Abolish the debt that is drowning Puerto Rico

We need to organize for immediate disaster relief for Puerto Rico–but we can also expose and oppose the debt disaster that came before the hurricanes.

Families begin to rebuild after the hurricane in Patillas, Puerto Rico (Andrea Booher | Wikimedia Commons)

Families begin to rebuild after the hurricane in Patillas, Puerto Rico (Andrea Booher | Wikimedia Commons)

SOCIALIST WORKER supports President Trump in his call to cancel Puerto Rico’s punishing debt.

We can pretty much guarantee you’ll never see the first five words of that sentence here ever again–and the supervisors of the “adult day care center” at 1600 Pennsylvania Avenue are obviously trying like hell to make sure we never have reason to.

But it says a lot about the Wall Street-made catastrophe that has plagued Puerto Rico for years before Hurricane Maria that even a reactionary fanatic like Trump didn’t think twice before stating the obvious.

“They owe a lot of money to your friends on Wall Street, and we’re going to have to wipe that out,” Trump said in an interview last week with Geraldo Rivera of Fox News. “I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”

“Wall Street promptly freaked out,” Politico reported the next day. That was an understatement. Heavy trading on the normally stable bond market pushed the value of Puerto Rico’s general obligation bonds–already devalued to 56 cents on the dollar after the island effectively declared bankruptcy earlier this year–down to 37 cents on the dollar.

The White House then “move[d] swiftly to clean up Trump’s seemingly offhand remarks,” Politico continued. Again an understatement. Office of Management and Budget Director Mick Mulvaney was rushed in front of a television camera to tell CNN: “I wouldn’t take it word for word with that.”

Just to make sure Wall Street got the message that no one in the Trump administration had any intention of doing what the head of the Trump administration had just said, Mulvaney was more explicit–and more contemptuous of the Puerto Rican people–in a second interview with Bloomberg: “We are not going to bail them out. We are not going to pay off those debts.”

Anyone want to bet that Trump doesn’t talk about “saying goodbye” to Puerto Rico’s debt again?

But the simple fact is that justice demands exactly that: The cancelation of all of Puerto Rico’s debt repayments, by the action of the U.S. government, taking responsibility for the Wall Street loan sharks who inflicted the damage in the first place.

Puerto Rico is caught in the same kind of debt trap that has ensnared poor countries in hock to the International Monetary Fund and World Bank–or more advanced economies like Greece, at the hands of European bankers and bureaucrats. The aim is to force vulnerable societies to knuckle under to the will of the ruling class.

And now, the devastation of neoliberal policies has made Puerto Rico’s crisis following Hurricanes Irma and Maria much, much worse.

People who want to show solidarity with Puerto Rico today will rightly focus on ways to provide immediate relief to communities desperate for food, water and critical supplies. SW hopes its readers will raise what money they can to donate to grassroots efforts–see the What You Can Do box with this article.

But we have another job to do now, while Puerto Rico lingers in the media spotlight: expose the debt trap that made the island more vulnerable when Maria struck and demand that it end.

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IN MAY of this year, Puerto Rico’s government went to federal court to file for the equivalent of bankruptcy on a debt that includes over $74 billion in repayments on government bonds and $49 billion in pension obligations. But in return for immediate relief, Puerto Rico will have to abide by even harsher austerity dictates.

The debt burden–which is larger than the annual economic output of the island when pension obligations are added in–is one consequence of a recession that has lasted for more than a decade.

The economic slump began when Corporate America–after many years of making super-profits off operations in Puerto Rico, particularly pharmaceutical production–abandoned the island after favorable tax incentives for investment were phased out starting in the early 2000s. Annual corporate investment in Puerto Rico peaked at 20.7 percent of gross domestic product in 1999–it has fallen to under 7.9 percent as of 2016.

Successive governments–whether led by New Progressive Party, which is aligned with the U.S. Republicans, or the Popular Democratic Party, tied to the Democrats–imposed policies that were guaranteed to make the crisis worse: neoliberal austerity.

Social spending was cut drastically–reductions in the island’s education budget led to hundreds of schools being closed, for example. Public-sector workers have been under intense pressure, with tens of thousands of layoffs and attacks on their unions. Regressive taxes have been hiked, making the sales tax of 11.5 percent higher than any U.S. state.

A succession of state assets were privatized on terms guaranteed to benefit the private purchasers: Back in the 1990s, conservative Gov. Pedro Rosselló González sold off hospitals that were part of a public health care system that was once fairly accessible and affordable at around half their market value.

Austerity measures propelled the vicious circle: Continuing economic decline made shortfalls in government revenues worse, leading to more spending cuts and regressive taxes that caused further economic contraction, and on and on.

The consequences even before Hurricane Maria were dire: Official unemployment is 11.7 percent, well over double the rate in the U.S. as a whole. Just under half of people on the island live in poverty, including three in five children.

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THROUGH IT all, debt was the straitjacket to make sure Puerto Rico didn’t stray from austerity.

