Inequality Is Probably Costing You a Lot of Money

When political scientists Jacob Hacker and Paul Pierson released Winner-Take-All Politics in March 2011, it made headlines. The book’s vivid descriptions of how moneyed interests had come to dominate the Washington political scene captured media attention and helped shape conversations around public policies affecting economic inequality.

But while Winner-Take-All Politics got a lot of attention, the media missed a crucial part of the book: Rising inequality comes at a high cost to individual workers. In the book, Hacker and Pierson presented calculations showing that if inequality had stayed constant from 1979 to 2006, the bottom 90 percent of Americans would make up to 36 percent more per year than they currently do.

Half a decade later, inequality is still growing. It also still isn’t getting the media attention it deserves, even though it’s making a massive impact on Americans’ lives. It’s like climate change: There is nothing “new” about growing inequality, so it gets pushed out of the news in favor of White House scandals and presidential tweets. But just like global warming, economic inequality is slowly but surely destroying the livelihoods of many Americans.

You can see this quite clearly when you look at how the distribution of household income has changed over the past 50 years. I extended Hacker and Pierson’s original calculations to include incomes from 1968 to 2015, giving us about two decades’ worth of additional data beyond other recent calculations. The wider timeframe shows an even deeper decline in income than the authors originally reported.

The table below breaks this down by income bracket. The second column shows what each group’s average household income was in 2015; the third column shows what the group’s average income would have been if inequality had stayed the same between 1968 and 2015.

table 1

Source: Author’s calculations based on 2016 data from the U.S. Census Bureau.

If it weren’t for the increase in inequality, the bottom 40 percent of households would be making more than 35 percent more today.

The 'winners' from increased inequality are really a small group of incredibly rich Americans.

The gains, of course, have gone to the very wealthiest Americans—especially those in the top 5 percent. Due to the rise in inequality, higher-income households—those in the top 20 percent of the income distribution but not in the top 5 percent—have seen a 9 percent increase in their annual incomes. But incomes for households in the top 5 percent are 26 percent higher—an increase nearly three times as great. This reveals something important about the nature of rising inequality: The “winners” from increased inequality are really a small group of incredibly rich Americans, who are taking increasingly large shares of the total national income.

table 2

The findings are pretty difficult to refute. Conservatives have long argued that household income statistics are unreliable because they fail to account for differences in household size. But the increase in inequality appears just as real even when we look at “equivalence-adjusted income shares,” which control for differences in household size and composition.

In fact, the figure below shows that households in the bottom 40 percent of the income distribution have actually seen their share of national income decline more when we use the equivalence-adjusted household income that addresses conservatives’ concerns.

table 3

The poorest fifth of households saw their share of national income decline from 4.2 percent in 1968 to 3.1 percent in 2015, a drop of 1.1 percentage points. However, if we instead look at equivalence-adjusted income, their share of the national income dropped more than twice as much (from 5.8 percent to 3.4 percent, a drop of 2.4 percentage points). Conservatives are right to say that normal household income statistics can be misleading; but that’s because the normal statistics understate the rise in inequality, not because they overstate it.

The rise in inequality is no statistical mirage. It is undoubtedly real—and its effects have been pernicious. Our country’s poorest households lose more than $4,000 every year as a result of the growth in inequality; lower-income families lose more than $11,000; and middle-class families lose around $13,000. That money could pay for real things that families have to do without, whether it’s better food or new shoes, a trip to the doctor or a great summer camp.

If the rise of economic inequality is going to be the great untold story of our time, then reducing inequality should be the greatest progressive objective of the 21st century.



This Year’s Poverty Data Look a Lot Different When You Break Them Down by Race

Yesterday’s Census release of data on income, poverty, and health insurance demonstrated two things: There are policies that work for people who are struggling, and there is still a lot of work left to do—especially for people of color in America.

It is encouraging that the people who saw the worst losses in the years since the Great Recession—specifically African Americans and Hispanics—saw the biggest earnings gains for the second consecutive year. Real median incomes increased 5.7 percent to $39,490 among African Americans and 4.3 percent to $47,675 among Hispanics. But the racial income gap is still stark—the median income among non-Hispanic whites stands at $65,041.


Source: Economic Policy Institute.

