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Thursday, January 24, 2008

Eleven Economic Failures, Seven Solutions

Progressive Reasons for
Reforming the Economy, 2008

by Ben Leet

Our economy needs broad, structural reforming. We have gross inequalities of income, wealth, and opportunity. Millions of people in our nation are excluded from a decent life simply because our man-made and arbitrary economic policies disadvantage and disfavor them. It will take an informed public to make the needed democratic reforms that reflect our higher common values.
Here are the problems we face:
1. Wealth: The top one percent of households (1.1 million households out of a total of 114 million households) own more assets than the combined assets of 91% of households. They own 33.4% of all wealth, while the bottom 90% own 30.5%. Is this inevitable or desirable? (My references are at the end of this essay.)

2. Income: The annual income of the top one percent is greater than the combined incomes of over 50% of households. The top one percent receives 18.4% of the income generated by the economy, while the lower 60% of the households earn 20.3% of all income.

3. Some 17% of households have no assets, about 30% have less than $10,000 in net worth, and the bottom 50% of households owns about 2.5% of the total net worth of the nation. If half of working America is unable to save, the question is why?

4. 28.9% of families with children under 12 are unable to achieve the basic family budget and undergo hardships such as lack of food, healthcare, childcare, and housing. (from a study that surveyed 600 geographic locations for 4 sizes of families, or 2,400 variables).

5. Childhood poverty: Half of the children in the U.S. over an 18 year period experience poverty. This comes from a longitudinal study of income called the Panel Study of Income Dynamics, University of Michigan.

6. Among 21 economically advanced nations child well-being ranks lowest in the U.S.A. Childhood poverty in the U.S. is double the average of the other 21 nations., 20% vs. 10%.

7. The actual unemployment rate is 10.3% of the labor force, not the 5% reported. To the official 5%, or lower, add those working part-time seeking full-time, or dropped out of seeking work.

8. 24.7% of jobs pay less than the poverty level for a family of four. When added to the 10% under- or unemployed it yields approximately the one third who own less than $10,000.

9. Growth in income: Median household income has risen by 15% over the past 35 years. Since 1999 it is down 1.7%. Worker productivity has risen 75% in 35 years. Women are working 500 hours, or 3 months, more each year than 30 years ago.

10. Personal bankruptcy increased by 5 times between 1981 and 2001, bankruptcy by women increased 7 times, and the rate of mortgage foreclosure has tripled. Personal savings rate went from 8% in 1980 to negative savings in 2005.

11. Barely progressive taxes: The overall tax rate (not simply the income tax rate) is 30.1% for one percent of households earning over $978,000 a year; it is 19.7%. for the lowest 20% of households who earn on average of $10,400 a year. A socially just tax system would be more progressive. (Citizens for Tax Justice)

Taken together, about a third of U.S. workers are really struggling; this picture shows a country undernourished in vitamin M. As a country we have to learn how to create an economy that will, as our economy fails in the simple fairness test. Too many people are shuttled into unproductive lives of want and lost potential, while a small portion are enriched beyond any measure of common sense for no apparent benefit.

Some of the democratic choices are these:
A. Expand the Earned Income Tax Credit, promote Individual Development Accounts (see, raise the minimum wage to at least 50% of the average prevailing wage so that it would provide a living income.

B. Create a federal jobs program aimed at full employment. Author Frank Stricker in the book Why We Lost the War on Poverty and How We Can Win It makes a persuasive case for modernizing old schools, upgrading infrastructure and refitting buildings for energy conservation and developing energy independence. Several direct advantages here: better educational services, a restored environment, better roads, water treatment facilities, etc., and a more efficient economy that works for all.

C. Raise the payroll tax income limit, or eliminate it, for Social Security and Medicare, while lowering the overall rate for everyone.

D. Streamline, unify and increase work supports, including childcare, healthcare, housing assistance, food assistance, welfare or public assistance, unemployment benefits, family leave, and educational grants.

E. Create a single-payer, universal health care system.

F. Create a more progressive tax system. For 40 years, 1943 to 1983, the maximum income tax rate for highest incomes averaged 80%, not today’s 35%. Corporate taxation is 1/4 the rate is was 30 years ago.

G. Negotiate fair trade foreign trade agreements that allow foreign workers to organize into free unions, and impement minimum wage rules for countries that export products into our marketplace.

The word “Recession” is in the air. That means the general population will seek answers. The mixed economy of the 50s, 60s, and 70s has been radically replaced. Dean Baker, in his book The United States since 1980, states, “As a result, for most of the poplation of the United States, the quarter century from 1980 to 2005 was an era in which they became far less secure economically, and the decrease in securtiy affected their lives and their political attitudes. It is important to realize that this decrease was the result of conscious policy, not the accidental workings of the market.” (page 5)

The President assures us that our economy is “robust,” but he should leave off the first syllable. It is a basket case. If it were a car, I’d buy a different model; if it were a sports team, I’d cancel my season tickets, if it only were a vacation, it would soon be over. Citizens must be more clever and better informed than, 1, politicians, 2, the media; and they should inform their neighbors. It is time to create a compassionate economic world that reflects the high values most of us hold, and to include the disadvantaged into our family.

I recommend the following web sites for information regarding the economy from this pro-majority standpoint:;; (Economic Policy Institute); (National Jobs for All Coalition);;;, (Center for Popular Economics), the Levy Institute for a recession stimulus proposal.

Sources: beginning from point 1, ending at point F.
1. Survey of Consumer Finance, Currents and Undercurrents, Arthur Kinneckill, 2006, page 11, Federal Reserve Bank, U.S. Department of Treasury.
2. State of Working America, 2006/2007, Mishel, Bernstein, Alegretto,
page 79, Economic Policy Institute, 2007. Also in Squandering of America by Robert Kuttner, p. 52.
3. ibid, Survey of Consumer Finance.
4. Hardships in America, Boushey, et al, 2001, pages 1 and 29
5. The Great Risk Shift, Jacob Hacker, 2006, page 32, Oxford Press
ibid, SWA, page 128
6. Child Well-Being in OECD Countries, UNICEF, January, 2007.
7. National Jobs for All Coalition,
8. ibid, SWA, 2006/2007, page 126
9. U.S. Census, Income, Poverty, and Health Insurance Coverage in the U.S.:2005, page 12; The Recession Analysis I Haven’t Seen, Jared Bernstein, December 2, 2007, Economic Policy Institute,
10. The Squandering of America, Robert Kuttner, 2007, pages 37 to 39.
11. Citizens for Tax Justice, Overall Tax Rates, 2004,
B. for Federal Jobs Program, the book How We Lost the War Against Poverty, F. Stricker
C. Bridging the Gaps, Work Supports, Boushey and Albelda, Center for Economic Policy Research, 2007.
D. Single-Payer Health Care.
F. Economic Policy Institute,, Briefing Papers,

by Ben Leet ----

1311 words