Faced with declining revenues as a result of the contracting economy, various branches and agencies of the Puerto Rican government issued bonds to raise money–but these came not only with the usual obligation to repay the cash with interest, but increasing pressure to intensify neoliberal measures.

The vultures of Wall Street were eager to set up the increasingly complex bond issues. They paid better than most municipal issues, and interest on income from Puerto Rico bonds is exempt from city, state and federal taxes.

But the biggest gamblers on Wall Street see more than a tax loophole in the suffering of the people of Puerto Rico. A 2015 report from the Hedgeclippers.org website paints an ugly picture:

Several groups of hedge funds have bought up large chunks of Puerto Rican debt at discounts and have also pushed the island to borrow at extremely favorable terms for creditors. Hedge fund managers are also recommending the implementation of austerity measures.

Known as “vulture funds,” these investors have followed a similar game plan in other debt crises, in countries such as Greece and Argentina. The spoils they ultimately seek are not just bond payments, but structural reforms and privatization schemes that give them extraordinary wealth and power–at the expense of everyone else.

It’s been obvious for several years that Puerto Rico’s debt burden is unpayable, but the hedge-fund vultures are counting on enforcers in the form of the U.S. government.

A law pushed through Congress last year by Barack Obama and the Democrats established a seven-person Fiscal Control Board with broad powers to direct government agencies on the island and dictate laws and policies. It has ordered, for example, exemptions to federal standards on the minimum wage, Medicaid and Temporary Assistance to Needy Families.

To top it off, the seven members of the board include some of the same financiers who imposed neoliberal policies and arranged the deals that caused the debt burden.

Bondholders may still be forced to take a “haircut”–that is, accept less than what they are owed on Puerto Rico’s bonds. But the mission of the Fiscal Control Board is to make sure working people on the island, not investors, pay as much of the price as possible.

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ALL THIS “reads like the 21st century equivalent of the metropolitan looting of wealth from the colonies,” as Lance Selfa wrote for SocialistWorker.org after Hurricane Maria struck Puerto Rico head on.

And we know who the looters and their accomplices are.

The hedge-fund parasites who are trying to inflict more suffering on Puerto Rico rather than lose a penny from their investment gambles should face pickets outside their offices. Members of Congress–Republican and Democrat alike–should be greeted at public events by solidarity activists demanding that they remove the noose that is strangling the island.

There is much work to be done to organize for immediate relief in Puerto Rico after the hurricane catastrophe. But the left has an opportunity to also expose and oppose the unnatural disaster that came before Irma and Maria.

We may not hear any more about canceling the debt from Donald Trump, but we can raise our own voices to demand that this crushing burden be lifted off the people of Puerto Rico.

https://socialistworker.org/2017/10/11/abolish-the-debt-that-is-drowning-puerto-rico

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More than 52 million Americans live in economically distressed communities

By Sandy English
28 September 2017

A new analysis of Census data shows that the so-called economic recovery under the Obama administration was an unmitigated catastrophe for the 20 percent of the American population that live in the poorest areas of the United States and that gains of jobs and income have gone overwhelming to the top 20 percent richest areas.

The 2017 Distressed Communities Report,” published by the Economic Innovation Group (EIG), analyzes the census data for 2011-2015 for people living in each of the nearly 7,500 American zip codes according to several criteria.

The EIG’s Distressed Communities Index (DCI) considers the percentage of the population without a high school diploma, the percentage of housing vacancies, the percentage of adults working, the percentage of the population in poverty, the median income ratio (the percentage of median income that a zip code has for its state), the change in employment from 2011 to 2015, and the change in the number of businesses in the same period.

The report divides the findings for zip codes into five quintiles based on these indicators, rated from worst- to best-performing: distressed, at risk, mid-tier, comfortable, and prosperous.

The results show that distressed communities—52.3 million people or 17 percent of the American population—experienced an average 6 percent drop in the number of adults working and a 6.3 percent average drop in the number of business establishments.

“Far from achieving even anemic growth from 2011 to 2015,” the report notes, “distressed communities instead experienced what amounts to a deep ongoing recession.”

Further, “fully one third of the approximately 44 million Americans receiving SNAP (Supplemental Nutrition Assistance Program or food stamps) and other cash public assistance benefits (such as Temporary Assistance for Needy Families (TANF)) live in distressed communities.” The report notes that most distressed communities have seen zero net job growth since 2000.

Residents in these zip codes are five times more likely to die than those in prosperous zip codes. Deaths from cancer, pregnancy complications, suicide, and violence are even higher. “Mental and substance abuse disorders are 64 percent higher in distressed counties than prosperous ones, with major clusters in Appalachia and Native American communities where rates exceed four or five times the national average,” the report continues.

One other important and alarming fact which the report highlights is that over a third of the distressed zip codes contain so-called “brownfield” sites—areas which are polluted or contaminated in some way. Not only do these have impacts on real estate and business development, they present a whole array of health hazards to the very poorest Americans.

