Dedrick Muhammad | 10-01-08
As we wait to see if Congress will bail out the financial sector, it is time to clarify what is the fundamental economic problem that faces this nation. Our current financial crisis and the subprime crisis are both symptoms of a larger economic problem: an economy that no longer sustains a middle class and instead, allows the wealthiest elite to gamble massive fortunes regardless of its possible impact.
Historically, what has made the US economy strong has been an economy that fed and strengthened the middle class. Over the last 30 years we have seen the American economy go in the wrong direction. Instead of a growing and prosperous middle class, wealth has become concentrated in the hands of the rich, leaving middle class and working class America cash poor.
Today the wealthiest 10% control 70% of America's wealth. In the last 35 years, the richest one percent of Americans witnessed a 62% drop in their federal tax rate, while their incomes have increased over 80%. Meanwhile, payroll taxes that directly affect middle and working class Americans has increased 25%, while their wages have remained stagnate. The average American has used debt to try to compensate for stagnate wages and increasing health care, education, energy, and other basic costs. Wall Street bought and sold this debt, making billions for themselves, but leaving the financial system of the country in ruins.
Wall Street got so carried away making massive profits off of the debt of average Americans that they lost sight of what was obvious: the already economically squeezed American did not have the means to pay the debt that was being sold as a commodity. As I stated in a January 2008 Democracy Now interview, this debt would have to be paid at some point and it appears that time is now. Too much of the debt that Wall Street was so happy to buy and profit off of is now recognized as not being worth much more than the paper it was written on.
Some "free market" ideologues like, Larry Kudlow of MSNBC, are trying to convince America that the current financial crisis is the fault of the Community Reinvestment Act (CRA), originally passed in 1977. Kudlow asserts that the CRA "forced" banking institutions to sell unsustainable sub-prime loans, which are to blame for this financial crisis. This analysis is wrong on every level. According to a study, done by the law firm Traiger and Hinckley, foreclosure rates were lower in metropolitan areas with proportionately greater number of CRA banks. The report also noted that loans by CRA banks were more likely to offer lower cost loans. The report concludes that CRA Banks avoided making the types of home purchase mortgage loans that provoked the foreclosure crisis. So, not only was the Community Reinvestment Act not responsible for increasing the rate of unsustainable subprime loans, but as the study found, this piece of legislation helped decrease high cost subprime loans which too often led to foreclosure.
As the American people instinctively know, this financial crisis and the larger economic crisis is rooted in the government forsaking the American people, for the short term interest of the economic elite. The uninhibited greed and rampant speculation by the wealthiest Americans, who now demand that the American public bail them out, are also major factors for these economic crises our nation faces. Government has failed to adequately advocate for those who have been working hard and who increased the nation's levels of productivity, but never saw a corresponding increase in wages. The US government failed to protect the 60% of Americans who qualified for lower cost prime loans, but instead were tricked into high cost subprime loans. The US government failed to properly monitor the leveraging of sub-prime loans. These loans were flipped over and over again, providing great profits to Wall Street, while at the same time creating a multiplier effect for the minority of subprime loans that went unpaid. Government also failed to adequately regulate rating agencies, who gave AAA ratings to mortgage securities filled with unsustainable subprime loans. The government has repeatedly failed to properly oversee Wall Street and now must step in, not for a bailout, but to finally properly regulate the industry.
After decades of being told that government aid is the problem, not the solution, many conservative ideologues now insist that the federal government bailout industries of the mega wealthy. For these conservatives our nation's economic problems have been caused by government legislation such as the Community Reinvestment Act that supports the middle and working classes. The conservative solution of a publicly paid for bail out of Washington is as wrong as their analysis of the country's economic problem. Clearly, our nation is in need of a new solution, one which ends the disproven theory of trickle down economics, and instead re-invests in America from the bottom up.
James Lardner | 06-19-08
Next month, the federal minimum wage will rise to $6.55 an hour. Even at that level, it will be a far cry from the nearly $10-an-hour level (adjusted for inflation) of forty years ago. The influence of the minimum wage, Holly Sklar says on the June 13 Bill Moyers Journal, is felt most immediately and clearly by the roughly 1.7 million Americans who earn it. But, as a statement of what our country considers acceptable compensation, Sklar adds, the minimum helps shape the pay of those higher up the economic ladder.
On the same program, one of those higher-ups, Jaron Quetel, discusses "the best job I've ever had in my whole life." Quetel, a 28-year-old Los Angeleno with a young son, works as a clerk at UCLA. He makes $30,000 a year "nearly three times the annual pay of a full-time worker at the current minimum wage of $5.85 an hour. "Yet I am a breath away from drowning," he says. "I am one car payment away from being re-po'ed. I'm barely surviving."
He's "way over what other people are making today, and he can't make ends meet." says Sklar, a syndicated columnist and senior policy advisor to the Let Justice Roll Living Wage Campaign, a coalition of faith, community, and labor groups.
Through the minimum wage and other decisions, Sklar says, elected officials help define an environment in which "average workers are making less, in real terms--in what they can buy--than they were able to in the 1970s When the government basically allows the minimum wage to become not just a poverty wage, but a desperately poor wage, it sends a big signal."
"What's happening to American workers is not the result of natural forces alone," says Moyers. "No, it's happened because corporate and political powers connived to keep wages down while shredding their workers' safety nets. For some time now the Great American Wealth Machine has been cranking out jackpots for the people at the top and pushing working people further down the ladder."
Vermont Senator Bernie Sanders recently put out an email blast asking constituents to talk about their economic lives. Moyers concludes his show by reading some excerpts:
"Some nights we eat cereal and toast for dinner because that's all I have."
"We have at times had to choose between baby food, diapers and heating fuel."
"I don't go to church many Sundays, because the gasoline is too expensive to drive there."
"The pennies have all but dried up--I am sad, broken, and very discouraged."
