Posts tagged inequality
The 2012 White House Budget Proposal. Who Will Survive In America?
Sigh. This is truly depressing.
In lieu of the doc, we’ve given you a handy data viz for the spending allocations. It’s illuminating.
So what’s the big deal? We reprint Jon Cohn in full…..
President Obama on Monday will release his budget request for the 2012 fiscal year. As you read commentary on it—or, if you’re as nerdy as I am, as you read the document itself—keep in mind that this is the first budget request he’ll be producing since the Republicans took over one house of Congress. It’s a huge difference and not merely in the obvious ways.
Obama’s previous budgets were the president’s way of signaling, to members of his own party, what initiatives he intended to pursue and roughly what resources he expected Congress to give him. He could expect some negotiation and pushback, from liberals on some issues and from centrists on others. But mostly he could count upon Congress, which Democrats controlled, to follow him.
The Republican House, of course, will do no such thing. They have their own, very different priorities and their own, very different ideas about how to pay for them. Accordingly, Obama’s budget is more of an opening bid in a tough, rancorous negotiation. That means you should evaluate the document as a signal of political strategy, not simply a statement of policy priorities. And that makes it tougher to judge.
Between the administration’s recent statements and a series of calculated leaks, we have a pretty good idea of what Obama is trying to do. He’s going to call for spending more money on education and other public investments, but he’ll also endorse enough cuts to keep overall non-defense discretionary spending at last year’s levels. Elementary and secondary school education, for example, should get a boost. But Pell Grants, for low-income college students, are going to take a hit, albeit a carefully crafted one.* There will be more money for building high-speed rail but less for helping low-income families pay their heating bills.
Is this a good thing? In absolute terms, clearly, the answer is no. The demand for Pell Grants is unusually high right now; among other things, cash-strapped states are raising tuitions at state schools just as cash-strapped students and families have fewer resources to pay them. Energy costs for next winter, when the cut in heating assistance would take effect, are likely to be higher than at any time since 2008. Unless the economic recovery quickens very suddenly, plenty of people will struggle to pay those heating bills. And those are just two examples of program reductions that will leave needy Americans even more needy.
But everything is relative, and that means judging these cuts alongside both the modest increases you’ll find elsewhere in this budget and the much larger increases you saw in previous ones. Robert Greenstein, director of the Center on Budget and Policy Priorities, will spend the next few days dissecting the Obama spending request and, as he does, he will likely find plenty not to like. But, during an interview, he also put disappointments in context:
I think [Obama’s] record is very strong — major expansions in refundable tax credits for the working poor, major expansion of student financial aid for low-income students so that more of them can go to and complete college, and of course, major health reform that will extend coverage to 32 million uninsured people. This is the most impressive record of any president since LBJ.
Obama’s spending request looks even better when you consider what the Republicans would do if left to their own devices. They haven’t committed themselves to a 2012 budget just yet. But they’ve said they want a far deeper freeze than Obama’s, reducing non-defense discretionary spending to what it was in 2008. On Friday, they offered a preview of that vision when they announced their proposal for how to finance government for the remainder of the current fiscal year.
They want far more severe cuts to Pell Grants and home heating assistance, plus reductions to such essential services as food inspections and the elimination of programs like Americorps. They also want to reduce spending on the Special Supplemental Nutrition Program for Women, Infant, and Children. That initiative, known as WIC, provides nutritional assistance to expectant mothers and newborns. As Paul Krugman notes, that cut will hurt today and tomorrow, since kids who grow up malnourished are more likely to have problems later in life.
The most important question about Obama’s budget, then, is how well it positions him and his allies in the coming debate over these sorts of priorities.
You could make a case that, by embracing the Republican narrative on the size of government and calling for a five-year budget freeze at present levels, Obama has effectively bid too low in the negotiation over federal spending—that he’s committed himself, and the country, to less government than it needs. (It’s happened before!) Or you could make the case that, by making “tough” proposals to cut programs he supports, he’s establishing the credibility with voters that he needs in order to marginalize the Republicans and to preserve more spending than might otherwise be possible. (It’s happened before!)
I really don’t know which argument is right. I’m not a political strategist and, besides, not even the political strategists can be sure about this sort of thing. But I know I’ll be hoping that Obama prevails in the coming standoff with House Republicans, even though a victory would still leave the government perilously underfunded.
