Election 2008: INEQUALITY IN AMERICA

September 17, 2008

As Election Day approaches, the economy is a top voter concern. Four student readings focus on economic troubles and the growing wealth gap; the accuracy of presidential candidate TV ads; and the candidates' economic proposals.

As Election Day approaches, the economy has risen to the top of voter concerns. The reasons are evident: an economic downturn, a rising unemployment and poverty rate, home foreclosures, difficulties in getting credit, millions without health insurance. At the same time, the gap between the wealthy and everyone else widens.

Four student readings below focus on the impact of economic troubles on students and working people; income and wealth trends; why the wealth gap is growing and whether it is important to Americans; the accuracy of presidential candidate TV ads; and the candidates' economic proposals. Discussion questions and suggestions for inquiries and projects follow.
 


Student Reading 1

Hard times for students and working people

Students

  • In Louisville, Kentucky, "record numbers of students" are homeless because their families have lost their homes in mortgage foreclosures. A stream of "anxious parents...often in tears" arrive at a school office to plead for free lunches for their children "because they do not have 70 cents a day to pay for the reduced-price meals."
  • In Mobile, Alabama, where homeless students tripled to 2,500 by the end of the last school year, student homelessness has grown worse. "Our numbers are going to be a whole lot higher this year," said a school social worker.
  • Detroit has laid off at least 700 teachers.
  • In Caldwell Parish School District in northern Louisiana, "People worry that they won't have enough money to last through the month," said the superintendent."
  • Administrators and teachers in many states reported they were seeing "more needy families than at any time in history."

(All from Sam Dillon's "Hard Times Hitting Students and Schools in Double Blow," New York Times, 9/1/08)

Working people

Apolinar Perez, a 26-year-old immigrant from Mexico, steers his mountain bike, plastic bags of food dangling from each handlebar, through downtown Manhattan traffic. He locks the bike in front of a large glassy building on Park Avenue, the headquarters of Caxton Associates, an investment firm which manages more than $11 billion. Perez heads into the building with two orders of pasta. He returns to his bike with a $2 tip. "I usually don't get very good tips from the fancy buildings," he tells a journalist. The CEO of Caxton Associates is Bruce Kovner, whose income in 2006 was $715 million. Kovner is also the chairman of the American Enterprise Institute.

Perez, who lives in the Bronx, delivers food for an Italian restaurant 11 hours a day, six days a week. His tips average $60 a shift, and he gets another $20 from a restaurant manager. He gets no health care coverage, no pay for overtime, no sick days and belongs to no union. "Every lunch hour in Manhattan, the very poor meet the very rich," writes Gabriel Thompson in his description of Perez ("Meet the Wealth Gap," The Nation, 6/30/08).

A few blocks away on Madison Avenue, Timothy Williams, a 24-year-old African American and a security guard, stands behind a first floor desk. His shift runs from noon to midnight and pays him $12.50 an hour. Like Perez, he has no health insurance and no union. In the building is another investment firm. Its CEO, John Paulson, earned $3.7 billion last year. Williams would have to work more than 20 years to earn what Paulson made in one hour.

Williams, like Perez, lives in the Bronx. After graduating from high school in 2002, Williams joined the Army, partly in the hope that it would help pay for college. He served in Iraq from August 2004 to July 2005 and gets monthly $1,300 checks from the GI Bill. It also pays his tuition at Monroe College.

Williams says he joined the National Guard because "I see the military as a place where I can actually have a career." He learned recently that he will be deployed to Iraq again next year.

When jobs like Williams' "remain union-free, with stagnating wages, the military can become the best option for advancement," writes Thompson.

Bruce Kovner's American Enterprise Institute (AEI) funds groups that oppose unions and fight increases in the minimum wage—thus "curtailing the chances for working people like Williams ever to earn a decent living as civilians."

(Gabriel Thompson, "Meet the Wealth Gap," The Nation, 6/30/08)

The expanding wealth gap

In the late 1920s, when the Great Depression began, the gap between the income of the very richest Americans and everyone else began to narrow. This was a gradual trend that continued for about 50 years well into the 1970s, but then that gap began to widen.

"Since the 1970s, the portion of national income [going] to the superrich-that is, the top one-tenth of 1 percent of earners-has essentially tripled. In fact, in recent years, the richest 1 percent of Americans have controlled the largest share of national income-currently 19 percent-since Franklin Roosevelt took the oath of office." That was in 1932. (Matt Bai, "The Poverty Platform," New York Times Magazine, 6/10/07)

For discussion

1. What questions do students have about the reading? How might they be answered?

2. What is "a mortgage foreclosure"? Why are foreclosures increasing?

3. What are among the reasons why there are more and more "needy" families?

4. How do you think Perez and Williams are affected by the absences of health insurance and unions?

5. What do you know about why the income and wealth gap are increasing?

 


Student Reading 2:

"Significant pain may lie ahead for many Americans"

U.S. income and wealth trends

The latest Census data for 2007 are disturbing. Between 2001 and 2007:

  • The number of poor Americans rose by 4.4 million.
  • Family income has dropped in non-elderly households by $1,100.
  • More Americans have no health insurance—nearly 6 million more.

