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OP-ED | State Must Address Widening Income Gap

by Susan Bigelow | Nov 16, 2012 12:20pm
(8) Comments | Commenting has expired
Posted to: Economics, Equality, Opinion

“There’s one thing this country won’t forgive, it’s the sin of being poor.”
–Garnet Rogers, “Election Night: North Dakota” (1984)

The gulf between rich and poor in most states is wide and growing, according to a new report by the Center for Budget and Policy Priorities. Connecticut Voices for Children and the Connecticut Association for Human Services analyzed the report, and found that Connecticut’s gap is one of the worst, and one of the fastest-growing, in the country.

This is grim news for the state and the nation, but it shouldn’t come as a surprise to anyone who has been paying attention. Government’s idea of virtuous economic policy since the presidency of Ronald Reagan has been a combination of tax cuts for the wealthy and service cuts for the poor. Welfare became harder to get and keep, education deteriorated, infrastructure decayed, and America became a meaner place. This terrible, toxic myth of “makers” vs. “takers” has poisoned how Americans think about income and poverty. It’s telling that one of the two major parties can so blithely deride the poor as greedy, lazy stealers of other people’s work, and then after their embarrassing loss complain that the opposition only won because they were giving “gifts” to blocs of people who did not deserve them. We’ve never had a lot of compassion for the poor, but sometime in the past few decades Americans decided to stop caring at all.

Income inequality in Connecticut is especially sharp. Again, this isn’t a huge surprise, given that we are home to both glittering riches in suburban Fairfield County and deep urban poverty in the cities on the coast and the valley. In fact, Connecticut ranks first among the states when it comes to the change in ratio of incomes of top-tier and bottom-tier families between 1977-79 and 2005-07. In short, the gulf between rich and poor is widening in this country, and Connecticut is leading the way.

Maybe one good thing that will come out of this report is that it finally, and permanently, discredits the destructive disaster that is trickle-down economics. One of the tiredest arguments against raising taxes on the rich is that the wealthy create good jobs by spending the income the government wants to “take” in taxes. If the super-wealthy do indeed create jobs, those jobs are in no way good or stable employment. Our leaders’ moral hand-waving about the virtuous rich and the lazy poor has done nothing but make the rich far richer while everyone else sinks.

Unfortunately, as the report suggests, there’s not really an easy fix. Connecticut was 46th in inequality between the top and bottom earners in 1977-79; our jump to the top of the rankings is in part a symptom of the economic collapse this state suffered thanks to the decline of defense, insurance, and manufacturing. These are structural problems, the end result of our embrace of a capitalism that cares not for the people and places it relies upon to flourish, but only for its own profit. This is a ship that has been sailing in the wrong direction for 30 years, and it can’t be turned around so easily.

Some of the suggestions in the report, such as strengthening programs like Medicaid and shoring up the unemployment insurance system, make sense and should be considered by the legislature during the upcoming session. Those are things that have a mild chance of success. The report also suggests a minimum wage hike and further taxation of the rich, which almost certainly don’t. Minimum wage hikes are always a hard sell, and an economy that continues to struggle makes it almost impossible. Gov. Dannel P. Malloy, with perhaps an eye on re-election in 2014, has said the budget will be balanced with no tax hikes this time, which means potentially harsh spending cuts.

Despite the looming budget gap, the state should continue to make smart investments in accessible, affordable education, public transportation, health care, and other institutions that enable people to get into the workforce and stay there. But if we’re really serious about closing this income gap, we need to change our thinking. We have to stop making poverty a sin and wealth an untouchable virtue, and work to rebuild the sort of economically mobile society with a strong and accessible middle class that we had in the past. We have to stop being cruel, and remember how to care about our fellow Americans.

Susan Bigelow is an award-winning columnist and the founder of CTLocalPolitics. She lives in Enfield with her wife and their cats.

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(8) Comments

posted by: borisvian | November 17, 2012  10:24am

How the US became a 3rd World country.

When I entered the workforce, in 1985, people were getting
about the same wages for hard, outside labor ($9-10/hr) as
today. However, it was then about 2-3 times as much as the
minimum wage. Today, for hard, outside labor, people get the
minimum wage.

The USA, with its infrastructure stumbling, fifth rate electrical
grid on wooden poles (instead of concrete poles or underground
wiring, as in any industrialized country), ever decreasing wages,
no access to affordable health care and education, pretty much
looks like a developing country.

In any decent, civilized country the minimum wage increase
is automatic and is indexed to inflation.

The good news is, though, that there’re plenty of guns and bibles available. And if you don’t believe in either, go screw
yourself.

posted by: ConnVoter | November 17, 2012  3:35pm

Susan, your heart is in the right place but you’re barking up the wrong tree.  The “income inequality” index is a silly metric.  If 1,000 millionaires move here, the inequality would grow, and if 1,000 poor people leave, the inequality would shrink.  So what?

Also, I love your use of adjectives and adverbs in the fourth paragraph.  Too bad it’s completely irrelevant.  Take a look at what has happened to GDP since Kennedy, Reagan, Clinton and Bush started hacking away at high marginal and capital gains tax rates—it has gone completely through the roof, along with income tax collection.  Is this something you want to reverse?