*The details of Obama’s Pell Grant proposal are complicated and worth an item of their own, which I’ll try to write shortly.
So on the one hand, Obama makes a political calculation, cuts spending on things people NEED (like higher ed grants, food inspectors, heating oil for the poor). On the other, the GOP stands for nihilism.
Who will survive in America? Besides the rich?
#letthemeatcake #whowillsurviveinamerica
Some 43 Million Americans Use Food Stamps
You can call the current state of affairs many things. “A broad based recovery” is not one of them. #inequality #letthemeatcake
WSJ Real Time Economics Blog:
Nearly a year and a half into the economic recovery, some 43.6 million Americans continued to rely on food stamps in November.
More than 14% of the population drew food stamps in November to purchase groceries as high unemployment and muted wage growth crimped budgets. The number of recipients was up 0.9% from October, according to the new report by the U.S. Department of Agriculture. Compared to a year ago, the number of people receiving food stamps was up 14.2%.
In both Washington, D.C. and Mississippi more than a fifth of residents received food stamps — the highest recipiency rates of any state.
But demand has grown stronger in the past year in a handful of other states that recorded significant increases on a per capita basis.
In New Mexico, 19.4% of the population tapped into food stamps. That’s up 3.2 percentage points from the same month a year ago, the largest increase for any state. Idaho reported a similar jump: 14% of residents received food stamps, up 3.1 points from a year ago. Washington, D.C., Florida, Delaware and Texas all experienced similar year over year increases.
Food Stamp Use, by State
Click on the top of any column to resort the chart.
State Number of people on food stamps Nov. 2010 Percent of population on food stamps ↑Year-over-year increase in percent of population on food stamps Year-over-year rise in umber of people on food stamps District of Columbia131,61121.9%3.017,939Mississippi612,88920.7%1.543,537Tennessee1,264,40719.9%1.278,616Oregon749,49819.6%2.077,462Michigan1,920,33019.4%2.4240,584New Mexico399,45419.4%3.264,917Louisiana866,90519.1%1.464,496West Virginia345,68318.7%0.713,318Kentucky813,04118.7%1.355,390Maine241,11718.2%1.621,255Alabama863,60618.1%1.885,934South Carolina839,10918.1%1.567,569Georgia1,732,86517.9%2.3226,054Arkansas487,78616.7%1.132,393Arizona1,050,18116.4%1.063,905Oklahoma615,19116.4%1.451,831North Carolina1,531,25516.1%2.6246,098Florida2,994,41315.9%3.0563,646Missouri931,93315.6%0.954,087Texas3,925,11915.6%2.8697,058Ohio1,772,60815.4%2.0230,378Washington1,019,79115.2%1.8122,678New York2,934,49315.1%1.6311,229Rhode Island154,03114.6%2.627,161Delaware129,04914.4%2.926,179Vermont89,31614.3%1.05,974U.S.43,595,79414.1%1.85,411,796Idaho219,27114.0%3.148,309Wisconsin771,41313.6%1.9109,383Illinois1,732,16913.5%1.3162,844Indiana863,48913.3%1.382,069Pennsylvania1,673,71413.2%1.3165,619South Dakota99,82612.3%1.19,316Massachusetts799,77012.2%1.279,259Montana120,01312.1%1.413,670Nevada322,95012.0%2.568,574Iowa351,89811.6%0.824,412Alaska79,24211.2%1.410,194Hawaii153,01811.2%1.621,657Maryland643,65111.1%2.0116,540Virginia837,00510.5%1.083,970Connecticut370,66510.4%1.656,826Kansas295,78710.4%1.441,118Utah268,2169.7%1.953,455California3,521,8819.5%1.3480,231Nebraska170,7319.3%0.916,057North Dakota60,6819.0%0.42,507Minnesota473,7768.9%1.367,463Colorado435,3068.7%1.155,350New Hampshire111,5188.5%1.114,789New Jersey706,7028.0%1.5127,748Wyoming35,9246.4%0.63,592
GREAT MOMENTS IN ELITIST HISTORY!
So the next time someone tells you that Obama brought on socialism, or that we’re soaking the productive rich, tell them GFY. From Mother Jones…
Sure, you already know this. But it never hurts to post a reminder with a nice graphical memory aid. Nickel summary: the richest of the rich have gotten even richer over the past two decades — 400% richer for the top 400, according to CBPP, in a nice bit of symmetry — and at the same time their federal income tax rates have gone down from 30% to 16%. Needless to say, this is further evidence that America’s heirs and Wall Street tycoons, the targets of endless class warfare from liberals and Democrats, deserves to have the estate tax eliminated. They’ve suffered enough already.
