The Downward Path of Upward Mobility

November 17, 2011 by · Leave a Comment 

By Fareed Zakaria

This week’s Washington Post-ABC News poll reveals what we have all sensed, that most Americans are increasingly concerned about the growing gap between rich and poor in this country. The issue quickly divides along partisan lines, as do so many, with liberals urging government to do more to reduce this gap and conservatives opposing such measures. (Overall, a significant majority does favor government action.)

But on an issue even more significant than income inequality, there does appear to be bipartisan agreement: the importance of social mobility. Indiana Gov. Mitch Daniels (R) accurately noted that “upward mobility from the bottom is the crux of the American promise.”

Some believe we’re still doing fine. In his address to the Heritage Foundation last month, Rep. Paul Ryan (R-Wis.) declared, “Class is not a fixed designation in this country. We are an upwardly mobile society with a lot of movement between income groups.” Ryan contrasted social mobility in the United States with that in Europe, where “top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class.”

In fact, over the past decade, growing evidence shows pretty conclusively that social mobility has stalled in this country. Last week, Time magazine’s cover asked, “Can You Still Move Up in America?”
The answer, citing a series of academic studies was, no; not as much as you could in the past and — most devastatingly — not as much as you can in Europe.

The most comprehensive comparative study, done last year by the Organization for Economic Cooperation and Development, found that “upward mobility from the bottom” — Daniels’s definition — was significantly lower in the United States than in most major European countries, including Germany, Sweden, the Netherlands and Denmark.

Another study, by the Institute for the Study of Labor in Germany in 2006, uses other metrics and concludes that “the U.S. appears to be exceptional in having less rather than more upward mobility.”

A 2010 Economic Mobility Project study found that in almost every respect, the United States has a more rigid socioeconomic class structure than Canada. More than a quarter of U.S. sons of top-earning fathers remain in the top tenth of earners as adults, compared to 18 percent of similarly situated Canadian sons. U.S. sons of fathers in the bottom tenth of earners are more likely to remain in the bottom tenth of earners as adults than are Canadian sons (22 percent vs. 16 percent). And U.S. sons of fathers in the bottom third of earnings distribution are less likely to make it into the top half as adults than are sons of low-earning Canadian fathers.

Surveying all the evidence, Scott Winship, a fellow at the Brookings Institution, concludes in this week’s National Review: “What is clear is that in at least one regard American mobility is exceptional. . . .

[W]here we stand out is our limited upward mobility from the bottom.”

When you think about it, these results should not be so surprising.

European countries, perhaps haunted by their past as class-ridden societies, have made serious investments to create equality of opportunity for all. They typically have extremely good childhood health and nutrition programs, and they have far better public education systems than the United States does. As a result, poor children compete on a more equal footing against the rich.

In the United States, however, if you are born into poverty, you are highly likely to have malnutrition, childhood sicknesses and a bad education. The dirty little secret about the U.S. welfare state is that it spends very little on the poor — who don’t vote much — lavishing attention instead on the middle class. The result is clear. A student interviewed by Opportunity Nation, a bipartisan group founded to address these issues, put it succinctly, “The ZIP code you’re born in shouldn’t determine your destiny, but too often it does.”

Tackling income inequality is a very difficult challenge. Tax increases on the rich will do relatively little to change the basic trend, which is fueled by globalization, technology and the increasing gains conferred by education. (Getting back to the 1990 levels of income distribution in the United States, for example, would mean hundreds of billions of dollars of redistribution every year, which is exponentially larger than the biggest tax hikes anyone is proposing.)