The racial wage gap also persists as black men earned 71 cents for every dollar earned by white men in 2016, and Hispanic men earn 66 cents on the dollar. Among women, it has actually grown worse since 2007: Black women now earn 79 cents for every dollar earned by white women, and Hispanic women earn 69 cents on the dollar.

It is therefore not surprising that although poverty rates for all groups were down, they remain highest among African Americans (22 percent) and Hispanics (19.4 percent), compared with whites (8.8 percent). African American and Hispanic children continue to face the highest poverty rates at nearly 31 percent and 27 percent, respectively. African American children are three times more likely to be in poverty than white children.

image (1)

Source: Economic Policy Institute.

While the Census releases new data every September, it is notable that the solutions remain the same every year: People need investments in quality training and good jobs in their communities; they need a safety net that protects our basic living standards for food, housing, health care, retirement (Social Security); they need access to good schools and higher education; they need child care that doesn’t cost more than a year of college tuition; and they need a minimum wage that isn’t a poverty wage.

The solutions remain the same every year.

Many of the key policies that helped people in poverty achieve some gains are at stake in upcoming congressional debates on the budget. Conservatives will continue to go after the investments that cut poverty in half year-in and year-out, such as Medicaid and affordable health care. They will call for tax cuts for the wealthiest Americans, even though the wealthiest 5 percent already captured 22.5 percent of all income last year. Nowhere on the agenda is there discussion of a just minimum wage and a real jobs plan that would target those who continue to struggle at the economic margins—disproportionately people of color—doing low-wage or unpaid work.

Recent gains need to be protected in the current political environment, but we also need to stay focused on a vision of how every man, woman, and child has the opportunity to fully participate in our economy and thrive.



Census Data Show We’re Finally Back to Pre-Recession Poverty Levels. Trump’s Budget Risks Erasing Those Gains.

Today, the U.S. Census Bureau released its annual snapshot of poverty, income, and health insurance in the United States. And following 2015’s historic gains, 2016 was another banner year on all three fronts: Poverty is now finally back to pre-recession levels, dropping from 13.5 percent to 12.7 percent; median income is up 3.2 percent to $59,039; and the share of Americans without health coverage has continued to decline, reaching a new record low of 8.8 percent.

But while all this is cause for celebration, today’s data also serve as a stark reminder of how much is at stake in the current political climate. That’s because they reflect continued progress made in 2016 thanks to policies such as the Affordable Care Act and Medicaid expansion and investments in programs that help families afford the basics, from Social Security to nutrition assistance, to tax credits for working families—all of which are at risk under President Trump’s and congressional Republicans’ budgets.

Ironically, as he’s been known to do on more than a few occasions, President Trump may try to claim credit for this continued progress, even though it predates the start of his term. But whether or not he pretends they’re his gains, the data make clear the difference policy choices make—and how much worse off struggling families would be under Trump’s Robin Hood in Reverse agenda.

New analysis by my Center for American Progress colleagues Rachel West and Kate Gallagher Robbins shines a light on just how much worse off poverty would be if Trump’s budget became law. If just three of Trump’s proposed cuts had been in place in 2015—the latest year for which data are available—a staggering 2.3 million more Americans would have been poor that year. This analysis takes into account Trump’s proposed deep cuts to the Supplemental Nutrition Assistance Program, or SNAP (formerly food stamps); his call to eliminate the Low-Income Home Energy Assistance Program, or LIHEAP, which helps 6.7 million Americans afford their energy bills; and the increased out-of-pocket medical costs millions of Americans would face due to Trump’s proposed rollback of Medicaid expansion.

Of course, these three cuts only scratch the surface of Trump’s agenda. His budget also calls for deep cuts to Social Security, critical disability programs, education and job training, school nutrition, job-creating infrastructure investments, and nearly every program or policy that helps working families make ends meet and get ahead. The House Republican budget released this summer shares much of the same DNA. But even just the three budget cuts my colleagues looked at risk erasing all the gains we saw last year.

Meanwhile, Trump and congressional Republicans are pursuing massive tax giveaways for the ultra-rich and corporations, in an effort to bring about a historic upward redistribution of wealth under the guise of “tax reform.” Indeed, Trump’s proposed elimination of the estate tax alone—a tax that affects just the richest 0.2 percent of estates—would cost the same as feeding more than 6 million seniors through Meals on Wheels, yet another critical program he’s targeting for deep cuts.