Distressed communities can be found all over the United States but are concentrated in the South: 43 percent of Mississippi’s zip codes are distressed, followed by Alabama, West Virginia, Arkansas and Louisiana. According to the report, [the South] “is home to a staggering 52 percent of all Americans living in distressed zip codes—far above its 37.5 percent share of the country’s total population.”

After this, the Southwest and Great Lakes region have the largest share. In the Northeast, most distressed communities tend to be found in urban areas and in the South, primarily in rural areas.

The biggest cities with the largest numbers of distressed zip codes are Cleveland, Ohio, Newark, New Jersey, Buffalo, New York, Detroit, Michigan and Toledo, Ohio. Mid-sized cities with the highest number of distressed zip codes include Youngstown, Ohio, Trenton, New Jersey, Camden, New Jersey, Gary, Indiana, Hartford, Connecticut and Flint, Michigan.

Urban counties with the highest number of distressed zip codes include Cook County in Illinois, with Chicago at its center, Los Angeles County in California, Harris County in Texas, with Houston at its center, and Wayne County in Michigan, encompassing Detroit. Most of these urban areas were once industrial centers and home to the industrial working class.

Zip codes that have a majority of minorities living in them are more than twice as likely to be distressed as zip codes that are majority white. “In total,” the report notes, “45 percent of the country’s majority-minority zip codes are distressed and only 7 percent of them are prosperous.” At the same time there are numerous distressed communities that are almost completely white. A quarter of the total distressed population is under 18.

The report found that the economic benefits of the recovery after the 2008 recessions have gone to the top quintile of zip codes, where the wealthier layers of the population live, including not only the very rich but also the upper middle class.

These areas, which the DCI terms prosperous, and make up roughly 85 million Americans or 27 percent of the US population, have for the most part the economic wherewithal to finance higher levels of education, have the lowest housing vacancy, highest percentage of working adults, and have had the lion’s share of job and business expansion.

“The job growth rate in the top quintile was 2.6 times higher than nationally from 2011 to 2015, and business establishments proliferated three times faster than they did at the national level,” the report notes. “Prosperous zip codes stand worlds apart from their distressed counterparts, seemingly insulated from many of the challenges with which other communities must grapple. The poverty rate is more than 20 points lower in the average prosperous community than it is in the average distressed one.”

The report makes much less of an analysis of the other three, middle quintiles, the at risk, mid-tier, and comfortable categories, but it does note some factors that address the overall trends nation-wide. “A remarkably small proportion of places fuel national increases in jobs and businesses in today’s economy. High growth in these local economic powerhouses buoys national numbers while obscuring stagnant or declining economic activity in other parts of the country.”

One of the more telling aspects of the report is that extreme poverty in the US is presided over by both capitalist parties: Democratic and Republic politicians have equal numbers of distressed communities in their constituencies. Democrats, in fact, “represent six of the 10 most distressed congressional districts.”

Another observation from the voting data, and one of the few that looks at conditions beyond the bottom and top quintiles, is worth quoting in full:

“President Trump accumulated a 3.5 million vote lead in counties that fell into the bottom three quintiles of well-being (equivalent to 9.4 percent of all votes cast in these counties). A vast array of factors determined voting patterns in the 2016 election, but it stands that the ‘continuity’ candidate performed better in the places benefiting most from the status quo, while the ‘change’ candidate performed better in the places one would expect to find more dissatisfaction.”

Broader figures and the historical view of wealth distribution in the US—that one percent of the population control 40 percent of the wealth or the decades-long decline in the percentage of the national income that goes to the working class—are not brought out in the report but the data add to a complete picture of social conditions across the United States, the character and geographical distribution of social and economic conditions in a country of more than 320 million.

The portrait provided by the EIG report is not simply one of increasing misery and poverty for the bottom 20 percent, and not only one in which only a minority of Americans are achieving anything like “prosperity,” but of growing and explosive dissent among tens of millions.

It exposes as a bare-faced lie the claim that President Obama made at the end of his second term, that “things have never been better” in America.

http://www.wsws.org/en/articles/2017/09/28/pove-s28.html

US Census report shows increasing social inequality

Small median income gain offset by debt and living costs

By Eric London
15 September 2017

US Census data from 2016 released on Tuesday shows increasing social inequality amid a small gain in household income that is offset by a massive growth of personal debt and rising living costs.

The data tracks the ongoing redistribution of wealth from the working class to the wealthy as a result of the pro-Wall Street policies of both the Republican and Democratic parties. It substantiates the oligarchic character of the United States.

Social inequality

The Gini index, used to measure social inequality, with higher figures indicating a wider economic divide, rose slightly from 2015 (.479) to 2016 (.481). The 2016 figure, according to rankings in the CIA World Factbook, makes the US slightly more equal than Madagascar and less equal than Mexico.

In terms of aggregate income share, the shift from 2015 to 2016 is as follows:

Income share from 2015-2016. *Census data reported to one significant figure, meaning percent decline is not reflected in 2015 and 2016 share columns.

The growth in inequality is even starker when traced from 2007, the year before the Wall Street crisis.

