The myth of Americans in poverty
Since the late 1970s, the majority of Americans have experienced little gains in household income due to stagnant hourly wages, while the stock market and national productivity have attained historic highs, overwhelmingly benefitting the richest few percent of Americans.
From 1980 to 2009, the nation’s hourly wage increased by only 7 percent, with 40 percent of the population suffering a decline in income equivalent to $275 billion per year. (footnote 1) Whereas in 2012, America’s richest 10 percent increased their share of market income from 30 percent in 1980 to 48 percent, the richest 1 percent from 8 to 19 percent, and the richest 0.1 percent from 2.6 to 10.4 percent – as the child poverty rate reached 22 percent. (2)
Meanwhile, those who live in poverty and receive government financial assistance have been categorized as “moochers,” living lives of “dependency and complacency,” abusing the social safety net and creating a perverse incentive against work.
However, available data refute this myth. The Economic Policy Institute reports that for the “the bottom 20 percent of earners in the United States – less than $14,687 a year – the share of income from wages, benefits, and tax credits rose to 69.7 percent of their income in 2010, from 57.5 percent in 1979.” These gains are “coming from working more hours, not from higher hourly pay.” More precisely, “the percentage of their income from public benefits, including Medicaid, food stamps, Social Security, and unemployment insurance has fallen.” However, given the increase in working hours, income increased by only 3.2 percent. EPI found income inequality “the biggest factor in contributing to the poverty rate.” (3)
How did the myth of dependency materialize and become a major component of today’s conservative gospel? Paul Ryan, chairman of the House of Representatives Budget Committee, recently wrote a Wall Street Journal article in which he cites America’s 1958-to-1973 historic prosperity as supposedly demonstrating that “the best anti-poverty program is economic growth a rising tide lifts all boats.”
But since 1980, the tide has been going out; the landscape has been dramatically altered. He conveniently and scurrilously avoids significant changes, including historic income inequality, technological advancements affecting middle-class employment, economic globalization, major tax reduction policies and tax-avoidance strategies. His analogy is ludicrous, illustrating the lack of integrity of America’s political class.
Importantly, it is estimated that “20 percent of all corporate profits in the United States are shifted off shore, and tax avoidance deprives the government of a third of corporate tax revenue. From the late 1980s until now, the effective corporate tax rate in the United States has dropped from 30 percent to 15 percent.” Additionally, it is estimated that $7.6 trillion – 8 percent of the world’s personal wealth is “stashed in tax havens,” which, if declared and taxed, would provide about $200 billion a year in taxes. (4) In America, the negative social and economic ramifications of such individual and corporate tax evasion and politically contrived tax-avoidance schemes are overwhelmingly more significant than the “welfare cheaters,” who attract more frequent and hostile moral indignation and condemnation.
Returning to the contrast of the current inequitable sharing (i.e., fairness) of national income, consider first the 1949-to-1979 era; all five quintiles of before-tax household incomes increased by about 3 percent per year. (5) Income tax rates were significantly higher then today, but economic growth produced historically high income for all quintile segments, and the poor population declined from 22 percent to 11 percent. (3)
However, the post-1970s has been vastly different for the overwhelming majority of Americans. Consider the 1979-to-2003 era, when slower growth and greater income inequality prevailed. The nation’s income profile dramatically changed as median family earnings increased by only 12.6 percent. The bottom 20 percent of earners gained only 3.5 percent while the top 20 percent gain was 45.7 percent. (5) Consequently, the poverty rate fluctuated between 12 and 15 percent, higher than before the early 1970s period of historic economic growth. (3)
To comprehend this post-1970s socio-economic transformation, juxtapose this period of reversal of middle-class fortunes with the dawn of the civil rights movement and its progressive social and economic agenda. Accordingly, the conservative backlash from the 1960s Civil and Voting Rights acts was immediate, hostile and continuous. Corporations envisioned unfriendly progressive environmental restrictions, tax policies and labor union support. Other segments of conservative pushback emerged; evangelicals and single-issue social advocacy groups coalesced, in common cause, around Southern white-supremacy states, giving birth to the current ultra-conservative Republicanism. Consequently, American society has undergone major political polarization, poor and middle-class socio-economic reversals, and a precipitous decline in international rankings of average “well-being.”
Representative Ryan’s critics suggest he isn’t just trying to reduce the federal budget and resolve the nation’s budget and deficit issues but, as a matter of philosophy, “trying to make life harder for the poor – for their own good.” According to Ryan, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” (6)
Finally, some Americans harshly view utilization of tax dollars to assist those in need as socialism, rather than elements of compassion, wise economics, social justice and promoting the common good. But many states, particularly poor Southern states, receive more federal money than the amount of tax money they send to Washington. From 1980 to 2009, New York state residents paid $950 billion in federal taxes, which were distributed to other states such as Kentucky, Texas, Alabama, West Virginia and Arkansas. Many Southern states have been chronically “on the take,” dependent on external assistance since the late 19th century while vigorously condemning their poor whites and those of color who receive government aid in times of need and oppression.
Thus today’s logic and ethics: Uncompromisingly believe in the ideologies and politics that elevate your wealth, self-esteem and social status – despite the facts and ramifications for others.
Tom Wallace is a resident of Loon Lake and Bonita Springs, Florida. Some material for this article was taken from his latest book, “America is Self-Destructing: Wealth, Greed, and Ideology Trump Social Justice and the Common Good.”
1. Cassidy, John, “Who Killed the Middle Class?” The New Yorker, Oct. 16, 1999, p. 32
2. Blow, Charles M., “We Can’t Grow the Gap Away,” The New York Times, April 15, 2014
3. Irwin, Neil, “Solid Growth for Decades. Why Hasn’t Poverty Fallen?” The New York Times, June 5, 2014
4. Leslie, Jacques. “The True Cost of Hidden Money,” The New York Times, June 16, 2014
5. Frank, Robert H., “Falling Behind: How Rising Inequality Harms the Middle Class,” Berkeley: University of California Press, 2007, p. 8-9
6. Krugman, Paul, “Galt, Gold and God,” The New York Times, Aug. 24, 2012