"Does anybody in Washington care?"
Chuck Collins | 06-13-08
Check out the June special issue of The Nation on The New Inequality. In conjunction, we have launched a sister web site for the Working Group on Extreme Inequality at www.extremeinequality.org
In our introductory essay to the issue, The Rich and the Rest of Us, by John Cavanagh and I, we argue that efforts to reduce poverty will be stymied so long as concentrated wealth defines our nation's political priorities. And until we seriously tax the holders of that concentrated wealth, we will lack the funding resources that any bold poverty-fighting initiative demands.
Working Group member Barbara Ehrenreich laments in her essay This Land is Their Land, that these days if a place is truly beautiful, you can't afford to be there.
Check out the amazing centerspread, designed by the Working Group on Extreme Inequality. Soon to be available as a poster! And a Resource List produced for The Nation that includes this web site, www.inequality.org
Chuck Collins | 04-15-08
By Holly Sklar
When it comes to cutting taxes for the wealthy, President Bush can truly say, "Mission accomplished."
The richest 1 percent of Americans received about $491 billion in tax breaks between 2001 and 2008. That's nearly the same amount as U.S. debt held by China -- $493 billion -- in the form of Treasury securities.
Do you want our government to mortgage more of our nation's future to finance tax breaks for the rich?
Tax cuts have already helped the richest 1 percent -- whose annual incomes average about $1.5 million -- increase their share of the nation's income to a higher level than any year since 1928 on the eve of the Great Depression.
Wall Street's five biggest firms paid "a record $39 billion in bonuses for 2007, a year when three of the companies suffered the worst quarterly losses in their history" and are eliminating thousands of jobs as losses mount from the subprime mortgage market collapse, reports Bloomberg.
The International Monetary Fund says the United States is in the worst financial crisis since the Great Depression. Yet, we are borrowing money with interest to finance tax cuts for Wall Street executives.
For Americans below the top 1 percent, the tax cuts have been a giant swindle. The bottom 99 percent of taxpayers were left with a bill of $3.74 in debt for every $1 in federal tax cuts from 2001 to 2006, reports Citizens for Tax Justice. Only the top 1 percent came out ahead.
Meanwhile, the federal budgets for environmental protection and housing for the elderly have been slashed more than 20 percent since 2001, adjusted for inflation, the Community Development Block Grant budget is down 32 percent, and the lack of health insurance is an epidemic.
Most households aren't even earning as much as they did in 1999, adjusting for inflation. But the 400 taxpayers with the highest incomes doubled their incomes between 2002 and 2005.
According to the latest IRS data, which excludes tax-exempt interest income from state and local government bonds, the richest 400 taxpayers reported an average $214 million each on their federal income tax returns in 2005 -- up from $104 million in 2002.
As the Wall Street Journal observed, "It's also important to remember that these figures don't represent wealth or even lifetime earnings -- merely income for a single year."
Thanks to tax cuts, it's now common for the nation's richest bosses to pay taxes at a lower rate than workers. The 400 richest taxpayers paid only 18 percent of their income in federal individual income taxes in 2005 --- down from 30 percent in 1995.
"The drop in effective tax rates for the top 400 filers," the Center on Budget and Policy Priorities reports, "worked out to a tax reduction of $25 million per filer in 2005." It would take 673 average workers earning $37,149 a year to reach $25 million today.
While tax cuts help the superrich compete over who has the biggest submarine-carrying superyacht, Katrina survivors are being hit with foreclosures, and neglected levees and bridges around the country are a disaster waiting to happen.
Most of the provisions of the 2001 and 2003 tax cuts are scheduled to expire at the end of 2010. President Bush wants to make them permanent.
The richest 1 percent of households would receive nearly $1.2 trillion in tax cuts from 2009 through 2018, reports the Center on Budget and Policy Priorities.
How much is $1.2 trillion? More than all the debt accumulated in the nearly 200 years from George Washington through Ronald Reagan's first two years in office. That's before adding interest payments on the borrowed $1.2 trillion.
Tax cuts for the wealthy fuel rising inequality along with rising debt and neglect. Taxpayers with annual incomes above $1 million in fiscal year 2012, for example, would increase their after-tax income by 7.5 percent thanks to an average tax cut of $162,000. The poorest 20 percent of taxpayers would get an average tax cut of $45 -- and decaying public services.
Democratic presidential candidates Hillary Clinton and Barack Obama promise to end the tax breaks for the wealthy. Republican candidate John McCain wants to extend them. What do you want?
Holly Sklar is co-author of "Raise the Floor: Wages and Policies That Work for All of Us" and "A Just Minimum Wage: Good for Workers, Business and Our Future." She can be reached at hsklar@aol.com.
Dedrick Muhammad | 04-02-08
Forty years after his death, Rev. Martin Luther King Jr.'s words tragically speak to our current reality.
"The majority of white Americans consider themselves sincerely committed to justice for the Negro," he wrote in the 1967 book, "Where Do We Go From Here: Chaos or Community?" "They believe that American society is essentially hospitable to fair play and to steady growth toward a middle-class Utopia embodying racial harmony. But unfortunately this is a fantasy of deception and comfortable vanity."
The Institute for Policy Studies' report 40 Years Later: The Unrealized American Dream, provides evidence of striking little progress in closing the gap between African Americans and whites since Dr. King's death, particularly in the area of economic equality.
In 1967, African Americans earned 54 cents for every dollar white Americans made per capita. In 2005, African Americans earned 57 cents on every dollar earned by white Americans. In other words, African Americans have made only 3 cents of progress in four decades. At this rate, it will take over 537 years before income parity is achieved. African Americans are similarly situated in terms of wealth. If the racial wealth divide continues to close as slowly as it has since 1983, it will take about 600 years for African Americans to reach wealth equality with whites.