The data reflects income and not wealth, thereby providing an incomplete and conservative indication of the scale of inequality. Even within the highest quintile, the income share increased only for the top 10 percent, and, in particular, the top 5 percent.

Income share from 2007-2016

Household income

The corporate media has portrayed the report as a sign of positive income growth, since it shows a slight rise in median income of 3.2 percent from 2015 to 2016.

But according to the Census data, the earnings of “full-time, year-round workers” remained stagnant. For men in this category, a total of 63.9 million people, earnings declined by 0.4 percent, from $51,859 in 2015 to $51,640 in 2016. For women in this category, 47.2 million people, there was a minor increase, 0.7 percent, from $41,257 in 2015 to $41,554 in 2016. In other words, families with 2 adults working full-time saw a paltry $78 increase in their yearly earnings from 2015 to 2016.

Claims of rising incomes mask the growth of inequality. The Census data shows that the household income of the 90th percentile (the 100th being the highest) was 12.53 times higher than the household income of the 10th percentile in 2016, up from 12.23 times higher in 2015 and 11.18 times higher in 2007. The degree to which income is concentrated in the richest 10 percent of the population is exemplified by the fact that the 5th percentile boasted a household income 3.82 times higher than the 50th percentile in 2016, up from 3.79 times in 2015 and 3.52 in 2007.

As Bloomberg News reported Wednesday, “Since 2007, average inflation-adjusted income has climbed more than 10 percent for households in the highest fifth of the earnings distribution, and it’s fallen 3.2 percent for the bottom quintile. Incomes of the top 5 percent jumped 12.8 percent over the period.”

For the working class, any income increase was transferred to the corporate elite in the form of rising debt payments and increasing living expenses, especially for health care.

According to figures from eHealth, a large private health exchange, average deductibles for families rose 5 percent from 2016 to 2017 (a year after the period covered by the Census report) and average individual premiums rose 22 percent over the same period.

The rising cost of student debt alone largely erases income increases seen by some young people. According to the Census, those aged 15 to 24 saw an income increase of 13.9 percent, from $36,564 in 2015 to $41,655 in 2016, while incomes for young people aged 25 to 34 rose 4.9 percent, from $58,091 to $60,932, nearly double the percentage increase for older age groups.

However, in 2016, student debt rose to an average of $30,000 per young person, up 4 percent from 2015, eliminating over 80 percent of the income rise for 25-34 year olds. For 15 to 24 year olds, the $4,000 increase in median income would hardly cover one sixth of the average debt payment, let alone make up for the fact that young people face a future in which they are unlikely to receive a pension, Social Security or Medicare.

Rising debt levels are not a phenomenon limited to young people. A Bloomberg report from August 10 notes that credit card defaults increased from the beginning of 2015—when roughly 2.5 percent of debt holders defaulted—to the end of 2016, when the total hit 3 percent. This figure subsequently climbed in 2017 to reach 3.49 percent.

Bloomberg notes: “After deleveraging in the aftermath of the last US recession, Americans have once again taken on record debt loads that risk holding back the world’s largest economy… Household debt outstanding–everything from mortgages to credit cards to car loans–reached $12.7 trillion in the first quarter [2017], surpassing the previous peak in 2008 before the effect of the housing market collapse took its toll, Federal Reserve Bank of New York data show.”

“For most Americans,” the report continues, “whose median household income, adjusted for inflation, is lower than it was at its peak in 1999, borrowing has been the answer to maintaining their standard of living. The increase in debt helps explain why the economy’s main source of fuel is providing less of a boost than in the past. Personal spending growth has averaged 2.4 percent since the recession ended in 2009, less than the 3 percent of the previous expansion and 4.3 percent from 1982-90.”

The Bloomberg report explains that income from wages minus household debt trended downward in 2015, meaning that debt is rising faster than wages, causing a loss of roughly $500 billion across the US economy in the space of just one year.

Poverty rate

Though the Census report shows that the poverty rate declined from 13.5 percent of households in 2015 to 12.7 percent in 2016, this figure is substantially higher than the 11.3 percent level that prevailed in 2000. In reality, individuals and families must make 2.5 to 3 times the official poverty rate of $12,000 for an individual, $15,500 for a married couple and $25,000 for a family of four just to make ends meet.

What the data really shows is that the poorest half of the country–over 150 million people–is in a desperate financial position, with the next poorest 40 percent facing constant financial strain and a declining share of the national income. In regard to poverty, the Census Bureau maintains figures that go up only to 200 percent of the official poverty level. The latest report shows that 95 million people—29.8 percent of the population—fall into this category. The share of those under the age of 18 in this category is much higher–39.1 percent.

This is the context for the drive by the Trump administration and both big business parties to slash corporate taxes, impose a health care “reform” that will increase costs for millions of people, and accelerate the transfer of wealth from the working class to the financial aristocracy.

WSWS

 

 

 

New York Times surveys the results of 35 years of affirmative action

By Fred Mazelis
13 September 2017

In a front-page lead article over a two-column headline a few weeks ago, the New York Times informed its readers that its own detailed analysis had shown that “Black and Hispanic students are more underrepresented at the national’s top colleges and universities than they were 35 years ago, despite decades of affirmative action efforts.”