"Never before on record has poverty been higher and median income for working-age households lower" at the end of years of a rising economy than at the beginning, said Robert Greenstein of the Center on Budget and Policy Priorities. "The gains from the 2001-2007 expansion were concentrated among high-income Americans."

And according to an analysis in The Nation ("Plutocracy Reborn," The Nation, 6/30/08):

  • "The income gap between people at the top and those in the middle or at the bottom is the greatest since just before the Great Depression."
  • "In 1928 the top one-hundredth of 1 percent of U.S. families averaged 892 times more income than families in the bottom 90 percent....
  • "In 2006 the top one-hundredth averaged 976 times more than America's bottom 90 percent."

Some statistics on the rise of U.S. household income, 1979-2005, adjusted for inflation:

  • Income in the top 1 percent more than tripled, rising 228 percent-or $745,000.
  • Income in the top 20 percent rose 80 percent-or $76,000.
  • Income in the middle 20 percent rose 21 percent-or $8,700.
  • Income in the bottom 20 percent rose 6 percent-or $900.

Some statistics on the U.S. distribution of household wealth:

  • About 1/3 is held by the top 1 percent.
  • About 1/3 is held by the 9 percent next most affluent.
  • About 1/3 is held by the remaining 90 percent.

Some statistics on the U.S. poverty rate:

  • The number of Americans living in poverty in 2007 rose to 37.3 million-an increase
    of 816,000 over 2006.
  • The number of children living in poverty in 2007 jumped by 500,000 to 13.3 million
    and the child poverty rate climbed from 17.4 percent in 2006 to 18 percent in 2007.

"The data for 2007 are of particular concern given that the economy is now in a slowdown, and poverty is almost certainly higher now-and incomes lower-than in 2007," says Robert Greenstein of the Center for Budget and Policy Priorities. "This suggests that significant pain may lie ahead for many Americans."

"The richest 1 percent of Americans currently hold wealth worth $16.8 trillion, nearly $2 trillion more" than 90 percent of the rest of Americans. "A worker making $10 an hour would have to labor for more than 10,000 years to earn what one of the 400 richest Americans pocketed in 2005." (John Cavanagh and Chuck Collins, "The Rich and the Rest of Us," The Nation, 6/30/08)

Sources: Statistics and the quotes under "U.S. income and wealth trends," unless noted otherwise, are from the testimony of Robert Greenstein, Executive Director, Center on Budget and Policy Priorities, before a subcommittee of the Congressional Committee on Education and Labor, 7/31/08 and a brief update, 8/26/08. Greenstein's statistics come from the latest available data of the Census Bureau, Internal Revenue System, and Federal Reserve Survey of Consumer Finances. The Center on Budget and Policy Priorities describes itself as a "nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs." (www.cbpp.org)

For discussion

1. What questions do students have about the reading? How might they be answered?

2. Statistics are abstract. It is difficult to see the people behind them. So consider a particular person from Reading 1, security guard Timothy Williams. What were the circumstances that led Williams to join the Army? the National Guard? Why do you suppose he wants to go to college? Assuming he returns safely from a second Iraq tour, do you think he will resume his college work? Suppose he wants to get married. How might that affect his decision? If he doesn't return to college, how might that affect the kind of work he gets and income he receives? Why?

3. What conclusions can you draw from the statistics given in this reading about poor people in America? Family income? Access to healthcare? Incomes of Americans since the Great Depression? The richest Americans and most Americans today?

4. Would you expect the widening wealth gap in the country to have significant effects beyond those experienced by individuals? If so, what? If not, why not?

 


Student Reading 3:

Why the wealth gap and does it matter?

Economists, social scientists, politicians, and many others have offered a variety of reasons for the growing inequality in America.

"Economists have a lot of ideas about what factors are contributing to this worsening inequality, from Bush's tax cuts to the ballooning pay packages of corporate executives, but the general consensus seems to blame a combination of technological advances and globalization. Automation means that companies can make the same products with fewer workers, and the emergence of a global work force means that they don't have to make those products here anymore. As a result, wages for high-school graduates, who used to be able to get factory jobs, have stagnated, while highly educated workers have become increasingly valuable to companies seeking any intellectual advantage in an increasingly competitive world." (Matt Bai, "The Poverty Platform," New York Times Magazine, 6/10/07)

The U.S. tax system has become less progressive. President Bush's large tax cuts approved by Congress in 2001 and 2003 heavily favored people at the top of the income and wealth ladder who were already benefiting considerably more from salary and stock market gains than those on the lower rungs.