In the late 1960's, Dr. King recognized that the next phase in the quest for civil rights and equality would focus on the economic divide. Dr. King recognized that this next step would not just require non-violent action and the blood of civil rights martyrs, but also billions of dollars of investment. King proposed such bold initiatives as the Bill of Rights for the Disadvantaged and supported the proposed Freedom Budget of 1966. These proposals called for mass federal investment into the poor and working class of America to secure jobs, housing, and the opportunity to build wealth for all Americans.
King understood that a mass wealth building program was needed. He envisioned more wealth-building legislation, similar to those of the 1930's and 1940's which resulted in the great white middle class economy. When the Civil Rights movement succeeded in ruling archaic segregation laws unconstitutional, King figured that this was the time for new wealth building programs that could finally benefit all Americans. Dr. King would not live to see the federal government support the mass investment necessary to make his dream a reality. Forty years later this federal investment for bridging the racial economic divide is still yet to arrive.
Today Congress and the Bush administration spend hundreds of billions of dollars to fight a tragic war abroad. Most recently, the government has decided to bail out investment banks that profited off of predatory subprime lending. This predatory subprime lending has led to record numbers of foreclosures. Yet, there is no money to be found to end the poverty of children in America. Today a third of Black children are born into poverty with similar numbers for Latino children and a tenth of white children in poverty.
From education, to income, to wealth, to incarceration 40 Years Later: The Unrealized American Dream, , outlines the various areas where the Black/white divide still remains. This report also provides a list of investment programs which can serve as the starting point in making Kings dream a reality. Forty years after the murder of the dreamer, it is not too late to address the racial injustices that still mark our nation. As the Hebrew Bible reminds us, the Jewish people spent 40 years wandering in the desert, because they lacked faith in the God that had freed them from Egyptian bondage. Our nation has similarly been off track for 40 years, tolerating racial inequalities rooted in white supremacy. It is time to make Kings dream a reality and enact the social policy he deemed necessary over 40 years ago.
Chuck Collins | 03-11-08
Tom Herman at The Wall Street Journal reports the latest on the Fortunate 400. New IRS data indicates that the 400 highest income earners together earned $85.6 billion in 2005, an average income of $213.9 million each. These 400 households took home 1.15 percent of all income earned in the U.S. The average federal income tax rate for the group was 18.23 percent, low because 86 of the income was capital gains and taxed at a 15 percent rate. A compelling case could be made that above certain income levels, income from wealth and income from wages should be taxed at the same level, especially on short-term capital gains. Want to do something about it?....
Come to Washington For Two Events on Extreme Inequality
We're organizing a session at the Take Back America conference called "Reversing the Second Gilded Age. " Speakers include: Sen. James Webb (invited). Bill Gates Sr., Barbara Ehrenreich, and Chuck Collins. It will be on Tuesday March 18 at 1:45-3:00 at Omni Shoreham Hotel, the Diplomat Room, in Washington, D,C. Learn more here.
Lift Your Voice to Preserve the Estate Tax
On Tuesday and Wednesday, we are co-hosting a Congressional education day aimed at preserving the estate tax. Learn more information about the activities.
Dedrick Muhammad | 02-21-08
In February of 1968 President Lyndon B. Johnson's Kerner Commission Report was released. The Kerner Commission was created in response to the 1967 urban Black rebellions in Detroit and Newark. The report famously stated: Our nation is moving toward two societies, one black, one white, separate and unequal.
Forty years later, I sat down in front of my laptop to examine the current presidential candidate's plans to deal with the still prevailing black/white economic divide. In examining the four leading presidential candidates websites and the dozen or so issues each highlight, only once did I find an issue that incorporated the black/white racial divide. Ironically enough it was the post-racial presidential candidate Barack Obama who saw civil rights as a worthy enough topic for his website. Obama highlights the issue by mentioning income inequality, a rise in hate crimes, the suppression of minority voters, and racial disparities in the criminal justice system. Obama recognizes that the racial divide still challenges this nation. The problem is that too many Americans naively see the mere fact of Obama's candidacy as evidence of the resolution of the black/white race divide.
The Kerner Commission report recognized that the black/white race divide was largely an economic divide and proposed economic policies to meet this social problem. This policy prescription included: creating two million jobs, in both the public and private sector; fully subsidizing on-the-job training for the chronically unemployed; providing federal assistance to all schools that worked to end de facto segregation; offering federal funding for year-round compensatory education programs serving disadvantaged children; developing a uniform national welfare standard to bring everyone's income up to the poverty line; and building six million new and renovated units of housing for low and moderate income families.
Though the Kerner report was widely discussed at the time of its release with over two million copies sold, the recommendations were at best ignored. As the African American Encyclopedia notes Congress passed antiriot legislation rather than the kinds of social programs advocated in the Kerner Report.
Obama's civil rights plan is much more modest than that of the Kerner Commission . Obama advocates strengthening civil rights enforcement, combating employment discrimination, ending racial profiling and deceptive voting practices, as well as some criminal justice reforms such as providing ex-offender support and eliminating sentence disparities. All of these are well and good but Obama's plan fails to make the necessary investment that could economically lift African Americans who currently earn about 57 cents on every dollar that white Americans earn and only have only 15% of the wealth of white America.
Today America still stands as a nation marked by segregated black and white societies that remain separate and unequal. A 2002 US Census Bureau report titled Beyond Black and White states that African Americans are still the most segregated racial group in the United States. It also highlights that whites have the strongest own-race preference when it comes to buying a home. The report further states that holding other factors constant, while Asian and Hispanic composition does not matter to Whites buying a home, black neighborhood composition does.
White Americans dislike of living in communities comprised of more than 10% African Americans causes a substantial decrease in demand for African Americans homes which correspondingly causes an erosion in home value. At the same time, it artificially increases the demand and value of homes located in overwhelmingly white neighborhoods. With homeownership as the primary source of wealth for most Americans, the prejudice of white Americans serves to maintain the current racial wealth divide.
