Wednesday, July 22, 2009

The oldest question

Slicing the Pie


Our strange politics of rich and poor

A while back, a talented civil servant who had done great public service found himself with a new boss. As so often happens in politics, merit was not relevant: the worker lost his job, but then it got worse, much worse. Minions of the new leader tied this guy’s hands behind his back, and then strung him up such that his suspended body’s weight broke both his shoulders.

But the guy was determined to prove his worth to the new leader, so when he was released, he went home and hammered out a lengthy memorandum about governing. One of the major talking points of this memo was his warning that a leader shouldn’t set himself up as an agent of change.

“There is no more delicate matter to take in hand, nor more dangerous to conduct, nor more doubtful in its success,” he wrote, “than to be a leader who introduces change...for he who innovates will have for his enemies all those who are well off under the existing order of things, and only the lukewarm supporters in those who might be better off under the new.”

That’s a loose translation from Niccolo Machiavelli’s infamous, seldom-understood little book The Prince.

As we survey the political landscape, it’s pretty darned clear that our current political leadership has taken this lesson to heart. But just now, because of the great economic collapse of the end of the Bush-Madoff era, change is being thrust upon us. It’s about time.

Nothing new about money

The toughest change is always going to be about money – about who gets it, and who gets to keep it. In 1980, Ronald Reagan made talk of “change” about money, but his kind of change was very easy: he promised everybody tax cuts. Reagan made government the enemy and succeeded, with Democratic politicians trying to out-pander him, in delivering significant tax relief to the highest-income individuals, biggest corporations and loudest lobbyists. Until his successor George Herbert Walker Bush admitted that he wanted to raise taxes (after having ranted “read my lips”), change meant what Reagan meant.

In his squishy way, Bill Clinton bravely attempted to change the money conversation, but he found, right in his first year in office, that even a very modest restoration of the progressivity of the tax system pissed off “...all those who are well off under the existing order of things,” to quote the Florentine.

But with Obama, we’re not getting a squishy progressivity. The guy who campaigned on “change” seems to be going right at it.

First, Obama has been pretty forthright about ending the tax cuts championed by George Bush. Bush’s politicking was a reprise of Reagan’s promise of riches, but that promise now smells like 10% unemployment.

Now is Obama’s progressive moment. It is a real moment of possibility for change, especially if the healthcare reform Congress is now working on includes a surtax on very high-income individuals. (By high-income individuals, most analysts mean the folks whose taxable income is over $200,000 a year.)

But to have this conversation in earnest, we need some local data on how much money the households of Upstate New York have – and have not.

And whether we talk about who should be taxed to pay for a fairer healthcare system or whether taxpayer-aided projects should pay construction workers the prevailing wage (and thus put public money not only in the hands of bankers and company-owners, but into the hands of wage-workers), let’s pay particularly close attention to the biggest number: the number of people who have very little dough.

The slicing of the pie

Before the great Crash that began in 2007, the Congressional Budget Office reports that the share of income brought in by the top 1% of people who filed income-tax returns was 22.2% of all the income reported to the IRS. The bottom 90% -- nine out of ten folks who report their income – earned just over half of total income, about 53%.

Bringing it home to Erie County, the story is pretty darned stark:

■ More than four out of ten Erie County residents who filed income tax returns in 2006 reported taxable income of under $20,000;

■ A little under 3 out of ten had incomes between $20,000 and $50,000;

■ Two out of ten had incomes between $50,000 and $100,000; and

■ Only 1.8% -- about 7,300 filers – reported incomes over $200,000.

What’s striking about these numbers is how they fit together:

■ When you add up all the incomes of everybody who makes less than $100,000 – in other words, over 9 out of 10 tax-return filers in Erie County – their income is just under 53 percent of all the taxable income reported here; whereas

■ The top 1.8 percent (folks reporting taxable income over $200,000) had over 25% of all the income here.

That about tracks with the national numbers. Those 7,300 individuals filing tax returns that report income over $200,000 had about the same total income as the more than 310,000 people who reported income of $60,000 or less.

So here’s the political question: if 7,300 of the folks in our neighborhood bring in the same money as 310,000 of their fellow Erie County residents, then why are so many high-income people so opposed to middle- and low-income people making more money?

Rich and Poor and keep it that way?

Then there is the issue of poverty. According to new figures from the State Labor Department, poverty in Upstate New York is much worse it is than in just about every place Downstate except the Bronx, Brooklyn and – still! – Manhattan.

In Erie County, the poverty rate is 13.7%. In Rochester’s Monroe County, it’s 13.4%. But it’s much worse in the Southern Tier: in Chautauqua, Cattaraugus and Allegany, the rates are well over 15 percent. It’s even worse in the North Country.

In Manhattan, almost 18 percent of all residents are poor; but in the Bronx, over 27 percent live in poverty.

One wonders whether now, our politics will change enough to address this question.

The evidence of 2008 is that Americans still believe that electing a new president can result in truly important change.

We in New York State don’t really know, based on our most recent experience in 2006, whether major change will come about if we elect a new governor. Eliot Spitzer left office even before his two biggest missions of change – his inquiry into the state university system, and his commission on local government reform – ever reported to him. And even if they had, it’s not governors who conduct foreign policy, set interest rates or influence the price of energy.

We know that presidents can affect the federal tax system; in large part, the debate over healthcare reform is about our tax system. But we also know that governors and state legislatures can affect economies. Studies show that local taxes aren’t too important, but that state policies truly are.

The curious feature of our local politics is that despite a high rate of poverty, despite low incomes, despite 42% of people filing income tax returns for incomes under $20,000, despite 1.8% of our neighbors reporting incomes about equal to 90% of our neighbors, we still do not talk very much about money.

It’s about time we got into it, folks.

Prevailing wage? Let’s have that discussion. Special projects that our state representatives help fund? Let’s test their value by how well they raise incomes around here. Wages that are paid to workers after the public money goes to private projects? Let’s talk about that, too. We can start any time. How about this election season?

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

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