But we do know how to create social mobility — because we used to do it. In addition, we can learn from those countries that do it so well, particularly in Northern Europe and Canada. The ingredients are obvious: decent health care and nutrition for children, good public education, high-quality infrastructure — including broadband Internet — to connect all regions and all people to market opportunities, and a flexible and competitive free economy. That will get America moving again — and all Americans moving again.

comments@fareedzakaria.com

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30 Years of Unleashed Greed

November 3, 2011 by · Leave a Comment 

By Robert Scheer

It is class warfare. But it was begun not by the tear-gassed, rain-soaked protesters asserting their constitutionally guaranteed right of peaceful assembly but rather the financial overlords who control all of the major levers of power in what passes for our democracy. It is they who subverted the American ideal of a nation of stakeholders in control of their economic and political destiny.

Between 1979 and 2007, as the Congressional Budget Office reported this week, the average real income of the top 1 percent grew by an astounding 275 percent. And that is after payment of the taxes that the superrich and their Republican apologists find so onerous.

Those three decades of rampant upper-crust greed unleashed by the Reagan Revolution of the 1980s will be well marked by future historians recording the death of the American dream. In that decisive historical period the middle class began to evaporate and the nation’s income gap increased to alarming proportions. “As a result of that uneven growth,” the CBO explained, “the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979:

The share of income accruing to higher-income households increased, whereas the share accruing to other households declined. … The share of after-tax household income for the 1 percent of the population with the highest income more than doubled. …”

That was before the 2008 meltdown that ushered in the massive increase in unemployment and housing foreclosures that further eroded the standard of living of the vast majority of Americans while the superrich rewarded themselves with immense bonuses. To stress the role of the financial industry in this march to greater income inequality as the Occupy Wall Street movement has done is not a matter of ideology or rhetoric, but, as the CBO report details, a matter of discernible fact.

The CBO noted that in comparing top earners, “The [income] share of financial professionals almost doubled from 1979 to 2005” and that “employees in the financial and legal professions made up a larger share of the highest earners than people in those other groups.”

No wonder, since it was the bankers and the lawyers serving them who managed to end the sensible government regulations that contained their greed. The undermining of those regulations began during the Reagan presidency, and so it is not surprising that, as the CBO reports, “the compensation differential between the financial sector and the rest of the economy appears inexplicably large from 1990 onward.” Citing a major study on the subject, the CBO added, “The authors believe that deregulation and corporate finance activities linked to initial public offerings and credit risks are the primary causes of the higher compensation differential.”

So much for the claim that excessive government regulation has discouraged business activity. The CBO report also denies the charge that taxes on the wealthy have placed an undue burden on the economy, documenting that federal revenue sources have become more regressive and that the tax burden on the wealthy has declined since 1979.

In the face of the evidence that class inequality had been rising sharply in the United States even before the banking-induced recession, it would seem that the Occupy Wall Street protests are a quite measured and even timid response to the crisis.

Actually, the rallying cry of that movement was originally enunciated not by the protesters in the streets, but by one of the nation’s most respected economists. Last April, Nobel Laureate Joseph Stiglitz wrote an article in Vanity Fair titled “Of the 1%, by the 1%, for the 1%” that should be required reading for those well-paid pundits who question the logic and motives of the Wall Street protesters.

“Americans have been watching protests [abroad] against repressive regimes that concentrate massive wealth in the hands of an elite few,” Stiglitz wrote. “Yet, in our democracy, 1% of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.”

Maybe justice will prevail despite the suffering that the 1 percent has inflicted on the foreclosed and the jobless. But to date those who have seized 40 percent of the nation’s wealth still control the big guns in this war of classes.

This article was published at NationofChange at:

All rights are reserved.

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People Power: Occupy Wall Street Movement

October 27, 2011 by · Leave a Comment 

The Canadian Charger

2011-10-26T074901Z_1864182193_GM1E7AQ17ZP01_RTRMADP_3_USA-WALLSTREET

An “Occupy Wall Street” demonstrator chants during a demonstration in response to an early morning police raid which displaced Occupy Oakland’s tent city in Oakland, California October 25, 2011.

