Friends of GEO

Niki Okuk on Cooperative Economics in African-American Communities

Shareable - Commons - September 20, 2017 - 5:17pm

In her engrossing TED Talk, business owner Niki Okuk explores three key themes: racism, economic oppression, and privilege, and how they relate to cooperate economics. Okuk, who runs tire recycling company Rco Tires, shares her personal story of starting the business, but puts it in larger, historical context. "So a lot of people ask, 'How did Rco come to be,'" Okuk says. "And I have to be really honest.

Categories: Friends of GEO

The Myths Of Recovery: Why American Households Aren’t Better Off

It's Our Economy - September 20, 2017 - 11:00am
Above Photo: Workers pack and ship customer orders at the 750,000-square-foot Amazon fulfillment center on August 1, 2017 in Romeoville, Illinois. The stagnation of real incomes from 1999 through today is structural, not cyclical Off the top, the figures published by the U.S. Census Bureau on Tuesday are encouraging: • Median household income rose to $59,039, the second straight gain; • The percentage of people in poverty fell to 12.7%, returning to around pre-recession levels; • The supplementary poverty measure also fell, to 13.9%; • The percentage of people without health insurance coverage fell to 8.8%. The excitement of some analysts reporting these as a major breakthrough along the trend is understandable, as notionally, 2016 U.S. median household income has finally surpassed the previous peak, recorded in 1999. Back then, median household income (adjusted for official inflation) stood at $58,665 and at the end of 2016 it registered $59,039. Opinion: It turns out that Obama got a bum rap on the economy As this chart clearly illustrates, notionally, we are in the “new historical peak” territory. Alas, notional is not the same as tangible. And here are the reason why the tangible matters probably more than the notional: 1) Consider the following simple timing observation: real incomes took 17 years to recover from the 2000-2012 collapse. And the Great Recession, officially, accounted for only $4,031 in total decline of the total peak-to-trough drop of $5,334. Which puts things into a different framework altogether: the stagnation of real incomes from 1999 through today is structural, not cyclical. The “good news” are really of little consolation for people who endured almost two decades of zero growth in real incomes: their life-cycle incomes, pensions, wealth are permanently damaged and cannot be repaired within their lifetimes. 2) The Census Bureau data shows that bulk of the gains in real income in 2016 has been down to one factor: higher employment. In other words, hours worked rose, but wages did not. American median householders are working harder at more jobs to earn an increase in wages. Which would be OK, were it not down to the fact that working harder means higher expenditure on income-related necessities, such as commuting costs, child-care costs, costs for caring for the dependents, etc. In other words, to earn that extra income, households today have to spend more money than they did back in the 1990s. Now, I don’t know about you, but for my household, if we have to spend more money to earn more money, I would be looking at net increases from that spending, not gross. Census Bureau does not adjust for this. There is an added caveat to this: caring for children and dependents has become excruciatingly more expensive over the years, since 1999. Inflation figures reflect that, but the real income deflator takes the average/median basket of consumers in calculating inflation adjustment. However, households gaining new additional jobs are not average/median households to begin with — and most certainly not in 2016, when labor markets were tight. In other words, the median household today is more impacted by higher inflation costs pertaining to necessary non-discretionary expenditures than the median household in 1999. Without adjusting for this, notional Census Bureau figures misstate (to the upside) current income gains. 3) In 1999, the Census Bureau data on household incomes used a different methodology than it does today. The methodology changed in 2013, at which point in time, the Census Bureau estimated that 2013 median income was about $1,700 higher based on new methodology than under pre-2013 methodology. Since then, we had no updates on this adjustment, so the gap could have actually increased. Tuesday’s numbers show that median household income at the end of 2016 was only $374 higher than in 1999. In other words, it was most likely around $1,330 or so lower, not higher, under the pre-2013 methodology. Taking a very simplistic (most likely inaccurate, but somewhat indicative) adjustment for 2013-pre-post differences in methodologies, the current 2016 reading is roughly 1.6% lower than the 2007 local peak, and roughly 2.3% lower than the 1999-2000 level. 4) Costs and taxes do matter, but they do not figure in the Census Bureau statistic. Quite frankly, it is idiotic to assume that gross median income matters to anyone. What matters is after-tax income net of the cost of necessities required to earn that income. Now, consider a simple fact: in 1999, a majority of jobs in the U.S. were normal working-hours contracts. Today, a huge number are zero-hours and gig-economy jobs. The former implied regular and often subsidized demand for transport, childcare, food associated with work etc. The latter implies irregular (including peak hours) transport, childcare, food and other services demand. The former was cheaper. The latter is costlier. To earn the same dollar in traditional employment is not the same as to earn a dollar in the gig economy. Worse, taxes are asymmetric across two types of jobs too. The gig economy adds to this problem yet another dimension. Many gig-economy earners (e.g. Uber drivers, delivery & messenger services workers, or AirBnB hosts) use income to purchase assets they use in generating income. These are not reflected in the Census Bureau earnings, as the official figures do not net out cost of employment. 5) Finally, related to the above, there is higher degree of volatility in job-related earnings today than in 1999. And there are longer duration of unemployment spells in today’s economy than in the 1990s. Which means that the risk-adjusted dollar earned today requires more unadjusted dollars earned than in 1999. Guess what: Census Bureau statistics show not-risk-adjusted earnings. You might think of this as an academic argument, but we routinely accept (require) risk-adjusted returns in analyzing investment prospects. Why do we ignore tangible risk costs in labor income? The key point here is that any direct comparison between 1999 and 2016 in terms of median incomes is problematic at best. It is problematic in technical terms (methodological changes and CPI deflator changes), and it is problematic in incidence...
Categories: Friends of GEO, SE News

