gains that year, leaving just 7% of the gains for the other 99%. Although 2011 data are not yet available, Piketty and Saez expect this skewed trend continued.
Piketty and Saez point out that even if Congress passed the Buffet Rule to impose a 30% minimum tax on earnings over $1 million (which, thus far, has failed to get majority support in either the House or the Senate) it would make only a small dent in our extreme inequality. The economists call for a much higher top tax rate on the rich – up to 50%, 70% or even 90% – and stress this would help, not harm, the economy. Currently the top rate is 35% but some in Congress think even this is too high. The budget recently passed by the House of Representatives (the “Ryan Budget”) would lower the top rate to 25% and bring down the corporate rate to 25%, while also imposing massive spending cuts to offset the lost revenue.
Before the end of this calendar year Congress will need to make a number of decisions about income taxes -- including whether to extend or end the 2001 and 2003 income tax cuts that primarily benefited the wealthy (the “Bush tax cuts”) -- and the estate tax. At a time when federal receipts have fallen to the level of the 1950s, forcing spending cuts and driving up the deficit, Congress must go where the money is. Congress must raise taxes on wealthy households and corporations, the ones who have received such a large share of our national income in recent decades.
Interactive graphics
Shares of national income growth received by various income groups between 1917 and 2008
Who’s in what income group, what is their income? (click on the income ranges shown on the left)
March 30, 2012
Upcoming Cuts in Federal Spending
The Washington-based Coalition on Human Needs has just released a report describing the impact of already enacted budget cuts on military and non-military government spending. Self-Inflicted Wounds: Protecting Families and Our Economy from Bad Budget Choices [1.48 MB] finds the cuts will have a “devastating effect on programs that for decades have helped families move out of poverty and children grow into healthy, productive adults.”
Some background: Last summer Congress passed the Budget Control Act of 2011, cutting federal spending by $2.4 trillion over the next 10 years compared with projected levels. About half of the cuts were loosely specified in the Bill. A second set of cuts – totaling some $1.2 to $1.5 trillion – were to be determined by a special Congressional Committee (the “super-committee”). The BCA also specified that if the super-committee failed to act, or if its proposal did not receive Congressional approval by the end of 2011, then the second round of cuts would be automatically triggered starting in January 2013. Late last fall when the Super-committee failed to agree on a plan to present to Congress, the deadline passed and the automatic cuts were triggered.
Nearly all the cuts, both those already specified in the BCA and the automatic ones that will begin in January are somewhat evenly split between military and non-military discretionary programs. But because of the recent run up in military spending, even after the cuts, military spending will still be at its 2007 level. However the impact on non-military programs will be drastic. For example, according to the CHN report:
• 25,000 children will lose access to quality child care
• 75,000 children will not receive Head Start services
• 12,200 people will be unable to afford the drugs they need to combat AIDS
• Community Health Centers will lose $55 million, reducing health care and eliminating jobs in hundreds of communities
• 550,000 poor adults, nearly 100,000 dislocated workers, and nearly 20,000 youth will not receive job training
CHN reviews the cuts in more detail and also examines some alternatives currently being considered by Congress, most of which would impose even more draconian cuts on social programs. The report also explores one somewhat more promising alternative, the Obama Administration’s 2013 budget proposal.
Self-Inflicted Wounds: Protecting Families and Our Economy from Bad Budget Choices concludes with a call for a balanced approach to deficit reduction, one that relies on tax increases and programs to create jobs, as well as spending cuts. The report is essential reading for anyone concerned with inequality and the further exclusion of our poor and low-income neighbors from the nation’s abundant resources. See more about a Faithful Budget.
March 15, 2012
Close Tax Loopholes
Last year as Congress obsessed about the deficit, policymakers agreed to cut approximately $2 trillion from federal spending over the next 10 years. (Read how the deficit is helping the economy, putting people back to work and back to paying taxes.) This is a sizable amount of money to cut. What wasn’t included in the legislation were any significant tax increases.
Citizens for Tax Justice recently released a report, Policy Options to Raise Revenue. In addition to explaining the general rationale for and benefits of closing loopholes and ending tax subsidies, CTJ describes 11 specific loopholes and subsidies that should be eliminated and estimates the revenue that would be raised from each one.
