Category Archives: Poverty & income gap

Sarles Makes Pitch for Metro Subsidies

richard_sarles

Richard Sarles. Photo credit:flickr/erin_m.

by James A. Bacon

Last Wednesday Richard Sarles, chief executive officer of the Washington Metropolitan Area Transit Authority (WMATA), appeared in Richmond to brief the Commonwealth Transportation Board (CTB) on the transit authority’s plans to meet the transportation needs of the fast-growing Washington region, including Northern Virginia, through 2025.

Sarles did not provide a specific figure that WMATA will be asking of Virginia and the localities served by the Metro and bus lines but he indicated that system-wide, the Momentum plan calls for boosting capital spending by $400 million to $500 million yearly above the $900 million a year it already spends. That sum would be divvied up between Maryland, Washington, D.C., and the federal government.

The pitch was pure economic development. “We’ve looked at what we need to do to provide for growth over the next 15 to 20 years — it’s the equivalent of the City of Houston moving to the region,” Sarles said. “If we did nothing, the area would become so congested that economic development would stagnate.”

In his presentation, Sarles focused mainly on plans to upgrade the length of Metro trains to eight, the longest possible, by acquiring additional cars, power capacity and rail car storage. That one initiative would allow the system to carry 35,000 more passengers per hour during rush hour — the equivalent, he said, of building 18 new lanes of highways into the district.

The presentation was purely informational, to acquaint the CTB with WMATA’s plans and the need for state support. In separate remarks to the CTB, Jennifer Mitchell, director of Virginia’s Department of Rail and Public Transit, said the state already contributes $50 million a year to WMATA’s program to bring the aging and problem-plagued system to a condition of good repair. Additionally, Governor Terry McAuliffe has promised a $25 million down payment to the Momentum expansion program, matched by equal sums from Maryland and D.C. “The goal will be working on a long-term funding agreement defining the state’s long-term funding commitment.”

WMATA trains and buses take 1.2 million trips off the road each weekday, said Sarles, relieving local jurisdictions of the need to construct at least 1,000 lane-miles of road and tens of thousands of parking spaces. Without Metro, Virginia would have to spend $1.3 billion on roads and $358 million on parking, he said. (Editorial comment: The sum for roads seems way low — could that be $1.3 billion per year on roads?)

A WMATA handout summarized the key components of WMATA’s expansion plan:

  • Eight-car trains. Expand the length of trains to eight cars, which will carry 35,000 more passengers per hour during rush hour.
  • Upgraded rail stations. Expand high-volume rail transfer stations in the Metro system core to ease congestion and accommodate new riders. This will include building underground pedestrian connections between select stations such as Farragut and Metro Center/Gallery Place in D.C. so riders can walk between stations rather than transfer on trains.
  • Priority corridor network (PCN). Completing the PCN will allow buses to bypass traffic congestion, moving 50% faster, saving passengers 3 to 4 minutes per trip and eliminating an additional 100,000 trips from roadways.
  • Blue line service. Restore peak-period Blue Line service between the Pentagon and Rosslyn stations through the construction of underground tracks. Adding five more trains per hour during the peak period will provide capacity for at least 4,000 passenger per direction.
  • Better information. Create one-stop information shopping so riders can plan, pay for and take transit trips seamlessly across the region. Also, stations will provide real-time travel information.
  • Bus fleet. Expand the bus fleet and maintenance facilities, enabling an extra 40,000 bus trips per day. (Yes, the document says bus trips, not bus passengers. Presumably, each trip would carry multiple passengers.)
  • New rail infrastructure. Build pocket tracks and crossovers to provide more flexibility to the system and respond to service disruptions. This investment could reduce operating costs to local jurisdictions. Continue reading

Someone Has to Worry about Tomorrow

Mercedies Harris

Mercedies Harris

Mercedies Harris, speaking to the Times-Dispatch, came as close as anyone to summing up what Virginia’s Medicaid debate is all about: “The system is crazy. They have got to stop worrying about what is going to happen tomorrow and deal with the people who need help today.”

The 53-year-old veteran and Waynesboro resident suffers from glaucoma, which, if it goes untreated, likely will lead to blindness. Harris has spent his meager savings, and he’s about to lose the house where he lives with his wife and a step-son who suffers from seizures. He applied for Medicaid but was turned down because he works and his income — $8.88 an hour — is too high. But he would qualify if Virginia expanded the program, as allowed by the Affordable Care Act and as proposed by Governor Terry McAuliffe and General Assembly Democrats.

With the federal government promising to pay 90% of the cost of Medicaid expansion, it is hard to tell someone like Harris — who served his country in the military and, to all appearances, remains a contributing member of society — that, no, we can’t help you. And the idea of letting him go blind, so that he, too, becomes a total ward of the state, seems the height of folly.

Republicans insist that Medicaid must be modernized before expanding the program. To buttress their argument, they have nothing comparable to the stories of real-live people like Harris, just bloodless numbers. That’s why they could well lose the debate and McAuliffe could well get his way. But that doesn’t mean the Republicans are wrong. Someone has to worry about tomorrow.

The nation and the Commonwealth of Virginia cannot continue expanding the social safety net forever. Even after an increase in the federal income tax and even after the budget cuts imposed by sequestration, the federal budget is on a trajectory to hell. Here is the Congressional Budget Office‘s take on the next 10 years:

After [2015] deficits are projected to start rising—both in dollar terms and relative to the size of the economy—because revenues are expected to grow at roughly the same pace as GDP whereas spending is expected to grow more rapidly than GDP. In CBO’s baseline, spending is boosted by the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary, and mounting interest costs on federal debt. By contrast, all federal spending apart from outlays for Social Security, major health care programs, and net interest payments is projected to drop to its lowest percentage of GDP since 1940.

And that’s an optimistic scenario. It assumes that the economy continues to grow in a slow-but-steady fashion without recession for what would amount to the longest business cycle in U.S. history. The longest recorded business cycle lasted less than 11 years. The current business cycle is almost five years old — another 10 years would make it the Methuselah of economic expansions. History suggests that the U.S. will suffer another recession and revenues, prone to wild gyrations due to its highly progressive structure, will plunge. The question then will be, can a president and Congress facing a fiscal crisis in 2024 be entrusted to keep the promises made by the president and Congress in 2014?

Without major policy changes, according to the CBO, the situation in 2024 will be dire: The deficit will exceed $1 trillion in a non-recessionary scenario. (One can only speculate what the deficit would be in a recession; it could exceed the $1.6 trillion-a-year level seen in the dark days of the last recession.) Ten years from now the national debt will blow past $21.6 trillion, interest payments on the debt will run $880 billion yearly, and the Social Security trust fund will be roughly seven years away from exhaustion. While entitlements and interest payments on the debt now amount to 66% of the budget, they will consume 77% in ten years (again, assuming no recession).

If a recession occurs in the early 2020s, the fiscal landscape will be far worse than it was in 2008 when the economy cratered. The United States will be forced either to cut discretionary spending (which includes the vast regulatory apparatus of the federal government plus the military), cut entitlements or cut both. The only way to avoid that fate in 2024 will be to start cutting entitlements sooner, not later. Continue reading

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.