Montana Quadruples Solar Energy Capacity In One Year

It's Our Economy - September 19, 2017 - 12:00pm
Above Photo: U.S. Department of Energy The state quadrupled its solar energy production over the past year, according to an announcement by Lt. Gov Mike Cooney on Friday. Montana was producing 6.6 megawatts of installed capacity a year ago. The governor’s office released an energy plan, Montana Energy Future, with a goal to double solar capacity by 2025. Now the state has an installed capacity of 26 megawatts. “It’s an incredible honor to announce Montana has not only doubled our solar production much earlier than expected, we’ve quadrupled it in a single year,” he said. Cooney said the state hopes to continue increasing solar production, which creates jobs and promotes energy independence. “Done right, we can drive economic growth while sparking new clean technology,” he said. There are 373,807 solar jobs as of 2016 in the United States. The solar industry employs more people than coal, natural gas, wind or nuclear sources. The announcement was made at the Lewis and Clark Library in Helena, which installed a 50kW rooftop solar array earlier this year. John Finn, library director, said adding the solar array, which was accomplished with funds from a host of donors, is about providing an opportunity for the community to learn about solar energy. The panels are visible and attract attention on purpose, he said. The cost savings are an added benefit and have saved the library $3,000 since April. Finn said the library is in the process of planning small solar projects at the library’s branches in Lincoln and Augusta. The Montana Renewable Energy Association presented the Bullock administration with a clean energy leadership award. “I know growth of an industry takes vision,” Henry Dykema, president of MREA, said of the administration’s work on promoting solar. The announcement was ahead of the 7th annual Montana Clean Energy Fair, which starts at 9 a.m. Saturday in Pioneer Park. In addition to a 5k Sun Run, exhibits by clean energy businesses in the state will provide people with an opportunity to learn more about solar. There will be workshops on solar and wind, an electric car show and activities for kids. Admission to the fair is free.    
Categories: Friends of GEO, SE News

