So, What About the Children?

child poverty rate

Should the Nevada Legislature care to address some issues other than those espoused by the gun-happy among us, there is one which should attract more attention than it’s getting.  23% of the children in this state are living in households at 100% of the official poverty line. [datacenter]  That’s an increase from the 2009 rate of 18%. In fact, the rate has been increasing – from 18% in 2009, steady at 22% in 2010 and 2011, up to 24% in 2012, and leveling at 23% as of 2013. [datacenter] The percentage in 2013 in Congressional District 1 was 36%, in Congressional District 2 – 18%, Congressional District 3 – 13%, and Congressional District 4 – 24%. [datacenter]  The numbers didn’t get any better in 2014.  Nevada’s 23.4% of children living in poverty was higher than the national average 22.6%. [LVRJ]

This has some significant implications for those ‘education reformers’ who are touting accountability in the public schools because the income/achievement gap was grown significantly in the last three decades.  And, this matters because, “By the early part of the 21st century, racial inequality was much lower (although far from eliminated) in terms of wages, health disparities, and residential segregation. Meanwhile, economic inequality reached historic highs (Saez, 2012). Although both remain high, economic inequality now exceeds racial inequality in education outcomes.” [ASCD] (emphasis added)

Wait, there’s more:

“The fact that the income achievement gap is large when children enter kindergarten—and does not grow substantially during the school years—suggests that the primary cause of the gap is not unequal school quality. In fact, the data in Figure 2 show that schools may actually narrow academic achievement gaps, rather than widen them. The data show the gap narrowing between the fall and spring of the kindergarten and 1st grade years—periods when students were in school—and widening in the summer between kindergarten and 1st grade—when they were not in school. Although we can’t assume that the same pattern holds in later grades, the ECLS-K data do suggest that schools may reduce inequality rather than widen it.” [ASCD] (emphasis added)

Isn’t it convenient to blame low test scores on ‘failing schools’ without looking at the impact of poverty on the kids who are entering those schools in kindergarten and first grade?  Rather than railing on about ‘failing schools’ and children not reading at grade level, it might be more useful to take a harder look at the conditions from which those children are coming.

There is a “language gap” which has nothing to do with English or Spanish, but with the vocabulary to which youngsters are accustomed in low and high income households.  We have about 50 years worth on research on this topic: [see also: ASCD, NYT, Stanford]

“…five-year-old children of lower socioeconomic status (SES) score two years behind on standardized language development tests by the time they enter school. In fact, a March 2013 study (link is external) by Fernald and colleagues titled, “SES Differences in Language processing Skill and Vocabulary Are Evident at 18 Months,” reported that signs of the vocabulary gap are evident before a child is even two-years-old.”

In short, by lumping all schools in a test-score matrix with bench marks for ‘success’ which don’t factor in poverty, we’re getting only half the picture.  How does one classify a school as failing when a significant number of kids entering it are already two years behind?  Further, if a significant number of kids attending ‘Moose Moon Elementary School’ are already behind before the doors open to them – then perhaps if the kids are reading only 1 level below ‘grade’ in the 3rd grade then we should call that success?

Poverty isn’t only a matter of vocabulary, nutrition plays a role as well.  One study conducted in Canada is instructive:

“These findings demonstrate an independent association between overall diet quality and academic performance among grade 5 students in Nova Scotia, Canada. Dietary adequacy and variety were identified as specific aspects of diet quality important to academic performance, thereby highlighting the value of consuming a diverse selection of foods in order to meet the recommended number of servings from each food group.”

There are all manner of research reports on the relationship between nutrition status and educational achievement.  [USDA, NCBI, GenYouth, NMichU]  However, we also know that, as the headline asserts, “Poverty drains Nutrition from the Family Diet.”  What tends to happen is that carbohydrates (cheap) tend to be a higher portion of the family diet as opposed to fresh fruit and vegetables (more expensive) or proteins in meat and fish.   Makes sense when we figure that Mac/Cheese comes to about 90 cents per box, with about 3 servings per box, that works out to about 30 cents per serving.  Compare that to broccoli at about 63 cents per serving, or fresh spinach at about 52 cents per serving, or even the orange at 34 cents [mdand]  and we can see where this is going.  Then there’s the lard, which can be purchased for about $5.88 for 64 oz.  The commodity markets are showing butter at about $1.61 for 16 oz.  48 oz of cooking oil go for about $2.50.  In sum, if a family is trying to make it on SNAP benefits those dollars and cents will go further on Mac/Cheese than on salmon and broccoli.

It just might be more constructive, in terms of educational achievement, to stop mocking, and rolling back, school lunch nutrition requirements – even if the little darlings aren’t that fond of veggies; and to look at increasing SNAP benefits to families with children so that a few heads of broccoli and more meat and fish proteins were included in the family diet.

