November 2011
October 25, 2011

The Great Divide: America's growing income inequality

Author: Matt Smith
Source: NYSUT United
Caption: NYSUT Executive Vice President Andy Pallotta, second from left, UFT President Michael Mulgrew, center, Yonkers FT President Pat Puleo, second from right, and other unionists join Occupy Wall Street demonstrators in calling for jobs and tax fairness. Miller Photography.
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The television news coverage of protesters occupying Wall Street was not enough for Scarsdale teacher Deborah Krisanda. Fed up with the lack of regard for the plight of America's working families, she needed to see, firsthand, the events unfolding in New York City's Zuccotti Park.

"Sadly, our political and economic systems are broken and in need of major reform," said the kindergarten teacher and NYSUT member. "I am happy to support [the protesters] because they are calling on the political and financial people to be honest and own up to their greedy manipulation of our supposedly free-market system.

"I am very offended by [Wall Street's] attitude and behaviors toward the working people," she added, "but I guess they figure they do not need us as they just look and find new markets worldwide."

With Washington in a state of perpetual gridlock, an economy that is persistently anemic and the nation's ever-widening income gap, many wonder if the American Dream is still within reach.

Since the 2008 Wall Street crash, millions of Americans have been plunged into joblessness and an increasing number of families across the country have found themselves on the streets in the wake of the nation's housing collapse. And the number of bankruptcies nationwide has soared.

Yet, for a select few, the Great Recession has been anything but.

The number of millionaires in the United States rose in 2009 by 16 percent. The average compensation for CEOs at S&P Index 500 companies last year averaged $11.4 million. But while CEO paychecks grew, the number of Americans on food stamps in 2010 topped 40 million for the first time in the nation's history. And according to the U.S.

Department of Agriculture, that number is expected to grow to 43 million this year.

New York state has the greatest income inequality among all 50 states, according to 2009 American Communities Survey data.

"America's working families have suffered as the economy collapses around us," said NYSUT President Dick Iannuzzi. "Unemployment in many places is above 9 percent. Foreclosures are at record highs, and those fortunate enough to have jobs have experienced wage freezes or cuts in pay, health benefits and pensions. As a result, students in our public schools and colleges are seeing their educational opportunities drastically diminished by cuts in aid.

"If we are going to rebuild the American Dream, we need a new conversation in our society. The protests on Wall Street have demonstrated to Albany and Washington that a frustrated and angry middle class wants government to recalibrate and start helping working people, while asking for a little sacrifice from those who have profited so much," Iannuzzi said.

America's growing income inequality is crippling the nation's economy.

"With so much wealth going to the top, the rest of us don't have enough purchasing power to keep the economy going," said Robert Reich, professor of public policy at University of California-Berkeley and former Clinton Administration labor secretary, in an exclusive interview with NYSUT United (see page 8).

Major manufacturers are taking notice. Procter & Gamble, for example, the maker of everything from toilet paper to detergent, is pulling away from manufacturing products aimed at the middle-class consumer and is instead putting more emphasis on producing luxury and bargain-priced goods, according to a recent report in The Wall Street Journal.

So just how rich is America's wealthy?

In a piece titled "Can the Middle Class Be Saved?," Don Peck of The Atlantic noted that in 2009 the richest 1 percent of American households possessed as much wealth as the bottom 90 percent.

If the middle class can, indeed, be saved, then its rescue could not come soon enough.

Some 1.53 million Americans in 2010 filed bankruptcy — a 9 percent increase over the previous year, according to the National Bankruptcy Research Center. The middle class, saddled with a growing crush of debt and paralyzed by flat wages in a stagnant economy, accounted for a significant share of those filings.

Especially troubling is the toll the country's economic crisis has taken on children and people of color.

The Foundation for Child Development reports that last year, 21 percent of all children in the U.S. were living below the poverty line — the highest percentage in 20 years. In New York, the number is 20 percent.

The double whammy of the Great Recession and the housing-market collapse also has created cavernous divides in wealth along racial and ethnic lines. A Pew Research analysis found the median net worth — a household's debt-to-asset ratio — of white households is 20 times that of black households, and 18 times that of Hispanics. In New York state, the median net worth of white households was $108,218, according to 2006 U.S. Department of Commerce data. The comparable net worth figure for non-white households is $855. That is not a misprint.

According to the Center for American Progress, while the poverty rate for the country's white population in 2009 was 9 percent, for blacks and Hispanics the rates measured 26 and 25 percent, respectively. In New York, poverty rates in 2008-09 were 13 percent for whites, 36 percent for blacks and 34 percent for Hispanics.

"The class war is from the top down," said Donald Nobles, a retired United Federation of Teachers chapter leader who joined protesters in New York City. "The issue is money. Our school system, when you take out poverty, is one of the best in the world. The whole system fails because they don't address poverty."

The occupation of Wall Street, which began on Sept. 17 with a small group of protesters, has triggered similar demonstrations in cities across the country with growing support from labor unions.

"If these same folks can be so assertive and demand reform in education," said Scarsdale's Krisanda, pointing to Wall Street, "then we can ask the same of them."

William Tabb — a Professional Staff Congress member who teaches sociology, economics and political science at the CUNY Graduate Center — said a rebirth of strong unions is key to America's economic recovery and greater social equality.

"We know that bailing out banks, and not people, is morally wrong. Union members must lead the fight to put America on track," he said.

President Obama, in his address to Congress in early September during which he unveiled his American Jobs Act, challenged lawmakers to reform the tax code so "everyone gets a fair shake, and everybody pays their fair share." In doing so, he pointed to billionaire Warren Buffett, who wrote in The New York Times: "My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice."

NYSUT, with support from a variety of civic and good government groups across New York state, has consistently called for tax reforms that would compel the wealthiest to pay a fairer share to help bridge budget deficits and support vital public services.

Union leaders also are fighting for jobs and strongly urging Congress to pass the components of President Obama's jobs plan.

However, Senate Republicans continue to refuse to support any proposal that contains tax increases. Obama's jobs plan called for $35 billion in aid to states and municipalities to rehire and retain teachers and first responders, $30 billion to upgrade and repair schools, $50 billion for repairs to infrastructure, and tax cuts.

"It's time to end the unfairness in the tax system, to put money back into the pockets of working families and to invest in the future of our children," said NYSUT Executive Vice President Andy Pallotta.