But you come here for more than snark. You want substance. So here’s some substance:
The low effective tax rate for the top 400 filers is largely due to the fact that capital gains and qualified dividends are taxed at much lower rates than ordinary income….It is not surprising that two of the largest reductions in effective tax rates for the top 400 filers occurred in two two-year periods (1996-1998 and 2002-2004) that coincided with the capital gains tax cuts enacted in 1997 and 2003.
The second half of this paragraph seems fine: tax rates for the wealthy really did fall starting in 2003, which is almost certainly due to the Bush tax cuts. But the Clinton capital gains cuts took effect in mid-1997. How could they be responsible for a drop that began in 1996? What happened in 1995 to get the ball rolling?
(In case you were wondering about what happened, that would be Newt Gingrich & Co 1994 Republican Revolution. Thanks guys- for nothing.)
Wealth, Race and the Great Recession
From NYTimes Economix blog. Excerpt:
The primal economic divide in America remains the chasm between the wealth of black and white families, and it has widened steadily over the last generation.
And that largely reckons — as demographic data trails a year or two behind economic reality — without the toll taken by the Great Recession, which several economists forecast will most likely deepen this divide. These conclusions arise from a study released today by Professor Thomas M. Shapiro and his colleagues at the Institute on Assets and Social Policy at Brandeis University. They studied the same 2,000 black and white families between 1983 and 2007, and found that the racial wealth gap “has more than quadrupled over the course of a generation.”
Mr. Shapiro and his colleagues say their data points to a “stampede toward an escalating racial wealth gap.” Other analysts might pick their own adjectives, but the bones of the study present a disturbing take.
White families saw “dramatic growth” in their financial assets, from a median value of $22,000 in 1983 to $100,000 in 2007; black families experienced only the slightest growth in wealth during this same period, measured in 2007 dollars. This held true even at higher income levels. Middle-income whites, for instance, accumulated $74,000 in assets by 2007, as opposed to high-income black families, whose median assets totaled just $18,000 in 2007. (For both races, middle income was defined as $40,000 to $70,000 in 2007 dollars.)
Lunchtime Read: How a New Jobless Era Will Transform America
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.
It’s long, but worth your time.
Afternoon Read: The VC Tax Break
Let’s talk tax policy! From Baseline Scenario, a good piece. Excerpt below:
The House of Representatives is considering a bill that would change the tax treatment of venture capitalists’ income (and that of private equity fund managers as well). Currently, VCs typically are paid “2 and 20″ — that is, an annual fee of 2 percent of assets, plus 20 percent of profits. For example, let’s say a fund starts out with $200 million. Most of that money is invested by the fund’s limited partners — pension funds, endowments, insurance companies, the usual suspects. After ten years (roughly the average life of a VC fund), the investments made by the fund are now worth $400 million — a pretty humdrum return of 7 percent per year (before fees). The venture capitalists themselves will earn about $14 million ($200 million x 2% x 7 years)* plus $40 million (20% x ($400 million – $200 million)) equals $54 million. (Note that they earn that $40 million even for doing worse than the stock market’s long-term average return.) The limited partners get what’s left over after those fees. And before you start crying for the VCs, remember that a typical VC firm will have multiple VC funds going at once.
Right now, the $14 million is taxed as ordinary income, but the $40 million is taxed as capital gains — that is, at a tax rate of 15%. The bill would tax the $40 million as ordinary income (actually, 75% as ordinary income and 25% as capital gains), for an effective tax rate of about 35%.
15 Mind Blowing Facts on Wealth & Inequality in America/GREAT MOMENTS IN ELITIST HISTORY
We coined the term GREAT MOMENTS IN ELITIST HISTORY last week.
My favorite: “Let them eat cake”, by Mary Antoinette.
Friday, we had a GREAT SETBACK IN ELITIST HISTORY, with Goldman Sachs taking 50 hot ones from the SEC. But don’t cry for them, Argentina. The elites in America are doing quite well. Not sure where I found this link (Klein?), but here are 15 mind blowing charts on wealth and inequality in America. It’s truly stunning. By the numbers, we’re in another gilded age. The gap between the top 1% of earners and everybody else hasn’t been this wide since the 1920s.
