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Wednesday, October 26, 2016

By Jake Grovum,

WASHINGTON — The two U.S. counties with the worst income inequality couldn’t be more different. No. 1 is Manhattan. The second is a rural Native American reservation in North Dakota.

The two illustrate how widely inequality is spread around the country, and how the issue presents itself in different ways. The far-reaching problem was a driving force behind a raft of proposals in the states this year, as lawmakers looked to address persistent wealth gaps exacerbated by the Great Recession and the subsequent years of halting economic growth.

Polls show inequality to be a growing public concern. A Pew Research Center survey this year found 65 percent of all Americans believed inequality was growing, and Gallup found similar results. Partisan differences abound: 90 percent of Democrats in the Pew poll thought there was “a lot” or “some” actions government could take about inequality. Half of Republicans said there was “not much” or “nothing” government could do.

Those differences carried over to the states, where responses in blue versus red states seemed at times as vast as research has shown the wealth gap itself to be. This year, lawmakers sought to do something about inequality, from giving tax breaks to individuals and businesses to bolstering safety net programs and clamping down on corporate pay.

“Our economic divide has become so stark, inequality is so off the historical wall, it’s almost forced itself on the country’s attention,” said Sam Pizzigati of the Institute for Policy Studies, a Washington-based progressive think tank. “It’s become so stark that it can’t be ignored anymore.”

Others worry the focus on inequality can lead to proposals — targeting executive pay, for example — that won’t directly help those who have less.

“Inequality has distracted attention from the bottom, where it needs to be,” said Alan Reynolds, a senior fellow at the libertarian Cato Institute who has questioned some of the research showing an increasing wealth gap. “Dealing with poverty is much harder.”

Inequality cuts across state lines and pervades every corner of the U.S. It also dovetails with a decline in economic mobility: A Pew Charitable Trusts report last year found 43 percent of Americans raised in the bottom of the income scale remain there as adults. Almost 3 in 4 never reach the middle. (Pew funds Stateline.)

The areas with the worst inequality show how the problem presents different challenges in different places.

New York County, which comprises Manhattan, for example, had the worst income inequality of all U.S. counties, according to U.S. Census Bureau data showing the average inequality from 2008-2012.

The second most unequal was Sioux County, N.D., within the Standing Rock Indian Reservation, which straddles the Dakotas. President Barack Obama visited the area on Friday.

Some patterns emerge from the inequality data:

    • Among the top 10 most unequal counties, six are in the South, including two in Georgia.
    • Eighteen of the most unequal 25 counties are in the South.
    • Three are in the area around New York City, while the city itself has the most billionaires in the world.

This year Democrats in two coastal states floated a pair of novel proposals that sought to tie state power of the purse to inequality. Experts and the bill authors said it was the first time such measures had been introduced to address inequality.

In California, two Senate Democrats proposed tying the state’s corporate income tax to CEO-worker pay equity, setting up a sliding scale whereby a company’s tax bill would decrease if the gap between executive and worker pay was smaller.

The bill would have reduced the corporate tax rate for any company where the CEO makes less than 100 times the earnings of the median worker at the company (with bigger discounts for greater parity). Last year, a Bloomberg survey found the average CEO compensation to be more than 200 times that of rank-and-file workers, an increase of 20 percent since 2009.

The bill eventually failed its first floor vote, but its authors, Sens. Mark DeSaulnier and Loni Hancock, have moved it keep it alive.

“My belief is the public is behind it, and will become more behind it,” DeSaulnier said this week. He said he plans to lobby his colleagues to back the bill, but acknowledges that “it can be intimidating taking on multibillionaires. We’ve got a lot of plutocrats in this country now.”

Opposition has been fierce: A handful of Democrats joined Republicans in opposing the bill, and the business community has come out in force to label it a “job killer.” Opponents range from the Chamber of Commerce to the state’s retailers and restaurants associations. The Tax Foundation, which advocates for “fairer, flatter” taxes, has been skeptical as well.

A bill in Rhode Island was more successful. The bill would give companies a preference in state procurement if they don’t pay their executives 32 times or more than the lowest-paid worker in the company.

Democratic Sen. Catherine Cool Rumsey said the focus on inequality led to her think about different ways to address the issue, and she decided to use state contracts as a tool.

