Profits and poverty are growing in a divided America

by Ned Barnett, News and Observer, November 10, 2013.

Last week, as the stock market reached record highs driven by soaring corporate profits, the U.S. Census Bureau released a revised measure of poverty. It showed the number of poor people in the United States is 3 million higher than the official count.

As the rich got richer and the poor became more, Republican U.S. senators were intently focused on an issue that has for them become all-consuming: The small share of Americans who buy individual health insurance and may have to pay more for better coverage.

The spectacle of Republicans on the Senate Finance Committee grilling Kathleen Sebelius, the secretary of health and human services, summed up the appalling disconnect between their posturing over a phony crisis and their indifference to the financial plight of their fellow citizens. The census report said the number of poor people in 2012 hit a record 49.7 million, or 16 percent of the U.S. population.

The revised measure is considered more accurate than the official number because it factors in living expenses and the value of government assistance programs. One cost driving up the poverty count, the report said, was higher out-of-pocket medical expenses.

Congressional Republicans, whose Wall Street and corporate constituencies are enjoying boom times, are bent on impeding and disrupting President Obama’s program for giving lower- and middle-income people relief from a financial scourge – the ever higher and often bankrupting cost of medical care. Beyond their crocodile tears about people with lousy coverage forced to buy real insurance, they know that tight times for most Americans are providing a bonanza for corporations. The Associated Press reported that profits of firms in the Standard & Poor’s 500 have nearly doubled since June 2009. Meanwhile, wages and salaries fell to 42.6 percent of the economy in the second quarter of 2013, near the record low set in 2011.

With unemployment high, interest rates low and inflation nearly non-existent, employers face no pressure to raise wages. Meanwhile, they absorb the productivity gains that flow from people working longer for less and advances in technology that let fewer workers do more. Five years after the financial crisis and the trauma of the Great Recession, the United States has settled into an increasingly unequally divided state, yet the issue gets virtually no attention from a party supposedly committed to a strong economy.

Republicans in Washington and Raleigh, of course, deny any design to profit from hardship. They say they are alarmed not by growing poverty, but by growing dependency on government aid. They are not out to cut people off, they say, they are out to set them free. In the spirit of liberation, they propose cutting food stamps, reducing payments to the unemployed and – most of all – preventing the law they call Obamacare from becoming another vast source of dependency alongside Medicare, Medicaid and Social Security.

At the same time, Republican-backed austerity measures are holding back the best anti-poverty program: more jobs. The sequestration and state budget cuts are weakening the economy, dampening demand and slowing job growth. The White House reported last week that the 16-day partial government shutdown may have cost the United States 120,000 new private sector jobs.

Poverty is not caused by assistance. It is reduced by it. The census report said food stamps lifted 5 million people out of poverty. If the program weren’t there, the poverty rate would increase from 16 percent to 17.6 percent. Without refundable tax credits such as the earned-income tax credit – the state version of which was just repealed in North Carolina – child poverty would climb from 18 percent to 24.7 percent. And if FDR’s opponents had won the day and there were no Social Security, the poverty rate for people 65 and older would be 54.7 percent and 24.5 percent for all age groups.

While congressional Republicans harrumph about the speed of servers on healthcare.gov, some local and state governments are trying to help human servers and others trapped in jobs that pay the minimum wage. Last week, voters in the Seattle suburb of SeaTac, the location of the Seattle-Tacoma International Airport, voted to increase the local minimum wage to $15 an hour, more than double the national minimum of $7.25. In New Jersey, voters made a minimum wage tied to inflation part of the state constitution and bumped the minimum wage to $8.25. The Wall Street Journal reported that New Jersey and New York next year will join 18 states and the District of Columbia that have minimum wages higher than the federal level.

In North Carolina, no such action is afoot. Republican legislative leaders and Republican Gov. Pat McCrory have “liberated” the jobless from extended unemployment benefits and spared many of the uninsured working poor from qualifying for Medicaid. Instead, they’re offering them “more take-home pay” with a new flat income tax rate that will give moderate- and low-income North Carolinians a pittance and deliver a windfall to very high earners.

There’s no changing the mindset of the leadership in Raleigh or the conservatives in Congress. It will come down to an election between spreading the wealth and hoarding it. Until then, the most prominent growth trends in the U.S. economy will be the rise of wealth at the top and the broadening of poverty below.