It often seems that families in poverty can’t win no matter what they do – Should they try to purchase more books for the kiddies they can be chastised for not spending the money on better food.  If they add a bag of oranges to the grocery trip then they can be taunted for not making the most economical use of their grocery dollars.  Heaven forefend they should add some raw spinach or broccoli to the grocery bag.   I can almost hear it now, “I was at the grocery store and the lady in front of me was buying Kale, KALE! with food stamps!”  No matter that Kale is one of the more nutritious  veggies available.

Sadly, as long as the I Got Mine Now You Try To Get Yours attitude prevails amongst legislators at the state and national level, we’ll have a “language gap” because we’ve not addressed the paucity of time and resources available for lower income working families. How easy it is to ‘save money’ by reducing the hours or staff at the public library!  And, we’ll have achievement gaps because kids are filled (or unfilled) with carbohydrate laden diets because that’s the way to stretch the grocery funds.  Even notions about increasing the minimum wage are met with vehement protests that we are creating a Nation of Takers, and speak to a Living Wage and the air fills with dire warnings of moral hazards.

What IF we tried thinking of children as an investment rather than a line item expense?  What IF we thought of them as assets in need of maintenance and care?  What IF we recognized that their poverty will be a factor in their educational achievement?  What IF we rewarded the schools which helped close the language, achievement, and nutritional gaps in their lives? Children aren’t abstractions, slogans like “freedom” don’t mean much on an empty stomach; they aren’t philosophical constructions, pronouncements on “entitlements” don’t mean much when the parents are working three or four minimum wage jobs to keep up.  We should save the sermons for the pulpits and invest in reducing the number of Nevada children who are falling into language, achievement, and nutritional gaps.  One in four is unacceptable.

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Filed under education, nevada education, Nevada legislature, poverty

AB 2: The Take Your Gun To School Bill on NV Legislature’s Agenda

AB 2 The firearm proliferationists are launching their agenda early in the  Nevada legislative season, with A.B. 2 – the pack your gun around in your vehicle everywhere you want to go bill.  Or, as the Legislative Counsel Bureau puts it more elegantly:

“Legislative Counsel’s Digest: Existing law generally makes it a gross misdemeanor to carry or possess certain weapons while on the property of the Nevada System of Higher Education, a private or public school or a child care facility, or while in a vehicle of a private or public school or a child care facility except in certain circumstances. (NRS 202.265) This bill adds an exception so that a person is not prohibited from possessing such weapons on the property of the Nevada System of Higher Education, a private or public school or a child care facility if the weapon remains out of public view and if the weapon is: (1) inside a motor vehicle that is occupied or, if the motor vehicle is unoccupied, the motor vehicle is locked; or (2) stored in a locked container that is affixed securely to the motor vehicle.”

There are precious few places where the proliferationists can’t pack their weapons of choice and pleasure.  School campuses are one such place.  Under the provisions of A.B. 2 that protection is eliminated.  And, of course the gun-proliferationists were out in force for the hearing. [LVRJ]  The supporters, notably Assemblyman Hambrick are quick to point out this isn’t a “campus carry” bill. However, it’s interesting that one individual offering testimony described his trouble clearing up charges after “someone entered his locked car at Reed High School in Sparks where he worked and found his gun. That person reported it.”  And, now someone needs to ask the question:

What if the individual who entered his locked car in the Reed High School parking lot didn’t report it, instead, say, stole it, or worse used it in the commission of a felony?  Are we to believe that if the gun is out of sight, and locked in, that it’s safe on school grounds?  Not necessarily, if the person offering the testimony is to be believed. Someone did, in fact, get into the vehicle, and did, in fact, find the firearm.

The NRA mythology is nothing if not embedded in the minds of those who promote gun ownership and possession.  Does the gun make you “feel safe?” It might, but the statistics show another pattern.  The ‘good guy with a gun’ myth has been pretty thoroughly debunked. [Slate

This won’t be the last proliferation bill before the 2015 session of the legislature, and there are some “model” bills from the NRA and ALEC which ought to be tracked.  Watch for bills similar to the “Campus Personnel Protection Act,” for which ALEC has model legislation.  There is also a model for the outright concealed carry statutes promoted by the NRA and ALEC.  Another variation on this theme is the concealed carry reciprocity model also promoted by those two organizations.  There’s also a model bill to prevent cities and counties from prescribing any local firearms regulations.

