Just Barely Getting By
The American Enterprise Institute and the Brookings Institution released a joint report on poverty intended at looking at things where there is consensus on action:
It’s no surprise that our group unanimously placed employment at the center of any national strategy to reduce poverty and increase mobility. But with a few exceptions, especially the second half of the 1990s, the nation’s labor market has been weak since 1979. Three problems are especially important: the share of men who have jobs has been declining; wages have been flat or growing slowly since roughly the 1970s, especially among workers in the bottom half of the wage distribution; and incarcera- tion rates, especially among black men, grew relentlessly until 2008 and remain at a very high level. Realizing that we face a difficult job market with low workforce attach- ment by some groups, in Chapter 4 we outline four sets of consensus policies that offer real hope for increasing employment and wages and thereby reducing poverty and increasing mobility. The first set of policies aims to increase the skills of low-income workers and their chil- dren; the second to make work pay better than it does now for less-educated workers; the third to expand work requirements and opportunities for the hard-to-employ while simultaneously maintaining a work-based safety net for the most vulnerable; and the fourth to ensure that jobs are available.
Over in the Nation, author Barbara Ehrenreich is back to discuss what is going on with the white working class:
For almost a century, the comforting American narrative was that better nutrition and medical care would guarantee longer lives for all. So the great blue-collar die-off has come out of the blue and is, as The Wall Street Journal says, “startling.”...
As New York Times columnist Paul Krugman puts it, the “diseases” leading to excess white working-class deaths are those of “despair,” and some of the obvious causes are economic. In the last few decades, things have not been going well for working-class people of any color.
I grew up in an America where a man with a strong back—and better yet, a strong union—could reasonably expect to support a family on his own without a college degree. In 2015, those jobs are long gone, leaving only the kind of work once relegated to women and people of color available in areas like retail, landscaping, and delivery-truck driving. This means that those in the bottom 20% of white income distribution face material circumstances like those long familiar to poor blacks, including erratic employment and crowded, hazardous living spaces.
Over at CityLab, Alana Semuels looks at the single working mother and how she gets by:
According to the paper, published last month by Seefeldt and Heather Sandstrom with the Urban Institute, many women did move off the welfare rolls and into jobs after welfare reform went into effect. But as the economy took a turn for the worse and women weren’t able to find jobs, a number of families became “disconnected,” meaning they were neither in the formal labor market nor the welfare system. About one-fifth of all low-income single mothers were “disconnected” in 2008, up from 12 percent in 2004, and these mothers had a median annual income of $535, Seefeldt said.
Though the name implies otherwise, “disconnected” mothers are especially reliant on social networks. They buy groceries with food stamps, live in public housing, and ask family and friends for cash. Doing this is far less lucrative than working, but mothers often found that the wages they could make barely offset the costs and hassle of transportation and childcare and the loss of Medicaid benefits, Seefeldt said.
“Motherhood left them with no choice but to stay at home because of limited childcare options, limited job opportunities (especially jobs with a schedule that fit working mothers’ needs), or pressure from a partner who would not allow them to work outside the home,” Seefeldt and Sandstrom write.
Okay let's have a cartoon from Tom Toles on gun violence:
Your editor is sure you heard the news about Mark Zuckerberg giving away 99 percent of his Facebook stock -- to an investment firm, writes Linsey McGoey in the Guardian:
The $45bn exceeds the Gates Foundation’s current endowment. It’s larger than Warren Buffett’s $30bn gift to the Gates Foundation in 2006, then the largest charitable gift in history.
The world responded in an understandable manner: we went apeshit with excitement. Or, to put a sociological gloss on things, we experienced “collective effervescence”, the sociologist Émile Durkheim’s term for rare moments of community cohesion marked by mass outpourings of a shared sentiment.There were some early sceptics, those quick to impute a selfish motive. But they were soon deafened by the global chorus of well-wishers chanting the same refrain: thank you, Mr Zuckerberg. Thank you for your revolutionary gift. It turns out neither assumption was right. There was no gift. Nor, in contrast to what we’ve been hearing over the past few days, is there anything particularly revolutionary about Zuckerberg’s new business model.
Whether you call it charity or philanthropy, one thing is clear about Zuckerberg’s business transaction: he didn’t surrender anything. He set up a new investment company, a limited liability company called the Chan Zuckerberg Initiative, and transferred $1bn in Facebook shares to it. As Jesse Eisinger reported in the New York Times, Zuckerberg simply “moved money from one pocket to the other”.
Over at ProPublica, Jesse Eisinger discusses the tax implication of the Facebook mogul's move:
If the LLC donated to a charity, he would get a deduction just like anyone else. That’s a nice little bonus. But the LLC probably won’t do that because it can do better. The savvier move, Professor Fleischer explained, would be to have the LLC donate the appreciated shares to charity, which would generate a deduction at fair market value of the stock without triggering any tax.
Zuckerberg didn’t create these tax laws and cannot be criticized for minimizing his tax bills. If he had created a foundation, he would have accrued similar tax benefits. But what this means is that he amassed one of the greatest fortunes in the world — and is likely never to pay any taxes on it. Any time a superwealthy plutocrat makes a charitable donation, the public ought to be reminded that this is how our tax system works. The superwealthy buy great public relations and adulation for donations that minimize their taxes.