Cost Of U.S. Solar Drops 75% In Six Years, Ahead Of Federal Goal

It's Our Economy - September 19, 2017 - 11:00am
Above Photo: A 250-MW solar project on the Moapa Band of Paiute Indians Moapa Indian River Reservation in southern Nevada. It is the first utility-scale solar project on tribal land in the U.S. FIRST SOLAR/DOE The Trump administration has announced that a federal goal to slash the cost of utility-scale solar energy to 6 cents per kilowatt-hour by 2020 has been met early. The goal, set by the Obama administration in 2011 and known as the SunShot Initiative, represents a 75 percent reduction in the cost of U.S. solar in just six years. It makes solar energy-cost competitive with electricity generated by fossil fuels. The Department of Energy attributed achieving the goal so quickly to the rapidly declining cost of solar hardware, such as photovoltaic panels and mounts. And it said it will next focus its efforts on addressing “solar energy’s critical challenges of grid reliability, resilience, and storage,” according to a press release. The DOE also announced $82 million in new funding for solar research, particularly for research into “concentrating solar” — which uses mirrors to direct sunlight to generate thermal energy — and into improved grid technology. It set a new goal to reduce the cost of solar even further: 3 cents per kilowatt-hour by 2030. The new funding and focus on solar energy seems to counter President Trump’s energy strategy. The White House proposed cutting Energy Department funding for solar research by 71 percent, to $70 million, in its 2018 budget request, according to Bloomberg News.
Categories: Friends of GEO, SE News

After The Hurricane, Solar Kept Florida Homes And A City’s Traffic Lights Running

It's Our Economy - September 19, 2017 - 10:00am
Above Photo: Florida, for all its solar potential, is still in the nascent stages of what could become a solar boom. Credit: Joe Raedle/Getty Images By using energy storage with solar panels, some homeowners were able to go off-grid, showing how distributed power could speed future storm recovery. Just after midnight on Sept. 11, Eugenio Pereira awoke to the sound of tropical-storm-force winds slamming his Gainesville, Florida, home. Hurricane Irma had arrived. At 1:45 a.m., the power flickered out, and he was in total darkness. Unlike large swaths of Florida that were facing days if not weeks without electricity, Pereira knew he would have power when the sun rose. He had installed rooftop solar panels two weeks before the storm, along with an inverter that allows him to use power from the solar panels without being connected to the grid. The next morning, he plugged an extension cord into the inverter, flipped it on, and let his 7-kilowatt rooftop solar array do the rest. He was able to use his appliances and his Wi-Fi, so he could continue his work as a home-based IT consultant while the neighborhood waited for grid power to came back on. “We didn’t have sun at all the day after the hurricane, but even with clouds, it was enough,” he said. Hurricane Irma cut the power to about 6.7 million customers across Florida, as well as hundreds of thousands in Georgia, South Carolina and North Carolina. Only about two-thirds of those in Florida had power back by Thursday, and Florida Power & Light said the outages could last weeks in some areas. It’s a scene that plays out every time a major hurricane hits. But this time, homeowners like Pereira, some businesses, and even cities were able to take advantage of the Sunshine State’s solar power while the grid was down. Most rooftop solar arrays are connected to the grid, so when the public power is off, the rooftop solar power can’t be accessed—unless the customer has a stand-alone inverter, like Pereira does, or a battery storage system like the Tesla Powerwall. Local solar contractors and companies have been using the hurricane-induced power outages this week to experiment with these technologies to run their homes and businesses