Why PPIC’s New Wealth Gap Report Matters


Data dump: This week’s Little Pulitzer Award for Actual Facts Reporting goes hands-down to Sarah Bohn and Eric Schiff of the (all rise) Public Policy Institute of California, for their terrific synthanalysis of income (mal)distribution in the state, and how it’s been affected by the recession.

The fundamental conclusion to be drawn from the data ain’t exactly a stop-the-presses shocker (spoiler alert: rich and poor each getting more so). At a time when income inequality has emerged as a crucial issue in the 2012 elections, however, the report’s comprehensive collection, sharp dissection and clear presentation of reams of up-to-date economic data provides policy makers and political hacks of every persuasion a sturdy bulwark of shared, high-quality and hard evidence.

“The gap between upper and lower-income families is now wider than ever,” the dynamic duo report. “As these findings suggest, the Great Recession has brought us to new extremes. These include record high measures of inequality, near-record lows in the proportion of middle-income families, and record high unemployment and unemployment duration.”

Not to put too fine a point on it.

But what does this mean to me?  While noting that “changes in the distribution of income are generally greater in California than in the rest of the U.S.,”  the radically non-partisan PPIC characteristically steered wayyy clear of getting too close to the messy business of politics by, oh, you know, pointing to any of the real-life political implications of the data.

Fortunately Calbuzz — Issue-oriented, solution driven! —  is here to sweep up after the elephant, whereby we glean at least three basic issues:

Economic activity.  The obscene, Third World-levels of income inequality in the state and nation are most often discussed as an issue of morality and social justice. But the most pernicious, long-term affliction of wealth-by-class distortion is its dampening impact on the overall economy.

As economic conditions for tens of millions at the lower level of the spectrum press them to spend proportionately more and save proportionately less than the wealthy, the plain fact is that the great mass of citizens with ever-declining levels of disposable income will increasingly shirk their solemn patriotic duty to act as energetic, highly-motivated consumers:

By 2010, families at the (lowest) 10th percentile had incomes roughly 24 percent lower than the 10th percentile did in 1980 (emphasis ours), and families at the 25th percentile had incomes 12 percent lower . . . At the other end of the spectrum, the 90th percentile saw a decline from its 2006 peaks. However, the gains at the 90th percentile over the past three decades mean that despite the Great Recession, the 90th percentile of income was still 34 percent higher in 2010 than in 1980.

Economic survival. At a time when state and local governments have responded to depressed economic conditions with year-after-year cuts in benefits for those at the bottom of the economic pile (and conservative blowhards ideologues endlessly chant their mindless mantra of tax cuts and trickle-down economics as the keys to growth; but we digress) such policies exert a multiplier effect on those most damaged by the severe downturn, who lack savings or investment portfolios as a safety net:

Family income derives from multiple sources. Earnings from work clearly are related to family economic well-being. However, other sources of income matter as well. In times of constricted labor market opportunities, income from sources other than wages – such as unemployment compensation, welfare, or earnings on investments – can compensate for declines in family income…

For low-income families, the third most important source of income is the government; this includes unemployment, Social Security, public assistance, and Supplemental Security Income.

Economy and education. The PPIC study confirms with updated hard numbers the widespread assumption that the single most important, long-term factor shaping income disparity is educational attainment, neatly summing it up this way:

The more education, the higher the median income and the lower the unemployment rate among families in California.

While “everybody knows” this is true, however, Jerry Brown and the Legislature are set to double down yet again on the state’s decades-long policy of steadily reducing public support for higher education.

As high school enrollments substantially increase, creating record demand for admission to California’s public universities, the mid-year trigger cuts about to be enacted by lawmakers and the governor will extend this all-wrong policy by piling another $200 million in reductions on the UC and CSU systems.

Consider: Twenty years ago, state funds accounted for nearly 80 percent of the cost of educating a UC student — $16,720 of $21,370; today, not only has the average expenditure per student shrunk about 20% — from $21,370 to $17,390 – but the state’s share of the cost has declined 60%, and now amounts to just $6,770 per student.

This at a time when a shortage of 1 million college educated workers in California is projected by 2025. Says PPIC:

The most important factor driving the gap between high- and low-income workers is education…

Economic opportunity in the new economy is inextricably linked to education. Policy has a role to play in creating economic opportunity across the income distribution, particularly through education. Looking ahead, California may need to find innovative ways to promote opportunity through education, especially so that middle- and lower-income families are not left behind.

Talk about your masters of understatement.