Reforming the tax code could raise huge sums of money while also strengthening the economy. Here’s one example. Repealing the rule that allows U.S. corporations to “defer” U.S. taxes on their offshore profits would bring in some $583 billion over ten years. (In this case, “deferral” means corporations pay no taxes on the profits until they are brought back to the U.S.) In addition to the revenue losses, CTJ explains that “deferral may give American corporations an incentive to move operations and jobs offshore.” Clearly, this loophole should be repealed.
Policy Options to Raise Revenue is a clearly written and important report. Read it, then ask candidates running for federal office if they would vote to repeal the deferral of corporate taxes on offshore profits, or support other reforms described in the report.
March 2, 2012
Slavery by Another Name
Slavery by Another Name is a powerful 90-minute documentary that recently aired on many PBS stations. The film shows that slavery did not end with the Civil War and Emancipation Proclamation. Chattel slavery, a condition where people can be treated as the personal property of a slave owner, did come to an end in the South in 1865. But thousands of African Americans continued to be enslaved in brutal conditions of forced labor. Under this new system, people -- often guilty of no crime -- were arrested, enslaved, and forced to work without pay. The practice ended only with the onset of World War II and the civil rights movement. This powerful and shocking film reveals history that should be more familiar to us all. Forced labor and extremely limited opportunity were facts of life for many African Americans until the mid-20th century. The legacy of this system continues to impact our lives today. Watch the preview and find more resources on the film’s homepage.
February 16, 2012
The Consequences of Economic Inequality
“While the achievement gap between white and black students has narrowed significantly over the past few decades, the gap between rich and poor students has grown substantially during the same period,” according to Stanford University Professor Sean Reardon. As reported in the New York Times, Reardon has found that the gap in standardized test scores between affluent and low-income students grew by about 40% since the 1960s and is now double the testing gap between blacks and whites. (A brief summary of Reardon’s research is here.) His analysis ended in 2007. Our on-going economic crisis has likely exacerbated the achievement differences.
Like Reardon, many respected researchers find economic conditions (such as inequality and income levels) are driving the widening gaps in social outcomes including educational achievement. But some people hold the opposite view: that social forces and moral values drive economic outcomes.
Toward the end of the New York Times article referred to above, the reporter describes a recent book by Charles Murray, Coming Apart: The State of White America, 1960-2010. Murray, a scholar at the American Enterprise Institute, argues that the growing income gap between the rich and lower-income whites is NOT being driven by economic conditions but by social forces including the breakdown of moral values.
Nobel-winning economist Paul Krugman challenges Murray’s logic and points out that entry-level wages of male high school graduates have fallen by nearly one-quarter since 1973 (adjusted for inflation) while employer-provided health insurance, which covered 65% of these men in 1980, covered just 29% in 2009. Today, workers without post-high school education or training (and a fair amount of luck) have trouble finding work at all, and extreme difficulty finding jobs with decent wages and good benefits. Krugman writes, “Yet somehow we’re supposed to be surprised that such men have become less likely to participate in the work force or get married, and conclude that there must have been some mysterious moral collapse.”
Maybe we all need better morals. But we certainly need jobs, a boost in wages particularly on the lower end of the wage scale, and universal health insurance coverage. Income inequality threatens our democracy and violates God’s dream of fullness of life for all people.
More about inequality.
February 3, 2012
Financial & Political Elites Engineer a Winner-Take-All Economy
Journalist Bill Moyers, who gave a powerful talk at General Synod in 2005, has a new, hard-hitting, insightful, not-to-be-missed TV program called Moyers and Company. It airs on PBS and some cable stations. Find when it is shown in your area or watch it online.
All three of the first one-hour shows focus on the same theme: how many of our politicians and financial elites have worked together to ensure the nation’s economic benefits flow to the very top. The massive inequality we are experiencing – with huge wealth being amassed by a very few, poverty rising, and the shrinkage of the middle class – is not happening by accident. It has been engineered by the financial and political classes.
In the first show, Winner-Take-All Politics, Moyers explores how America’s vast inequality didn’t just happen but was politically engineered. Moyers interviews the authors of the book Winner-Take-All-Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.
Authors Jacob Hacker and Paul Pierson (political scientists at Yale and U. of Calif., Berkeley, respectively) trace the rise of the winner-take-all economy back to the late 1970s when a major transformation of American politics began. Big business and conservative ideologues organized themselves to undo the regulations and progressive tax policies that had helped ensure a fair distribution of economic rewards. Deregulation got underway. Taxes were cut for the wealthiest. Business decisively defeated labor in Washington. This transformation continued under Presidents Reagan, both Bushes, and Clinton, with both parties catering to the interests of those at the very top. The epic battles waged during President Obama’s first two years in office reveal an unpleasant but catalyzing truth: winner-take-all politics, while under challenge, is still very much with us.