Instead of lavishing praise on Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in. Who should fund our general societal needs and how? Charities rarely fund quotidian yet vital needs. What would $40 billion mean for job creation or infrastructure spending? The Centers for Disease Control and Prevention has a budget of about $7 billion. Maybe more should go to that. Society, through its elected members, taxes its members. Then the elected officials decide what to do with sums of money.
In this case, it is different. One person will be making these decisions.
David Callahan of Inside Philanthropy had similar things to say:
Now, with the rise of Big Philanthropy, we’re seeing the logical next act in this age of inequality—the conversion of all those big piles of money into influence that extends into every last corner of U.S. society, not to mention into remote villages in Africa and Asia. Today’s economic inequality may be nothing compared to tomorrow’s civic inequality as more activist mega-donors emerge with big money and big ambitions—at a time, I should add, when government will be spiralling down into fiscal paralysis due to soaring entitlement costs as the boomers retire. If the 20th century was the era of Big Government, the 21st Century is shaping up as the age of Big Philanthropy. This power shift is one of the most important stories of our time...
Philanthropy is not a meritocracy, nor is there a moral litmus test for entering. Anyone with enough money can play. And as more billionaires enter this game—whether we cheer them or fear them—it’s getting harder for the rest of us to be heard in the public square.
You all might be interested in this package of stories on the growth of endowments around the nation and why some people are unhappy about it (most of the stories are firewalled). Also of interest is this New York Times article about Illinois' billionaire governor and the influx of political money transforming state politics. Check out this chart on how wealthy Chicagoans views equity versus the average American:
Around the same time that Mr. Rauner began running for governor, a group of researchers based at Northwestern University published findings from the country’s first-ever representative survey of the richest one percent of Americans. The study, known as the Survey of Economically Successful Americans and the Common Good, canvassed a sample of the wealthy from the Chicago area. Those canvassed were granted anonymity to discuss their views candidly...
Where the general public overwhelmingly supports a high minimum wage, the one percent are broadly opposed. A majority of Americans supported expanding safety-net and retirement programs, while most of the very wealthy opposed them. And while Americans are not enthusiastic about higher taxes generally, they feel strongly that the rich should pay more than they do, and more than everyone else pays.
Seems like the pharmaceutical industry is in hot water with the American people, following a rash of companies buying the rights to drugs and then jacking up the price. As the Atlantic explains, this means the more expensive the drug the less access poor people have to it:
If state governments were to pay for Sovaldi or Harvoni for all of the Hep C patients on their Medicaid and prison rolls, the total bill would have been $55 billion. Most state Medicaid programs, therefore, are sharply limiting access to them. An August study in the Annals of Internal Medicine found that most states were only making these new drugs available to Medicaid patients who had advanced fibrosis, or liver scarring. Two-thirds required urine drug tests for drugs and alcohol before they would cover the medication.
You might also be interested in this story from Politico that explains a round of votes on the Affordable Care Act in the Senate -- ranging from issues of Medicaid expansion to gun control to tax inversions -- designed to be politically painful for all in the coming election year.
And speaking of inversions and drug companies, over in the New York Times Jeff Sommer looks at why Pfizer didn't need to invert in Ireland to avoid taxes:
An excellent report by Audit Analytics, an accounting research firm, found that at the end of 2014, the companies in the Russell 1000 index held more than $2.3 trillion in earnings abroad. The report, which had limited scope and is already slightly out of date, restricted itself to earnings that those 1,000 big companies had declared to be “permanently” or “indefinitely” invested abroad. Under United States rules, when companies give earnings this designation, they are not required to actually pay American taxes on that money unless they return the cash to the United States. Audit Analytics found that the 2014 total was twice the 2008 amount. The jump from 2013 to 2014 alone was 8.6 percent...
[E]ven if the Pfizer merger, or tax inversions generally, are ruled out of bounds, the United States still faces a gigantic problem. American companies are hoarding money overseas and avoiding United States taxes without inversions. Unless the laws change, it is difficult to imagine them bringing all that money home.
There is also the front page of the Economist looking more generally at corporate short-termism and whether it is really the problem ailing the economy:
If firms are sitting on cash, it can lead to a deficit in overall demand in the economy. Even if they return their surplus profits to shareholders, that may not boost demand if those shareholders are already rich and squirrel away the extra money. Macroeconomic policies to boost demand will help. But competition can also make a difference by reducing outsize profits and spurring firms to invest more. Here there is cause to fret.
The boom in Silicon Valley gives an impression of a golden age of dynamism—in some industries, such as taxis, startups are indeed causing revolutions. Overall, however, American capitalism is more sluggish than it was. Small firms are being started at the slowest rate since the 1970s. Young firms’ weight has shrunk, measured by their number and share of employment. The labour market has become less dynamic...
The answer is twofold. First, remove the barriers to the creation of small firms. Nearly 30% of American occupations now require licences—tourist guides in Nevada need 733 days of training, for example. Some 22% of small firms complain that red tape is their biggest problem; many have trouble getting credit. Both issues loom even larger in Europe. Second, be vigilant about oligopolies: so far America’s antitrust regulator has blocked only a handful of the large deals proposed since 2008, although it is now scrutinising combinations such as Office Depot and Staples. Rather than trying to stipulate the horizon over which investors and firms should think, governments should promote competition.
You also might be interested in this Steve Forbes op-ed in the Washington Times on why he does not like the plan by Tom Steyer and others to short sell fossil fuel stocks.