Category Archives: Poverty & income gap

The Terrible Link Between Income and Longevity

RAM in Wise County

RAM in Wise County

By Peter Galuszka

Call it a tale of two Virginias.

One is rich with military retirees, ample benefits and gated communities. The other is remote, poor and polluted, where the life expectancy for men is merely 64 years.

The former is Fairfax County at the heart of NOVA, Virginia’s economic engine, the land of federal largesse. The other is 350 miles away in McDowell County, in the coal belt of southern West Virginia just a stone’s throw from the Old Dominion border.

In one of the best and most glaring reporting of income disparity in this country, Annie Lowery of The New York Times lays out the stunning contrasts in two very different places maybe a six-hour car ride distant. The nut of her report is that higher income means longer lives thanks to better access to decent food, retirement benefits and medical care.

In Fairfax County, men live to be 82 and women 85. In McDowell County, men (as noted) live to 64 and women to 73. Even more astonishing is that this is happening in 21st century America, the supposed land of plenty. If ever there were a call to do something about health care, this is it.

Think what you will about the Affordable Care Act, the prior system of managed care with Big Insurance calling the shots just isn’t working. One also wonders, in the case of McDowell, where Medicaid and Medicare are. Where are the benefits from the coal companies that used to dominate employment in the area?

This hits home for me because I grew up partially in West Virginia when my father, a Navy doctor, decided to retire and go into practice there. I also traveled about researching a recent book on the coal industry. I spent a lot of time in Mingo County, the next one over from McDowell. I drove plenty of times through the small town of Williamson, a major rail marshaling yard, and was struck by how many elderly people I saw pacing slowly with oxygen tanks strapped to their aluminum walkers. Coal-related black lung? Too many cigarettes? Breathing air dirty from coal trains and trucks  and strip mines? Over in Fairfax, people of a similar age are more likely to be in a warm swimming pool at an aquatic aerobics class.

Back in the Appalachians, one morning my photographer Scott Elmquist and I were traveling from Kentucky back into Mingo County and I happened to see a Remote Area Medical free clinic at a high school in Pikesville. We turned in and found more than 1,000 people thronging the gymnasium floor waiting for doctors or for their turns at the more than seven dozen dental chairs for free care they couldn’t otherwise afford. Some I spoke with had been waiting there since 1:30 that morning. RAM runs a circuit that includes Wise County in Virginia, also in coal country.

So how did these people slip through the cracks? The Times notes that in McDowell, there aren’t any organic food stores or Whole Foods. The place in inundated with fast food and convenience stores that sell ready-to-go hot dogs, energy drinks and salty chips.

Another reason is the connection with the coal industry which has been so lucrative over the years that it should have provided plenty for the elderly. Instead, as coal seams play out and natural gas usurps coal’s role in electricity generation, coal firms are setting up to skedaddle. One is Patriot Coal, an offshoot of St. Louis giant Peabody, that took over its Appalachian interests so the mother firm could concentrate on richer areas in the U.S. West and Asia. Patriot was set up to fail and perhaps take retirement benefits with it. It’s an obvious scam. You spin something off to get some distance between you and having to pay pensions and health benefits.

Another factor is what they are doing with the local environment. Mountaintop removal is a powerful instrument in places around McDowell. At the blog Blue Virginia, they ran an intriguing map showing just how this highly destructive form of mining that rips up thousands of acres overlays with high poverty areas. Out of sight out of mind. It’s a shame how many in the green movement are forgetting the horrors of mountaintop to beat up on fracking which may be closer to home for them. Continue reading

Redistributing the Wealth: College Tuition

rich-poor-ratio

by James A. Bacon

In the on-going sparring between left and right over inequality in the United States, the left has succeeded in framing the debate by defining the issue as income inequality, as in income reported to the Internal Revenue Service. Conservatives have countered that IRS income does not include income generated through the $2 trillion underground economy, nor does it include more than $1 trillion a year in means-tested transfer payments such as Medicaid, food stamps, the Earned Income Tax Credit and Temporary Assistance for Needy Families. Conservative pundits have generated some traction by highlighting the government-funded income transfers but even that doesn’t tell the whole story.

Our society is riddled with other means-tested programs. Social Security skews payouts in favor of the poor. Medicare increases contributions based on income bracket. Many hospitals and doctors provide billions of dollars of free or reduced-cost health care services to the poor, or at least they did before Obamacare. Speaking of Obamacare, the Affordable Care Act itself is a massive income transfer scheme. And let us not forget private philanthropy, which underwrites thousands of community programs across the country. (See the list of programs, most of which are focused on poverty, supported by the United Way of Greater Richmond and Petersburg.)