What the Times presents as the somewhat unexpected result of longstanding social policy was illustrated by an unusually detailed full-page series of graphs for 100 institutions of higher education, broken down into five categories: The Ivy League, Flagship Public Universities, Other Top Universities, Top Liberal Arts Colleges, and the massive University of California system.

The graphs use percentages of white, Asian, Hispanic and black students at each of these schools, compared to their numbers in the college-age population, to depict the degree of “overrepresentation” or “underrepresentation” for each group.

Overall, the survey shows that white and Asian students are more “overrepresented” than ever, and blacks and Hispanics more “underrepresented” today than in 1980. Hispanic students made up 13 percent of the freshman class among these 100 schools, for instance, compared to 22 percent of the population. In 1980, with a far smaller Hispanic population, the “gap” was only 3 points.

Black freshmen were 5 percent of the enrollment in 1980 and 12 percent of the population. Thirty-five years later, the gap has grown to nearly 10 points: the percentage of African-Americans is 15 percent, but the college freshman enrollment is only 6 percent.

The rationale for affirmative action, which has its origins in policies initiated by the Nixon administration more than 45 years ago, was that it would level the playing field and enable broad layers of black and Hispanic youth to obtain enter colleges and universities for the first time.

The failure of affirmative action to meet these promises is not accidental, nor was it unforeseen—certainly not by socialists, who understood the real purpose of this program.

It is obvious that without providing tens of millions of good-paying jobs, without vastly improved educational opportunities for all youth from pre-kindergarten through high school, and without the provision of free universal health care and child care, there can be no serious expectation that the latest generation of black and Hispanic working class youth will fare any better than its predecessors in obtaining and in making use of a quality higher education.

The decades of affirmative action have coincided with the decades of social counterrevolution, of the shredding of the social safety net that increased under the presidency of Ronald Reagan and that has continued since then, under Democrats and Republicans. The political and corporate establishment demagogically used the suffering of minority workers and youth to promulgate programs that were never designed to help them in the first place.

This does not mean that some aims of affirmative action have not been achieved. They have—but they are for the most part unstated ones.

A small slice of the African-American population, largely from the middle class, has been selected and integrated into the ruling elite, including the corporate and political establishment. These are the men and women who have been elected to high office, who occupy a few more of the top rungs of the corporate ladder, and who are helping to set the agenda in higher education and other spheres of social life. They in turn are presented as role models and representatives for a small but significant upper middle class constituency, in that way serving as a new base of support for the capitalist system.

The image of “progressivism” and diversity is also used to burnish the image of American capitalism as it competes against its rivals internationally. The small layer that has benefited from affirmative action is utilized to showcase the supposed virtues of the market and the endless possibilities for success under the profit system.

At the same time, however, a political division of labor involved in affirmative action has also become ever clearer with the passing years. The program was first backed by Nixon, who saw no contradiction between affirmative action and his own racist views. For about a decade the programs were largely bipartisan policy, accepted by both major capitalist parties. This began to change, especially in the 1980s. While the Democrats became the program’s biggest boosters, the Republicans discovered that Nixon’s “Southern strategy” could be expanded throughout the country by utilizing resentment caused by racial preferences.

The two big business parties developed a reactionary and cynical means of magnifying and promoting racial division. Affirmative action was attacked from the right, and challenged up to the US Supreme Court. It continues today, as college administrators are for the most part allowed to take race into account in admissions policies, as long as they do not employ quotas.

Affirmative action was never the demand of the working class. It was the brainchild of the political establishment, of a faction of the ruling class, with the approval of sections of the middle class civil rights leadership. And it has been used for decades to encourage resentment among white workers and youth, among students passed over for college admission, all the while ignoring the conditions and needs of the vast majority of the youth—black, Hispanic and white.

The challenges that black and Hispanic youth face are essentially no different than those facing millions of white working class families. The purpose of the Times study, even as it acknowledges part of the truth about affirmative action, is to cover this up so as to continue the effort to divide the working class on racial grounds.

The New York Times put its reporters and researchers to work for many hours, if not weeks, to document the racial breakdown of the student body all over the country. No one appears to have been assigned to analyze the class reality underlying the percentages, however. No one looked at the plight for the vast numbers of white working class youth for whom college has become increasingly unaffordable, and who are likewise “underrepresented” as compared to the upper middle class families, of all races. The category of “whiteness,” by combining the poor, the unemployed, the underemployed and the victims of deindustrialization and wage-cutting, together with the wealthy, is being used to obscure the reality of class relations.

Sixteen years ago, the World Socialist Web Site, in a statement on “Affirmative action and the right to education: a socialist response,” contrasted the demands of the civil rights movement of the 1960s, for greater social equality, with affirmative action, part of “the politics produced by [the capitalist] system, which is based on splitting working people along racial, ethnic religious and other lines to cover up the fundamental class divisions of society.”