In 1968 there was an understanding that ending the black/white race divide was an important challenge to the nation as a whole and that it would require massive federal investment. Today none of the presidential candidates advocate an economic development plan that will heal the nations centuries old black/white divide and only Barack Obama even highlights that the area of civil rights as one of current national priority. The report State of the Dream 2008, which I helped write, found that upper-income African-Americans are almost twice as likely as low income whites to have taken a subprime loan and that a third of black children or born into poverty. The candidates apparently dont deem these issues as important enough to focus on during a presidential election. But they should.
This year holds much promise. Our country may well elect for the first time a woman or an African-American to the presidency. Either scenario would mark a major milestone. Yet there's no such promise in bridging the continued racial divide. It would help all the presidential candidates and the nation as a whole to look back at the 40-year-old Kerner Commission report and see a plan that could truly bring forth the change we all could believe in.
Dedrick Muhammad is a senior organizer and research associate at the Institute for Policy Studies in Washington.
Dedrick Muhammad | 01-23-08
I am sitting here in Park City, Utah at the Black House, a building that houses events for Blacks in the film industry and provides free internet access. Thousands from across the country come to this beautiful but cold place for the Sundance film festival, the most important film festival in the country. It has been snowing all morning and a good part of the night. When you look up to the mountains you can see deer running through the snowy terrain and on main street you see paparazzi running up and down looking for a celebrity.
Who would have thought that this is where work on the racial wealth divide would take someone? I have come to Sundance in support of the documentary " Traces of the Trade: A story of the deep North". This documentary premiered Martin Luther King day and that same morning there was a panel discussion concerning the film. Katrina Brown the project leader of the film was on the panel and described how coming to terms with being a descendant of the largest slave trading dynasty in the United States inspired her to develop this film and commit herself to advancing racial dialogue and racial justice. We were honored to have on the panel Congressman Conyers, the chair of the Congressional Judiciary Committee and the longest serving African American in the House of Representatives. Four days after Martin Luther King was killed Congressman Conyers introduced legislation to make Dr. Kings birthday a national holiday. After 15 years the congressman's legislation was finally accepted into law creating the Dr. King holiday that we currently celebrate. Congressman Conyers came to the Traces of the Trade panel to discuss another piece of legislation that he has been pushing for almost twenty years HR 40, a bill that would create a commission to study the legacy of the trans-Atlantic slave trade and its contemporary effects.
200 years after the end of the trans-Atlantic slave trade, the United States is still fearful of examining this part of US history. The slave trade created the financial wealth which made the industrial revolution possible. The documentary "Traces of the Trade" describes how the Dewolf family (the Rhode Island slave trading dynasty) had a rule about what was impolite conversation. It went: Don't talk about politics, religion, and the Negroes. Every year the nation honors a man who did all three. Dr. King talked about the political-economic change needed in America, the moral and religious responsibility we have to be agents of this change, and the plight of African- Americans in a racially divided America.
I also spoke on the Sundance panel and highlighted that 45 years after Dr. King wrote his book "Why We Can't Wait" a third of African American children are in poverty, Blacks only have a tenth of the wealth of white America, and that as the United States enters into a recession Black America is teetering on a depression as it relates to wealth. The sub-prime crisis threatens to set back African-Americans in their attempt to be a majority homeowner population. The traces of the trade of enslaved Africans and the wealth it created for white America are seen throughout the economic disparities that still exist today. "Traces of the Trade" helps highlight this reality and with its soon to be national release promises to educate millions of Americans beyond this snow bound valley.
Chuck Collins | 01-22-08
Written for Alternet
Every couple of years, when big investors suffer losses, Congress and their partisan economists launch into a heated debate over how to stimulate the flagging economy. This is mostly a rehash of the "trickle down" versus "bottom up" debate that dates back to the Reagan years.
Conservatives argue that the answer to the recession is to cut taxes and interest rates targeted at their über-wealthy and global corporate patrons. This is their program for any season, rain or shine, so it is immediately suspect.
Progressives argue, correctly, that we should target tax breaks and rebates to low- and middle-income people; their consumer spending will keep the economy chugging. Give a tax break to big corporations and the rich, and it will go anywhere on the planet in search of maximum returns. Give a tax rebate to a lower-income person or a small business and it is spent in the local economy, thus stimulating bottom up demand.
The likely congressional compromise will direct tens of billions in tax breaks to corporations and send ordinary people a check for $300 or $400. The wealthy will be further enriched, and everyone else will have extra cash to spend or pay down their Visa bill.
Whatever Congress does, however, it will borrow funds -- adding further to a national debt that now tops $9 trillion. More borrowing will continue to weaken our economy, widen our trade deficit, increase current and future wealth inequality, and postpone the bill payment for another day.
Meanwhile, the rest of the world's economists look at the United States like we're profligate fools jumping up and down on a bubble of debt. They're nervously depending on us to remain the "shoppers of the world" by borrowing money and buying imports beyond our means. But they see what we ignore: The gig is up.
Underlying our economic crisis is a polarization of income and wealth. Real wages for working people have been stagnant for decades, a horrific fact that has been masked only by increased work hours and vast amounts of private consumer debt in the form of credit cards and second mortgages. On the other end of the wealth spectrum, the superrich have so much money that they are engaging in speculative investments in search of maximum returns. This casino class, with its hedge funds and mortgage gambling schemes, have fueled further economic instability.
Congress should pass a "bottom up" stimulus package and pay for it with taxes on the rich. Three progressive tax proposals could pay for additional investments that would broaden prosperity and reduce distortions caused by concentrated wealth.