“We can, as legislators, as keepers of the purse, help drive those incentives,” she said. “You don’t want to be anti-business, but at the same token we have to change the conversation to the impact as a taxpayer.”

The bill was approved in the Senate last week and sent to the House, where no companion legislation has yet been introduced.

Minimum wage hikes — often framed in terms of income inequality — were a popular issue in states and cities this year. Seattle set a historic high-water mark with its $15-an-hour rate, set to be fully implemented by 2017.

Several other states have moved to increase their rates, even while Obama’s call for Congress to do the same has gone nowhere.

The debate around the minimum wage is likely to continue through the rest of the year, as several states have placed minimum wage hikes on their fall ballots.

In some states, Democrats and Republicans alike have gotten behind a wage increase. In Michigan, for example, Republican legislators approved an increase to $9.25 per hour by 2018, even though some Democrats saw the GOP’s support as a back-handed attempt to short-circuit a bigger increase that had been headed for the November ballot. Republican-leaning states such as Arkansas, Alaska and South Dakota also will have wage hikes on the ballot this fall.

Advocates for the working poor have also looked to boost paid sick and paid family leave, arguing that raising the wages of the lowest-paid workers and giving them more flexible hours — so they can keep their jobs — go hand in hand.

“More and more, people see these in tandem,” said Ellen Bravo, executive director of Family Values @ Work, which advocates for family-friendly work policies. “This is exactly what the economy needs: People need to keep their jobs and keep their income.”

Yet those efforts haven’t paid off in the same way. Attempts to start paid family leave programs state by state have hit a wall recently. Cities such as the District of Columbia, New York City and Portland, Ore., have created or expanded paid sick leave requirements, but opposition from businesses and some lawmakers on both sides of the aisle has halted efforts elsewhere.

Much of the debate this year on inequality has taken place in the context of an economy ever-so-slowly recovering from the Great Recession. Lawmakers in some states have trimmed the safety net in response, saying if government assistance is too generous, workers will have less incentive to re-enter the workforce. Creating good jobs, they say, is the best way to address inequality.

The dynamic played out most prominently with regard to unemployment insurance, both at the state and federal level. Lawmakers considered changes to reduce the number of weeks available and trim benefits, with an eye toward boosting workforce participation.

In Congress, lawmakers allowed federal jobless benefits, which were expanded during the recession, to expire at the end of 2013. Efforts to revive the program this year have failed.

Likewise, some states have cut back their own regular unemployment programs, reducing the number of weeks available to levels not seen in decades. At least eight states have reduced the number of weeks available below the usual 26 weeks, often on a sliding scale that reduced availability as the jobless rate declines. The Missouri legislature approved a similar bill, but Democratic Gov. Jay Nixon hasn’t acted on it yet.

The familiar argument about not letting the safety net become a hammock, as articulated by Republican U.S. Rep. Paul Ryan of Wisconsin, also spawned cuts to other parts of the safety net this year.

“Rather than focusing on inequality, it’s how do we actually help the poor and help individuals in need?” said Rachel Sheffield of the conservative Heritage Foundation. “If we look at our policies from our welfare system, they don’t promote that, they don’t promote work and self-sufficiency. Our welfare system has failed to do that.”

In a subtle but significant change, many states opted recently not to continue waivers from the federal government that let their residents collect food stamps without meeting certain work requirements. The moves were cast as welfare reform, to push people back into the workforce.

Pro-growth, business-friendly tax proposals have carried over into the fiscal realm in states this year as well. At the same time, other states wielded the tax code to boost workers’ income.

Efforts to boost business through taxes took the form of cuts to personal and corporate tax rates. Lawmakers in Missouri overrode a gubernatorial veto of a cut in income taxes for top earners. Indiana also cut the state’s corporate income tax rate.

Advocates for the working poor turned to the tax code to boost the earned income tax credit (EITC), a benefit that offsets payroll and income taxes for low-income workers, mostly parents. Obama’s proposal to expand the federal credit hasn’t gained traction in Congress.

The credit is unique in that it generally enjoys support from Republicans and Democrats. The federal credit directs billions in benefits to taxpayers across the country, and 25 states plus D.C. have their own versions.

2014 was a year of expansion, in part thanks to recovered state budgets. Minnesota, Maryland, District of Columbia and Republican-controlled Ohio all approved expansions of their EITCs.

