Progressive Reasons for Reforming the Economy, 2008

[The following is a guest post emailed in to the Center for Popular Economics by a reader of CPE’s newsletter]

by Ben Leet

I am a retired school teacher who has done research on the U.S. economy partly for personal reasons and also because I had been teaching at a school in a poverty neighborhood in Oakland. There were many murders, crimes and depressing events in the neighborhood where I taught. Children brought in bullets that had passed through their walls, or one described a murder that happened in his back yard. Those were the worst examples, but violence was not uncommon. Bad economics, I concluded, contributed to poor student performance, poor behavior, and stunted emotional development. Here are the salient facts I’ve uncovered that point to a society mired in inequality.

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 can be found at

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.

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 share prosperity. (See for more.)

Now comes the subprime mess, recession, and it mushrooms from there. My friend is a carpenter and we argue about economics. He is a math graduate from UCLA. I ask him to divide 15 in 130. It’s not hard. About 8.7 is the answer. Well, the U.S. GDP is $13 trillion plus, and there are 150 million in the work force, so the average income is 130/15, or about $90,000 a year. (Believe me it adjusts upward from 8.7) Then why is the median income just over $32,000? Why do a quarter of the jobs pay less than $21,000? Shouldn’t the median be close to the average? I can argue this line with many of my underpaid friends.

We’ve got some economic homework to do as a society. I sound like a teacher, sorry.

I think we are tired, if not fed up, with the stress of incomes that don’t quite make it anymore. I am happy to see that liberal-left economists like Robert Kuttner, Robert Pollin, Jeff Madrick, and Frank Stricker are seeing the light of day in the media. We’ve got a long ways to go, though.

My prescriptions are the following:

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 America 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 implement minimum wage rules for countries that export products into our marketplace.

With recession on the horizon, the general population will begin to 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 population 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 security 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)

When a politician says our economy is “robust,” tell him to leave off the first syllable.
(My references can be found at