Increase top income tax rates. There are 7,500 households in the United States with annual incomes over $20 million. This private jet crowd has been the big winner of the rigged tax system of the last two and a half decades. Congress should boost the top tax rate to 50 percent on annual incomes over $5 million and to 70 percent on incomes over $10 million. This would generate an additional $105 billion a year and pay for a federal stimulus package.
Increase estate taxes. While the Bush administration is using the recession as a pretext for abolishing the estate tax by making the 2001 tax cut permanent, Congress should do just the opposite. The estate tax, our nation's only levy on inherited wealth, should be revamped to tax inheritances over $20 million at higher rates. Revenue should be dedicated to reducing the payroll tax or providing debt-free college educations. As part of reforming the estate tax, Congress should restore the credit that allows states to "piggy back" on the federal estate tax and generate billions in revenue for states. State spending on education, infrastructure and community development are among the most effective intermediate-term economic stimulus.
Tax warehouses of wealth. Over the last two decades, the über-rich have funneled billions of dollars -- funds that could have been taxed -- into private foundations and nonprofit organizations like Harvard University. This is the "people's money," forgone tax dollars that should help stimulate the economy. We should increase the annual excise tax on private foundations and nonprofit corporations with assets over $20 million by two percent. Foundations that fail to pay out more than 5 percent a year, excluding their overhead, should be assessed an even higher excise tax.
These measures would generate hundreds of billions to pay for immediate economic stimulus as well as meaningful investments in economic opportunity. Borrowing funds to stimulate the economy will just postpone the pain. Paying now, through targeted taxes on the wealthy, makes economic sense. Further, it addresses the root of our current economic distress, the extreme inequality of wealth and power.
Chuck Collins is a senior scholar at the Institute for Policy Studies and chair of the Working Group on Extreme Inequality, an emerging coalition of religious, business, labor and civic groups concerned about the wealth gap.
Originally published on Alternet
Dedrick Muhammad | 01-16-08
To commemorate the 79th birthday of Dr. Martin Luther King Jr. the Institute for Policy Studies and United For A Fair Economy co-sponsored a forum on the new report The State of the Dream: 2008 . This report focuses on the historic racial wealth divide, what progress has been made in bridging this divide since the death of Dr. King, and the impact of our contemporary subprime housing crisis on this divide.
The primary form of wealth for most Americans is homeownership. Today we are seeing that the dream of homeownership is increasingly being shattered due to unregulated subprime markets and lack of government investment into the wealth development of its own citizens. Leaving homeownership to the dictates and uncertainty of the private market has never been adequate in for most Americans. Whether it was the homestead act of the 1800's, the GI bill of the 1940's, or the ongoing mortgage insurance programs from Washington, government subsidies have been a necessary component of growing homeownership.
Between the Depression in the 1930's, and the beginning of the Civil Rights movement in the 1950's, billions of dollars were invested in American homeownership. The post-War housing boom was fueled by subsidized assistance to over 35 million Americans between 1948 and 1972. During these years, 11 million families bought homes and another 22 million improved their properties. The biggest beneficiary was defacto white suburbia, where half of all housing could claim FHA or VA financing in the 1950's and 1960's. For example, at the end of World War II the percentage of U.S. citizens that owned their own home was about 44 percent. In comparison, 2004 showed 76 percent of whites owned their own home, compared to 49.1% of Blacks and 48.1% of Latinos.
The progressive economic measures of the Post-War era had a positive impact in strengthening the economic situations of most middle class and lower income Americans. However, due to the racist nature of the country during this time it also reinforced the economic supremacy of whites in relation to people of color. There has been no such mass investment into homeownership that people of color could equally access since the end of legal segregation in the late 1960's. This has left African Americans and Latinos particularly susceptible to subprime targeting by dubious mortgage lenders. In their struggle to develop economic security through homeownership, too many people of color were misled into financial arrangements that would not be wealth developing. Conversely, these arrangements would strip away the little wealth that they had accumulated.
Increases in the cost of housing, education, and health care, paired with an increase in payroll taxes of 25%, and massively decreased government investment in affordable housing, employment, and job training, have left most of America cash poor. Americans found the liquidity needed to pay daily bills through debt: credit cards, refinancing, subprime loans. The American middle and working classes are maintaining their lifestyle on a foundation of quicksand (debt they cannot afford). If current indicators are correct it is quite possible that the entire US economy will sink into the debt that the middle and working class have developed over the last twenty years.
This year marks the anniversary of many historical moments of great significance including the 40th anniversary of the deaths of Dr. Martin Luther King and Robert Kennedy Jr, and the anniversary of the famed Kerner Commission Report. The State of the Dream: 2008 highlights the racial wealth divide that still marks America and the growing divide between the wealthiest and the rest of us. A rededication to the socio-political vision of Dr. Martin Luther King Jr., coupled with the wealth building policies discussed in the The State of the Dream: 2008 , can redirect the United States back on to the path of greater racial equality. Forty years after the murder of Dr. Martin Luther King there are those of us in the United States who believe it is not too late to implement the economic reforms that he knew were needed to make his Dream a reality. Hopefully, 40 years from now we can stop talking about King's Dream and instead live a Kingian American reality.
Chuck Collins | 01-08-08
In my home city of Boston, it is obvious where the money is. There is a building boom as new state-of-the-art buildings mushroom up on college and university campuses.
A few miles away, in the working class neighborhoods of Jamaica Plain, Roxbury and Dorchester, the skyline remains the same as it did two decades ago. Basic public infrastructure projects such as bridges, parks, and neighborhood libraries lag for years, waiting for funds. What accounts for the disparity?
The dynamics of concentrated private wealth are driving these trends. Boston's private universities fueled by charitable donations from wealthy alumni are pushing their boundaries outward and upward.