Labor union membership has declined. In 2007 about 15.7 million workers-12.1 percent-belonged to unions, according to the U.S. Department of Labor's Bureau of Labor Statistics. In the mid-1950s about 33 percent of workers were unionized. Some of the biggest losses have been in automobile manufacturing though there have been gains in public service union membership. Historically, union workers have earned substantially more than non-union workers. (The median weekly earnings for a union worker in 2007 was $863; for non-union workers it was $663-about 23% less.) Unionized workers are also more like to have health insurance and other benefits

The recent housing foreclosure crisis coupled with the difficulty working people have in getting credit have also contributed to growing inequality.

"Most social scientists seem to agree that, sooner or later, income inequality will exact a steep social cost, if not an economic one." (Matt Bai, "The Poverty Platform")

Not everyone agrees. A visiting scholar of the American Enterprise Institute (AEI), a conservative thinktank, wrote in the Wall Street Journal : "The evidence reveals that it is not economic inequality that frustrates Americans. The data do tell us that economic mobility-not equality-is associated with happiness.

"The National Opinion Research Center General Social Survey asked respondents: 'The way things are in America, people like me and my family have a good chance of improving our standard of living-do you agree or disagree?' The two-thirds of the population who agreed were 44% more likely than the others to say they were 'very happy'. In other words, those who don't believe in economic mobility-for themselves or for others-are not as happy as those who do.

"In the real world where people believe there is opportunity one's own income potential matters a great deal more than what others are earning. Some studies even find that the happiness of workers rises as the incomes of others climb relative to their own, because they see the incomes of others as evidence of what they themselves can achieve." (Arthur Brooks, "The Left's 'Inequality' Obsession," Wall Street Journal , 7/19/07)

Another AEI writer, Michael Novak, wrote: "Polling data suggest that ordinary Americans are much less taken with the social democratic vision of equality than are intellectuals. Practically all Americans would agree that if everybody is better off, it does not matter if some are much better off-they or their children would like to have that chance." ("Inequality and Ideology," 1/1/2000, www.aei.org/publications)

But everyone does agree that the economy has become the top presidential campaign issue.

For discussion

1. What questions do students have about the reading? How might they be answered?

2. What seem to be the main reasons for growing inequality?

3. Why do the AEI writers think that economic inequality is not so important to most Americans? What do they think is crucial? Do you agree? Why or why not?

For pair-share dialogues

What problems, if any, does the wealth gap pose for democracy in the United States? Why? Consider, for example: Huge amounts of money are spent these days in political campaigns. Where does most of the money come from? If you don't know, how might you find out?

Have students pair off to respond to these two questions. Each should have a minute or two to speak while the other focuses on listening, without interruption. After each has had an opportunity to speak, provide another few minutes for the pair to discuss their viewpoints. Then open the questions for class sharing of what has been said in the dialogues and a wider discussion.

 


Student Reading 4:

The candidates on the economy and taxes

Both Senators John McCain and Barack Obama include proposals for the economy on their websites and in their speeches. They agree on such matters as the need to generate more jobs in a weakened economy, especially through the development of clean energy alternatives to oil.

Both candidates say they are for "fairer taxes." But what does each candidate mean by this term? What would he do to make them "fairer"?

In their TV ads, the two senators frequently make inaccurate accusations about the other's plans, as FactCheck.org points out (www.factcheck.org). FactCheck describes itself as "a nonpartisan, nonprofit consumer advocate for voters that aims to reduce the level of deception and confusion in American politics."

Two examples of inaccuracies in ads from FactCheck

Fact-checking OBAMA

The narrator in an Obama TV ad asked: "In tough times, who'll help Michigan's auto industry? Barack Obama favors loan guarantees to help Detroit retool and revitalize. But John McCain refused to support loan guarantees for the auto industry. Now he's just paying lip service, not talking straight."

FactCheck reported that the quote shown on the screen—"McCain Opposed Government Help for Automakers"—is from an August 23, 2008, Detroit News article, which reported: "The loan program got a boost Friday when John McCain, who had opposed government help for automakers, said he would support low-cost loans." The article also stated that "Obama 'criticized McCain for changing his position on the same day a new poll showed McCain losing ground with Michigan voters."

Fact Check concluded: "This may be what the ad means when it says McCain is 'just paying lip service.'" (9/3/08) But the Obama ad did not explain why McCain originally opposed the loan guarantees and assumed his position change was only to gain votes.

For discussion

1. Why are loan guarantees to auto makers important to them?

2. Should the Obama ad have included information about why McCain did not originally support the loan guarantees? Why or why not? Why do you suppose it omitted this information?