Minimum wage increases were likely a major driver of the declines in poverty.

Trump talked a good game during his campaign, pledging to fight for the “forgotten man and woman” and restore prosperity to communities that have been left behind. Meanwhile, Speaker Ryan has spent years styling himself as a supposed poverty crusader, famously taking a “poverty tour,” hosting a poverty summit featuring Republican presidential candidates, and releasing a big plan to overhaul key antipoverty programs. But today’s data serve as Exhibit A of the gargantuan gap between their rhetoric and the reality of their policies.

If Trump and Ryan were serious about cutting poverty and fighting for communities left behind, they’d embrace the policies that brought about declines in poverty and rising incomes in 2015 and 2016—like raising the minimum wage. State and local minimum wage increases were likely a major driver of the declines in poverty and rising incomes we saw over the past two years—and, tellingly, in states that had enacted minimum wage increases, low-wage workers saw faster wage growth in 2015 than workers in states whose minimum wages remained flat. They’d close the book on repealing the ACA and slashing Medicaid, programs that together have brought the nation’s uninsurance rate to historic lows. And they’d abandon their proposals to slash nutrition assistance and other programs that help families afford the basics, which cut poverty nearly in half in recent years while also boosting mobility in the long-term.

But instead, they seem hell-bent on snatching any gains working families have seen in recent years and funneling them upward so millionaires and billionaires can buy a second yacht.

So as we digest this year’s Census data, let’s not get out the balloons just yet. Instead, we should let them be a lesson to us about how much is at stake—and the policy agenda we need to build an economy that works for everyone instead of just the wealthy few.

This article originally appeared on Spotlight on Poverty and Opportunity


First Person

My Sister Served in the Army. The Biggest Threat to Her Survival is Congress.

My older sister, Lynn, was always getting into trouble when we were kids. I was the goody two-shoes in the family, but if I did ever get myself in trouble, she’d get in even more trouble to help me out. She was a good sister in that way—always looking out for me. When I was little, I didn’t like to sleep by myself during thunderstorms, and she’d let me crawl into bed with her because she knew I was afraid.

Now, in some ways, I’m her big sister. I do my best to take care of her.

Lynn—a 62-year-old army veteran—cannot walk. Her dementia makes it impossible for her to remember to take her medicine. Her forgetfulness has life-or-death implications, since she has diabetes, high blood pressure, and high cholesterol. As a result, Lynn has been in a nursing home for the past four years. Medicaid pays the bills for that—just like it does for most people who need nursing home care—and I’m terrified of what would happen without it.

Lynn joined the army right out of high school. When she was in boot camp, she had a traumatic head injury during basic training. The military doctors held her for observation, diagnosed her with a concussion, and then released her. She served her time as a private, then was honorably discharged and got married.

A few years later, she was struck by a car. She was at a crosswalk, and the car in front of her stopped to let her cross. But the car behind it was impatient, so it swerved around the first car, plowing into the crosswalk and hitting my sister. That left her with another traumatic head injury, as well as the beginning of hip problems that will plague her for the rest of her life.

Over time the hip problems worsened, until she finally had a hip replacement in her mid-50s. She was able to walk without pain for a while, but she then contracted a MRSA infection in her new hip joint. That can happen with artificial joints—it’s rare, but once you have the infection it’s hard to remove. Lynn’s infection spread quickly, and it almost killed her. Doctors tried to treat her with some very powerful drugs at first, which made her thoughts so fuzzy that she said her brain was buzzing.

Eventually, doctors had to remove her hip bone to control the MRSA. Medicaid paid for this surgery, too—otherwise, we wouldn’t have been able to afford it.

Just four years ago, Lynn was working multiple jobs to put her daughter through college: in the cafeteria at her daughter’s school, at Walmart, and at a deli. Now Lynn can no longer walk, or work. The doctors say the drugs impaired her brain and made her dementia onset much more quickly.

She’s not trying to take more than her fair share of the pie.