"The shift from public money to private wealth in shaping the nation's cities is evident in national data, " writes Louis Uchitelle in The New York Times (Private Cash Sets Agenda for Urban Infrastructure January 6, 2008) The percent of GDP spent on government funded public infrastructure has shrunk from 3.6 percent in the 1960s to 2.7 percent today. Charitable giving has jumped from 1.5 percent of GDP in 1995 to 2.5 percent.
Uchitelle contrasts Yale University with a $22.5 billion endowment and $400 million a year to spend on infrastructure with the entire city of New Haven, which budgeted $137 million for all its capital projects. As a result, Yale University is constructing 16 new buildings including a fancy new mansionlike field house but the city of New Haven is unable to complete basic infrastructure projects for lack of funds.
Charity dollars are not a substitute for robust public investments. As Uchitelle writes, "Philanthropic spending adds mainly to the nation's stock of hospitals, libraries, museums, parks, university buildings, theaters and concert halls. Public infrastructure highways, bridges, rail systems, water works, public schools, port facilities, sewers, airports, energy grids, tunnels, dams and levees depends mostly on tax dollars. Private wealth going into charity is now badly out of balance with public funds available for infrastructure."
Across the U.S., we see rich universities and poor cities. We see new student dorms that look like Marriot hotel suites next to neglected public housing developments and broken down mass transit facilities. There is something wrong when 18 year old students have vastly superior housing conditions and libraries than the adults who serve their meals and pick up after them.
We used to tax the wealthy and use these funds to build infrastructure that benefited everyone. Private donations to education are important but not as a replacement for investments in the common wealth of community infrastructure.
Chuck Collins | 11-16-07
I got to watch Warren Buffett testify before the Senate Finance Committee on Wednesday in defense of the federal estate tax, the nation's only tax on inherited wealth.
It was really a remarkable hearing. A longtime Washington lobbyist and former Hill staffer said it may have been the best hearing he'd every seen.
Buffett's prepared remarks invoked the historical roots of the estate tax, established in 1916 during the Gilded Age to put a brake on anti-democratic concentrations of wealth and power. "Dynastic wealth, the enemy of meritocracy, is on the rise," Buffett told the panel. "Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."
After a decade of false accusations and innuendo, Wednesday's hearing was the first opportunity to set the record straight as to who pays the estate tax, how much revenue it generates and why we should retain it. Senate Finance Chair Max Baucus (D-Montana), a supporter of abolishing the tax, conceded that "99 times out of a hundred, the tale is worse than the tax."
Republican Chairman Charles Grassley (R-Iowa) complained that "the death tax" was "fundamentally wrong." Buffett responded that use of the phase "death tax" was "intellectually dishonest" and "clever, Orwellian and dead wrong." Buffett pointed out that the tax cuts of the last decade have enabled the superrich, including himself, to get richer.
"Tax-law changes have benefited this superrich group, including me, in a huge way. During that time the average American went exactly nowhere on the economic scale: He's been on a treadmill while the super rich have been on a spaceship."
Buffett noted that only one in 200 households in the U.S pays the tax and they are exclusively multi-millionaires and billionaires. "Leona Helmsley's dog, Trouble, reportedly is inheriting $12 million," Buffett quipped. Without an estate tax, "Trouble could instead receive $22 million."
Buffett has a few lessons for Congress on tax priorities for the coming years. He supports making the tax system more progressive. To underscore the unfairness of the tax system, he recently offered a $1 million reward to any member of the Forbes 400 who could prove that they pay a higher tax rate than their personal assistants and secretaries. So far, he has had no takers.
He thinks helping low-wage Americans is a bigger priority. "Keep the estate tax and its $24 billion," Buffett proposed. "There are 23 million households in the United States with $20,000 or less of income. Let's give those 23 million households a $1000 annual credit. The cost of this would be less than getting rid of the tax on less than 12,000 estates.
Let's hope Congress starts to act on common sense from the Sage of Omaha.
James Lardner | 10-22-07
The top 1 percent of Americans received 21.2 percent of all personal income in 2005, according to the latest Internal Revenue Service data. That's a big jump from 2004, when the top 1 percent's share was 19 percent, and slightly above the 2000 figure of 20.8 percent - the modern-day peak. The bottom 50 percent of Americans got 12.8 percent of all 2005 income, down from 13.4 percent in 2004 and 13 percent in 2000. The new IRS numbers highlight the "divergence of economic fortunes blamed for fueling anxiety among American workers," writes Greg Ip of the Wall Street Journal.
The latest leap upward of inequality parallels the recent performance of the stock market. This time around, though, the biggest gains appear to be flowing to dealmakers and speculators rather than to garden-variety corporate executives.
In 2004, according to Steven Kaplan and Joshua Rauh of the University of Chicago's Graduate School of Business, the top 0.5 percent of earners included more than twice as many Wall Street professionals as executives of nonfinancial companies.
Since the bubble (the last one) burst in 2001, the biggest winners have been managers of hedge funds and private equity funds, investment bankers and other financial engineers and their advisers and consultants. "The top 25 hedge-fund managers earned more in 2004," the Journal story notes, "than the chief executives of all the companies in the Standard & Poor's 500-stock index, combined." The 2004 compensation of the typical partner at a top-100 law firm was over $1 million - double the inflation-adjusted figure for 1994.
This latest upsurge in inequality - now hovering near 1920s levels - looks like "a Wall Street, financial industry-based story," Rauh told the Journal.
Economic inequality has been on the rise in America for roughly three decades, with a brief interruption in the late 1990s. When the trend first became a topic of widespread discussion, the crucial gap seemed to lie between the top 20-to-40 percent of Americans and others, lending plausibility to a "skills gap" explanation. On one side of the chasm stood professionals with college degrees; on the other side stood Americans (males above all) with high school degrees or less.
