Tuesday, March 29, 2011

The Elephant in the Room

Rising poverty and wealth inequality are threatening the health of our nation and our democracy. Why aren't we all talking about this?

First, let's establish where we are

As Paul Krugman noted earlier this month, “one-sixth of America’s workers … can’t find any job or are stuck with part-time work when they want a full-time job…. Unemployment has become a trap, one that’s very difficult to escape. There are almost five times as many unemployed workers as there are job openings; the average unemployed worker has been jobless for 37 weeks, a post-World War II record.”

We are told that cuts in corporate taxes and in government spending will produce the new jobs we so desperately need, but nowhere has this actually been shown to work as advertised. This is classic supply-side economics but, with so many un- and under-employed, our problem is lack of demand. If more people had more money to spend, businesses would be hiring more workers to produce what they want to buy. Business costs are already moderated by historically low interest rates, and the profit levels and cash on hand of the largest corporations (more than $2 trillion, in one estimate I found) have rebounded to pre-crisis levels. Yet they are not hiring in significant numbers, because demand lags.

What about small businesses, often touted as the real job creators in our economy? Entrepreneurs need working capital to get started. From 2001 to 2003, cuts in capital gains, dividend, and estate taxes amounted to more than $3 trillion, yet there is little evidence the proceeds of these cuts (since extended) have been invested in job creation. The Small Business Association of Michigan recently surveyed its members, asking how they would use the money saved by no longer paying businesses taxes, as Gov. Snyder’s plan proposes. Only 48% said they would add employees. While 51% said they would buy new equipment, that can often lead to an actual loss in jobs, as it did in the auto industry. And a full 50% reported they would “realize the profits” — which creates no new jobs, of course.

For at least a generation now, political leaders have preached the religion of supply-side economics, yet wealth and income disparities have grown exponentially.

How’s that “rising tide” working out?

According to the adage, a rising tide lifts all boats — we all benefit when the rich are allowed to get richer. And richer they have gotten. Last December, Sen. Al Franken quoted the Economic Policy Institute to note that “during the past 20 years, 56 percent of all income growth has gone to the top one percent of households. Even more unbelievable — a third of all income growth went to just the top tenth of one percent. At the same time, middle class families have done decidedly worse. When you adjust for inflation, the median household income declined over the last decade.”

The disparity grows, yet Americans habitually and significantly underestimate the extent of wealth inequality in the U.S. A nationally representative random sample of respondents surveyed by Harvard Business School researchers “vastly underestimated the actual level of wealth inequality in the United States, believing that the wealthiest quintile held about 59% of the wealth when the actual number is closer to 84%.”

This is not what we want. In the same survey all demographic groups exhibited a surprising consensus on the “ideal” distribution of wealth. They all approved of some inequality, but their ideal was far more equal than the current level, and “far more equitable than even their erroneously low estimates of the actual distribution.”

What has this to do with education?

Americans believe strongly in offering all the opportunity to do better in life, and they recognize that educational opportunity is the key to changing one’s economic circumstances for the better. Our rising child poverty rates are directly related to our difficulty in erasing student achievement gaps.

Just as we are in denial about growing wealth disparity, we seem blind to the fact that more children are poor. Census data from 2000 showed more than 23% of children in Wayne County lived in poverty. By 2008, that percentage had risen to 29.3%. By 2009, 59% of school-age children in the county qualified for free or reduced-price lunch. [See KidsCount.org for many such statistics.]

It is not an excuse to note that poor children need much more help to overcome the disadvantages of starting further back and having less support at home. Their preparation and support for learning must be greater than that required by more advantaged children, yet funding inequality in education persists and, by some measures, is getting worse. Children from wealthy families routinely enjoy better schools — with more resources, lower pupil-teacher ratios, better-paid staff, and better-equipped buildings — in addition to their advantages at home. Poor children tend to need much more but to get much less.

The results are documented in our national results on the international PISA achievement tests. National Association for Secondary School Principals researchers disaggregated the 2010 results by income and issued a report entitled “PISA: It’s Poverty Not Stupid.” When comparing apples to apples — other nations and American schools with equally low poverty rates — our students were first in the world.

It is our poor students who perform poorly. The reasons why are no mystery: poorer nutrition (starting before birth), poorer health (especially high levels of asthma), poorer attendance (due to poor health and chaotic households), higher incidence of drug use and violence in their homes, higher rates of homelessness, lower quality child care, fewer books in the home, and so on and so on. All of these handicaps affect not just preparation and and support at home for academic achievement but — more importantly — children’s ambitions, motivation, and sense of what is possible for them.

All of those things can be overcome, but not by magic. Blaming and penalizing teachers for not being able to work miracles without extraordinary resources will not help. (Why would anyone want to work with our neediest students if their pay and job security depends upon their working miracles?) Further cutting already-inadequate funding to schools with high-needs students will not help. Turning to charter schools, whose overall track record with poor children is worse than that of public schools, will not help.

What will help is a serious commitment to provide for needy children what their households cannot, so that they can catch up with the wealthier children who start out so far ahead of them. Such a commitment requires money, time, and effort. Anyone who tells you there is a magic shortcut is selling you a bill of goods.


  1. I’m watching the generation of hard-working, well-educated young adults struggle to survive in poverty. What is worse is to see the underemployed/unemployed people lose hope by their mid-30s – the point at which they should be at the peak of their professional accomplishments. That, the realization that - unlike the experience of my entire life until now - the generation of our children and grandchildren will not achieve a better standard of living than their parents.

    And as for genuinely poor children, it is more than heartbreaking to see how little compassion the privileged exhibit for them. It is now at levels of neglect so profound and comprehensive that it has become criminal. The corporate overlords, their callous sellout paid-for greedy government representatives, and their sheep-like minions are driving this clown car of our economy into another and possibly worse financial meltdown. Your concerns are framed in terms of public education, but spread over the entire spectrum of our increasingly uncivil society.

    I understand Michigan’s Republican governor recently reduced the duration of unemployment benefits. Unemployed people would use the funds to pay bills, pay rent, buy food etc. thereby keeping the money in circulation and benefitting the economy. Instead, more corporate tax breaks. I can only imagine what these officials would do if their ostensible agenda wasn’t to “create jobs”.

    What amazes me about all of this is the question you began your post with. Why aren’t we televising the revolution? Instead of awakening the downtrodden and vanishing middle class, politicians like Michelle Bachman seem to hypnotize them into voting against their own interests. Again and again.

    The history of several of the French revolutions indicates that things don’t always end well for those smug cake-eating nouveau riche. I’m reading about the Teapot Dome scandal and the parallels to today are striking. So, while we wait for karma to trickle up, your thoughtful posts reassure me that all hope is not lost.

  2. A state government official actually rationalized this by saying that now businesses could divert money from paying unemployment benefits to paying to hire folks. If only we'd thought of that sooner!

    Like before 36% of our unemployed had been job-hunting for more than a year.

    I would like my state to be a leader, but cutting state benefits to 20 weeks from the 26 every other state has offered for 50 years is not what I had in mind.