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Suggested Further Sources on Growing Income Inequality

Prepared by Denny Braun, Ph.D.

for Osher Program, San Diego State University (April 2011)

Larry M. Bartels, Unequal Democracy: The Political Economy of the New Gilded Age (co-published by RSF and Princeton University Press, 2007). Larry M. Bartels of Princeton University examines the political causes and consequences of the growing gap between rich and poor in Unequal Democracy: The Political Economy of the New Gilded Age (co-published by RSF and Princeton University Press, 2007). Bartels demonstrates elected officials’ tendency to be more responsive to the concerns of the rich and argues that increasing inequality is not simply the result of economic forces, but the product of policy choices in a political system dominated by the interests of the wealthy. Denny Braun, THE RICH GET RICHER: THE RISE OF INCOME INEQUALITY IN THE UNITED STATES AND THE WORLD. 2nd Ed. 1997. Despite data that is now 15 years out of date, the trends Braun identifies in his book are still with us and are even worse today than ever before. This book imparts a much needed global perspective to income inequality, a detailed regional analysis within the U.S., and a contemporary theoretical basis that underlies inequality. Do NOT buy this book new since the cost (in my opinion) is exorbitant. Four or five dollars for a clean, used copy plus $4 shipping through Amazon.com is the way to go. Also, the 1st edition is available in the SDSU library.

The Economic Policy Institute (EPI), The State of Working America. You can see this

annual flagship publication on its own website. The comprehensive economic data that

has in the past been available only in book form is now available on the web in a

searchable and highly user-friendly format. Unlike past editions, this year's edition of

The State of Working America will not be published in book form. The State of

Working America presents data in eight broad issue areas: income, mobility, wages, jobs,

wealth, poverty, health and international comparisons. The data is designed to give

readers a deep understanding of the effect of the economy on low- and middle-income

American workers and their families. This data is not compiled in one place anywhere

else. The State of Working America provides a comprehensive examination of critical

trends and economic measurements. See http://www.stateofworkingamerica.org. The

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Economic Policy Institute is also publishing a series of papers and a narrative-driven

book under The State of Working America banner. The book, Failure by Design,

presents the story of the U. S. economy -- both where it stands today as it emerges from

the Great Recession as well as how it got there (January, 2011).

Barbara Ehrenreich, THIS LAND IS THEIR LAND. 2008. Despite long national claims to being a classless society, the U.S. has a growing gulf between the haves and have-nots and what used to be the middle class. Ehrenreich, author of Nickel and Dimed (2001) and Bait and Switch (2005), catalogs the many ways that the rich are getting richer and the rest of us are getting poorer. The new top of the polarized social order has “pay in the tens of hundreds of millions, a private jet and a few acres of Nantucket,” and the new bottom is virtual slavery—captive domestics, sweatshop workers, and sex slaves exploited by their employers. She details the huge compensation gaps between CEOs and other management, top-ranked professors and adjunct professors, law firm partners and temp lawyers. In separate sections, Ehrenreich analyzes how wealthy individuals and corporations maintain the gap by engineering social, political, and economic policies that continue to disadvantage the middle class and poor, and our accommodation to it.

Charles Ferguson, INSIDE JOB. 2010.

This recent 2011 Oscar award-winning documentary film is, according to the L.A. Times, “—a powerhouse documentary about the global economic crisis--you will more than understand what went down—you will be thunderstruck and boiling with rage.” (10/15/2010). The film offers evidence that the meltdown of 2008 in the U.S. was the result of an out-of-control finance industry that took unethical advantage of decades of deregulation. Ferguson, who has a doctorate in political science from MIT, has also produced NO END IN SIGHT, a film about the U.S. occupation of Iraq. He was a senior fellow at the Brookings Institution and a consultant to firms such as Apple, Intel, and Xerox.

Food Research and Action Center. http://frac.org/ This site contains up-to-date information and data on hunger in America. Read especially their recent report on food hardship in America (http://frac.org/nearly-one-in-five-americans-report-inability-to-afford-enough-food/)

Jacob S. Hacker and Paul Pierson, WINNER-TAKE-ALL POLITICS: HOW

WASHINGTON MADE THE RICH RICHER—AND TURNED ITS BACK ON THE

MIDDLE CLASS. 2010.