With the passage of time, however, the so-called education premium has declined, and a new body of research - spearheaded by Thomas Piketty and Emannuel Saez of the University of California at Berkeley - has put the line of fissure at a much higher income level. Piketty and Saez work mainly with IRS data, which, though less up-to-the-minute than Census Bureau figures, provide a more refined picture of the highest earners. They have shown us a trend propelled largely by the gains of a tiny slice of the population, with corporate and financial insiders looming very large.
The cumulative numbers point to a tale of power - financial power - more than skill or education. They also suggest that we're talking about a trend that was made in America, rather than one shaped by the tides of globalization. If technology and trade could explain the rise in inequality, we would see the same pattern in Holland, France and Germany, among other countries. For the most part, we don't.
Against the mounting weight of evidence, though, many political and business leaders cling to the old consoling story. "Scholars," the Journal says, generally attribute the trend to "change that favors those with more skills, and globalization and advances in communications that enlarge the rewards available to 'superstar' performers whether in business, sports or entertainment."
In January 2007, President Bush had a populist moment. Addressing an audience of Wall Street moguls and professionals, he entreated them to "step up to their responsibilities," and "pay attention to the executive compensation packages that you approve."
But when the Journal raised the issue with President Bush last week, there was no mention of boardroom or Wall Street complicity. "First of all, our society has had income inequality for a long time," the President replied. "Secondly, skills gaps yield income gaps. And what needs to be done about the inequality of income is to make sure people have got good education, starting with young kids. That's why No Child Left Behind is such an important component of making sure that America is competitive in the 21st century."
Dedrick Muhammad | 10-16-07
Privatization is to move that which is under public control (most often administered by government agencies) to private control (usually a corporation driven by a profit motive). The rationale for privatization is the theory that private companies guided by the profit motive, and not hindered by the public will, will be more effective and efficient.
A few years ago, President Bush came up with a privatization plan involving social security, one of the most successful government programs ever created. (Since its inception, the poverty rate among elderly Americans has dropped from 50 percent to 11 percent.) The public disapproved, as it usually does when such proposals are put forward. The unusual part of the story was that elected officials listened and put a halt to the Bush initiative.
During President Clintons time in office there was a massive privatization of the public digital broadcast spectrum, the airwaves which transmit digital information. It is estimated that this public digital broadcast spectrum was valued at 70 billion dollars and was given (as in for free) to major telecommunication corporations. Too often this is the negative side of privatization; private corporations make mass profit off public assets with little seen in public benefit and with little to no improvement in service.
The New York Times describes the next frontier in domestic privatization, the privatization of state lotteries, as the biggest privatization of a government enterprise in American history. A sophisticated scheme designed by major investment banks has been developed to circumvent the current 60% disapproval of privatizing state lotteries. Major investment banks are pitching to government officials the benefits and risks of privatizing state lotteries. One must assume that the benefit of 100s of millions of dollars in fees to these investment banks if privatization is implemented has some influence on the objectivity of their reports.
For good reason the public is cautious about the privatization or (what might be more accurate) the profitization of public agencies. There are billions to be made by corporations when they take over state developed lotteries, but how much public good is there?
The private sector believes that there is tremendous growth potential in expanding the consumer base of lotteries and the type of lotto games to be played. Yet do we as a society think it is better for a larger proportion of our community to gamble their earnings away to raise corporate profit margins? Currently most states link state lottos to funding public schools and hospitals with the aim of channeling non-productive consumption dollars into a productive social good, education and health care. In many areas of service the private sector does not adequately serve the needs of the public. Often times these are the essentials of life, defense, policing, healthcare, protection of the environment, education, etc.
The myth of privatization rests on the supposed efficiency and effectiveness of private corporations. It is clear that privatization is often effective and efficient at increasing profits for the select owners of a given corporation. It is also clear that the public understands that immediate profits for corporations does not equal service that best provides for the public at large. The true challenge in this public vs. private debate is whether public officials will heed the calls of the public at large or will follow the "advice" (usually followed with dollars) of those who will most profit from privatization.
Dedrick Muhammad | 10-02-07
Last week the top tier presidential candidates for the Republican Party rejected two important opportunities to engage the African-American community on the policy matters which will shape this country. It was widely reported that Romney, Giuliani, McCain, and Thompson refused to participate in the Republican primary debate held at Morgan State University, a historically Black college within an hour of Washington, DC. Less noticed was the absence of the candidates at the Annual Legislative Conference of the Congressional Black Caucus Foundation held this past last week of September.
This conference brings together a who's who of policy makers, analysts, activists, and celebrities from across the country. Much insight was shared about policy changes that could move our nation forward. Congressman Bobby Scott of the 3rd District of Virginia held an impressive forum on the Federal Budget, revealing the radical fiscal irresponsibility of the "conservative" Congress and President. The forum revealed how the $5.6 trillion dollar surplus left by the Clinton administration is projected to decline by $8 trillion dollars to a $2.4 trillion dollar deficit, thanks to Bush's economic policies. Even if we factor in a very generous 1 trillion dollars for Bush's unnecessary war against Iraq and the war in Afghanistan, the nation will still be left with $7 trillion dollars less than what President Clinton left for the nation. This current Bush administration with 6 years of a Republican Congress has also managed to have the slowest job growth rate in 70 years and the lowest increase in the Dow Jones Industrial Average since Ronald Reagan's first term.
The Congressional Black Caucus developed a budget in 2006 that would have ended President Bush's tax cuts for the wealthy that has so thoroughly put the nation in debt. This budget was projected to balance the budget in five years while at the same time adding $80 billion dollars of investment into education and job training, $20 billion more for healthcare, $20 billion more for veteran services, and $6 billion more for community development with a good deal going to help those who are still recovering from Hurricane Katrina.