Rarely considered, much less debated, is the income transfer engineered by higher education. The cost of education is significantly discounted for the poor. We always knew that as a generality. Thanks to today’s Times-Dispatch’s Degrees of Difference” report, we now have that information broken down institution by institution for Virginia.

The chart above shows the average net cost of attending a Virginia university in the 2011-2012 school year. That includes tuition, fees, room, board, books and miscellaneous expenses. For each university, I have calculated the ratio of what households making $110,000 or more pay compared to what households making less than $30,000 pay. Thus, for the College of William & Mary, with the most “progressive” tuition scale in Virginia, students from upper-income families pay 6.7 times more than students from poor families. Please note: We’re not talking millionaires and billionaires here. A middle-class family with two working spouses can easily fall into that category.

My point here is not to criticize colleges and universities for discriminating against the middle class. I accept the idea that it is in society’s best interest to make it possible for talented lower-income students to attend college. I’m all in favor of promoting social mobility. (I’ll set aside for now the question of how many lower-income students are prepared for college and how many drop out, accumulating large debts in the process.) My point is that our society is steeped and marinated in wealth transfers. But for liberals, nothing is ever enough. President Barack Obama has dedicated the remainder of his second term to flagellating the idea that income disparities are too great and that society needs to do something more.

Fine, let’s have that debate. All I ask is that, instead of focusing purely on income reported to the IRS, that we consider all the actions our society is taking to ameliorate the effects of poverty. That includes the cost of a very big-ticket item, attending college.

More Data Points in the Income Inequality Debate

On the New Geography blog, Joel Kotkin has published an interesting list ranking the 50 largest U.S. metropolitan regions by the percentage of income derived from interest, dividends and rent. Inhabitants of metros that rank at the top of this list earn a higher percentage of their income from their investments than from salaries, wages and income transfers.

Much to my surprise, Virginia metros tend to rank high on the list.

income_share4
Frankly, I’m really not sure what this data means. I present it to you, dear reader, because it illuminates an aspect of Virginia’s political economy that usually goes unremarked upon.

A higher percentage implies greater wealth — after all, interest, dividends and rents are income generated from stocks, bonds and real estate. As Kotkin points out, older Americans tend to have accumulated more wealth than young people, so areas with large numbers of retirees tend to rank high. That may explain Florida and Arizona, but I don’t think it pertains to Virginia metros.

A high percentage also could signify lower wages, which would appear not to be the case in Virginia, with its top-quintile income rankings, or it could reflect less reliance upon transfer payments, which is a possibility, given the relatively low level of poverty here.

– JAB

Chart of the Day: Quantitative Easing and the 1%

progress

Back to one of my favorite themes… If you want to understand the increase in income inequality over the past few years, look no further than this chart (which I have taken from Zero Hedge). For those who don’t intuitively draw the obvious conclusions, let me spell it out for you. Quantitative easing (as reflected in Federal Reserve assets) drives up stock and bond prices. The Top 1% own the vast majority of stocks and bonds; they enjoy major capital gains, which they report as income. The rich get richer. But QE represses interest rates, which punishes small savers with money in banks and money market funds. The middle class and working class get zilch. Actually, they get less than zilch. A 1% interest payment on a bank CD lags the inflation rate. The little guy actually loses wealth.

Can we please stop pretending that the answer is higher tax rates and Congressionally designed wealth transfers? The biggest wealth transfer of all is staring us in the face. Wind that down, and you’ll see a big reduction in income inequality.

– JAB

America’s Most Egalitarian City… Less of a Distinction than It Appears

Egalitarian... but comparing apples with oranges.

Measured by income extremes, Virginia Beach is the most egalitarian large city in the country. Among households in 2012, the average income of the Top 5% was only six times that of the average income for the Bottom 20%. That compares to Atlanta, where the ratio was almost 19 to one, San Francisco, where the ratio was almost 17 to one.

In a recent paper, Brookings Institution scholar Alan Berube calculated the ratio for the 50 largest cities in the United States.

Berube observes that regions with great income disparities can be classified into two groups: cities like San Francisco where there are exceptionally high incomes (lots of wealth creation going on) and cities like Atlanta where there are exceptionally low incomes (little upward mobility).

Virginia Beach would appear to be an example of a city with modest extremes of wealth and poverty. In that sense, one could say it is the most middle class of all the nation’s largest cities. But there’s really not much to brag about here. Only a small portion of the “city” consists of urban core: the old resort area. Norfolk and Portsmouth were the urban centers of the south Hampton Roads region. Demographically, Virginia Beach is a middle-class suburb. The city owes its egalitarian distinction to the fact that Berube, not taking into account Virginia’s unique system of local government, was comparing apples to oranges.