We might also want to be aware of ALEC/NRA model resolutions on guns and child safety, which basically says tell your kids guns are dangerous, a little “education” is all that’s needed.  Interesting, since a person in the United States is more likely to be killed by a toddler than a terrorist. [Forward]  See also, the NRA resolution on promoting Eddie the Eagle to protect us from toddlers who find firearms.  Then, there’s the resolution decrying waiting periods for gun purchases, or as we might call it the “Suicide Facilitation Act?”

For ceremonial purposes, there’s the ALEC/NRA model resolution on the glories of the 2nd Amendment – as interpreted by the National Rifle Association.  Or as introduced in Nevada,  AB 100, “relating to the Attorney General; requiring the Attorney General, under certain circumstances, to commence an action to protect and secure the rights of residents of this State under the Second Amendment to the United States Constitution…” Translation: If the President of the United States issues an executive order “infringing” on 2nd amendment “rights” then the AG’s office will file a suit.   Paranoia reigns supreme?

However, if you’d really like to witness paranoia in action – click over to the NRA’s legislative action page.  Here’s betting we see several items from the NRA wish list, during this session of the Assembled Wisdom.

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Filed under Gun Issues

We need a vaccine for Stultus

vaccine Nevada isn’t immune.  Health officials in Washoe County are taking action concerning two possible cases of measles, and 40 families whose children attend Spanish Springs Elementary School  have been contacted.  Children from those families may be unvaccinated or may have compromised immune systems – they will be immediately excluded from school. [RGJ] NRS 392.435 provides for two, and only two exemptions from the vaccination requirements: religious beliefs and medical condition. Otherwise – vaccinations are required.   This isn’t a matter of ‘parental choice.’  Nor is it a matter of ‘personal freedom.’

It’s a matter of public health.  And, the avoidance of vaccinations has been going on too long:

“Last year 10 children died in California in the worst whooping cough outbreak to sweep the state since 1947. In the first six months of 2011, the Centers for Disease Control and Prevention recorded 10 measles outbreaks—the largest of which (21 cases) occurred in a Minnesota county, where many children were unvaccinated because of parental concerns about the safety of the standard MMR vaccine against measles, mumps and rubella. At least seven infants in the county who were too young to receive the MMR vaccine were infected.” [SciAm 2011]

Further, the article in Scientific American nailed down the source of the problem:

“This sad state of affairs exists because parents have been persistently and insidiously misled by information in the press and on the Internet and because the health care system has not effectively communicated the counterarguments, which are powerful. Physicians and other health experts can no longer just assume that parents will readily agree to childhood inoculations and leave any discussion about the potential risks and benefits to the last minute. They need to be more proactive, provide better information and engage parents much earlier than is usually the case.” [SciAm 2011]

I’m going to let the medical profession off the hook a bit – yes, they should have known there were some parents so imbecilic as to swallow the pernicious anti-vax propaganda, but I’d not hold them responsible for having to remind parents each and every year that vaccinations are essential.  This is usually called ‘parental responsibility.’  So, how can we tell if a person is suffering from ego stultus?  Symptoms:

1. The individual believes that the manufacturer of the rubella vaccine uses aborted fetal material in the process, or at one time used aborted fetal materials, or at one time might have used aborted fetal material in the manufacturing process.  [Debunked Here]

2. The individual believes that the MMR vaccine causes autism. [Debunked Here

3. The individual believes that if other people are vaccinated they should not worry about their unvaccinated children if the vaccine works.  Stop. Think. It isn’t the vaccinated kids who are at risk. Those at risk are unvaccinated, and many of those have immune systems compromised by other diseases, like cancer.

4. The individual thinks that the immunization programs are an assault on individual liberty, that parents should have the ‘right’ to keep their children vaccine free. Otherwise, it’s like… you know… the Nazis!  No, what’s under assault are diseases, which if left to replicate themselves cause immeasurable harm to our nation’s children.

5. The individual believes it’s all just part of a big pharmaceutical manufacturing  scam to make money. Relax, take a dose of this professional medical advice.  If you’d like to get into the weeds of vaccine versus drug production and profitability levels there’s information available from the NBER.

In the mean time, I’d like to see the pharmaceutical industry take on the task of eliminating Stultus Maximus.  (Maximum Stupidity)

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Filed under health, Health Care

Heller and the Keystone Amendments: Taxpayers on the Hook

Heller 3 Before the Keystone Pipeline bill made it to a vote in the U.S. Senate there were some amendments which shed light on the mindset of the proponents of the construction. Remember, this pipeline is for the transportation of foreign oil (Canadian) through (not to) the United States to foreign markets.  S.Amdt 155 came up for a vote, its sponsor Senator Corey Booker (D-NJ) spoke in favor saying,

“Mr. President, I want to say that amendment No. 155 is a  very important amendment. It is common sense. It is practical. The National Environmental Policy Act, NEPA as it is known, is one of the most emulated statutes in the world. It is something that many people see as valuable in other countries because NEPA, in fact, by many is referred to as the modern-day environmental Magna Carta. NEPA regulations require agencies to supplement already-issued environmental impact statements when significant new circumstances or information is found to exist relating to the environmental impact of a project. The pending Keystone bill, however–and quite surprisingly–would deem the final environmental impact statement issued last January to fully satisfy this NEPA requirement going ahead. This would remove the obligation from permitting agencies to supplement any environmental impact statements if significant new circumstances or information is discovered.”