Some Democratic candidates did attend, the Congressional Black Caucus Legislative Conference. They listened to the policy proposals presented while adding a few ideas of their own. Senator Hillary Clinton floated the idea of providing Baby Bonds to American youth. This is a policy proposal that is already being implemented in Great Britain. Every newborn child is given a small piece of societys wealth (Senator Clinton proposed $5000), to be invested in the national economy, yielding a growing return. At age 18, the "baby bond" can be used to help with higher education, job training, home ownership or some other productive wealth building activity. At Senator Barak Obama's forum on Global Climate Change, Van Jones, Executive Director of the Ella Baker Center for Human Rights, made a passionate call to tie the development of the growing environmental sector - the "Green" economy - to job opportunities for the disenfranchised. Van Jones well articulated the need and the means to save the communities in which our children are dying, while we save dying polar bears.
In rejecting policy discussion with the African-American community and in particular the community's top legislators, the top tier Republican candidates are rejecting that which can serve as the foundation for a better direction for the United States. Next year when the general election begins and the Republican party proclaims itself as one of inclusiveness many Americans will remember that the top candidates decided to exclude themselves from those Americans who were coming together and sharing solutions to our country's most pressing problems.
Dedrick Muhammad | 09-20-07
The story of the Jena 6 has struck a nerve with Black America, particularly the youth and young adult population. Mos Def, a popular rapper and actor, expressed the sentiments of a generation when he said on the Bill Maher show, "I shouldn't have to live in two Americas... People should be more upset about it [the Jena 6]. What the f*** am I supposed to tell my kids? What am I supposed to tell my son, that you are supposed to be a second class citizen?"
At Howard University, there was a rally of support for the Jena 6 a few weeks ago. In Baltimore Black students designed their own Free the Jena 6 t-shirts and held their own rallies at Coppin and Morgan State University. Kids, young adults, and national radio personalities, as well as traditional Civil Rights leaders like Rev. Al Sharpton and Martin Luther King III, came to the town of Jena, Louisiana on September 20th to voice their outrage over the treatment of Black youth.
According to the State of the Dream 2004, the percentage of Black men who have served time in state or federal prison almost doubled between 1974 and 2001, from about 8.7% to 16.6%. Do we as a nation see it as a coincidence that one out of three Black males born in 2001 will be imprisoned at some point in their lifetime and this same ratio of one in three Black children were born into poverty in this, the wealthiest nation in the world?
It infuriates me when I watch television and hear commentators blame the inequality between whites and Blacks on Black people's inferior morals and work ethic. The suggestion is that racial inequality has nothing to do with living in a nation that was founded on white supremacy and to this day remains a white supremacist state (whites are supreme in terms of health care, income, wealth, educational attainment, most positive social indicators).
The mainstream press isn't doing much better in their coverage of the Jenna 6 case. I most often hear the press describe the case of the Jenna 6 as anger over Black youth charged with attempted murder for beating up a white youth in a school yard fight. The television news most often leaves out that previous to the incident involving the Jenna 6, white youth had attacked a Black youth and were charged with a misdemeanor. A white youth had also pulled a gun on a Black youth. The Black youth managed to wrestle the gun away from the white youth. Later the Black youth would be charged for stealing the weapon and no charges were filed against the white youth who originally pulled out the weapon.
Last week a friend of mine, Reverend Lenox Yearwood, was singled out from a long line of progressive activist hoping to enter into a congressional hearing where General Patraus was giving his report on the Iraqi war. As a veteran of the military service, a youth activist, and a man dedicated to the peace and justice agenda that was so well symbolized by Dr. King, he thought it was important to be there. But Rev. Yearwood, one of the few African-Americans in the line, was kept out even as the white activists on the line were being permitted in. After he verbally challenged this injustice, six officers wrestled him to the ground and arrested him.
The case of the Jena 6 is a symbol of what is happening to Black youth across the country. In Washington DC a Black youth leader, a young Reverend at that, tries to attend a congressional hearing and ends up being jumped by 6 police officers. He is charged with felony assault of an officer, is kept in jail over night and leaves his initital court hearing on crunches. In Jena, Louisiana six black youth are charged with attempted murder for an assault against a white youth, while white youth who pulled a gun on a Black youth has no charges filed against him.
What do we tell our children? I guess we tell them what our parents told us, and their parents told them: This is a racist society and we must struggle to make it less so. One day, I hope we have a better story to pass on to our children.
Dedrick Muhammad | 09-10-07
Over the last few weeks we have
seen daily reports concerning the decline of the housing market and how it could
affect the rest of the economy.
What hasn't been
reported is that this housing market crash is a result of the growing inequality
between the richest in society and the rest of us. This housing crash, the
resulting stock market volatility, and the possible oncoming recession all have
to do with the decline of our middle class economy.
From 1974 to 2004 the median
national home price increased from about $108,000 to $197,000, an increase of
almost 82%. Much of this
appreciation of homes happened after the stock market collapse of 2000. Wealthy investors bailed out of the
stock market and invested in real estate.
This led to a great increase in housing speculation that further inflated
the price of homeownership. During
this same time period, the median family income went from $44,678 to $55,869, an
increase of 25%. So how does an
average American family buy a home when housing costs are increasing at more
than three times the rate of their income?
The answer is debt, debt, and more debt.
The
The wealthy elite of
In the last 35 years, the richest
one percent of
President Bush has assisted the
wealthy of
Increases in the cost of housing,
education, and health care paired with massive decreases in government
investment in affordable housing, employment, and job training and an increase
in payroll taxes of 25%, have left most of
Dedrick Muhammad | 07-20-07
Forty years ago this month, two
years of Black riots/rebellions came to a head in
"Our nation is moving toward two societies, one black, one white, separate and unequal," the commission memorably declared in its report, issued in February of 1968. White racism and the chasm of inequality between Blacks and whites were the primary causes of the riots/rebellions, according to the Kerner Commission, which called for massive federal investment in undereducated, poorer African-American communities across the country.
The Kerner Commission was right, but Blacks have been left on the wrong side of inequality.