But this isn’t a sob story. I don’t want you to feel badly for her, or take pity on her. Lynn is still the same person I’ve always known, full of life and warmth. She can break the tension in a moment better than anyone I know. I still remember a moment a few years ago, when she was recovering from her first hip surgery. She flew into Washington, D.C., to visit us, and we were trying to get her out of baggage claim and into the elevator in her wheelchair. The doors started to close, and nobody wanted to hold them—she was far away, and she was moving so slowly. But she shouted, “I’m coming as fast as I can!” across the airport. They actually held the door for her. In the elevator, she chatted with them amicably, asking how their Christmas was going. Strangers were smiling and talking to her—that’s a rare sight in D.C.

Lynn would be lost without Medicaid. She served her country and worked hard to provide for her family. She’s not trying to take more than her fair share of the pie. She’s just somebody who needs care—and she didn’t expect to need the care that she needs as young as she is.

When our elected representatives decide to cut Medicaid—whether through repeated attempts to repeal the Affordable Care Act or a budget that cuts $3.6 trillion from services such as Medicare and Medicaid—they should think about what this means to people like me and my family. They should think about Lynn, and the millions of other veterans who have turned to Medicaid.



Tension Builds as St. Louis Awaits Another Police Killing Verdict

On Labor Day, there was a candlelight vigil on the corner where Anthony Lamar Smith was killed. He was shot by Jason Stockley in 2011, who remained a St. Louis police officer until 2013. That’s the year the city paid out a wrongful death settlement to Smith’s family. Now, Stockley’s murder trial has concluded. The city has been waiting on a verdict since August 9.

St. Louis residents are used to being told to wait for justice, and this all feels familiar. In 2014, it took months to get the grand jury’s decision not to charge Darren Wilson for the shooting of Michael Brown.

Now, any time something big happens in St. Louis—like a verdict or an important anniversary—people converge on the city. Activists, journalists, residents, and protesters head back to the same street corners and the same cafes, and everybody speculates, though there’s no telling what might happen next.

This year’s unseasonably early cold snap makes it feel like that November when we all waited for Wilson’s verdict. Again, the waiting has stretched into months, and there’s an edgy monotony of checking the news and reporting on local events, and wondering how long tension can build before it bursts.

On September 1, two officers were shot and a woman was killed by a stray bullet near the downtown area. A few hours later, residents who’d gathered in the area spotted heavily armed officers a few blocks away. It turned out to be a search of nearby abandoned buildings, presumably for a suspect in the shooting. Five cruisers and at least as many undercover units gathered and milled about, while residents speculated that it was a raid of someplace nearby.

“I saw the cops converge behind this building for something or somebody,” said Megan Macarey, a yoga teacher at a nearby charity. “Police are militarizing the neighborhood.”

Macarey had been calling her friends, telling everyone they might have to come outside and keep an eye on things. Most neighborhoods that are the target of police in St. Louis are like that, with informal networks and a practiced sequence of events. Cops show up, everyone comes out and videos everything. Macarey said, “Tensions are high, and we know police are putting up the barricades,” which the city had erected earlier that day in anticipation of the verdict’s release.

Annie Smith is, like many people, tired of waiting for justice.

That is how policing is done in St. Louis: opaquely and usually with a show of force. There are times when the police can be perfectly lovely, such as at the Labor Day parade when they were playing with children. But policing of protests is decidedly less friendly in many instances, and given that two officers have just been shot, few people in the activist community expect the police to be in a conciliatory mood any time soon.

Over Labor Day weekend, there were protests going on at nearly any hour. Sunday night, local activists marched through a bar district, gaining a fair amount of support from patrons who joined them to chant, “Out of the bars and into the streets!” Monday morning, Fight for $15 shut down a local McDonald’s before joining the Labor Day parade, which featured thousands of union workers alongside ads for Boeing and Lockheed Martin.

Monday evening was the vigil for Smith, which was supposed to be candlelit until a storm roiled above us and forced everyone to use their cell phone lights instead. Annie Smith, Anthony Smith’s mother, gave a statement: “Why has it taken so long for the verdict?” Smith is, like many people, tired of waiting for justice. “I lost my voice yelling, and I’m tired of yelling,” she said.

The verdict could feasibly come back guilty. But although roughly 11,000 people were shot and killed by police officers from 2005 to 2016, only 77 officers were charged—and only 26 were eventually convicted. It’s more likely that Stockley will be found not guilty. When that happens, the people here will be reacting to not just this verdict, but to every verdict this feels like, each piling on top of one another.

Editor’s note: This is the first in a three-part series on the trial over the killing of Anthony Lamar Smith.