After that block-buster beginning, Moyers doesn’t let up. The second show of the season examines Crony Capitalism. Moyers and former White House budget director David Stockman discuss how politics and high finance have turned our economy into a members-only private club.
The third show looks at How Big Banks are Re-writing the Rules of our Economy. Moyers talks with former Citigroup chairman John Reed and former Senator Byron Dorgan to explore how the largest banks influenced Congress to benefit the richest among us.
This is a weekly show. We don’t know what will be coming in the weeks ahead but these first three shows are not to be missed. As one Occupy Wall Street protester’s sign proclaimed, “The Economy is not Broken, it’s Fixed.” Watch Moyers and Company to find out how, by whom, and how we can take it back.
January 23, 2012
Racial Economic Disparities
We celebrate the birth of Dr. Martin Luther King, Jr., and seek to further the work of racial justice by examining persistent economic disparities associated with being African American.
United for a Fair Economy recently released its ninth report assessing racial economic inequality, State of the Dream 2012: The Emerging Majority. They write: “In 2042, thirty years from now, people of color will collectively represent the majority of the U.S. population. If we continue along the governing path of the last thirty years, the economic divide between races will remain and, in many regards, will be considerably worse.” The report examines the impacts of public policies on a host of social and economic indicators including income, wealth, poverty, health care, homeownership, education and incarceration.
- In 2010, the median family income of black and Latino families was a mere 57 cents for every dollar of white median family income. If current trends continue, in 2042, black median family income will be just 61 cents, and Latino median family income will have declined to 45 cents, for every dollar of white median family income.
- In 2007, near the height of the housing bubble, average white wealth (net worth) was five times greater than average black wealth, and more than three and a half times that of average Latino wealth.
In Why Do Black Men Earn Less?, researchers at the Economic Policy Institute looked at wages for white and black men. In 2008 black men earned only 71% of what white men earned, that is, for each dollar earned by a white man, a black man earned just 71 cents. Educational and other differences explain some, but not all, of the discrepancy. Racial segregation and discrimination persist in the workplace.
What researchers call “occupational segregation” plays a large role in the wage gap. Nearly 90% of U.S. occupations are racially segregated, meaning that black workers are either under-represented or over-represented in the occupations compared with the number of workers in the population with the needed skills and educational requirements to do the job. In high-paying occupations, whites tend to be over-represented and blacks tend to be under-represented, that is, more whites and fewer blacks are employed in these occupations than would be expected based on the number of white and black workers with the needed skills and education. The reverse is true in lower-paying occupations: blacks are over-represented and whites are under-represented. Black men experience the most severe under-representation in construction, extraction/mining, and maintenance. These occupations pay wages that are significantly higher than those in occupations with comparable education requirements like the service sector where black men are over-represented. Across occupational sectors, at all levels of skill and educational requirements, black males are under-represented in high-wage occupations and over-represented in low-wage occupations. More
January 11, 2012
Land of Opportunity? Little Movement up the Economic Ladder
The Occupy Wall Street movement has brought to our attention the large income and wealth differences between the bottom 99% and the top 1%. But is this gap really so important if, with hard work and determination, people can move up the economic ladder, even into the top 1%?
A large amount of economic inequality is always socially destructive. But research also shows that it is very difficult for children to rise above their parents’ economic station in life. Moreover, moving up the economic ladder is less likely in the U.S. than in Western Europe or Canada.
A January 5 article in the New York Times cited a number of recent research findings.
- Nearly two-thirds (62%) of people raised in the top one-fifth of families stay in the top two-fifths.
- Roughly two-thirds (65%) of people raised in the bottom one-fifth of families stay in the bottom two-fifths.
- Among people born in the middle fifth of families, about one-third (36%) rise higher on the ladder, 41% move down the ladder, and 23% stay in the middle fifth.
If family background mattered very little and anyone who worked hard could get ahead, then 8th grade test scores might predict fairly well whether someone would finish college. But these data from the Economic Policy Institute tell a different story. High-income students with low test scores are more likely to graduate from college than low-income students with high test scores.
