I think of myself as a political moderate, conservative on fiscal matters and somewhat liberal on social issues. My blog posts are usually based on a recent newspaper article or think tank study presenting one side or the other of an important issue in an intelligent way. In other words, I seldom bother to refute what I consider to be dumb ideas. I assume that they will eventually die of their own dead weight. My favorite approach is to respond to an attractive article with which I may have a somewhat different point of view. Today’s New York Times has such an article, “Many Feel American Dream is Out of Reach, Poll Shows,” pointing out that 64% of a NYT Poll respondents think that it is possible to start out poor and become rich (see above chart), which opinion has dropped from 72% in 2009. The Poll also reports that:
81% of Americans have confidence in their own local banks whereas only 41% have confidence in Wall Street bankers and brokers.
52% think the economic system in the U.S. is basically fair, since all Americans have a chance to succeed, whereas 45% think it is unfair.
54% of Americans think that over-regulation of the economy, which interferes with economic growth, is a bigger problem than under-regulation, which may create an unequal distribution of wealth.
For almost two-thirds of Americans to be upbeat about the American Dream, after six or seven years of recession and slow recovery is to me a very positive sign. After a severe financial crisis, it is not at all surprising that “main street” bankers have a much higher favorability rating than “Wall Street” bankers.
Several months ago I reported on a survey taken by the progressive Global Strategy Group showing that 80% of voters consider economic growth more important than income inequality.
Both today’s NYT Poll and the previous GSG Survey are saying loud and clear that Americans put a high premium on economic growth and this is where our national leaders should be concentrating their time and energy. The new Republican majority in Congress has an almost historic opportunity to get this right. Let’s hope they don’t blow it!
My last two posts have dealt with the racial unrest in Ferguson MO and how American society should respond to the basic underlying causes. In particular Omaha NE where I live is in the process of setting up a large scale pilot project in early childhood education to better prepare children from low-income families to succeed in school.
The St. Louis Post Dispatch had a recent article “Frustration in North County Has Deep Economic Roots” pointing out, for example, that unemployment for young black men in St. Louis is 47% compared to 16% for young white men. Said the author, David Nicklaus, “If police tactics were the spark which set off the explosion in Ferguson this week, then poverty and hopelessness were the tinder. Those in charge of the police can begin the healing process, but it won’t be complete unless we tackle the deeper economic issues too.” The Equality of Opportunity Project at Harvard University has published a chart (above) showing the degree of upward mobility for children born into low-income families in different parts of the country. Omaha ranks much higher than St. Louis but not as high as it could. The current unemployment rate in Omaha is 3.8% which essentially represents full employment. This means that there are plenty of jobs available for well qualified applicants. However the above chart shows the extent of the achievement gap in metro Omaha between middle class children and children living in poverty. It is already substantial for fourth grade reading proficiency and becomes much worse in the higher grades. Conclusion: in Omaha NE the root cause of lack of economic opportunity for racial minorities living in poverty is not the availability of jobs but the inadequate educational achievement to hold a good job.
Omaha is a prosperous community in a prosperous state. But it could do a better job of educating children living in poverty.
As the Wall Street Journal reported several days ago, “Economic Mobility Is the New Flashpoint”. “Both parties agree the opportunity gap is widening, but the proposed solutions are starkly different.” The Democrats want to increase the minimum wage, extend unemployment benefits, and expand access to college. The Republicans suggest a whole potpourri of approaches such as reforming welfare (including food stamps), extending school choice, cutting taxes, and relaxing regulations on new businesses.
A look at the latest jobs report from the Labor Department should provide the focus which Congress needs to figure out how to increase economic opportunity. Although the unemployment rate dropped substantially to 6.7% from 7.0% at the beginning of December, only 74,000 new jobs were created in December. The explanation is that 347,000 left the labor force last month. The labor force participation rate, the share of the U.S. working-age population employed, age 16 and over, has dropped from 64.5% in 2000, to just under 63% at the beginning of 2008 to near a post-recession low of 58.6% last month (see chart below). In other words, Congress should be totally focused on speeding up economic growth in order to create more jobs. Since new businesses create the most new jobs, we should indeed relax as many regulations as possible which impede entrepreneurship. We should lower the corporate tax rate from its very high current value of 35% to get American multinational companies to bring their trillions of overseas profits back home for reinvestment in the U.S. Moving to a national consumption tax (see the Graetz Plan discussion in my January 7 post), could mean dropping the corporate tax rate to as low as 15%.
Isn’t is obvious that the best thing we can do to give low income people an opportunity to rise up the economic ladder is to just give them a job in the first place? If they’re ambitious they’ll take any opportunity they can get and run with it!