off-grid. In Jacksonville—where the storm surge reached record levels—Pete Wilking, president of A1A Solar Contracting, said he’s been using his home rooftop solar and battery storage system the entire time since the storm. About 95 percent of his customers are grid-tied because it’s the cheapest option, but he said some have batteries that they are using at full capacity now that it’s sunny. “Events like Irma have made people aware of how dependent we are on electricity,” Wilking said. Cities have also been putting off-grid solar power systems to work. Coral Springs, just northwest of Fort Lauderdale, used solar-powered traffic lights while its grid power was down. During the worst part of the storm—when 300,000 people had lost power in Broward County—Coral Springs placed 13 lights in major thoroughfares throughout the city. Two small batteries sit beneath a solar panel that powers the light, which is placed on the ground at an intersection, said Derek Fernandes, traffic officer for Coral Springs. The batteries are used at night so the lights stay on. “We were able to cover the major arteries in the city that didn’t have power,” Fernandes said. “One has been running since Monday, and we haven’t had to replace it.” Opportunity to Redesign the Grid for Resilience Solar advocates say that now—as the state rebuilds thousands of miles of damaged power infrastructure—is the perfect time for Florida to rethink grid resilience and bringing in renewable energy. Alissa Jean Schafer, solar communications and policy manager for the Southern Alliance for Clean Energy, had just returned to the Fort Lauderdale area after evacuating with her family to Atlanta and was already having conversations with people in her community about the potential for distributed solar. “If we’re going to be taking steps toward resiliency, and people are still living in South Florida, [we have to] look at how to create a more resilient grid between having distributed resources like rooftop solar as opposed to only have power coming from one source, like natural gas,” she said. Solar can also help run microgrids that are able to continue providing power to a local area when the main grid is damaged elsewhere. “Microgrids could potentially make it easier to bring small communities back on quicker,” Schafer said. “The more spread out, the more resilient you’re able to be,” she said. “Those issues really come to a head when we see something go wrong.” Solar Support Is Growing, Despite Politics Florida, for all its solar potential, is still in the nascent stages of what could become a solar boom. Utilities are beginning to expand their renewable energy footprint: Florida Power & Light has announced plans for eight new solar plants across the state, and last month, Duke Energy canceled a nuclear project and said it will instead spend $6 billion building solar farms, installing electric vehicle charging stations, and improving the electric grid. There is also a grassroots movement growing: last year, voters passed an amendment that extends a tax break for residents who have installed solar or equipment for other renewable energy. They also rejected a utility-backed solar amendment that would have raised fees and kept out companies wanting to compete with utilities to sell solar. In recent months, solar cooperatives, which allow a community to buy solar together and save money, have also become a popular way to access rooftop solar; there are now nine in the state. South Miami recently approved an ordinance that would require solar installations on all new homes and requires solar installations for any renovations that expand a home by more than 75 percent or replace more than 75 percent of the existing roof. Last month, St. Petersburg city officials proposed a similar ordinance. Orlando’s sustainability officials have also expressed interest in advancing solar initiatives in the coming months. The city set its own renewable energy standard in...
Categories: Friends of GEO, SE News