Here’s a loophole through which one could drive an oil tanker.  In every other instance the regulatory agencies are required to consider new evidence and new circumstances when overseeing the environmental impact of any proposal – but not this one. Not Keystone Pipeline. No, once the “final” impact statement is filed – that’s it. No more adjustments. Even if the construction called for a route change which might put a local drinking water source in peril? Even if the construction caused peripheral damages, unforeseen in the initial plans….  Senator Dean Heller (R-NV) was one of the 56 members of the Senate to vote “No” on this amendment.  [rc 46]

S. Amdt 141 was simplicity itself, delay the effective date until the White House had determined that the construction of the Canadian pipeline would have no negative impacts.  Again, Senator Heller voted, “No.” [rc 47]

S. Amdt 178 was also fairly simple. “To ensure that products derived from tar sands are treated as crude oil for purposes of the Federal excise tax on petroleum.”  Here’s a lovely catch

Return, for a moment, back to 2010 when there was a pipeline spill in Michigan, some of which was from Canadian tar sands.  Enter the Tar Sands Tax Loophole:

Five months later, the Internal Revenue Service quietly ruled that a significant portion of the type of Canadian crude flowing through that Michigan pipeline was exempt from the per-barrel tax created for that spill-liability fund. The loophole for oil sands fuel, which also forms the bulk of the crude set to run on the Keystone XL pipeline, remains in effect today despite congressional proposals to close it. [EE]

Now it’s clear – Senator Heller voted against having TransCanadian pay taxes into the spill-liability fund to pay for clean up in the case of a pipeline break or failure.  A vote against this amendment was quite simply a vote in favor of having anyone – anywhere – pay to clean up the oil spill EXCEPT the pipeline company responsible for the problem. [rc 48]   Nothing sends such a Valentine to the Koch Brothers and the Canadian oil companies as this.  And then he voted in favor of the unamended bill. [rc 49]

In short, Senator Heller’s bought into the various and sundry convenient prevarications associated with the Keystone debate.

It will NOT be a long term “job creator,” because most of the jobs, about 3,500 will be short term construction.  The construction jobs would be beneficial, but only about 35-40 long term jobs would be created.  The pipeline does transverse a section of a major aquifer, and that’s reason enough in an agricultural region (read: breadbasket) to think very carefully about pipeline spills.   While it’s one thing to support a foreign pipeline transporting foreign oil to the world markets – it’s another to exempt the pipeline and oil producers from paying into the  Spill Liability Fund.

The Fund can provide up to $1 billion for any one oil pollution incident, including up to $500 million for the initiation of natural resource damage assessments and claims in connection with any single incident. The main uses of Fund expenditures are:  State access for removal actions; Payments to Federal, state, and Indian tribe trustees to carry out natural resource damage assessments and restorations; Payment of claims for uncompensated removal costs and damages; and Research and development and other specific appropriations.

Recall, the next time Senator Heller bemoans the “tax payer bailouts,” that he just voted to put the U.S. taxpayer on the hook for any clean up costs associated with the Keystone project.


Filed under ecology, energy, energy policy, Heller

Wall Street, Main Street, and Nevada’s Working Families

Average hourly earnings

The Bureau of Labor Statistics released its Jan. 30th report and we get a look at the reason some people aren’t feeling all that Bullish about the economy.  For starters there’s the chart shown above – the average hourly earnings increases or decreases.  Those zeros aren’t all that appealing. Even during the housing bubble period (2005-2008) the increases in hourly earnings weren’t  all that impressive.  The table for average weekly hours for all employees in the private sector isn’t much more delightful – being filled with more zeros as it is.

Average hourly earnings haven’t moved much since 2006, average weekly hours haven’t moved much more, and thus we have a situation in which about the only way to stay in place is to take on more consumer debt.  As illustrated in a 2013 publication from the NY Federal Reserve:

Consumer Debt Trends Chart

There are a couple of ways to look at the chart – for the half-full souls it looks like people are shedding mortgage debt, for the half-empty it looks like fewer people are buying homes and therefore the construction sector is still a bit weak.  The New York Federal Reserve reports on consumer indebtedness on a quarterly basis, the last report told us:

“Aggregate household debt balances increased slightly in the third quarter of 2014. As of September 30, 2014, total household indebtedness was $11.71 trillion, up by 0.7 percent from its level in the second quarter of 2014, an increase of $78 billion. Overall household debt still remains 7.6 percent below its 2008 Q3 peak of $12.68 trillion.”