This is a groundbreaking work that identifies the real culprit behind one of the great economic crimes of our time— the growing inequality of incomes between the vast majority of Americans and the richest of the rich. The guilty party is American politics.

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Runaway inequality and the present economic crisis reflect what government has done to aid the rich and what it has not done to safeguard the interests of the middle class. The winner-take-all economy is primarily a result of winner-take-all politics. This is a must read due to its cogent and coherent analysis of American politics and the deterioration of our country as a result of these largely hidden forces. Larence R. Jacobs and Benjamin I. Page, CLASS WAR? WHAT AMERICANS

REALLY THINK ABOUT ECONOMIC INEQUALITY. 2009.

The following is Amazon.com’s product description of this book: “Recent battles in Washington over how to fix America’s fiscal failures strengthened the widespread impression that economic issues sharply divide average citizens. Indeed, many commentators split Americans into two opposing groups: uncompromising supporters of unfettered free markets and advocates for government solutions to economic problems. But such dichotomies, Benjamin Page and Lawrence Jacobs contend, ring false. In Class War? they present compelling evidence that most Americans favor free enterprise and practical government programs to distribute wealth more equitably.

At every income level and in both major political parties, majorities embrace conservative egalitarianism—a philosophy that prizes individualism and self-reliance as well as public intervention to help Americans pursue these ideals on a level playing field. Drawing on hundreds of opinion studies spanning more than seventy years, including a new comprehensive survey, Page and Jacobs reveal that this worldview translates to broad support for policies aimed at narrowing the gap between rich and poor and creating genuine opportunity for all. They find, for example, that across economic, geographical, and ideological lines, most Americans support higher minimum wages, improved public education, wider access to universal health insurance coverage, and the use of tax dollars to fund these programs.

In this surprising and heartening assessment, Page and Jacobs provide our new administration with a popular mandate to combat the economic inequity that plagues our nation.”

Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and

the Next Financial Meltdown (Vintage) [Paperback] (January, 2011).

David Siegfried from Booklist: “Johnson and Kwak are the coauthors of The Baseline Scenario, a leading economic blog that pulls no punches when criticizing current economic policy. Just when you thought we were past the worst of the financial crisis, they are here to tell us that another potentially worse meltdown looms ahead in the future, due to the fact that nothing has really changed in the way large financial institutions do business. After the failures of banks like IndyMac, WaMu, and Wachovia, there are now just a handful of banks left that control not only all the money but also the political influence to prevent the kind of reform that is needed to rein in the industry from indulging in the risk-taking practices that got us in trouble in the first

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place. The government has already set the precedent that these financial institutions are “too big to fail,” thus shifting all the risk onto the American taxpayer if and when the next financial crisis occurs. The authors propose enacting strong legislation that will effectively reduce the size and scope of our national banks and make them ‘small enough to fail.’”

The system that led to the crisis of 2008, and the recession that has so severely damaged so many Americans, encouraged excessive risk-taking by major private sector financial institutions and, yes, Fannie Mae, Freddie Mac, and other Government Sponsored Enterprises (although these were most definitely not the major drivers of the crisis – see 13 Bankers).

More from the Baseline Scenario Blog: “Today’s most dangerous government sponsored enterprises are the largest six bank holding companies: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. They are undoubtedly too big to fail – if they were on the brink of failure, they would be rescued by the government, in the sense that their creditors would be protected 100 percent. The market knows this and, as a result, these large institutions can borrow more cheaply than their smaller competitors. This lets them stay big and – amazingly – get bigger.

In the latest available data (Q3 of 2010), the big 6 had assets worth 64 percent of GDP. This is up from before the crisis – assets in the big six at the end of 2006 were only about 55 percent of GDP. And this is up massively from 1995, when these same banks (some of which had different names back then) were only 17 percent of GDP.

No one can show significant social benefits from the increase in bank size, leverage, and overall riskiness over the past 15 years. The social costs of these banks – and their complete capture of the regulatory apparatus – are apparent in the worst recession and slowest recovery since the 1930s.” (1/9/2011)

Paul Krugman, The Return of Depression Economics and the Crisis of 2008.

2009.