Note: I have totally rewritten this post to correct a major misunderstanding in the original version.

– JAB 

The Tragic Lessons of Kiev

A pro-European protester swings a metal chain during riots in KievBy Peter Galuszka

The news from Ukraine is frightening and familiar.

At least 100 people have been killed in rioting in Kiev. Some were shot by Interior Ministry snipers after demanding that President Viktor Yanukovych allow new elections. The latest is that he may do just that.

Like all former Soviet republics, Ukraine has been caught in the usual post-collapse of the U.S.S.R. Liberal Democrats can’t amass enough power to overturn leftovers from the Communist system who have prisons and police at their disposal.

The economy has not recovered from the shock of the Soviet split up. It happened too fast. You can’t go from a seriously ossified command structure that provided cradle-to-grave services, crash it and then pretend the “magic of the market” will work overnight, or even in 25 years.

These failures have set up the tragedy in Kiev that if not controlled soon, could get truly scary. All Europe needs right now is a civil war on its edge. So far, the Ukrainian military is not involved and luckily for the world, Ukraine apparently got rid of its 5,000 nuclear weapons after the Soviet Union broke apart in 1991.

For me personally, the Kiev drama is reminiscent on several levels. I used to go to Kiev and Ukraine fairly often. Downtown Kiev is lovely. The main drag where the violence is taking place is on Khristyatyk Street, an impressive boulevard of monuments and buildings. I used to stay at a hotel around the corner near a leafy park on a bluff overlooking the Dnieper River.

Ukrainians are pleasant and friendly – somewhat like U.S. Midwesterners or Southerners. Ukraine used to be a farming dynamo until Stalin got involved. It also has some impressive industries, including advanced metallurgy and an aircraft plant that makes gigantic Antonov cargo planes. Tragically, it was also the scene of Chernobyl.

There’s been an underlying tension between western Ukrainians who felt much more in common with Western Europe and the east where Russians and their language prevailed. The friction, however, never got as intense as between Russians and, say, the Chechens or Central Asians. Ukrainians are very close in religion, language and color. There were rivalries and insults, such as Russians who dubbed Ukrainians “Hok-lee” which is a putdown of the Ukrainian language which is very close to Russian but has different inflections. Some Ukrainians hate being called “the” Ukraine because it means “on the edge” of Russia.

Vladimir Putin is a major player in today’s problems. Just as Ukraine was getting closer to the European Union in aid, trade and funding, Putin swept in with a $15 billion aid package. Putin is part of the old “Sil” or “forces” such as the KGB who have re-emerged in a new form, sort of like the robo-cop in the Terminator II movie. Continue reading

Flood Insurance: Subsidizing the Rich

Flags show coastal property that FEMA moved out of flood zones, allowing owners to benefit from cheaper insurance.

Flags show coastal property that FEMA moved out of flood zones, allowing owners to benefit from cheaper insurance.

Owners of expensive condos and beach houses along the coastline are petitioning the Federal Emergency Management Agency to redraw flood-zone maps to exclude their maps from the flood zones. Getting the maps redrawn saves as much as 97% in flood insurance — but gives petitioners the same protection as their neighbors inside the flood zones. NBC News has identified more than 530 sections of coastal property — eight of them in Virginia — where the lines have been redrawn.

NBC News also found that FEMA has redrawn maps even for properties that have repeatedly filed claims for flood losses from previous storms. At least some of the properties are on the secret “repetitive loss list” that FEMA sends to communities to alert them to problem properties. FEMA says that it does not factor in previous losses into its decisions on applications to redraw the flood zones.

And FEMA has given property owners a break even when the changes are opposed by the town hall official in charge of flood control. Although FEMA asks the local official to sign off on the map changes, it told NBC that its policy is to consider the applications even if the local expert opposes the change. …

Because waterfront properties are expensive, and it costs thousands of dollars to hire an engineer to press a case with FEMA, the remapped properties tend to be luxurious, either the first or second homes of industrialists, real estate developers and orthopedic surgeons.

That’s 21st-century America — get rich, hire a bunch of lawyers, engineers and tax accountants, lobby the government for special privileges, and sponge off the less well-to-do. FEMA is doing the right thing by raising insurance rates on coastal properties to reflect real risks of flood damage. But a morally corrupt system allows the wealthy and well connected to evade paying their share. Populist conservatives like me don’t mind people getting rich — creating wealth is a good thing. But we resent like hell when the rich use their wealth and power to win privileges not enjoyed by others.