Overall household debt includes housing debt. We might want to drill down to non-housing debt levels.

non housing debt balance

That large reddish swath is student loan debt, the orange is credit cards, and the green shows auto loans in the last ten years.  Remember, Wall Street has securitized this debt and it’s happily traded in securitized form in the financial markets; betting that Americans can (or can’t) pay off the debts incurred.   We can infer with some confidence that this national chart is representative of what’s been happening in Nevada.  Nevada’s median family income hasn’t exactly stormed up to the top of the charts.

Nevada Median Family Income 59 to 99

Nevada Median Family Income 2000 to 2013

The ACS reported an annual median income for Nevada families as $56,499 in 2000, and the number has struggled to maintain that general level. The number reported for 2013 is $51,230.

The good news is that Nevada’s unemployment rate is down to 6.8% as of December 2014. More good news is that we’ve seen a 3.7% YOY growth rate. [DETR pdf] Last August the state’s economist was pleased with the wage numbers:

“Wage trends during the first three months of the year in Nevada were a bit more encouraging than in prior quarters,” he said. “Whereas prior gains struggled to keep pace with inflation, this year’s first quarter gain outpaced the overall level of inflation. Specifically, inflation, as measured by the Consumer Price Index, came in at 1.4 percent relative to a year ago during the first three months of the year. Hence, wages grew in real terms.” [DETR pdf]

Before we dance, there’s the usual fly in the floor wax: “However, wage gains have been sluggish, averaging just a bit above one percent annually over the 2011-2013 period.”

Here’s the point at which it’s necessary to talk about the differences between Wall Street and Main Street.  If American consumers, Nevadans included, are taking on more student debt, car debt, mortgage debt, and credit card debt, Wall Street is buoyantly elated. More debt = more securitization = more financial products = more revenue = more bonus payments.  The picture isn’t quite the same for Main Street.

People make decisions about their own personal finances and those decisions create some markets and deplete others. For example, as of August 1913, the New York Federal Reserve was reporting that people holding student loan debt were “retreating from the housing and auto market.”  That would make sense – burdened by student loans? — then a person would be much less likely to take on auto loans or mortgages.  This means, of course, that the local auto dealership or the local developer isn’t going to see increased demand for his or her products – while those burdened with student and other loans or credit obligations decide not to take on yet more debt.  What’s great for Wall Street becomes a drag on Main Street.

There are at least a couple of ways to help people reduce indebtedness and thus enhance their local economies.   For those at the lower end of the economic spectrum we could increase the federal minimum wage.  This will be met with the usual objections, mostly commonly that employers will be forced to cut employees and therefore the people we hope to help will be the ones hurt.  This is a false argument. Hiring isn’t geared to wages, at least it isn’t in a free market economy. Again, and again, and again,  the only rational reason to hire someone, anyone, is that current staffing levels are inadequate to provide an acceptable level of customer service. 

Tax breaks, veterans’ status – those are nice, but if there is no increased demand for service at Ready Auto Dealers Inc. then an additional mechanic will not be hired.  Tax incentives, apprenticeships – those are nice too, but if there is no increase in the demand for single family home construction then Mugwump Brothers Construction won’t need to hire another carpenter. Free market enterprise simply works that way. 

If Nevada (and national) median family income remains stagnant, then the demand for goods and services will remain stalled. If average hourly earnings remain sluggish, and the average weekly hours fall along that line, then there is less demand for goods and services.  If middle income workers take on more debt, Wall Street is delighted, Main Street is on the defensive.

There is one way to finance projects which would help the Great American Middle.  Make some simple tax code reforms.   Wall Street will squawk to the Heavens, but we could (1) close the trust fund loophole which allows the ultra-wealthy to pass along appreciating assets to their offspring – tax free; (2) Raise the capital gains and dividend rates back to what they were when Ronald Reagan was in office – 28%; (3) put the breaks on excessive borrowing by Wall Street financial firms.  What could we buy with this?

For one thing, we could invest some of the revenue in INFRASTRUCTURE which will employ workers across the country in jobs which will create assets for states and municipalities.  Bridges, dams, water works, sewer systems, schools, aren’t counted on the books as liabilities – they are assets.  We might also want to consider investing in education and training facilities and employment.  Want to reduce the burden of student loans?

