Wall Street vs. Main Street part deux

I recently introduced the authors of the American Human Development Report at a presentation and made the point that just as the GDP has been criticized for not reflecting how the economy affects everyday people, the last year has driving home how out of touch stock market performance is with most regular folks. As this chart from a Huffington Post article when the Dow Jones hit 10,000 a couple weeks ago shows, unemployment has continued to rise even as Wall Street has rallied over the last seven months.

In this vein, TIME’s recent cover story describes “What’s Still Wrong with Wall Street.” Allan Sloan writes:

Welcome to Round 2 of Main Street vs. Wall Street. The divide is the worst I’ve seen in my 40 years of writing about finance. In a new TIME poll, 75% of the respondents say they believe Wall Street will revert to business as usual, 67% want the government to force pay cuts, and 59% want more government regulation.

Main and Wall are never going to love each other. And they probably shouldn’t, because their interests aren’t identical. But if we’re going to get through this mess as a society and regain our prosperity, Main Street and Wall Street need to understand each other. And they don’t.

(To see some interesting poll data, as well as a telling graph from Thomas Piketty and Emmanuel Saez’s research on income inequality, check out the PDF version of the article.)

Sloan concludes with four ideas for fixing the disconnect, the first two geared toward policy makers, the latter two directed to you and me.

1) Break up institutions that are too big to fail so that we can allow them to fail.
2) Tell the truth, and play it down the middle.
3) Put not your faith in the Fed or Uncle Sam.
4) And for heaven’s sake, don’t put your faith in Wall Street.

To reinforce these points, I might add that Nancy Gibbs’s article in the same issue on “The Case for Modesty, in an Age of Arrogance” should be required reading for all of us.

New Homeless Numbers for L.A. What did we expect?

We’ve been suffering through the worst economic recession since the Great Depression over the past year, leading many of us to assume that social conditions have been worsening. Poverty and unemployment, and foreclosures have clearly been on the rise, and certainly we’ve expected that homelessness – the most extreme expression of poverty and insecurity – has been increasing as well.

Well, according to the 2009 Greater Los Angeles Homeless Count – released today – it hasn’t. The 2009 figure – 48,053 persons homeless in Los Angeles County every night – represents a 38% decline from the 2007 count. This is actually part of a trend over the past four years, as shown in the following chart:
LA Homeless count

When the 2007 numbers came out lower than 2005, a common justification was that the count became more precise as the methodology improved, implying that the earlier count wasn’t as accurate. Having been briefed on this year’s methodology, I agree that the 2009 count is the most reliable we’ve had yet. But, it still begs the question of whether we’re really seeing declines. As one news article characterizes it, “whether the drop was real or the by-product of fuzzy math in previous years, is hard to say.”

Leaders in Los Angeles are trying to frame the results in the positive, claiming that the decline is the result of increased public and private efforts to house the homeless. As Michael Arnold, Executive Director of LAHSA, stated in reaction to the numbers, “We know, we can sense, we can feel that there’s a change out there. These numbers provide us with some documentation, that things are really happening in Los Angeles.”

As I’ve written about before, there has been real, quiet progress in addressing homelessness in Los Angeles. That work is to be applauded. At the same time, we shouldn’t forget that we still have tens of thousands of people in Los Angeles who will sleep on the streets today. We still have plenty of work to do.

Providing housing for the homeless saves money

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It shouldn’t be a surprise, but to many people it is.  It turns out that instead of letting people suffer on the street or in shelters, we should be working to provide housing for them.  Not only is it better for them personally, it’s better for all of us because it leads to much lower costs to society (i.e. the emergency room, criminal justice, drug and alcohol treatment, etc.).

Plenty of research around the country has shown that housing combined with services (aka permanent supportive housing) is the best solution to chronic homelessness. Finally, we are beginning to get some hard numbers of how this plays out in Los Angeles, the “homeless capital of the world.”

A report released today by United Way of Greater Los Angeles and conducted by USC researchers provides data on public costs before and after entering housing for four people. The analysis found that:

The total cost of public services for two years on the streets was $187,288 compared to $107,032 for two years in permanent housing with support services—a savings of $80,256 or almost 43%.

This level of decline in public costs is consistent with findings from another upcoming report on Los Angeles which I’ve had the opportunity to review. Hopefully, these reports will push policy makers and funders to direct increased resources and efforts to address chronic homelessness toward the long-term, cost effective solution of permanent supportive housing rather than short-term, costly attempts such as shelters.

The real price of oil

A couple weeks ago, I wrote about the case of indigenous groups against Texaco/Chevron for polluting the Amazonian region of Ecuador. There is a documentary on this sordid tale that has just come out in theaters (currently in NYC and LA but coming out across the country over the next few weeks). It’s called Crude: The real price of oil and was shown at Sundance and other festivals. If you are in LA, it’s showing at the Nuart in West LA from the 18th-24th (and the filmmaker will be at showings on the first two days).

On a related note, Forbes recently published a commentary on the case by Steven Donziger, the attorney representing the indigenous groups in the case. Almost more interesting than the column itself (which is obviously not un-biased) are the diatribes against it from Forbes readers.