Press Clips: Belated mega-kudos to erstwhile Calbuzz Washington correspondent Mackenzie Weinger, whose journalistic talent, indefatigable work ethic and endless capacity for alcoholic beverages have helped her land a real job. Her latest Politico offering reports on a new Organization for Economic Cooperation and Development study about wealth inequality around the globe:

The U.S. — where the Occupy Wall Street movement exploded to protest the disparity between the richest 1 percent and the remaining 99 percent — ranks in with the fourth-highest inequality level, coming after Chile, Mexico and Turkey. Overall, the report stated, inequality among U.S. workers has risen by 25 percent since 1980…

 “The social contract is starting to unravel in many countries,” OECD Secretary-General Angel Gurría said, according to a press release. “This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, inequality will continue to rise.”

Lock up the kids Maude: All Right-Thinking People will be spending Saturday night in front of the big screen, checking out the All-Time Most Importantly Crucial Republican Presidential Debate This Week (6 p.m. PST on ABC).

Drinking game: Throw one down every time Newt says the words “fundamentally,” “profoundly,” or “deeply” and we’ll see you Monday morning when you finally pull your face out of the guacamole. H/T Ruth Marcus.

Let’s get Don King to arrange it: Mike Kazin (son of Alfred) was one of those triple-smart guys at college whose massive brain matter thoroughly intimidated a working class kid from Cleveland on the first day of school, although he later turned out to be one of the more friendly and level-headed SDS honchos working tirelessly to smash the state.

His new history of the American Left stands ready on the book pile next to the bed, but in the meantime we strongly recommend his excellent essay on why an Obama-Gingrich race would be a valuable and clarifying experience for America.

And this could set up the kind of campaign Americans have never witnessed before: a serious debate between articulate exponents of liberalism and conservatism—the ideological conflict that has shaped American politics since the emergence of a mass movement on the right in the 1950s.

In other words, we would have a fair chance of having a true contest of ideas and ideals between two smart men. Newt would force Obama to talk about his principles and not just his programs—or rather how the latter flows from the former. The debates would sharpen the terms of political discourse in a healthy rather than demagogic fashion: Standing just feet away from the president, Newt would probably refrain from ranting about the Democrat’s “secular socialist agenda,” and Obama would not be able to get away with empty talk about “winning the future.”

Must read of the week: Jacob Weisberg’s examination of the most important question in politics today: Is Newt clinically insane?

ICYMI: Here’s Burton’s instantly iconic star turn on “The Daily Show.”

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There are 4 comments for this post

  1. avatar tlachiquero says:

    A series of Obama-Gingrich debates would be the stuff of history. Too bad most of the electorate wouldn’t understand them (See Calbuzz, 18 Nov). On the other hand, the MSM will be on the scene to translate the discourse into language that tea partiers and other troglodytes will understand.

  2. avatar tegrat says:

    “At a time when income inequality has emerged as a crucial issue in the 2012 elections”

    Damn those leaderless, messageless occupiers! A relevant factoid: six Walmart heirs have as much wealth as 30% of everyone in the country, We can pretend that they didn’t create that wealth on the backs of those 30%, but the fact is that they did, along with taking a healthy toll on the publicly funded infrastructure that supports their personal wealth creating enterprise. Taxing that wealth and putting it back to work in the economy by rebuilding our crumbling and out-of-date infrastructure is the order of the day. Our infrastructure and the overall health of our economy have been at their peaks when taxation rates were also highest – there is virtually a one-to-one correspondence in the historical record. I defy anyone to find a millionaire “job creator” whose creation of jobs is affected by their personal or corporate tax rate. Taxes are simply not a major part of that calculus.

  3. avatar sactownjoey says:

    You were *thisclose* to making a salient point about the un- and under-educatedness (the red squiggly tells me that might not be a word, ironic, yes, so be it) of Californians being an impediment to economic growth and equality. I’m not quite sure why you decided to use the relatively minor issue of university tuition increases as a proof point when you have to whistle past the more unpleasant and significant issues of K-12 education equality and quality to even get there.

  4. avatar chrisfinnie says:

    By failing to adequately fund education, California and the country are doing what farmers call “eating our seed corn.” We are not alone in this. They are doing it in the UK too. China and India, in the meantime, are turning out college graduates at a furious pace. So, not only have we doomed several generations to working below their potential, but we’ve set ourselves up to let other countries eat our lunch. Stupid and short-sighted.

    As for tinkle-down economics, the president put it quite nicely, “it simply doesn’t work. It never has.” Studies like the one you cite simply prove his point.

    Right-thinking people got up early to watch the eclipse instead of the 3,000th Republican lie-fest and flip-flop contest. Besides, it’s more fun to wait and see what Comedy Central has to say about it. Safer for my TV too as I’m less likely to throw things at it.

    And Burton killed. The comedian was having a hard time keeping a straight face.

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