If you want to look at an institutional trend that has accelerated the “widening” of the income inequality gap (whatever that means), blame the income tax.  As it has grown over the last 20 years, middle-class jobs have departed.  Coincidence?  When we had low inequality, we had no income tax.  Hmm.

posted by: CitizenCT | November 18, 2012  11:48am

Susan, the state is doing something.  They are giving incentives to Hedge fund companies, UBS and Cigna WHQ so the state can retain and increase the high earners with higher wage growth to fund state unions and programs for the entitlement class.  Someone has to pay for the Obamacare/Medicaid spending increases.  What’s most revealing is that the bottom 20% in income have seen a 4% decline over time, whereas every other category has seen inflation adjusted increases.  This seems to indicate that with the Gvt handing out free stuff, there is little incentive to improve your lot in life.

posted by: gutbomb86 | November 18, 2012  2:41pm

gutbomb86

@CitizenCt - I’ve read your theory before in these comments from a few others as well but the obvious is always missing from the “gov’t handing out free stuff” argument:

This seems to indicate that with the Gvt handing out free stuff, there is little incentive to improve your lot in life.

So by realizing a 4% decline in earnings over time, they’re being encouraged in some way to continue what you deem to be an entitlement lifestyle, without trying to improve their income or lot in life.

There’s this assumption that it’s the same individuals using these services forever, which is not the case nor has it ever been the case. But conservatives seem to buy it because they see the world in stasis - it’s black and white to them, clear as day, and yet they can never figure out how to come up with a real solution.

Here it is - in a system of capitalism we have explosive growth during boom periods and terrible poverty during bust periods. But Boom-Bust is what capitalism gets us. We use regulation and the safety net to create some stability, but stability is an illusion. The marketplace is what it is, so get used to paying for services for people who have crashed or simply run out of money. People aren’t going to suddenly say to themselves, “Hey, I’ve lost my job, bummer. I’ll just start farming the land and hunting for meat because that’s what a self-reliant Republican would do.” That’s the logical conclusion of nonsensical Republican thinking. It’s simply unrealistic to assume that we don’t need a safety net, unions or no unions.

We need to find a way to fund the services and fund the programs that help train people to get better jobs or launch new businesses that will support them. The gov’t isn’t handing out free stuff, the gov’t is keeping people from starving. It’s a fundamental difference in assessment there that really has isolated the GOP and will continue to do so. The Republicans appear to want to legislate their way to a “king of the hill” situation where they’re the winners and the rest can simply disappear. It’s part of the reason they lost the election - an assumption that the rest of the people don’t count. They do count. And they vote.

posted by: GoatBoyPHD | November 18, 2012  9:25pm

GoatBoyPHD

These reports need to consider transfer payments includng educating the kids of the 30% wgo pay no taxes and providing health care and the pensions that accrue to support the socal services rendered.

Section 8, public housing and foodstamps, Include all the transfers.

The real problem is the loss of jobs in CT. The semi-skilled tradesman class and construction jobs that evaporated in 2008

Where would higher taxes go? To pay off the $11 Billion Pension deficit fiasco and to further expand Health Care without cost containment? More utban education dollars without accountability?

posted by: CitizenCT | November 18, 2012  9:43pm

Gutbomb, watch the Sunday edition of face the state and hear how the SNAP food stamp debit card is being used at ATMs at strip clubs and casinos.  You really don’t think this is waste and abuse?  When Malloy’s commissioner was asked about it, he said maybe they use the strip club ATM because it’s more convenient.  But look on the Brightside, now that this abuse has been spotted, SNAP cards won’t be allowed in strip clubs…..starting in 2014.  You’re right about them voting, they vote for the candidate that will give them the most free stuff.

posted by: gutbomb86 | November 19, 2012  11:31am

gutbomb86

So we should shut down Medicaid because someone found a handful of ATM receipts from a strip club or a casino ... I wonder if it was the single moms who work at the club or casino who were using the ATM? Is that possible or does that fall outside of the realm of the conservative narrative’s possibilities?

OK yeah let’s do that. Let’s deny healthcare coverage to all the low income elderly because of that. It’s the conservative thing to do.

posted by: GMR | November 19, 2012  10:27pm

GMR

Inequality is rising for a bunch of reasons.  Immigration is a big one: you get people here from countries without great English ability and without good educations (or in some cases, without adequate credentials), and they’re pretty much relegated to lower wage jobs.  Better than their home countries, but still on the lower end of the scale in Connecticut. 

Another reason is that decent manufacturing jobs have largely left Connecticut due to the poor business climate—regulation, taxes (somewhat), and infrastructure (CT has high electric rates, freight rail is inferior and the roads are very congested).

One of the problems with too many social programs is that they attract more people who need them.  In the past 20 years, California added 10 million people, but only 150,000 net new taxpayers. (Those numbers may be exaggerated, but in any event it is clear that California is losing taxpayers for other states and gaining people who don’t pay much in taxes).

Something else to ponder: CT has high income inequality, but high taxes. 

Another thing I wonder about the data: when people sell their homes, does the gain count as income?  In Fairfield county, people who have owned homes for 10-15-20 years get huge gains when they sell.