A Toolkit for Establishing a Great Lakes Commons

Shareable - Commons - September 18, 2017 - 2:59pm

The Great Lakes Commons is a regional grassroots initiative advocating for the freshwater chain of lakes in the upper Midwest and Mideast parts of the U.S. and Canada. As part of that mission, the group has released a new toolkit designed to help communities and residents protect the lakes, which its members view as a public, natural resource. The kit is a mix of traditional advocacy tools, policy statements, historical documents, and educational tools.

Categories: Friends of GEO

What America Would Look Like If It Guaranteed Everyone A Job

It's Our Economy - September 16, 2017 - 8:00pm
Above Photo: From vox.com Imagine if a well-paying job, with benefits and a high enough salary to pay for rent, transportation, and food, were a human right. Imagine the US federal government established a policy whereby anyone who didn’t have a job and wanted one could go into a local office for a government agency — call it the Works Progress Administration — and walk out with a regular government position paying a livable wage ($15 an hour, perhaps) and offering health, dental, and vision insurance, and retirement benefits, and child care for their kids. Different people would do different things: teaching or working for after-school programs or providing child care or building roads and mass transit or driving buses and so on. But everyone would be guaranteed a job, including during recessions. Involuntary unemployment would be a thing of the past. No one who works would be in poverty. That’s a truly radical policy idea. But it has deep roots in the Democratic Party’s past, from the New Deal’s emergency employment programs to the Humphrey-Hawkins Act, a 1970s proposal that, as originally written, would have given unemployed Americans the right to sue the government. Today, there are even some actual proposals on the table. In May, the Center for American Progress issued a report calling for a “large-scale, permanent program of public employment and infrastructure investment.” But some labor economists, even left-leaning ones, are skeptical. None of the programs, they argue, have done enough work on the details. And those details are crucial to the eventual fate of such a policy. An effective job guarantee that eliminated unemployment and boosted wages without negative side effects could be a very good thing. But an ineffective job guarantee that amounts to a welfare check plus onerous work requirements wouldn’t just be bad policy — it would also be politically toxic. Why liberals are flocking to job guarantee plans in 2017 It might seem strange to be debating how best to solve mass joblessness at a time when the US unemployment rate is 4.3 percent, the lowest in over a decade. And indeed, analysts critical of the plan raise exactly that objection: “Advocates who imagine we need a major restructuring of the entire economy are utopian and dystopian all at once,” says Adam Ozimek, an economist at Moody’s Analytics. “They are utopian in that they imagine we can nationalize a quarter of the labor force without significant negative effects on productivity and economic growth. They are dystopian in that they imagine things are so terrible that this kind of radical transformation is necessary.” But there are both political and policy reasons for why the job guarantee is suddenly a hot topic. In the wake of the 2016 election, liberal commentators have latched onto the job guarantee — an idea pushed by some left-wing economists for years — as a way to forge a cross-racial working-class coalition. They need a plan that appeals to both to the white Wisconsin and Michigan voters who switched from Obama to Trump and to black and Latino workers left behind by deindustrialization. The ideal plan would both improve conditions for lower-income Americans while supporting Americans’ strong intuition that people should work to earn their crust. “A federal job guarantee is both universal—it benefits all Americans—and specifically ameliorative to entrenched racial inequality,” Slate’s Jamelle Bouie notes. “The job guarantee asserts that, if individuals bear a moral duty to work, then society and employers bear a reciprocal moral duty to provide good, dignified work for all,” Jeff Sprossadds in the influential center-left journal Democracy. “If Democrats want to win elections, they should imbue Trump’s empty rhetoric with a real promise: a good job for every American who wants one,” writes Bryce Covert in the New Republic. “It’s time to make a federal jobs guarantee the central tenet of the party’s platform.” Many experts argue the employment situation is a bit worse than it looks — and that there’s plenty of room for improvement.Economic Policy Institute But there’s also a policy rationale for the idea’s resurgence. Many experts think the unemployment rate makes the economy, or at least the labor market, look better than it really is. The unemployment rate only counts people looking for work, and the most recent recession and slow subsequent recovery forced some people out of the labor force. In January 2007, 80.3 percent of people ages 25 to 54 were employed; in July 2017, only 78.7 percent were. If the rate had stayed at its prerecession peak, there’d be 2 million more people employed today. If the rate were at its all-time peak (81.9 percent, in April 2000), there’d be 4 million more people employed. It’s possible those people will get jobs as the economy continues improving, but it’s not a sure thing. For one thing, the Federal Reserve keeps raising interest rates, a move that effectively kills jobs. There are also other factors at play. For decades, in both good economic times and bad, the share of men who are either working or looking for work has been declining. The labor force participation rate for 25- to 54-year old men fell from 98 percent in the 1950s to 88 percent today, per a 2016 report by White House Council of Economic Advisors members. And it’s not just a matter of jobs. Wage growth has been somewhat anemic. During the last great boom in the late 1990s and early 2000s, wage and salary growth in the private sector, before adjusting for inflation, was about 3.5 to 4 percent per year, sometimes even topping 4, according to the Employment Cost Index. In recent quarters, however, wage growth has hovered around 2.5 percent. That’s slightly worse than things were in the mid-2000s, before the housing bubble burst. Nor has the recovery been evenly shared. As of July 2017, 60.4 percent of white people in America were employed, but only 57.7 percent of black people were. Once black men’s disproportionate representation in prisons and jails is accounted for, the gap grows still larger. A mere 27.7 percent of disabled people age 16 to 64 are employed, compared to 72.8 percent of...
Categories: Friends of GEO, SE News