– JAB

Tar Heel Grief Just Down the Road

By Peter Galuszka

It’s sad to see mccrorytwo states to which I have personal ties – North Carolina and West Virginia — in such bad ways.

The latest raw news comes from the Tar Heel state where we are seeing the handiwork of hard-right- Gov. Pat McCrory who has been on a tear for a year now bashing civil rights here, pulling back from regulation there.

The big news is Duke Energy’s spill of coal ash and contaminated water near Eden into the Dan River, which supplies Danville and potentially Virginia Beach with drinking water. Reports are creeping out that the McCrory regime has been pressuring the N.C. Department of Environment and Natural Resources (DENR) to pull back from regulation.

According to Rachel Maddow, DENR officials had stepped in with environmentalists as plaintiffs on two occasions in lawsuits to get Duke Energy to clean up coal ash. But when a third suit was filed, McCrory, a former Charlotte Mayor and career Duke Energy employee, influenced a third lawsuit settlement against Duke to be delayed.

Also, not long before the Eden spill, the City of Burlington released sewage into the Haw River which flows into Lake Jordan serving drinking water to Cary, Apex and Pittsboro. DENR allegedly did not release news of the spill to the public.

Late last year, Amy Adams, a senior DENR official, resigned to protest the massive cuts McCrory and Republican legislators were forcing at her department, notably in its water quality section.

McCrory’s been on a Ken Cuccinelli-style rip in other ways such as cutting back on unemployment benefits in a top manufacturing state badly hit by the recession and globalization. He’s shut down abortion clinics by suddenly raising the sanitation rules to hospital levels, much like former Gov. Robert F. McDonnell did in Virginia.

A reaction to McCrory is building, however. Recently, I chatted with Jason Thigpen who served in the Army and was wounded in Iraq in 2009. When Thigpen returned to his home in southeastern North Carolina, he was upset that the state was sticking it to vets by making them pay out-of-state college tuition in cases where some had been state residents before deploying. So, he started an activist group to protect them.

Next, Thigpen decided to run for Congress. His views fit more neatly with the Republican Party but he simply could not take what McCrory was doing in Raleigh so he became a Democrat and is a contender in a primary this spring.

Why the switch? “I just couldn’t see what the GOP was doing with my state in Raleigh,” He told me. “Also, I didn’t like what they were doing with women. I had served with women in war and they come back to North Carolina and they are treated like second class citizens,” he said.

West Virginia, meanwhile, is still struggling with its drinking water issues from a spill near Charleston. Although drinking water for 300,000 is said to be potable, children are reporting rashes.

Somehow, this conjures up another story involving a Republican governor – Arch Moore.

Back in 1972, Moore was governor when Pittston, a Virginia-based energy firm, had badly sited and built some damns to hold coal waste. After torrential rains, the dams burst and a sea of filthy water raced down the hollows, inundating small villages and killing 125 people. The state wanted a $100 million settlement from Pittston for the Buffalo Creek disaster, but Moore interceded and they settled for a measly $1 million.

Moore was later convicted of five felonies after he was caught extorting $573,000 from a coal company that wanted to reduce its payments to a state fund that compensated miners who got black lung disease.

Does anyone see a pattern yet?

Meanwhile, we in Virginia should breathe a sigh of relief considering just close it was dodging the bullet last election.

Keep ‘em Poor; It’s for the Best

minimum-wages-around-the-worldBy Peter Galuszka

The think tanks are spinning their lines now that Congress is considering raising the federal minimum wage.  A Democratic proposal would hike the level from $7.25 an hour to $10.10 by 2016, putting more money in the pockets of 27.8 million people.

As The New York Times points out this morning, think tanks and other professional navel gazers are coming out with the pros and cons of doing what seems to be a no brainer. One Employment Policies Institute in Washington  claims that hiking the wage would increase poverty and unemployment.

Not reported, the Times notes, is that the think tank is run by a P.R. group paid in part by the restaurant industry which has a vested interest in keeping wages low.

So, I guess it is no surprise that on Sunday’s “Commentary” front page in the Richmond Times-Dispatch  is a piece making pretty much the same argument. It was written by A. Fletcher Mangum, managing partner of Mangum Economics in Richmond, who also advises the governor and General Assembly.

Mangum argues that raising the wage is a bad idea because, “If politicians want to help the least fortunate among us, knocking an unlucky number of them into employment is simply not the best way to do it.” Virginia is one of 19 states that follows the federal minimum wage as its own. Twenty states have higher minimum wages and four have lower rates and (of course) are all in the South.