For as long as it has been used, the WSWS explained, “affirmative action measures have benefited primarily a small section of middle and upper class minorities. … Affirmative action not only fails to overcome the problem of racism, its discriminatory character inevitably exacerbates racial divisions and pits white and minority workers and youth against each other in the struggle for a completely inadequate number of jobs and educational opportunities.”

In 2001, the average tuition at a public university was $3,500. Today it is $9,650 for state residents, and more than $24,000 for those out of state. For private schools, average tuition in 2001 was more than $15,000. The latest figure is $33,480, not including $10,000-$15,000 in room and board and other expenses. More than ever before, affirmative action has become a means of integrating a very small section of the upper middle class and grooming it for future roles presiding over increasing inequality and repression.

Growing sections of the working class, including African-American and Hispanic families, are coming to recognize that affirmative action is worth no more than any other promise made by any capitalist politician. This recognition must be translated into a complete break with the Democratic Party.

In opposition to the promise of a step up for a select few by trampling on the hopes and futures of the vast majority, the working class must fight for a socialist program of free quality higher education for all. This is part of the struggle to defend and extend the basic rights of the working class and eliminate the social inequality that is the product of the profit system. This fight is taken up only by the Socialist Equality Party.

WSWS

Enough With the Top 1 Percent: The Top 20 Percent, the Upper Middle Class, Is Hoarding the American Dream

ECONOMY

Scholar Richard Reeves points out the real winners in the economy as Congress eyes tax reform.

Photo Credit: University of Nevada Las Vegas / Youtube.com

Already President Trump and the Democrats are trading clichés in the opening skirmishes over Trump’s tax reform proposals. Yet both are missing the bigger reality of who are the economy’s winners and losers—a pattern that’s only grown over recent decades.

Trump, of course, want to cut corporate taxes, and consolidate and lower rates for income tax brackets, among other things. All one really needs to know there is that he is dubiously assuming the savings for businesses wil “trickle down” to employees in jobs and wages. Leading Democrats, in response, are being misleading in a different way.

“If the president wants to use populism to sell his tax plan, he ought to consider actually putting his money where his mouth is and putting forward a plan that puts the middle class, not the top 1 percent, first,” Senate Minority Leader Chuck Schumer said.

Trump’s plan mostly would benefit the biggest corporations and the wealthiest individuals. But Schumer’s Occupy-Wall-Street-like whack at the top 1 percent and defense of the so-called middle class is muddled in a different way. That’s because it isn’t the super rich, but the upper middle class—representing the top 20 percent, or households making at least $117,000 a year—that disproportionately have been doing better than the rest of Americans, the bottom 80 percent. Their tax breaks are one reason why.

“The upper middle class, the top fifth, broadly, and above, not only maintain their position very nicely, but perpetuate it over generations more effectively than in the United Kingdom,” said Richard Reeves, a Brookings Institution scholar and author of Dream Hoarders: How The American Upper Middle Class is Leaving Everyone in the Dust, Why That is a Problem, and What to Do About It. “And yet, that that’s not so widely known or seen as a problem, because of the kind of myth of classlessness that has developed in the U.S.”

Comments like Schumer’s—defending a blurrily defined middle class—are a perfect example of the myth of classlessness that is parsed by Reeves, who was born in Britain but became a U.S. citizen. The biggest picture statistic he cites to frame the problem of improperly dissecting the economy’s real winners and losers is pre-tax income growth between 1979 and 2013. The bottom 80 percent saw their incomes grow by $3 trillion, while the top 20 percent saw their incomes grow by $4 trillion. When you put this on a graph, the bottom four quintiles, or 20 percent sections, slope upward slightly. But not so with the upper middle class; people making roughly $120,000 a year or more.

Why does this matter? It doesn’t just confirm what most Americans feel—that they are relatively stuck economically, perhaps doing better than their parents, but sometimes not even that. It shows that bashing the super-rich, the 1 percent, is politically expedient rhetoric that diverts the focus from those in America, members of both major parties, whose interests are maintained by the political system, instead of sharing the wealth. Reeves’ book, Dream Hoarders, explains how the top 20 percent protects its status, essentially by segregating educational opportunity, their housing—which is federally subsidized through the tax deduction for home mortgage interest rates—career networking and other government-supported perks. As he recounts in a lecture that traces how he wrote his book, he started by noticing the politics surrounding a 2015 proposal by President Obama to change the way the feds managed tax-free college savings plans, called the 529 program.

“Don’t you dare touch my 529!” was the response upper-middle-class constituents told top Democrats, Reeves said, then laying out how these folks think: “Do you know how hard it is to make ends meet by the time I’ve saved for my kids’ college, paid their private school fees, paid my massive mortgage—thanks for the [mortgage deduction] tax break; still it’s lots of money—I’ve got a skiing holiday, school trip gets more expensive, I’m barely making even here…I’m working really hard. I’m part of the 99 percent.”