Destructive Stock Buybacks—That You Pay For

It's Our Economy - September 15, 2017 - 8:00am
Above Photo: ‘Conventional monetary policy has failed,’ writes Brown. An economy in service of the people, not industry and the banks, is what’s needed now. (Photographer: Andrew Harrer/Bloomberg) The monster of economic waste—over $7 trillion of dictated stock buybacks since 2003 by the self-enriching CEOs of large corporations—started with a little noticed change in 1982 by the Securities and Exchange Commission (SEC) under President Ronald Reagan. That was when SEC Chairman John Shad, a former Wall Street CEO, redefined unlawful ‘stock manipulation’ to exclude stock buybacks. Then after Clinton pushed through congress a $1 million cap on CEO pay that could be deductible, CEO compensation consultants wanted much of CEO pay to reflect the price of the company’s stock. The stock buyback mania was unleashed. Its core was not to benefit shareholders (other than perhaps hedge fund speculators) by improving the earnings per share ratio. Its real motivation was to increase CEO pay no matter how badly such burning out of shareholder dollars hurt the company, its workers and the overall pace of economic growth. In a massive conflict of interest between greedy top corporate executives and their own company, CEO-driven stock buybacks extract capital from corporations instead of contributing capital for corporate needs, as the capitalist theory would dictate. Yes, due to the malicious, toady SEC “business judgement” rule, CEOs can take trillions of dollars away from productive pursuits without even having to ask the companies’ owners—the shareholders—for approval. What could competent management have done with this treasure trove of shareholder money which came originally from consumer purchases? They could have invested more in research and development, in productive plant and equipment, in raising worker pay (and thereby consumer demand), in shoring up shaky pension fund reserves, or increasing dividends to shareholders. The leading expert on this subject—economics professor William Lazonick of the University of Massachusetts—wrote a widely read article in 2013 in the Harvard Business Review titled “Profits Without Prosperity” documenting the intricate ways CEOs use buybacks to escalate their pay up to  300 to 500 times (averaging over $10,000 an hour plus lavish benefits) the average pay of their workers. This compared to only 30 times the average pay gap in 1978. This has led to increasing inequality and stagnant middle class wages. To make matters worse, companies with excessive stock buybacks experience a declining market value. A study by Professor Robert Ayres and Executive Fellow Michael Olenick at INSEAD (September 2017) provided data about IBM, which since 2005 has spent $125 billion on buybacks while laying off large numbers of workers and investing only $69.9 billion in R&D. IBM is widely viewed as a declining company that has lost out to more nimble competitors in Silicon Valley. The authors also cite General Electric, which in the same period spent $114.6 billion on its own stock only to see its stock price steadily decline in a bull market. In a review of 64 companies, including major retailers such as JC Penny and Macy’s, these firms spent more dollars in stock buybacks “than their businesses are currently worth in market value”! On the other hand, Ayes and Olenick analyzed 269 companies that “repurchased stock valued at 2 percent or less of their current market value (including Facebook, Xcel Energy, Berkshire Hathaway and Amazon). They were strong market performers. The scholars concluded that “Buybacks are a way of disinvesting – we call it ‘committing corporate suicide’—in a way that rewards the “activists” (e.g. Hedge Funds) and executives, but hurts employees and pensioners.” Presently, hordes of corporate lobbyists are descending on Washington to demand deregulation and tax cuts. Why, you ask them? In order to conserve corporate money for investing in economic growth, they assert. Really?! Why, then, are they turning around and wasting far more money on stock buybacks, which produce no tangible value? The answer is clear: uncontrolled executive greed! By now you may be asking, why don’t the corporate bosses simply give more dividends to shareholders instead of buybacks, since a steady high dividend yield usually protects the price of the shares? Because these executives have far more of their compensation package in manipulated stock options and incentive payments than they own in stock. Walmart in recent years has bought back over $50 billion of its shares – a move benefitting the Walton family’s wealth – while saying it could not afford to increase the meagre pay for over one million of their workers in the US. Last year the company bought back $8.3 billion of their stock which could have given their hard-pressed employees, many of whom are on welfare, a several thousand dollar raise. The corporate giants are also demanding that Congress allow the repatriation of about $2.5 trillion stashed abroad without paying more than 5% tax. They say the money would be used to grow the economy and create jobs. Last time CEOs promised this result in 2004, Congress approved, and then was double-crossed. The companies spent the bulk on stock buybacks, their own pay raises and some dividend increases. There are more shenanigans. With low interest rates that are deductible, companies actually borrow money to finance their stock buybacks. If the stock market tanks, these companies will have a self-created debt load to handle. A former Citigroup executive, Richard Parsons, has expressed worry about a “massively manipulated” stock market which “scares the crap” out of him. Banks that pay you near zero interest on your savings announced on June 28, 2017 the biggest single buyback in history – a $92.8 billion extraction. Drug companies who say their sky-high drug prices are needed to fund R&D. But between 2006 and 2017, 18 drug company CEOs spent a combined staggering $516 billion on buybacks and dividends – more than their inflated claims of spending for R&D. Mr. Olenick says “When managers can’t create value in the business other than buying their own stock, it seems like it’s time for a management change.” Who’s going to do that? Shareholders stripped of inside power to control the company they own?...
Categories: Friends of GEO, SE News