Mangum’s logic is keep ‘em poor because they are more hireable that way. Mangum offers no other economic argument, but that should be no surprise since he’s writing for the Richmond Times-Dispatch whose editorial policies tend to represent the Capital’s monied classes and business interests. It was this way when the Bryan family owned the TD and hasn’t really changed with Warren Buffett.

Now I have been an editor and actually used to handle the first reading of some economic opinion pieces like this. If I had been at the keyboard, I would have demanded a higher altitude argument than improving wages will hurt the poor because if you increase the price of something people automatically buy less of it.  One could make a similar argument as justification for usury, penury and slavery that way, but I don’t edit the TD. I do know that Richmond and Virginia in general are rather short on economic forecasters.

The New York Times, which is somewhat more sophisticated than Richmond’s daily newspaper, on the same day refuted conservative arguments that hiking the minimum wage only hurts the lowest working classes. “The weight of evidence shows that increases in the minimum wage have lifted pay without hurting employment. . . ,” the Times says.

But that doesn’t stop conservatives from claiming, as Mangum does, that raising the minimum wage prompts less employment or that it will push up prices for goods. “Those arguments are simplistic,” The Times says.

I tend to agree. The bigger issue facing this country is dealing with the disparity in income and larger gulf between classes. CEO pay has skyrocketed to obscene levels over the past decades while CEO performance has hardly matched it.

Yet there are plenty of people out there, such as Mr. Mangum, who seem to want to keep people making less than $15,000 a year by arguing disingenuously that it’s really the best they can hope for.

Strike a Blow against Income Inequality — Marry a Floozy

sugar_daddyby James A. Bacon

President Obama has made it plain that addressing income inequality will be the great theme of the rest of his presidency. Now is the time for all good liberals and progressives to follow his call — not just by seeking to tax the rich but by aligning their personal behavior with the values that they espouse and seek to impose upon others. One way would be to voluntarily contribute their excess income (above the national median) to the federal government, or at least to a philanthropic cause of their choice. As that does not seem likely, I advance another proposal: Pick different mates.

There are many causes of the disparity in incomes in American society, some economic and some social. Globalization has increased the rewards for the millionaires and billionaires who make it to the very top of the income pyramid. Our egalitarian-minded president has accentuated income disparities through his support of monetary policy that inflates stock and bond prices, thus rewarding the rich, while repressing interest rates, thus punishing small savers. Also, entitlements built up over the past 50 years incentivize dysfunctional behaviors that have kept an underclass mired in near-permanent poverty. Making life harder for those at the bottom, runaway immigration has swelled competition for jobs among unskilled workers, depressing incomes for lower-income Americans.

There’s not much that individual Americans can do to roll back globalization, alter U.S. monetary policy, reform entitlements or stop immigration. But we do have control over whom we marry and a modest degree of influence over whom our children marry. And that, it turns out, is a significant lever affecting income inequality.

Jeremy Greenwood, an economist at the University of Pennsylvania, and co-authors from Germany and Catalonia estimate that what they call “assortative mating” accounts for more than 20% of income inequality in the U.S. (or, more accurately, 20% of the Gini coefficient, a measure of household income inequality). In “Marry Your Like: Assortative Mating and Income Inequality,” Greenwood et al argue that income inequality intensified between 1960 and 2005 as women joined the workforce, married husbands with similar life prospects and created more two-income families.

Men and women tend to seek mates at comparable levels of education. College graduates tend to marry other college graduates. People with professional degrees tend to marry others with professional degrees. High school drop-outs tend to consort with other high school dropouts. That should come as no surprise: When it comes to choosing life partners, people gravitate to others who share similar interests, values, world views and lifestyle expectations as themselves.

Clearly, the trend to two-income households increases the disparities between those who marry and form stable family units on the one hand and those who do not. But the trend applies even to working women, with the effect most pronounced at the upper end of the income scale. At the 80th percentile the share that married women contributed to household income rose 18 percentage points, to 34 percent, between 1960 and 2005. At the 20th income percentile, the share of household income contributed by women increased only 12 percentage points, to 25 percent.

Liberals and progressives are not likely to urge their womenfolk to give up their jobs and put on an apron, so that really leaves only one alternative — stop marrying within your educational/social class. Millionaire liberal men, marry trailer park floozies! Hard-charging liberal women, marry a fitness instructor! (Hey, it works for Madonna.) Until you start changing your assortative behavior, you’re part of the problem you decry. Until then, I’ll take your exhortations to address income inequality about as seriously as I took Jim Bakker’s admonitions on family values, Jimmy Swaggart’s diatribes against homosexuality and Al Gore’s sermons on Global Warming.