“No, you’re not,” Reeves said, underscoring how the upper middle class is different. The 529 tax break was a college savings plan where you don’t pay any capital gains on money set aside and invested here, he explained. Who has these college savings plans? he asked. Forty-seven percent of people earning $150,000 or more annually, he answered.

“The truth was it [Obama’s proposal) was unbelievably unpopular among the constituency that really mattered… something that was virtually sacred for the upper middle class in America. It was about education. This was rewarding savings. It was about the future,” Reeves said. “For me, it was like, boom! No wonder we can’t change the tax system, when even relatively liberal people try to do it… People also forget this [529] was a tax break that has long been proposed by Republicans… Don’t mess with the American upper middle-class—that was the lesson.”

Reeves listed a series of metrics that he says amount to hoarding the American dream. It’s the inverse of the way social scientists talk about intergenerational poverty, or cite statistics about how most people don’t stray far from the rungs on the economic ladder of the family they were born into.

Thirty-seven percent of those born into the top 20 percent also stay there, he said, a slightly bigger number than the poorest 20 percent of Americans. “Wealth is even stickier than income. Forty-four percent of the wealth of the upper 20 percent remains there.”

Why is this happening? It comes down to hoarding the best opportunities in education, housing, careers and government tax policies that reinforce that status. This is not about inheritance taxes, which is a rarified subject. It’s how 40 percent of the upper middle class live near the public schools that have the best test scores. It’s how zoning in those communities only allows housing at price points well above those affordable by people earning median incomes—the real middle class. It’s about how the mortgage deduction allows people to buy even pricier homes. It’s about going to top schools, colleges and universities, and sending your kids there, and creating networks that turn into select entry-level jobs, internships and careers. In short, Reeves says all the political verbiage about equal opportunity, meritocracy and fighting inequality is sullied.

“Forty-six percent of those in the top 20 percent have the same educational status as their parents. The inheritance of educational status is even greater than wealth, which is even greater than income,” he said. “The expansion of higher education in the U.S. has disproportionately gone to the top. Four out of five of those in the top 20 percent go to elite schools. Two-thirds of the students in the top schools are from the top 20 percent.”

On the subject of tax breaks—which will be coming to the national political landscape as Trump and the GOP push tax reform—the upper 20 percent gets the most capital gains benefits, mortgage interest deductions and Social Security and pension earnings, Reeves said.

“The point is clear. This is upside-down. These are upper-middle-class tax breaks,” he said. “And, like the 529, guided with laser precision to the bank balances of people like me: to the bank balances of people who have been doing so well in recent years. And by god, it’s hard to touch them. Even the incoming Treasury Secretary [Steve Mnuchin], he mentioned we might reduce tax rates but do so by getting rid of a lot of these deductions. Wow, that didn’t last very long. By the time the National Association of Housing and the Republicans [weighed in]… This stuff is hard to get at. I think part of the reason is we [the upper middle class] have kidded ourselves that we are part of the 99 percent.”

Reeves said that nine out of 10 Americans tell pollsters they are middle-class. That isn’t accurate or useful on many levels, he said, especially when it comes to addressing the lingering frustrations about one’s place and prospects in the American economy.

“I have genuinely come to believe that unless the conscience of the American upper middle class is somewhat awakened, then it will be very hard to bring about the political reforms that I believe are necessary… to one of equal opportunity,” he said. “Right now, America, some of America, has something of a problem of a sense of entitlement. And I mean the upper middle class. And they are very good about sometimes talking about people who feel entitled to welfare; I think they feel pretty entitled to their upper-middle-class welfare too. I think Obama found that out too.”

Indeed, Reeves said it is not very useful for Democrats to keep pushing out the rhetoric blasting the 1 percent, because among other things, that’s not what’s really going on, and it doesn’t address structural inequality.

“I think that until and unless we recognize that we are not the 99 percent, that we have done pretty well, and that we will have to give something up—not much, but a bit, a bit on zoning, a bit on school admissions, a bit on taxes, in order to help the others—then we won’t get anywhere,” he said. “But that will require us to recognize that we are not the losers from inequality trends, but the winners.”

Steven Rosenfeld covers national political issues for AlterNet, including America’s democracy and voting rights. He is the author of several books on elections and the co-author of Who Controls Our Schools: How Billionaire-Sponsored Privatization Is Destroying Democracy and the Charter School Industry (AlterNet eBook, 2016).

http://www.alternet.org/economy/enough-top-1-percent-its-top-20-percent-upper-middle-class-thats-hoarding-american-dream?akid=16043.265072.7R3xaE&rd=1&src=newsletter1081981&t=4

Nobel Prize Winners Name Trump and His ‘Ignorance’ as Top Threats to World Population

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Laureates have grave concerns about Trump’s anti-science agenda as well as his recent rhetoric on nuclear war

Trump's brand of populism was named as a major threat to scientific advances in a survey of 50 Nobel Laureates.

Trump’s brand of populism was named as a major threat to scientific advances in a survey of 50 Nobel Laureates. (Photo: Michael Vadon/Flickr/cc)

Along with nuclear war and climate change, President Donald Trump has made the list of what Nobel Laureates consider to be major risks to the world population.