The Racial Wealth Gap Is Leading To An Almost-Nonexistent Middle Class

It's Our Economy - September 15, 2017 - 8:00am
Above Photo: Top photo | Deborah Goldring stands inside her Baltimore home. From growing up black in the segregated 1960s, Goldring pulled herself out of poverty and earned a middle-class life – until the Great Recession. First, her husband fell ill, and they drained savings to pay for nursing homes before he died. Then Goldring lost her executive assistant job of 17 years. Then came a letter from the bank, intending to foreclose on her home of almost three decades. For Goldring and many others in the black community, where unemployment is still rising, job loss has knocked them out of the middle class and back into poverty. Some even see a historic reversal of hard-won economic gains that took black people decades to achieve. (AP Photo/Steve Ruark) With people of color projected to make up the majority of Americans by 2043, a new study warns against policies that keep many black and Latino households out of the middle class. A new study finds that if the racial wealth divide is left unaddressed, the median wealth for black Americans will fall to $0 by 2053, with Latino Americans reaching the same median wealth two decades later. According to the report by the Institute for Policy Studies and Prosperity Now, the wealth gap between people of color and their white counterparts is showing no sign of narrowing in the coming years—even as racial demographics in the U.S. are rapidly shifting, with people of color projected to make up the majority of the population by 2043. In the next three years, black households are projected to lose 18 percent of their median net worth, while white families are expected to gain about three percent more wealth. The report, “The Road to Zero-Wealth,” defines middle-class wealth as a household net worth of $68,000 to $204,000, and notes the disconnect between income and wealth: a median income for one’s racial background does not guarantee entry into the middle-class. “White households in the middle-income quintile—those earning $37,201-61,328 annually—own nearly eight times as much wealth ($86,100) as Black middle-income earners ($11,000) and ten times that of their Latino counterparts ($8,600),” write the authors. Black Americans are also unable to accumulate middle-class wealth even with high levels of education: If we consider educational attainment—often considered as the “great equalizer” between the rich and the poor and between families of different racial and ethnic backgrounds—White families whose head of household holds a high school diploma have nearly enough wealth ($64,200) to be considered middle class. A typical Black or Latino family whose head of household has a college degree however, owns just $37,600 and $32,600, respectively, in wealth.   In addition to impact of income inequality on individual families, the racial wealth gap has increasingly dire implications for the overall economy if, as the authors project, the majority of Americans aren’t able to enter the middle class: If the racial wealth divide continues to accelerate, the economic conditions of black and Latino households will have an increasingly adverse impact on the economy writ large, because the majority of U.S. households will no longer have enough wealth to stake their claim in the middle class. The report emphasizes the severe economic disadvantage black Americans had throughout the 20th century as the middle class grew. While the G.I. bill offered millions of veterans and their families access to home ownership, higher education, and business loans, the authority of individual states to implement the bill with little oversight led to “pervasive racial discrimination in which service members of color were more likely to be denied access to a range of benefits that greatly expanded the American middle class.” Meanwhile, black Americans have been subjected to redlining and other discriminatory practices, creating a vicious cycle in which households are refused credit as a penalty for living in low-income areas—in turn making it impossible, in many cases, to move into the middle class.   To combat the growing racial wealth divide and to keep it from resulting in a further-weakened middle class, the study urges, among other things, a correction of the country’s “upside-down” tax structure in which the government would “stop subsidizing those who are already wealthy and start investing in opportunities for low-wealth families to build wealth.” “The growing racial wealth divide documented in this report is not a natural phenomenon, but rather the result of contemporary and historical public policies that were intentionally or thoughtlessly designed to help White households get ahead at the expense and exclusion of households of color,” the report reads. “Although public policy has been a significant contributor to the divide, the good news is that public policy can also help to close the divide.” Read the full report ‘The Road to Zero-Wealth’ below  
Categories: Friends of GEO, SE News