3. Was it fair for the Obama campaign to suggest that McCain's change of position was simply to get votes? Why or why not?

4. Do you think that the FactCheck analysis is fair? Why or why not?

Fact-checking McCAIN

The narrator in a McCain TV ad, speaking after a crowd chants "Obama, Obama" said: "Take away the crowds, the chants. All that's left are costly words." Barack Obama's plans include "painful tax increases on working American families. They're ready to tax, ready to spend, but not ready to lead."

After checking with the director of the nonpartisan Urban-Brookings Tax Policy Center, which has analyzed the two candidates' tax plans in detail, FactCheck reported that Obama's plan "would produce a tax cut for 81.3 percent of all households, and a cut for 95.5 percent of all households with children. Under Obama's plan, "people (or couples) making between $37,595 and $66,354 a year would see an average savings of $1,118 on their taxes. Under McCain's plan, on the other hand, those same individuals would save $325 on average—$793 less than the average savings under Obama's plan." (9/2/08)

Obama has said repeatedly that he would cancel President Bush's tax cuts that favor the wealthy over other groups and increase taxes only for individuals and couples making $250,000 or more, He would reduce taxes for everyone else. FactCheck stated that in his speeches and ads McCain has exhibited a "pattern of deceit" in insisting that Obama's plan includes "painful tax increases on working American families." McCain has reversed his position on the Bush tax cuts favoring the wealthy that he once opposed and now says he would make them permanent as well as reduce taxes on corporations and middle- and lower-income people.

FactCheck found that Obama's plan for spending and tax cut proposals, "like McCain's, would leave the U.S. facing big budget deficits, according to independent experts." (8/28/08) Because Obama would increase taxes on the wealthy and reduce them for everyone else, his plan would reduce the wealth gap and inequality to some degree. But neither candidate has addressed directly growing inequality and the wealth gap and neither party platform has anything to say about it.

For discussion

1. Should the McCain ad have included the information that Obama's tax increase would be only for those making $250,000 or more? Why or why not? Why do you suppose it omitted this information?

2. Should the McCain ad have included the information that he now supports making the Bush tax cuts permanent? Why or why not? Why do you suppose it omitted this information?

3. Should the McCain campaign have consulted the nonpartisan Tax Policy Center before running its ad? Why or why not? Why do you suppose that it did not?

4. Which candidate's tax proposals, if either, seem most reasonable to you and why?

5. Why do you suppose that neither candidate speaks directly about the growing inequality and the wealth gap?

Among his economic proposals Obama would:

  • Create new jobs for work on aging bridges, roads, and other public works
  • Support new laws to make union organizing easier
  • Provide a college tuition subsidy of $4,000 per year for students who agree to
    perform community service
  • Invest $150 billion over 10 years for the development of clean, alternative
    energy sources
  • Require that 25 percent of electricity consumed in the U.S. be drawn from
    sustainable energy sources

Among his economic proposals McCain would:

  • Provide subsidies of up to $10,000 for two years to older workers forced to take
    lower paying jobs
  • Expand free trade and promote globalization by reducing trade barriers
  • Propose the construction of 45 new nuclear power plants by 2030 with the goal of
    eventually constructing 100 new plants
  • Expand domestic oil and gas exploration, including offshore drilling
  • Grant a $300 million prize for the development of a battery package that would be
    a huge advance on available plug-in hybrids or electric cars.

Keep in mind that most presidential proposals requiring the expenditure of taxpayer money must be written into bills and approved by Congress. Very often presidents are unable to enact proposals they made on the campaign trail.

 


For small-group discussion

Each group member should have the opportunity to express his or her views before general group discussion. A recorder can summarize the views expressed for the class. Then conduct a wider class discussion.

1. Which Obama and/or McCain proposals seem especially interesting and valuable to you? Why?

2. Which proposals would you oppose? Why?
 

Inquiry

Compare in more detail the economic plans of the two candidates. Helpful sources include:

1) their websites, www.johnmccain.com and www.barackobama.com

2) a July 7, 2008 speech of McCain's at www.johnmccain.com/Informing/News/Speeches

3) "How Obama Reconciles Dueling Views on Economy" Dave Leonhardt, New York Times , 8/24/08 (www.nytimes.com)
 

Project work

An earlier lesson about inequality in America, "Presidential Election 2004: The American Dream," is available in the high school section. It includes a lesson encouraging close student examination of the words "promote the general welfare" in the preamble to the Constitution. "What, specifically, should the U.S. government do today to "promote the general welfare"? It also includes guidelines to help students prepare and administer a poll to family and friends on how they view "the general welfare."


This lesson was written for Teachabl eMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: lmcclure@morningsidecenter.org