Nobel Prize–winning economist Krugman, in his New York Times bestseller, shows how today’s economic crisis parallels the Great Depression—and explains how we can avoid catastrophe. Krugman warns that, like diseases that have become resistant to antibiotics, the economic maladies that caused the Great Depression have made a comeback. He lays bare the 2008 financial crisis—the greatest since the 1930s—tracing it to the failure of regulation to keep pace with an out-of-control financial system. He also tells us how to contain the crisis and turn around a world economy sliding into a deep recession. Brilliantly crafted in Krugman’s trademark style—lucid, lively, and supremely informed—this new edition of The Return of Depression Economics has become an instant classic. A hard-hitting new foreword takes the paperback edition right up to the present moment.

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Nolan McCarty, Keith Poole, and Howard Rosenthal. Polarized America: The

Dance of Ideology and Unequal Riches (MIT Press, 2007.

Nolan McCarty and Keith Poole of Princeton University and Howard Rosenthal of New York University argue in their Russell Sage Foundation-supported book Polarized America: The Dance of Ideology and Unequal Riches (MIT Press, 2007) that rising economic inequality in the U.S. has led to more extreme polarization between the nation’s two political parties, with one party favoring the interests of the rich and the other the interests of the poor. As the parties square off in defense of vested interests at either end of the income distribution, gridlock ensues thus limiting the ability of the political system to pass legislation to counteract the social effects of rising inequality.

Raghuram G. Rajan, FAULT LINES: HOW HIDDEN FRACTURES STILL

THREATEN THE WORLD ECONOMY. 2010.

Raghuram Rajan, former chief economist at the International Monetary Fund, was one of the few economists who warned of the global financial crisis before it hit. Now, as the world struggles to recover, it's tempting to blame what happened on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed. Rajan shows how the individual choices that collectively brought about the economic meltdown--made by bankers, government officials, and ordinary homeowners--were rational responses to a flawed global financial order in which the incentives to take on risk are incredibly out of step with the dangers those risks pose. He traces the deepening fault lines in a world overly dependent on the indebted American consumer to power global economic growth and stave off global downturns. He exposes a system where America's growing inequality and thin social safety net create tremendous political pressure to encourage easy credit and keep job creation robust, no matter what the consequences to the economy's long-term health; and where the U.S. financial sector, with its skewed incentives, is the critical but unstable link between an over- stimulated America and an under-consuming world.

In Fault Lines, Rajan demonstrates how unequal access to education and health care in the United States puts us all in deeper financial peril, even as the economic choices of countries like Germany, Japan, and China place an undue burden on America to get its policies right. He outlines the hard choices we need to make to ensure a more stable world economy and restore lasting prosperity.

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Robert Scheer, THE GREAT AMERICAN STICKUP: HOW REAGAN

REPUBLICANS AND CLINTON DEMOCRATS ENRICHED WALL STREET WHILE

MUGGING MAIN STREET. 2010.

“Coziness between Wall Street and Washington, D.C., from as far back as the Reagan administration, set up the nation for a deliberate swindle that nearly brought down the U.S. economy, argues Scheer, a veteran journalist and editor of TruthDig.com. Drawing from investigative reporting, memoirs, and news accounts, Scheer traces the building crisis through the Reagan, Clinton, Bush, and even Obama administrations, taking aim at three myths: that the financial markets are logical and self-correcting, that excesses only hurt speculators and not the general public, and that government regulation stands in the way of effective free enterprise. Instead, he presents a portrait of financial and political skullduggery by several influential players, notably Alan Greenspan, Robert Rubin, and Phil Gramm, and heroic efforts by a few regulators to stop it. Scheer explains in accessible detail the expanding derivatives markets, loosening of regulations on financial activities, and the subprime mortgage market, with much of the abuse aided and abetted by a handful of influential men. He highlights Rubin’s machinations within government to grant expanded powers to Enron and Citigroup, then later joining Citigroup to benefit from the changes that he helped to engineer. Scheer is also critical of the business press that championed deregulation and asked few questions as iconic figures sat atop failure after failure, many of them now engaged in “reforming” the system. A scathing, penetrating look at the unsavory links between American finance and politics.” --Vanessa Bush, in BOOKLIST.

Robert B. Reich. AFTERSHOCK: THE NEXT ECONOMY AND AMERICA’S FUTURE.

2010.

