The Wealth Gap

I believe there are two preeminent challenges (among several) in this country, the most significant of which is Toxic Racism. In What’s Going On, I acknowledged that while there have been positive changes as far as opportunities for persons of color are concerned, when it comes to police brutality and justice inequities, what’s going on today is what was going on fifty years ago. Hand-in-hand with Toxic Racism is America’s second greatest challenge: the Wealth Gap that is bracketed on one side by obscene wealth and on the other by Toxic Poverty.

There are many rationalizations I’ve heard expressed as to why there is poverty. My favorite is, “Poverty is a choice. Poor people just need to decide not to be poor.” It is my favorite because it is pure idiocy. During the last year of my career as an educator, I provided support to charter schools in Philadelphia, which meant that every week I would drive to those schools through parts of Philly that no one I know has ever seen. Block after block after block of homes inhabited by souls who were struggling to survive in the second poorest city in America, in which 23.3% of the inhabitants lived below the poverty level. I would ask anyone who believes the idiocy quoted above to consider this: if tomorrow, the tens of thousands of Philadelphians who are living in poverty decided not to be poor, just how, exactly, would they go about doing so?

I do not know how else to look at the extensive poverty in this country except to think that the people with power in this country, the people with the bulk of its wealth, do not feel responsible for doing anything about it. If they, as a group, did see poverty as a “problem” or more accurately, an immoral circumstance, the Wealth Gap would be significantly smaller than it is, and the economic well-being of all Americans would be appreciably better. Bottom line? The huge Wealth Gap that exists in this country is not a media fabrication; it is a reality represented by a large body of facts.

One such source of these facts is The Federal Reserve Bank of St. Louis, which in 2019 published What Wealth Inequality in America Looks Like: Key Facts & Figures. It is written in lay terms should you wish to verify what follows:

In 2016 there were approximately 126,000,000 households in the U.S.

Income distribution is a reflection of the Wealth Gap: households in the top 10% earned $176,000 per year or more; households in the top 50% to 90% earned from $53,000 to $176,000 per year; and the bottom 50% earned less than $53,000 per year.

Under the St. Louis Fed’s bullet, “Wealth inequality is starker:” the middle 50% to 90% of households held 22% of all American household wealth; the top 10% (~12,600,000 households) held 77% of the wealth; and the bottom 50% (~63,000,000 households or 5 times the number of households in the top 10%) held only 1% of America’s total household wealth.

(Note: while the data above is from 2016, 2020 data reported by Bloomberg indicates the Wealth Gap continues to grow: Bloomberg’s headline reads, “The 50 Richest Americans Are Worth as Much as the Poorest 165 Million.”)

While there are people of color who are represented in the top 50% of Household Wealth, according to the St. Louis Fed’s data, Race appears to have a significant bearing upon families of color. In 2016, the typical white family had 10 times the wealth of a typical black family, and 7 times the wealth of a typical Latino family.

For the “kitchen racists” among white folks who might hypothesize in the privacy of their homes to other such folks that race/wealth data is a reflection of some inherent quality of white folks, data in Americans Are Mistaken About Who Gets Welfare (2018) reports that in 2016, Medicaid had more than 70 million beneficiaries, of whom 43 percent were white, 18 percent black, and 30 percent were Hispanic; of the 2.7 million people served by the Temporary Assistance for Needy Families Program (i.e. “welfare”), 36.9% were Hispanic, 29.1% were black, and 27.6% were white—which suggests that poverty is an equal opportunity devastator.

Toxic poverty added to Toxic Racism creates a poisonous stew that creates What’s Going on and that makes me want to scream, “What the hell’s been going on?

If you are a frequent reader of my blogs—especially the defunct Education and Freedom, and Educational Follies blogs—you can confirm that I often cite the following from JFK’s Inauguration, a prophesy that is based upon the results of actual phenomena like the French and Russian Revolutions:

If a free society cannot help the many who are poor, it cannot save the few who are rich.

Too often, old men like me—even presidential candidates—hurl insults and complaints at the TV, but we seldom offer solutions. In order to correct that unfortunate old-guy behavior, I offer the following CNBC article (which I have included below, full-cloth), which explains how our free society could begin to help the many who are poor.