We could make it easier for states to finance their colleges and universities. Improve the Pell Grant program. Improve the GI Bill. It worked after World War II, it can work again.  We could assist working families by adjusting the child care tax credit, operating on the assumption that it’s more important to have children of working families in adequate day care than it is to protect the inheritance of far fewer trust fund children.  There are far more options available, once we stop protecting the interests of the ultra-wealthy, the friends and allies of Wall Street, and start giving a higher priority to the needs of average families on Elm Street who spend their disposable income on Main Street.

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Filed under Economy, education, Infrastructure, Taxation

It’s The Income Inequality Gap, and it’s stupid

Nevada Income Gap Map We’ve had the following information in hand since last February:

“The average income in Nevada rose just 8.6% between 1979 and 2007, among the lowest increases in the nation. However, most of the state’s residents actually lost money during that time, as average real income dropped by 11.6% for the bottom 99% of earners. For the remaining top percentile of earners, average incomes rose by 164% between 1979 and 2007. As of 2007, the top 1% accounted for 28% of state residents’ total income, the fifth highest percentage in the United States. The gap between the top percentile and other earners has further increased in recent years. Incomes for the top 1% rose by 4% between 2009 and 2011, while incomes for the bottom 99% of earners slipped by a nation-leading 6.7%. Nevada has struggled with high unemployment in recent years, including an average unemployment rate of 11.1% in 2012, the highest in the nation that year.” [24/7WallSt]

Need more? The share of growth captured by the top 1% = 218.5%. The real income growth from 1979 to 2007 was the second lowest in the nation, at 8.6%  The income growth for the bottom 99% of Nevada residents was –11.6%, the 2nd least in the country, and the income growth for the top 1% was 164%, the 24th highest in the country. [24/7WallSt]

If this were a “one off” situation we might dismiss it more causally, but it isn’t.  The change in Nevada household income from the late 1970s to the mid 2000’s shows a 16.8% increase for the bottom 20%, a 19.7% increase for the middle 20%, and the top 20% saw income growth of approximately 58.6%. [CBPP pdf]  So, how much annual income does it take to make it into the top 1% of Nevada’s income earners?

Nevada top 1% From the map shown above, it takes about $306,000 per year to be in the top 1% of Nevada income earners.  And, what is the income inequality ratio in Nevada?

Nevada Income Inquality ratio map The answer is 44.1%, one of the highest in the United States.  The next obvious question is: Why does a widening gap in income by households create a problem?  Hint: You don’t need a degree in finance or economics to figure this one out.  What tends to happen is that in the long run the lower income families tend to stay in the lower income brackets, the top 1% move steadily upward, and it’s the middle class that gets caught in the squeeze.  Economists Saez and Zucman explain:

“Among the fascinating findings of Saez and Zucman is how thoroughly the top 0.1% have shouldered their way past all other households. While their wealth share was soaring, that of the next 0.9% was barely growing, while that of the “merely rich” — those ranking in the top 10% but below the top 1% — actually shrank.

But the real victims of the trend are in the middle class. Saez and Zucman show that the wealth share of the bottom 90% grew from the 1920s through the mid-1980s, from 15% to 36%. Mostly the gain was due to the growth of pensions and of homeownership. Since the mid-1980s, however, middle-class wealth has evaporated, falling to 23% in 2012, about the same level as 1940.” [LATimes]

So what? What if middle income range families are getting the squeeze? To demonstrate that they ARE getting shouldered out of their share of increasing wealth doesn’t necessarily prove the situation is essentially economically negative?  Or does it? The answer is “yes, it does” if we’re talking about the real economy and not the shadow economy of the investment bankers and financialist allies.  For what now may be a record number of times in a single blog, let’s review the calculation of the Gross Domestic Product:

Gross Domestic Product Formula

Once More! The C is for consumer spending. The I is for investment. The G is for government spending. The (X-M) part is the difference between imports and exports. Who has disposable income to spend on goods and services? Who has income to save or invest?  If you guessed that there are more lower and middle income households you’d be right.

As of the 2012 IRS report, there were 144,928,472 household income tax filings. Of these filings 705,029 came from homes in which the annual adjusted gross income was between $500,000 and $1 million. Incomes between $1.5 million and $2  million accounted for 71,874 households, and there were 106,711 filings from households reporting income between $2 million and $5 million. 27,167 homes reported AGI of between $5 million and $10 million, and 17,685 reported AGI over $10 million. [IRS download]

Those 2012 filings of AGI ($500K-$1M) were 4.68% of the total; the next category up were 1.68% of the total filings; the next category composed 0.49% of the total; and the next 0.74%; at the very top the AGI ($5M-10M) comprised o.0187%, and the over $10 million were 0.0122% of the total filings. Now for the practical question: Who is buying more washing machines, television sets, and automobiles?  Who is buying more clothing, gasoline, and groceries?