“That’s a really great policy, along with the minimum wage, for making sure that state economies are recovering and that working families get to recover too,” said Erica Williams of the left-leaning Center on Budget and Policy Priorities.

Photo: brad_crooks via Flickr

  • charleo1

    The mechanism that worked within the private sector to create the necessary connectivity between company profits, worker productivity, and wages, has been demonized, and in many cases intentionally legislated out of existence. I’m speaking of course of Unions. It’s hard to name another entity the Right Wing has gone after with more zeal, and just plain maniacal, single mindedness, than Unions. At their apex, a union member occupied 37% of all private sector jobs in America. The wage support, and benefits these workers were able to collectively bargain for, served to support the wages, of all workers, union, or otherwise. So all labor benefited by the same free market forces that encouraged competition in the wider marketplace, drove innovation, and brought to the fore, the most diverse, and dynamic economy ever created. But it was the unions, that were the effective, and necessary equalizer between the rank, and file worker on the floor, and the management crew up top, that allowed our Capitalistic, and open economy, to thrive, and grow. Now, at last check, Unions in the private sector only accounted for about 3% of all American workers. And no longer are able to balance the enormous power of the dollar in a Capital, profit driven system, against an emasculated labor force. So, we see the predictable problems that arise from that. And so now there are those that cast around for a replacement for that natural, and vital, and hard won solution. And are finding, or will find, at the end of the day, there simply are none. That now, they truly have us on the ropes, and soon we’ll be flat of our backs! Because, they are not letting up. Hell no! They’re energize, and empowered, and the only thing we hold as a glimmer of hope to ever getting back to our feet, they control a bit more of it by the second. And certainly enough to stop any rescue any time soon. And they are not about to rest, until every ounce, and option is removed, from every worker in every Walmart, Seven-Eleven, and every car hop in the Country. Save for the option they approve. So, come on in! Meekly though, and take off your hat, for Pete’s sake! And, beg them for a raise. America, how sweet it was.

    • Independent1

      If Reagan were still alive, he’d probably think about taking a victory lap thinking that he’s accomplished his objective of enriching the already rich and advancing the destruction of unions. But despite his policies having recreated the great income inequality that America saw about 100 years ago, I think any victory would be very hollow; because of the immense polarization that Reagan’s legacy has created within our country.

      The rich have about decimated the ability of the middle class to provide them with much more in the way of riches; they’ve created what has to be from here on out a world-wide economy of diminishing returns. Although some companies have been making record profits, that certainly can’t continue for long as the resources of the middle class and poor continue to rapidly dwindle. It’s not long before the upper 20% will have sucked so much money from the lower 80% that few will be able to afford to buy much of what the upper 20% has to sell. And that’s not just in America but world-wide. I think the upper 20% is going to be very surprised when that happens and the profits of their companies plummets. The cluelessness of this group is absolutely astounding to me; that they are so blind that they can’t see where all their efforts to drain the world of wealth are headed.

      Even the CEO of one of the world’s largest banks, Lloyd Blankfein, CEO of Goldman Sachs can see as he calls it: the destabilizing effect of today’s income inequality.

      “Blankfein argues that the growing division between the top and bottom of income earners drives political divisions that makes it difficult to legislate and to “deal with problems” and therefore “drive growth,” he said, “It’s a very big issue and something that has to be dealt with.”

      In addition, analysis of the current income inequality brings out that “Rising income inequality comes with a host of negative consequences: It pushes Americans into more debt, makes them sicker, makes them less safe, and keeps them from moving up the economic ladder. It also hurts economic growth, while addressing it through modestly redistributive policies doesn’t.

      And it destabilizes the political system, as Blankfein predicts. Research has found that high inequality leads to a less representative democracy and a higher chance of revolution as the less well off come to believe that the government only serves the rich. And those people would be right, as our current political system is far more responsive to the wealthy — like Blankfein himself — and doesn’t listen to what the middle class and poor want and need.”–emailfield..syntax–recipientid~~&elqCampaignId=~~eloqua..type–campaign..campaignid–0..fieldname–id~~

      • old_blu

        Just what I was going to say. We can all thank Messiah Ronald for starting the destruction of the unions, and now we have the Koch brothers taking up where he left off.

