Five Misconceptions about our Tattered Safety Net

Original Link: http://www.commondreams.org/view/2012/11/12

By Paul Buchheit

Mitt Romney said he wasn't concerned about the very poor, because they have a safety net. This is typical of the widespread ignorance about inequality in our country. Struggling Americans want jobs, not handouts, and for the most part they've paid for their "safety net." The real problem is at the other end of the wealth gap.

How many people know that out of 150 countries, we have the 4th-highest wealth disparity? Only Zimbabwe, Namibia, and Switzerland are worse.

It's not just economic inequality that's plaguing our country. It's lack of opportunity. It's a dismissal of poor people as lazy, or as threats to society. More than any other issue over the next four years, we need to address the growing divide in our nation, to tone down our winner-take-all philosophy, to provide job opportunities for people who want to contribute to society.

Here are some of the common misconceptions:

1. Americans believe that the poorest 40 percent own about 10% of the wealth.

Most people greatly underestimate the level of inequality in our country, guessing that the poorest 40 percent own about 10% of the wealth, when in reality they own much less than 1% of the wealth. Out of every dollar, they own a third of a penny.

Factor in race, and it gets worse. Much of minority wealth exists in home values. But housing crashed, while the financial wealth owned almost entirely (93% of it) by the richest quintile of Americans has rebounded to lofty pre-recession levels.

As a result, for every dollar of NON-HOME wealth owned by white families, people of color have only one cent. Median wealth for a single white woman is over $40,000. For black and Hispanic women it is a little over $100.

2. Entitlements are the problem

No, they're not. The evidence is overwhelming. Social Security is a popular and well-run program. As summarized by Bernie Sanders, "Social Security, which is funded by the payroll tax, has not contributed one nickel to the deficit and, according to its trustees, can pay 100 percent of all benefits owed to every eligible American for the next 21 years." Dean Baker calls it "perhaps the greatest success story of any program in US history."

Medicare, which is largely without the profit motive and the competing sources of billing, is efficiently run, for all eligible Americans. According to the Council for Affordable Health Insurance, medical administrative costs as a percentage of claims are about three times higher for private insurance than for Medicare. And it's just as popular as Social Security.

3. Welfare benefits are a drag on the economy

Critics bemoan the amounts of aid being lavished on lower-income Americans, making dubious claims about thousands of dollars going to every poor family.

But despite an ever-growing need for jobs and basic living necessities, federal spending on poverty programs is a small part of the budget, and it's been that way for almost 50 years, increasing from 0.8 percent of GDP in 1962 to 1.2 percent of GDP in 2007.

Temporary Assistance for Needy Families (TANF) has dropped significantly over the past 15 years, leaving benefit levels far below the poverty line for most families. Ninety percent of the available benefits go to the elderly, the disabled, or working households.

For each family, current federal budgets pay about $400 per month for food, housing, and traditional 'welfare' programs. Food stamp recipients get $4.30 a day.

4. The American Dream is still alive -- if you just work hard

The Horatio Alger tale has been a popular one for conservatives, but the OECD, the Economic Policy Institute, and the National Journal all came to the same conclusion: the future earnings of a child in the U.S. is closely correlated to the earnings of his or her parents. This lack of mobility is more prevalent in the U.S. than in almost all other OECD countries.

Only 4 percent of those raised in the bottom quintile make it to the top quintile as adults. Only about 20 percent even make it to the top half.

A big part of the problem is the severe degree of poverty for our nation's children. According to UNICEF, among industrialized countries only Romania has a higher child poverty rate than the United States. Just in the last ten years the number of impoverished American children increased by 30 percent.

Not unexpectedly, it's much worse for minorities. While 12 percent of white children live in poverty, 35 percent of Hispanic children and 39% of black children start their lives in conditions that make simple survival more important than the American Dream. 80 percent of black children who started in or near the top half of U.S. income levels experienced downward mobility later in life.

5. Prison puts away the bad guys

Despite a falling violent crime rate in the U.S., there are now, as noted by Adam Gopnik, "more people under 'correctional supervision' in America -- more than six million -- than were in the Gulag Archipelago under Stalin at its height."

Incredibly, almost half of the inmates in federal prisons were jailed for drug offenses. Between 1980 and 2003, the number of drug offenders in prison or jail increased by 1100% from 41,100 in 1980 to 493,800 in 2003.

Outrageously, African Americans constituted 53.5 percent of all persons who entered prison because of a drug conviction. In the nation's largest cities, drug arrests for African Americans rose at three times the rate for whites from 1980 to 2003.

In Washington, D.C., it is estimated that three out of four young black men will serve time in prison. In New York, with 50,000 marijuana arrests per year, 90% are black or Latino. In Seattle, the 8% black population accounts for 60 percent of the arrests. Over the last ten years Colorado police have arrested Latinos at 1.5 times the rate of whites, and blacks at over 3 times the rate of whites. Newly passed marijuana laws reflect the beginnings of a backlash.

Perversely, this is all happening as studies by the Substance Abuse and Mental Health Services Administration find that both black and Hispanic adolescents use drugs LESS than the general population, and as a study by the National Institute of Health shows that the prevalence of marijuana use in colleges and universities was highest for white students.

The Greatest Misconception: The rich are being "soaked"

Redistribution has not spread the wealth, it has concentrated the wealth. Conservative estimates say the richest 1% have doubled their share of America's income in 30 years. It's worse. From 1980 to 2006, the richest 1% actually TRIPLED their share of after-tax income.

The real problem is tax avoidance: lost revenue from tax expenditures (deferrals and deductions), corporate tax avoidance, and tax haven losses could pay off the entire deficit. But the very rich refuse to pay. They have their own safety net in the House of Representatives.