Racial Inequality Is Hollowing Out America’s Middle Class

It's Our Economy - September 15, 2017 - 8:00am
Above Photo: Kenneth Worles, Jr. / Institute for Policy Studies As our country becomes more diverse, our racial wealth gap means it’s also becoming poorer. America’s middle class is under assault. Since 1983, national median wealth has declined by 20 percent, falling from $73,000 to $64,000 in 2013. And U.S. homeownership has been in a steady decline since 2005. While we often hear about the struggles of the white working class, a driving force behind this trend is an accelerating decline in black and Latino household wealth. Over those three decades, the wealth of median black and Latino households decreased by 75 percent and 50 percent, respectively, while median white household wealth actually rose a little. As of 2013, median whites had $116,800 in wealth — compared to just $2,000 for Latinos and $1,700 for blacks. This wealth decline is a threat to the viability of the American middle class and the nation’s overall economic health. Families with more wealth can cover emergencies without going into debt and take advantage of economic opportunity, such as buying a home, saving for college, or starting a business. We looked at the growing racial wealth gap in a new report for the Institute for Policy Studies and Prosperity Now. We found that if these appalling trends continue, median black household wealth will hit zero by 2053, even while median white wealth continues to climb. Latino net worth will hit zero two decades later, according to our projections. It’s in everyone’s interest to reverse these trends. Growing racial wealth inequality is bringing down median American middle class wealth, and with it shrinking the middle class — especially as Americans of color make up an increasing share of the U.S. population. The causes of this racial wealth divide have little to do with individual behavior. Instead, they’re the result of a range of systemic factors and policies. These include past discriminatory housing policies that continue to fuel an enormous racial divide in homeownership rates, as well as an “upside down” tax system that helps the wealthiest households get wealthier while providing the lowest income families with almost nothing. The American middle class was created by government policy, investment, and the hard work of its citizenry. Today Americans are working as hard as ever, but government policy is failing to invest in a sustainable and growing middle class. To do better, Congress must redirect subsidies to the already wealthy and invest in opportunities for poorer families to save and build wealth. For example, people can currently write off part of their mortgage interest payments on their taxes. But this only benefits you if you already own a home — an opportunity long denied to millions of black and Latino families — and benefits you even more if you own an expensive home. It helps the already rich, at the expense of the poor. Congress should reform that deduction and other tax expenditures to focus on those excluded from opportunity, not the already have-a-lots. Other actions include protecting families from the wealth stripping practices common in many low-income communities, like “contract for deed” scams that can leave renters homeless even after they’ve fronted money for expensive repairs to their homes. That means strengthening institutions like the Consumer Financial Protection Bureau. The nation has experienced 30 years of middle class decline. If we don’t want this to be a permanent trend, then government must respond with the boldness and ingenuity that expanded the middle class after World War Two — but this time with a racially inclusive frame to reflect our 21st century population.
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