Reich (SUPERCAPITALISM), secretary of labor under Bill Clinton and former economic adviser to President Obama, argues that Obama's stimulus package will not catalyze real recovery because it fails to address 40 years of increasing income inequality. The lessons are in the roots of and responses to the Great Depression, according to Reich, who compares the speculation frenzies of the 1920s–1930s with present-day ones, while showing how Keynesian forerunners like FDR's Federal Reserve Board chair, Marriner Eccles, diagnosed wealth disparity as the leading stress leading up to the Depression. By contrast, sharing the gains of an expanding economy with the middle class brought unprecedented prosperity in the postwar decades, as the majority of workers earned enough to buy what they produced. Reich has a detailed, well-reasoned list of ways we can overcome our burgeoning income inequality and wrest back our threatened democracy from mega-corporations and the very wealthy. Of all books listed here, this is a

MUST READ!

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Joseph E. Stiglitz, Freefall: America, Free Markets, and the Sinking of the

World Economy (W.W. Norton, 2010).

From Amazon.com’s description: “Written by a Nobel Prize recipient, a graduate of President Bill Clinton’s Council of Economic Advisors, and a stout advocate of Keynesian economics, this inquest into the recession of 2007–09 lashes many designated villains, banks above all. Writing in a spirit Andrew Jackson would have loved, Stiglitz assails financial institutions’ size, their executive compensation, the complexity of their financial instruments, and the taxpayer money that has been poured into them. But unlike Jackson, who didn’t understand a thing about economics, Stiglitz is a little more analytical. He dwells on incentives—perverse, in his argument—for risky financial legerdemain in housing mortgages. The temptations stemmed from deregulation of the financial industry, a Reaganesque policy Stiglitz rebukes: he favors re-regulation and more government involvement in the economy. In fact, Stiglitz waxes unhappily about he Obama administration’s interventions, which thus far have been inadequate in his view. Zinging the Federal Reserve for good measure, Stiglitz insistently and intelligently presses positions that challenge those of rightward-leaning economists upholding the virtues of markets. Amid animated contemporary economic debate, Stiglitz’s book will attract popular and professional attention. --Gilbert Taylor.” Arianna Huffington, Third World America: How Our Politicians Are

Abandoning the Middle Class and Betraying the American Dream (Crown, 2010).

From Booklist: “Could the U.S. be on the brink of becoming a Third World nation? Syndicated columnist Huffington argues that overspending on war at the expense of domestic issues and the alarming decline of the middle class are troubling signals that the U.S. is losing its economic, political, and social stability—a stability that has always been maintained by the middle class. She pinpoints the beginning of the decline to the Reagan era, with its denigration of a government safety net. But she is nonpartisan in assigning responsibility to George W. Bush and Bill Clinton for supporting monied interests over those of the middle class; she then takes aim at Obama for expending more money to bail out Wall Street than Main Street. She also points to loss of manufacturing jobs, outsourcing, and globalization, all with emphasis on corporate profits at the expense of workers. Although the U.S. has faced similarly fearful times during the late 1800s and the Great Depression, the middle class was not threatened, as it is today. She offers possible solutions for the decline, including creating jobs to rebuild national infrastructure, reforms in home and credit lending, and tighter restrictions on Wall Street. An engaging analysis of troubling economic and political trends.”

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Additional Data and Contacts

Detailed tables, historical tables, press releases, and briefings are available electronically on the U.S. Census Bureau’s income, poverty, and health insurance Web sites. The Web sites may be accessed through the Census Bureau’s home page at <www.census.gov> or directly at <www.census.gov/hhes/www/income/income.html> for income data, and

<www.census.gov/hhes/www/poverty/poverty.html> for poverty data.

The income and poverty estimates shown in Census reports are based solely on money income before taxes and do not include the value of noncash benefits, such as nutritional assistance, Medicare, Medicaid, public housing, and employer- provided fringe benefits. All income values are adjusted to reflect 2009 dollars. “Real income” or income in prior years or income referred to as “2009 dollars refers to income after adjusting for inflation. The adjustment is based on percentage changes in prices between 2009 and earlier years and is computed by dividing the annual average Consumer Price Index Research Series (CPI-U-RS) for 2009 by the annual average for earlier years. The CPI-U-RS values for 1947 to 2009 are available on the Internet at <www.census.gov/hhes/www/income/data/incpovhlth/2009/p60no238 _appacpitable.pdf>.