Check them out yourself, but a couple of the most surprising stats….
- The top 1% of Americans hold fully 50.9%(!) of stocks, bonds, and mutual funds.
-The bottom 50% of the income distribution holds only 2.5%(!) of the wealth
Now don’t get me wrong. I don’t resent the rich. I hope to join their ranks. I don’t think we should institute confiscatory, growth-killing taxes. But it cracks me up to hear the chattering heads yelling about socialism. Clearly, there’s plenty of cake flowing straight to the top. The more interesting question is how the very wealthy (in the form of the GOP’s knee jerk tax cutting/deregulatory urges) have convinced so many other Americans to get behind policies that are serving their interests badly (to put it gently). More on this to come.
Sunday funday. Lots of stuff going up today. Enjoy
ps- #classwarefare is only a half serious tag. Just in case you were wondering.
WSJ Opinion leaves it over the middle of the plate, Ezra Klein Hits 500ft Home Run
On tax day, and usually about once a week, the WSJ Opinion page runs pieces on how oppressively high taxes are suffocating the American dream. They all boil down to the same shrill argument that the rich are getting soaked, and that this unlawful seizure of their wealth jeopardizes the republic.
Today (really, Thursday), the writer was a financial adviser named Mike Donahue from La Jolla. You can read his letter in full here. Basically, he makes $250k/yr, the govt is robbing him, and if Uncle Sam doesn’t back off, he’ll go Gault, and live on the dole. Photo below..
The letter itself is nothing special. He got some ridicule on the web, like here. But Ezra Klein really took it to another level. Not only did he demolish the specious logic of Donahue’s argument, but he then makes a critical leap. Klein strongly argues that rules and structural components of life determine our outcomes at least as much as hard work. I’d argue they matter substantially more, in some respects. Very sharp analysis.
I’ve put the full post below. It’s worth your time.
Mike Donahue is a Hard Worker
Lots of people are making fun of financial adviser Mike Donahue’s cry for understanding, and for lower tax rates. I will join them.
Since I graduated in 1983, I have been in straight commission sales and have had many 60- to 70-hour work weeks. No secure salary, no big promotions, no pension — just me profiting through helping others while being subject to the swings of the economic cycle. The first 20 years were tough, but it’s finally starting to pay off …
I have more than most only because I’ve worked harder than most and because I am a saver.
“Just me profiting through helping others.” And profit Mike did: Now he makes more than $250,000.
I don’t want to get into a long argument about the role of luck in outcomes. Suffice to say that Mike — who’s pictured above — is a white guy in a rich country who graduated from college and rode a series of unsustainable booms in the financial sector that ultimately did terrible harm to the economy.
But one of the things that people need to think harder about when they pop off about this stuff is the difference between comparing the incomes of people in the same sector and comparing the incomes of people in different sectors. Hard work might account for some of why Mike makes more money than other financial planners. But yesterday, I rode in a cab driven by an African immigrant who works during the day at a printing press. Hard work doesn’t account for why Mike makes more money than that guy.
What does account for it, in part, are rules. The rules of the game help decide who wins the game. If basketball hoops were five feet tall, then the sport wouldn’t be dominated by giants. Same goes for policy rules. The Bush tax cuts, for instance, made Mike richer than he would’ve been if, say, he was a financial planner in Denmark. Alan Greenspan’s low interest rates contributed to Mike’s financial well-being. Government policy that encouraged the spread of universities helped Mike. And if you look at the demographics of Congress, the rules are made by, well, people like Mike. Andy Stern got at this well in our interview yesterday.
For people at the top, since they get to make the rules, the rules work really well, no matter how hard they work. Whether you were born rich and the estate tax is reduced to virtually nothing, or you get legacy admissions into elite universities, there’s a lot of history and self-perpetuation of the rich to continue to be rich that has nothing to do with hard work.
Later in the op-ed, Mike drops a bomb. “My patience and pocketbook are reaching the breaking point,” he complains. “I am not for equal outcomes regardless of effort. I’m tired of being the mule. Maybe I will quit and live on the dole for awhile.” Maybe. But if he thinks $250,000 is an equal outcome, he should give living on the dole a try. He’ll soon learn that the rules written for people who aren’t like him don’t feel all that equal after all.
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