We can narrow this down to Nevada’s statistics. [IRS download]   There were a total of 1,289,360 filings in 2012. Of these 4,420 were for adjusted gross incomes over $500,000 and 3,300 came from households with over $1 million.  The top bracket filings constituted 0.34% of the total and 0.25% respectively.  Again, who is purchasing consumer goods and services in Nevada?  Facing reality – a household could own one home in Las Vegas, one at Lake Tahoe, and another in Elko County – that’s still only three washing machines, three dryers – we could even toss in a car elevator and the total consumer spending wouldn’t create the DEMAND for goods and services which might be generated from the remaining 99% of Nevada income earners.

This is precisely WHY the Supply Side “Trickle Down” hoax is so pernicious. Continuing to monkey with the tax code by giving tax breaks, tax ‘incentives,’ and tax avoidance tactics to the upper 1% simply means we’ve skewed the numbers by which we measure our own economic growth. It has been, and continues to be, nothing less than a recipe for disaster.

Now, let’s take a look at the I part of the equation. Where is the investment going?  In good old fashioned garden variety capitalism, the “savings” or excess income is Invested in stocks or bonds which corporations can use to expand production, add employees, and use to build facilities or put into research and development – so, what are investment advisors telling their clients in the upper income brackets now?

The “hottest” investments for 2014 were in non-wrap mutual funds (82%) and exchange traded funds (79%). [OnePA]  “The exchange traded funds are like index funds but they can be bought and sold just like shares of common stock.  Whenever an investor purchases an ETF, he or she is basically investing in the performance of an underlying bundle of securities — usually those representing a particular index or sector. Unit Investment Trusts (UITs) are often organized in the same manner. However, the unusual legal structure of an ETF makes the product somewhat unique.” [Invest]  They can be bought and sold like common stocks but the crucial part is that they are NOT common stocks, and the “somewhat unique” structure comes with some tax advantages.  Who could have guessed?  A non-wrap mutual fund is one in which there isn’t a mutual fund advisory program giving the investor access to a big pool at a set annual fee.   Not to put too fine a point to it, but what we have here is a Financialists Day Dream – lots of ‘financial products’ to trade based on “an underlying bundle of securities.” Not reality.  If you were thinking that the I stood for the good old capitalistic categories of fixed investment and changes in business inventories – think again?

And this is the way the income gap expands.  Wage and salary workers face issues of globalization, technological changes, educational and training gaps, and increasing levels of indebtedness, while the top 1% bets on the capacity of the 99% to pay off the debts which have been warehoused, sliced, diced, slung into the Wall Street version of the financial Cuisinart, and traded in the financial markets.

There are no Silver Bullets but there are some things that might help.

  • Tax capital gains at the same rate as any other form of income. People work and get taxed, if ‘money works’ then tax it as well.
  • Close the special tax advantage loopholes which allow ‘investors’ to play with Dark Pools, exotic funds, and other Wall Street creations which serve to minimize Wall Street risk and place the general economy in a volatile financial environment.
  • Don’t fall for simplistic solutions like the Flat Tax, which is simply one more way for the top 1% to get a break while the wage and salary owners continue to pay the freight.
  • Increase the federal and state minimum wages.
  • Increase investment in education and training programs.
  • Encourage union and worker organizations.
  • Encourage American manufacturing with a long term national plan to improve U.S. manufacturing, including the government procurement of items made in America.
  • Avoid trade treaties which impinge on U.S. production, labor, environment, and U.S. sovereignty.

Nor can we assume that any one of these elements will bring Peace and Prosperity – there must be a conscious desire to return to that good old garden variety Capitalism – with an acknowledgement that “financial products” are here to stay – coupled with the encouragement of investment in infrastructure (public and private), production improvements, and research and development.  It’s possible if we can get our noses out of our checkbooks long enough to get a better view of our economic horizons.

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Filed under Economy, Nevada economy

The Boondoggle On The Border Is Back: H.R. 399 and the GOP anti-immigration campaign

Immigration Bill

What a week for the U.S. (and Nevada) immigrant population, first the Attorney General of the State of Nevada decides to squander state resources joining the nasty little lawsuit from the Texas Tea Partiers, and now the House of Representatives is scheduled to take up H.R. 399 the Secure Our Borders First Act of 2015.