The following is a June 19, 2019 CNBC article by John Harwood


The rise of income inequality and the struggles of so many families to get ahead have shaken American politics across the spectrum. President Donald Trump invokes the plight of “the forgotten people.” Liberals call for massive new government programs. Wall Street titan Jamie Dimon proposes “a Marshall Plan for America.” Ideological conservatives warn of a socialist uprising that would ruin American capitalism. But economists who study the issue say it need not come to that. With bold and targeted steps, they argue, government can increase opportunity and incomes for many more people in ways that strengthen, not weaken, American capitalism. Here are five of them:

BOLSTERING HUMAN CAPITAL: “We could tax more from all the folks at the top to spend money making investments in the people who are being left behind,” says University of Maryland economist Melissa Kearney. That includes access to affordable health care, job training, apprenticeships and vocational education. Most important is improved basic education, beginning with prekindergarten programs for 3- and 4-year-olds. “I don’t think education by itself is a solution to income inequality,” says MIT’s David Autor. “It’s the best tool in our toolkit.”

RAISING WAGES AND RETURNS: Government can make employment more profitable for low-income workers. A higher minimum wage is just one way, and a limited one. “There’s only so much you could do in terms of making workers more expensive without actually harming the people you’re trying to help,” Kearney said. Alternatives include increasing the earned income tax credit and subsidizing child-care services so more low-income parents can work. Easing occupational licensing requirements would smooth the path to more people taking up higher-paying lines of work, and loosening prohibitions against work would boost incomes for millions of Americans now reliant on disability benefits.

ALTERING CORPORATE GOVERNANCE: In recent decades, the rise of “shareholder capitalism” in the American system has reduced the influence of workers in economic decision-making and enhanced the influence of business owners. Government and corporations can alter the social contract. “The idea that corporations should just maximize profits without any regard to any other objective is fairly recent,” Autor says. “It’s possible to imagine adjustments to the structure of corporate governance that would think a little harder about additional stakeholders and potential beneficiaries aside from just owners.” For example, Democratic presidential candidate Elizabeth Warren has proposed that workers at a corporation be allowed to elect 40% of the board of directors. Similar arrangements in Germany have resulted in much more limited use of one manifestation of shareholder capitalism — stock buybacks.

EXPANDING INFRASTRUCTURE: Better roads, bridges and airports can improve productivity and prosperity for business owners and workers alike. So can digital connections to sparsely populated communities the 21stcentury economy has left behind. “Forty percent of rural Americans don’t have access to broadband internet,” Kearney says. “That’s like electricity to a previous generation, so that’s an obvious infrastructure investment that would make a place more conducive to job growth.” At the same time, the cost of a decent home keeps many potential workers from opportunities in economically thriving cities. Relaxed zoning, development subsidies and rental assistance could increase the stock of affordable housing.

PROTECTING INTELLECTUAL PROPERTY: Trump’s tariffs have roiled financial markets. And a trade war with China won’t bring many manufacturing jobs back. But improved protection of intellectual property can help the new American economy. “The Trump administration has been correct to focus on that area of dispute with China,” Autor says. “China has not played by the rules … and forced a lot of disgorgement of U.S. intellectual property, which ultimately will make us poorer over the long run. “It’s not at this point so much about jobs as it is about ownership of ideas and control of frontier sectors that we don’t want to lose like aircraft, like microprocessors, like personal computers and mobile phones, like pharmaceuticals.” None of these steps is easy. Substantial economic change ignites conflict — in Washington, on Wall Street, on Main Street.

But they could shift entrenched patterns that have left tens of millions of Americans feeling economically helpless. “There are many countries that are facing the same set of challenges,” Autor says. “And they’ve adapted in different ways. “If we compare ourselves to Germany, to Canada, to Sweden, to Switzerland, Norway — these are all a spectrum of market economies. We all have mixed economies, ranging from sort of cowboy capitalism in the United States to kind of cuddly capitalism in Norway. And those countries have made different choices about how much they want to push against those forces through a variety of programs.”

The question is whether public policy is susceptible to big changes. The 2020 campaign will tell whether discontent has grown powerful enough to force them. “I worry that there’s a complacency from some folks that, you know, this is always been the American way,” Kearney says. “Our capitalist system continues to be the best in the world and it’s all going to work. “There are global forces,” she concludes. “Things are different now.”

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