      • charleo1

        Shame on Reagan. That’s right, shame on Ronald Wilson
        Reagan. Because intentional or otherwise, the economic policies he so skillfully, and confidently sold to his Country,
        have been roaring successes for the tiny minorities at the top. And abject failures for his Country, and everyone else.
        As legacies go, his will either be the low water mark, from
        which his Country’s economy either did, or never will recover. We can’t yet know. But, what we can determine is, it will never recover, as long as the economic con that was his defining endowment to the Middle Class, is pursued.
        And what of his indictment of big government? That the 10
        most destructive words in the English language are, “I’m here from the government, and I want to help.” One of his
        most popular lines, could just as well have been a promise
        kept to the well healed super Plutocrats, who’s fortunes have swelled to enormous size, since his Presidency. And,
        a truthful warning of those same destructive policies to the
        overwhelming majorities, Reagan’s kind of government help
        have been most destructive. We can also thank Reagan for
        his legacy of cynicism, and fundamental mistrust of our
        government institutions. As his economic, and social biases aligned those institutions with the most powerful financial entities, against the interests of the average American. Who
        depended on them to enforce the laws that protect all of us,
        and the Country itself, from the elements of usury, avarice, and corruption. Are now left to run amuck. And how that tiny minority do love him for his communication skills. Why he could set a cow pie on the American table, and make them believe it to be a Christmas ham! And did. And they lionize him. And, extoll his name with their gargantuan bull horns across our body politic. And also across our Country’s poorer, and disenfranchised labor, and empty factories, and corporate farms, and crumbling roads, and all the rest. And we wonder, I wonder, do they truly not care about anything good, and decent, after Reagan? Did they ever?

    • RobertCHastings

      There are a couple of very serious people who would disagree with you about there being no alternative. Gar Alperovitz and Noam Chomsky have for years been advocates for what they refer to as democratic socialism (NOT the socialism demonized by the right), a system in which it indeed takes a village. When the steel mills in the rust belt closed down, the workers at a mill in Cleveland (?) were able to put in a successful bid and took over the plant. This same sort of thing has occurred all around the country, with public utilities being perhaps the largest example (co-ops). Many smaller farmers have done the same thing, forming cooperatives to allow them to purchase and utilize equipment the could not otherwise afford.

      • charleo1

        I personally would support that. Absolutely. My bottom
        line philosophy in all matters economic. Is simply, that the
        economy should work for the vast majority of the people
        that labor within it. Anytime a factory is closing, and the
        workers aren’t relegated to replace decent wages with
        low pay, no benefit, retail employment, I’m 100% glad as
        heck to hear about it.

        • RobertCHastings

          If you have the time (and can find them) read Gar Alperovitz’s “What Then Must We Do”, and Noam Chomsky’s “Profit Over People”. Both are excellent examinations of what our economy looks like today through the eyes of the everyday individual, and presentations of either what is currently being done to effectively counteract this collapse of the middle class or what CAN be reasonable accomplished without violent revolution.

  • tiredofitall

    so to me one questions is…. as we near full employment, how can 47% (or is it really just 1%) of the country argue we are still supporting / disincentivising people who could be working?

    • Independent1

      Interestingly, from what I’ve read recently, economists predict that our economy is only about .7% from what they would recommend as being considered full employment; that being, having enough people job seeking that are qualified to fill positions that would come open as companies create new jobs as the economy revs up. The latest recommendation I heard was a projection that 5.6% should be considered “full employment”. Given that that latest unemployment rate was 6.3% we’re only .7% away from full employment. Yet to hear many conservatives talk, you’d think our economy was still the total disaster that Bush allowed it to turn into at the end of 2008.

      • plc97477

        I think it is wishful thinking that runs the gotp. They don’t want to ever give credit to the dems for anything.

  • howa4x

    Joseph Stieglitz has the best Idea which is to raise taxes on capital investment, since this is where the true wealth of the country is. So if it is now 15% raise it to 30%. This is not a job killer since raising taxes on interest earned will not hurt investment or company hiring. Also get rid of the carry forward interest provision which allow wealthy to hide more money. 3rd ferret out all money hidden overseas. Romney hid 250 million in offshore accounts. Tell a country like the Cayman Islands and any other country where the wealthy avoid taxes by sheltering money, that we will break off diplomatic relations unless they disclose what Americans have hid money there. Again this has no effect on job creation and may actually help. Also tell any company like Cisco and Halliburton that fled this country to avoid taxes that they are not allowed to bid on any military of government contracts since they are foreign companies, and American companies only will get procurement preference. This takes courage and the only reason that congress won’t do it is because they get insider information on stocks so why bite the hand that feeds you. Grover Norquist would claw out his eyes if this ever happened.