“The bill would require the Secretary of Homeland Security to gain operational control of the U.S.-Mexico border within five years and would require the creation of additional fencing and roads.  The bill is controversial with Democrats, but it has also generated opposition from immigration hawks in the Republican Conference for not being tough enough.” [GPW]

Isn’t it interesting – the issue always seems to be about immigrants from Mexico and Central America?  This in the face of the fact that net-migration numbers show zero or less [Pew] from Mexico?  And for a net-migration of zero or less we’re building expensive and ecologically questionable fencing?  H.R. 399 is the same rather exhausted old Fence Bill otherwise known in some circles as the Boondoggle on the Border, “While the H.R. 399 list of fencing and technology is not identical to the last one, it is still looks just like another recycled version of a Department of Homeland Security wish list of hardware that was included in its “Report on the Assessment of the Secure Border Initiative-Network (SBInet) Program” five years ago.” [USNWR] Some contractors will be very pleased to hear of this bill’s passage?  Taxpayers for Common Sense has an interesting graphic (pdf) of some of the hardware contractors would very much like to unload on us as “elements of border security.” … And the price tags attached thereto.

Needless to say, as a rehash of previous Fence Bills this one sailed through the committee process in the House after its introduction on January 16th to committee passage (18-12) on January 27th. Aside from the Boondoggle aspect of the bill, there’s another big problem.

What is meant by situational awareness and operational control ?

The bill says: ”The Secretary of Homeland Security shall  gain and maintain situational awareness, and operational control of  high traffic areas, by the date that is not later than two years after  the date of the enactment of this Act, and operational control and situational awareness along the southern land border of the United States by the date that is not later than five years after such date of enactment.”

So how do we define those two crucial terms and who crafts the definitions?

The bills says: “In general.–Not later than 120 days after the date of the enactment of this Act, the Secretary of Homeland Security shall submit to the appropriate congressional committees, the BSVC, and the Comptroller General of the United States a comprehensive operational plan for each of the components of the Department of Homeland Security responsible for border or  maritime security to gain and maintain situational awareness, operational control of high traffic areas, and operational control along the southern land border of the United States by the dates, respectively, referred to in subsection (a).”   This doesn’t get us much further along in terms of what situational awareness and operational control mean in border security terms.  Let’s assume that the term of art “Metrics” is a form of definition statement:

“Metrics consultation.–In developing the metrics required under paragraph (1), the Chief of the Border Patrol shall consult with staff members of the Office of Policy at the Department of Homeland Security and staff members of the Office of the Chief Financial Officer of the Department of Homeland Security. Such staff members may not be political appointees. 3) Metrics not reviewable.–The metrics required under  paragraph (1) may not be reviewed or otherwise amended by the President, any staff employed by the Executive Office of the President, the Secretary of Homeland Security, the Deputy Secretary of Homeland Security, the Commissioner of U.S. Customs and Border Protection, or the Deputy Commissioner of  U.S. Customs and Border Protection before the submission of  such metrics to the appropriate congressional committees, the BSVC, and Comptroller General of the United States, as required under subsection (m). The prohibition described in this  paragraph does not apply to the Office of National Drug Control  Policy.” (emphasis added)

Let’s take a closer look at part one – wherein the Chief of the Border Patrol consults with staff of the DHS CFO and the policy office BUT not with any political appointees?  A quick look at the organizational chart (pdf) of the Customs and Border Patrol agency shows that the Chief of the Border Patrol is a second tier position beneath the office of the Commissioner and Deputy Commissioner.  The Commissioner’s office is a political appointment. Are we saying the Chief may not consult with his superior?  The chief may not consult with the Deputy Commissioner?  Nothing says Chaos quite like having a subordinate for whom a manager is responsible not be empowered to seek advice and counsel or be given managerial direction.

However, the power shift is apparent is the section (4) describing the composition and appointment of the Border Security Verification Commission.  One head of a national laboratory within DHS appointed by the President in coordination with the Speaker and minority leader of the House, and the majority and minority leaders of the Senate. One head of a university based center within DHS, with the same appointment scheme. Three Presidential appointments from recommendations made by the ‘special congressional commission on border security.  In short, the whole “verification” panel is essentially congressionally controlled; thus the Secretary of Homeland Security may be the titular head of the border security apparatus, but it will be Congress that determines the implementation of the policy.

It’s a bit difficult to see how the “verification” system is supposed to work when the Republicans in the House of Representatives can’t seem to get on the same page well enough to even bring this proposed dis-organizational system to the floor for a vote at the moment. And yet…

The bill specifically states that no one can review the metrics of border security until the “appropriate congressional committee” has taken its gander at them, and the highly politicized and rather clumsy Border Security Verification Commission has had its run at it.

A vote against this bill is a vote in favor of eliminating taxpayer funded boondoggles in which the Wish List of a Big Government Department becomes the delight of contracting corporations.  It is also a vote against one of the most unfathomable, glommed up, messy exercises in mismanagement and bifurcated accountability imaginable.

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Filed under Immigration