Some basic Census Bureau and Economic

concepts defined How Income Is Measured: For each person 15 years and older in the sample, the Annual Social and Economic Supplement (ASEC) asks questions on the amount of money income received in the preceding calendar year from each of the following sources: 1. Earnings 2. Unemployment compensation 3. Workers’ compensation 4. Social security 5. Supplemental security income 6. Public assistance 7. Veterans’ payments 8. Survivor benefits 9. Disability benefits 10. Pension or retirement income 11. Interest 12. Dividends

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13. Rents, royalties, and estates and trusts 14. Educational assistance 15. Alimony 16. Child support 17. Financial assistance from outside of the household 18. Other income

It should be noted that although the income statistics refer to receipts during the preceding calendar year, the demographic characteristics, such as age, labor force status, and household composition, are as of the survey date. The income of the household does not include amounts received by people who were members during all or part of the previous year if these people no longer resided in the household at the time of the interview. The Current Population Survey (CPS) collects income data for people who are current residents but did not reside in the household during the previous year. Data on income collected in the ASEC by the U.S. Census Bureau cover money income received (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, social security, union dues, Medicare deductions, etc. Therefore, money income does not reflect the fact that some families receive noncash benefits, such as food stamps, health benefits, subsidized housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents, which often take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Data users should consider these elements when comparing income levels. Wealth is discussed at one point in this presentation. It is defined in as “net worth”, or the value of a person’s bank accounts, property, stocks, bonds, art collections, etc. minus the value of things like loans and mortgages. Wealth inequality, which the Census Bureau does not measure, is much more extreme than income inequality in the United States.

A household includes all the persons who occupy a housing unit. A housing unit is a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied (or if vacant, is intended for occupancy) as separate living quarters. Separate living quarters are those in which the occupants live and eat separately from any other persons in the building and which have direct access from the outside of the building or through a common hall. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. (People not living in households are classified as living in group quarters.)

A Family is a group of two or more people who reside together and who are related by birth,

marriage, or adoption.

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Gross Domestic Product is defined as the amount of goods and services produced in a year, in a

country. It is the market value of all final goods and services made within the borders of a

country in a year. As a measure of economic well-being, wealth, or standard of living—this

measure leaves much to be desired. It does not account for distorted inequalities of income and

wealth, environmental damage of any kind in economic production, immediately dwindling

resources (think currently rich oil-producing nations), non-market transactions such as bartering,

subsistence activity, wide fluctuations from year to year of inflation, etc. Bear in mind that by

using this measure without caveats, the Gulf Oil Spill or Hurricane Katrina actually increases the

GDP of America. Other, less commonly used measures--such as the United Nations Human

Development Index--may serve as better indicators of national well-being.

Who is defined as “under poverty”?

Following the Office of Management and Budget's (OMB) Statistical Policy Directive 14, the

Census Bureau uses a set of money income threshold that vary by family size and composition

to determine who is in poverty. If a family’s total income is less than the family’s threshold,

then that family and every individual in it is considered in poverty. The official poverty

thresholds do not vary geographically, but they are updated annually for inflation with

the Consumer Price Index (CPI-U). The official poverty definition uses money income before

taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid,

etc.

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Inside America’s Poorest County ● ● ●

Nomaan Merchant Associated Press (2/15/2011)

In the barren grasslands of Ziebach County (South Dakota), there’s almost nothing harder to find in winter than a job. This is America’s poorest county, where more than 60 percent of people live at or below the poverty line…nowhere are the numbers as bad as here—a county with 2,500 residents, most of them Cheyenne River Sioux Indians living on a reservation. In the coldest months of the year..unemployment among the Sioux can hit 90 percent…The Cheyenne River Indian Reservation , created in 1889, consists almost entirely of agricultural land in Ziebach and neighboring Dewey County. It has no casino and no oil reserves or available natural resources…Families live in dilapidated houses or run-down trailers. Multicolored patches of siding show where repairs were made as cheaply as possible…The county has been at or near the top of the poverty rankings for at least a decade. ----------------------------------------------------------------------------------------------------------------------------

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