In a survey of 50 Nobel Prize winners in the sciences, medicine, and economics, more than a third of the respondents said damage to the environment brought about by issues like over-population and climate change, was the biggest threat to mankind. Twenty-three percent said nuclear war was their top concern, while six percent said theirs was “the ignorance of political leaders”—with two of the winners naming Trump specifically.

Peter Agre, winner of the chemistry Prize in 2003, told the Times Higher Education, which conducted the poll and released the results Thursday, that “Trump could play a villain in a Batman movie—everything he does is wicked or selfish.” He also called the president “extraordinarily uninformed.”

The survey also found serious concerns among the respondents about the brand of populism pushed by Trump as well as right-wing European leaders. Forty percent of the Nobel winners called Trump-style populism, characterized by his distrust of climate science and the media, and political polarization “a grave threat to scientific progress, while 30 percent say that they are a serious threat.”

“Today, facts seem to be questioned by many people who prefer to believe rumors rather than well-established scientific facts,” said Jean-Pierre Sauvage, who won the Nobel Prize in Chemistry last year.

Another laureate added, “it is a disaster when people start believing things that are false and, even worse, when governments induce them to believe facts that are evidently wrong and ignore all evidence-based, scientifically proven data.”

The Times Higher Education noted that “Agre is particularly worried by how Trump ‘flaunts his ignorance’ to appeal to a group of Americans who are happy to dismiss the opinions of scientists.”

It’s not the first time some of the world’s top scientists and doctors have publicly expressed disapproval of the president. Earlier this year, 62 Nobel Laureates signed a petition denouncing Trump’s executive order directing U.S. agencies to ban travellers from seven Muslim-majority countries from entering the United States.

https://www.commondreams.org/news/2017/08/31/nobel-prize-winners-name-trump-and-his-ignorance-top-threats-world-population

Why We Need the Liberal Arts Now More Than Ever

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Bowdoin College Michele Stapleton
Rose is the 15th president of Bowdoin College

As I prepared to welcome Bowdoin College’s students back to campus this week, I couldn’t help pondering where we are today in the worlds of politics, of government and of the media — imperfect but essential institutions for a healthy democracy. We have evolved to a most distressing place — to a place in our society and world where intellectual engagement is too often mocked.

Facts are willfully ignored or conveniently dismissed. Data is curated or manipulated for short-term gain rather than to test or illuminate aspects of the truth. Hypocrisy runs rampant and character appears to no longer be a requirement for leadership. Instant gratification and personal aggrandizement are celebrated as virtues over the work of tackling hard problems that ultimately serve the public interest and common good.

Too often, respectful and thoughtful discourse about the tough issues and efforts to find common language for a conversation — let alone common ground for solving problems — are among the rarest of commodities.

This is decidedly a nonpartisan problem. We have evolved to this place over a long period, and there is more than enough blame to go around to all sides. Whatever one’s political and world views, we should all be alarmed. A system where skill, expertise, data, judgement, discourse, respect and character are in short supply is a system in trouble.

liberal arts education can play an important role in correcting this problem. At Bowdoin, we work hard to create an environment where students can be intellectually fearless, where they can consider ideas and material that challenge their points of view, may run counter to deeply held beliefs, unsettles them or may make them uncomfortable. We do this to prepare our graduates to effectively tackle climate change, economic inequality, race relations and so many other issues that polarize us today.

In a liberal arts setting, intellectual fearlessness is achieved through the development and enhancement of competence, community and character.

Competence comes through a rigorous education — one that builds and sharpens the skills of critical thinking and analysis; the ability to understand the political, social, natural, ethical, cultural and economic aspects of the world we inhabit; the ability to continue to learn; and the disposition to be intellectually nimble, to exercise judgment and to communicate effectively.

We don’t tell students what to think. We strive to teach them how to think, to give them the knowledge and skills to develop the courage to think for themselves and shape their own principles, perspectives, beliefs and solutions to problems.

We also provide students with seemingly endless ways to serve the common good — the notion that we have an obligation to something bigger than ourselves. This serves to strengthen our community and to make our students part of other communities, helping them better understand what binds each of us together.

We want our students to understand and celebrate their wonderfully diverse identities, experiences and backgrounds, while also enjoying and appreciating the deep bonds of being a part of our college community. Being part of a strong and diverse community requires an ability to talk honestly with one another about the real issues. That’s why we push our students to develop skills and an ability to engage in thoughtful and respectful ways with those who have varying perspectives, and with whom they may disagree — sometimes profoundly.

We also seek to promote character — principled lives, work and play that have integrity, an acknowledgment of the gifts we have been given and respect for others and ourselves. Liberal arts colleges are steeped in opportunities to engage intellectually and to reflect deeply across all disciplines about what character means, why it matters and how one might live it. And there are many chances over four years for students to actually engage in challenges that test and develop their character.

At this challenging moment in our society and world, it would be easy to despair. But I do not. I am optimistic because I know the power of competence, community and character. The liberal arts matter now more than ever.