    • ps0rjl

      I can’t agree more with you. Getting rid of things such as the carry forward interest provision may hurt the income of Wall Street but it wont affect Main Street. Many companies go offshore to foreign tax havens to save money but usually those are many times just an office where everything is forwarded back to the real office in the US. These companies should NEVER be allowed to bid on federal or state contracts as the money is tax money collected from US taxpayers. If they don’t want to pay here then they should play here.

    • Independent1

      You sure got that right. As long as taxes are low on investment income, there is no incentive for the rich to take that money on which they’re making millions with low taxation, and invest it into new business opportunities which create greater risks than where there money is already hiding.

      You may have seen this before, but here’s a little excerpt from an article that purports to show that it’s only when taxes are high on capital gains and other investments, that our economy really performs well; because it’s only then that the rich are willing to risk investing their money in business ventures that spur the economy.

      Economic Stagpression: Two Charts The Entire World Must See

      An excerpt:

      Ironically as we gave our businesses more and more money with lower taxes, less regulation, tax funded price supports, hand-tied their unions, and made free new technology at our taxpayers expense, despite all these perks and incentives, they invested less. So what are they doing with their money? Pick up any financial publication and read the headlines. They all will let you know.

      Rather than invest in plants and equipment, businesses are primarily using their funds to repurchase their own stocks in order to boost management earnings and ward off hostile take-overs, pay dividends to stockholders, and accumulate large cash and bond holdings.

      None of which help our economy. It is as if we work hard, buy their products, and they put that money into a mattress. Soon, we are going to run out of money. Fortunately the Fed has filled the gap by printing more and giving it to banks for free. It too, filters though the system, and when it gets to the top, it goes into the mattress.

      Instead of recycling money, we are letting the tap flow from our printing presses to the top echelon of our society… Now do you get it?

      What is missing is a system that recycles the materials back into our economy so we have less money we need to print. If we were talking about paper, we would be saying we need to recycle paper to keep from cutting down more and more trees simply to fill up our landfills….

      We need a system to return that money to the bottom so it can rise again and again and again.

      Here are the options that have been tried across our lifetimes..

      1.Price and pay freezes.
      2.Government set and regulated prices.
      3.Lower tax rates.
      4.Cash incentives from taxpayers to reinvest.
      5.Pleas and entreaties from the Oval Office.
      6.Higher marginal tax rates.

      For the answer to which of these 6 is the only solution that has every worked, see the entire article via this link:

      • howa4x

        I think It would work now because Canter’s election loss was really attributed to crony capitalism. the Tea party is convinced the Wall st game is rigged and they felt Canter was on the inside. If you remember the Tea party was originally formed from rage against the Bank bailout, so I think that taxing investment income would appeal to them too. It is a cross cutting issue for both sides.

  • idamag

    The income disparity creates a caste system, where the minimum wage earner can’t raise above his income level, and he cannot send his children to college and thus his status quo perpetuates itself. Sine the economy is consumer driven, the minimum wage earner does not support the retail community when all his money goes for necessities. He can’t give the support to the tax base necessary to stabilize the national debt. It is hard for the wage earner to understand it when the top CEO’s get million dollar annual salary and big six million dollar bonuses on top of that and he is told he is not worth any more than what he is getter when his labors make the corporation rich.

  • jointerjohn

    The Earned Income Tax Credit is no substitute for decent wages. It is a subsidy paid indirectly to low-paying employers which allows them to continue to pay substandard wages and still have employees who can show up to work wearing shoes. Employers all across the country also receive subsidized business development loans, Community Development Block Grant dollars for Economic Development, and other tax forbearance for creating minimum wage jobs. They get paid to make money off of workers who in turn qualify for government subsidized housing, SNAP benefits and free school lunch programs. Continuing this makes no sense at all.

    • LotusJoan

      Corporate welfare is alive and well, that hammock is king sized.