Rise in Poverty in the U.S.

The U.S. Census Bureau released new data on income, poverty and health insurance today and as expected the new isn’t very good. The number of people living in poverty rose from 37.3 million in 2007 to 39.8 million in 2008, and the poverty rate rose from 12.5% to 13.2%, the highest level in eleven years. The number of people without health insurance increased from 45.7 million in 2007 to 46.3 million in 2008.

Poverty in the US 1959 to 2008

The poverty rate has generally been between 10-15% since the mid-1960s, so this isn’t a dramatic trend, but there are obviously concerns that it could continue to rise over the next couple years due to the recession. Also, it is important to remember that the income levels at which poverty is measured are relatively low by today’s standards. For example, for 2008 a single person had to have an income under $10,991 to be considered poor, while a family of two parents and two kids had to have an income under $21,834. Clearly a much higher percentage than 13% of Americans are struggling to make it in this economy.

By the way, if you’re interested in how poverty is measured and current calls to update it to today’s realities, check out http://www.povertymeasure.org/

Labor Day fact sheet

In honor of Labor Day, here are some numbers on the state of working America, courtesy of the Economic Policy Institute:

• New jobs needed per month to keep up with population growth: 127,000
• Jobs needed to regain pre-recession unemployment levels: 9.4 million

• Number unemployed: 14.9 million (up from 7.5 million in December 2007)
• Underemployment rate: 16.8%; Share of workers un- or underemployed: roughly 1 in 6
• Under- and unemployed, marginally attached and involuntary part-time workers: 26.4 million
• Unemployment rate, ages 16 to 24: 18.2%

• Decrease in all prime-aged worker’s real median weekly wages, 2000-2007: $1; Decrease for African Americans: $3
• Ratio of average CEO’s pay to typical worker’s pay in 1979: 27 to 1; Ratio in 2007: 275 to 1

• Drop in children covered through parents’ employers, 2000 to 2007: 3.4 million
• Share of people under 65, with incomes in the top 20%, covered by employers in 2007: 86.4%; Share with incomes in the bottom 20%, covered by employers: 21.9%

• Percentage of amount needed to maintain living standards that is held by average 401(k) participant approaching retirement: 20-40%
• Share of 401(k) assets estimated to be lost since 2007: 29%

For data sources and even more fun (and not so fun) facts, visit EPI’s Labor Day by the Numbers fact sheet.

Environmental justice?

In the current concerns about climate change, it often seems like environmental degradation doesn’t discriminate: your economic class or color of your skin won’t necessarily save you from the thinning of the ozone layer or rising sea levels. On a more local level, however, researchers and activists have been concerned about disparate effects of environmental problems in poor and minority communities. Robert Bullard’s classic study of Dumping in Dixie connected the environmental hazards of African American areas of the South with conceptions of social (in)justice, spawning a new area of activism and research known as “environmental justice.” Manuel Pastor and colleagues from USC recently even linked environmental justice to climate change, arguing that climate change does not affect everyone equally, and it is people of color and the poor who will be hurt the most” in The Climate Gap.

Environmental risks here in the U.S. pale in comparison to what happens in the developing world, often the dumping ground for wealthy nations. The LA Times recently dedicates space for two longer-than-usual editorials on the suit of Ecuadorean indigenous groups against Texaco/Chevron. The discovery of oil in the Amazonian region of Ecuador in the 1960s created an economic boom, but also led to horrible contamination:

Today, a swath of the Ecuadorean Amazon the size of Rhode Island remains contaminated beyond imagining. At one site after another, oil hangs in the air, slides on the water’s surface and saturates the land. Pipelines and waste pits left behind years ago still drip and ooze. Advocates for the plaintiffs have called the former Texaco concession area the “Amazon Chernobyl.” Were it in the United States, it would easily qualify as a Superfund site. Neither side in the case disputes the devastation, only who should pay for it. Chevron says it is the state-owned oil company’s responsibility; the plaintiffs say it is Chevron’s.

Secoya Indians living in the village of San Pablo remember the day the river ran black. Old men tell of oil rushing down the waters, engulfing everything in its path and staining the banks. Then came the dead fish, floating on the surface. The people, however, continued to eat the fish, bathe in the water and use it for their cooking. They didn’t know any better.

The suit originated against Texaco but Chevron is now the defendant due to a merger.   Formerly in collusion with oil companies, the Ecuadorean government and courts now are more disposed to support the indigenous communities.  A verdict will come soon on this case, but the ultimate verdict on the links between a globalized economy, climate change and social justice is far from being settled.

Housing and inequality

Our housing-market-implosion-induced financial meltdown has prompted a rethinking by increasing numbers of researchers and policymakers of how we approach housing policy in the U.S. The concerns and implications are both personal and societal. Much of the angst has arisen from the stratospheric increase in home mortgage delinquencies and foreclosures. A recent NY Times feature series traces the sad tale of one short cul-de-sac in Moreno Valley, California, where “over the last two years, half of Beth Court has been in foreclosure, and homes whose owners took out thousands of dollars in equity during the bonanza years are now worth less than half the price paid for them.”