REUTERS/Stephen Lam

In the United States – the world’s lone superpower and a beacon of hope for many the world over – 14 million people are officially unemployed and two million of those have given up looking for a job. And that’s the tip of the iceberg: half a million people are homeless; nearly 50 million people are without health insurance; and 46 million Americans live below the poverty rate, yet banks and large corporations received billion dollar bailouts from taxpayers’ hard-earned money and bank executives never stopped receiving million dollar bonuses, on top of their seven figure incomes.

In response, the Occupy Wall Street movement – in the midst of its fourth week – continues to escalate, protesting against corporate greed, government inefficiency and income inequality. Many people are debating what the real message of this movement is and, more importantly, what impact it will have on the country itself.

Writing in the New York Times recently, Nobel Prize winning economist Paul Krugman said: “With unions and a growing number of Democrats now expressing at least qualified support for the protesters, Occupy Wall Street is starting to look like an important event that might even been seen eventually as a turning point.”

Of course, as with most controversial issues, the end of the political spectrum one is viewing the events from greatly influences one’s interpretation of said events. Speaking on the television show Cross Talk recently, radio talk show host and Tea Party organizer Tony Katz said that the Occupy Wall Street movement looked like a bunch of anarchists and he cautioned that the movement has the potential to turn violent.

Jason Del Gandio, assistant professor of rhetoric and public advocacy at Temple University, responded that the Occupy Wall Street movement is a nonviolent movement, expressing a deep desire for democracy that responds to the wants and needs of everyday people, not corporations.

Sensing the growing popularity of the movement, President Obama and his team are now saying that the demonstrators have a point; but with a team of Wall Street veterans as advisors, making all the important economic decisions that Obama lacks the expertise to make, the demonstrators consider Obama to be part of the problem, not part of the solution.

Meanwhile, on Cross Talk, Kevin Zeese, a political activist and one of the organizers of www.October2011.org said he and many others in the Occupy Wall Street movement see the Obama White House as part of the crony, capitalist, corrupt economy which has resulted in 400 people having as much wealth as 154 million – not because they’re smarter or work harder but because they’re politically connected and essentially bribing through campaign donations.

“Our goal is to shift the power to the people and end the corporate rule. Corporate rule does affect the cost of college; corporate rule does put our students in the greatest debt they’ve ever been in. They’re coming into a job market that’s absolutely terrible. These kids are in the streets because they’re being treated poorly by this economy…The empire economy with 1100 military bases around the world is not good for the United States; it’s not good for our national security; it’s not good for our democracy; it’s not good for our economy. We need to remove the power of corporations.”

Similar to the G20 protests, where citizens were expressing legitimate concerns about government policies, a minority of protesters always engage in destructive – and at times unlawful – conduct; and unfortunately it’s these acts that tend to make the evening news, and become the focus of right wing commentators. Not surprisingly, this is what Tea Party organizer Mr. Katz sees when watching the Occupy Wall Street movement.

“If you take a look from the outside looking in, it looks like a bunch of people who don’t care about the land, who are willing to abuse businesses around them and defecate on police cars. That’s the evidence base. You’re not going to get the Tea Party to favor a concept where everyone gets paid for doing nothing. We don’t accept that. We believe in capitalism; we believe in the free market; we believe you should keep what you earn. Governments shouldn’t get what you earn and Wall Street shouldn’t get what you earn. You should keep what you earn.”

The mantra of a free market is constantly trotted out by the right, as they continuously demand that government get out of the way of business and let the market decide. However, the reality is often quite different: Columbia University professor and Nobel Prize winner Joseph Stiglitz pointed out in his book Free Fall, that over many years, governments have had to continuously bail out banks and large corporations when their bets went sour. And the current crisis is just a part of this continuum.

Mr. Del Gandio, and many others, can see this.

“Do we actually live in a free market society? Because the last time I looked it was the richest corporations and the richest banks on the face of the planet that were getting bailouts. So it’s communism for the rich and capitalism for the poor. We do not live in a free market society. That’s a myth. We’ve never lived in a free market society. It’s always privileged the rich,” Mr. Del Gandio said.

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