Probably like most everyone, I personally know people who have lost their homes or are at serious risk of doing so. Besides the obvious financial drain, there are social and emotional costs of losing a home and having to move. The consequences are not just personal, of course, as declining property values mean reduced property tax revenue for local governments and the credit meltdown contributes to rising unemployment and overall insecurity in financial markets: a truly vicious cycle.

What surprised me most during the early stages of the meltdown was the, well, surprise with which policymakers, economic and financial “experts,” and the media reacted. It wasn’t as if plenty of researchers, analysts, activists and even some policymakers hadn’t been sounding alarm bells about the dangers of the housing boom. Even my 2004 dissertation highlighted the dangers of subprime lending for minority and low-income communities (further evidence that no one besides those who have to read those things…).

Now that things have (hopefully) stabilized somewhat, some are questioning whether the American-Dreamy promotion and prioritization of home ownership is in the best interest of society. U Penn Historian and Sociologist Thomas Sugrue had an interesting piece in the Wall Street Journal titled, “The New American Dream: Renting.” Sugrue traces how home ownership became so intertwined with American mythology:

The story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It’s not the story of the inexorable march of the free market. It’s a different kind of American story, of government, financial regulation, and taxation.

We are a nation of homeowners and home-speculators because of Uncle Sam.

The mortgage interest tax deduction has helped subsidize increasing home ownership rates and suburbanization in the U.S., but also costs the federal government tens of billions of dollars in revenue. In a 2005 article in Shelterforce, Peter Dreier highlights the disparities in how homeowners and renters fare in help from the government:

Of the hundreds of tax breaks (what economists call “tax expenditures”) for corporations and individuals in the nation’s tax code, the largest are the subsidies for homeowners. The two major homeowner tax breaks cost the federal government almost $90 billion last year – $70.1 billion for the mortgage interest deduction and $19.3 billion for the property tax deduction – according to a report by the Congressional Joint Committee on Taxation. That would be ok if most of it helped middle- and working-class people. But it doesn’t. Those with the highest incomes and the most expensive homes (including second homes) get the largest subsidy.

Most Americans think that federal housing assistance is a poor people’s program. In fact, less than one-fourth of all low-income Americans (those who have Section 8 rental vouchers or who live in government-assisted developments) receive federal housing subsidies. In contrast, almost two-thirds of wealthy Americans – many living in mansions – get housing aid from Washington.

Even the sacred cow of mortgage deduction has come under attack and been subjected to possible revision by the federal government. Even though, having bought a town home several years ago, I benefit greatly from this federal subsidy, I have to agree with Thomas Sugrue that “if there’s one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic.” Or, I might add, at least make access to it a little more equal.

Criminalizing poverty

A recent op-ed by Barbara Ehrenreich asks, “Is It Now a Crime to Be Poor?” In her engaging style, Ehrenreich tells the story of how a man who is “an ordained minister and does not drink, do drugs or curse in front of ladies” was arrested taken from a homeless shelter and put in jail because there was a warrant out for him for sleeping on a sidewalk. Several cities have made it a crime to give out food to the homeless in public parks. As she explains, we create systems that make it impossible for the poor to advance and then punish them:

The pattern is to curtail financing for services that might help the poor while ramping up law enforcement: starve school and public transportation budgets, then make truancy illegal. Shut down public housing, then make it a crime to be homeless. Be sure to harass street vendors when there are few other opportunities for employment. The experience of the poor, and especially poor minorities, comes to resemble that of a rat in a cage scrambling to avoid erratically administered electric shocks.

We certainly see this how we treat the homeless in our society. A recent report called “Homes Not Handcuffs” highlights the fact that cities across the nation are creating punitive measure against the homeless (e.g. for sitting or sleeping in public places) without providing adequate shelter or places to live. Overall, 4 out of 10 homeless persons in the U.S. are “unsheltered.” In Los Angeles, 8 out of 10 are unsheltered, partly explaining why the report listed the City of Angels as the “meanest city” toward the homeless.

Politics, politics…and who always loses?

Have you heard the one about the origin of the word, “politics?”   It comes from “poly,” which means many, and “tics,” those blood-sucking parasites…..

I tell you, I get back from a trip overseas for a couple weeks and when I get back it seems like the crazies have taken over the political scene.  We have 47 million people without health insurance in this country and all some people seem to care about is old, tired baggage about “socialized medicine”  and using any scare tactics necessary to make President Obama and the Democrats look bad.  It’s really just disgusting.  I’m personally ok with my health insurance, but I think it’s immoral for a rich country like the U.S. to not provide coverage for everyone. As usual, it’s the poor – and in this case uninsured – who don’t have a seat at the table and are thus left out of the equation.

One of the few sane voices I heard on the radio today was that of Wendell Potter, formerly a communications executive at two major health insurance companies and now a repentant advocate for health care reform (talk about a conversion experience).  Check out the interviews with him and testimony he’s given before congress.