Linked to the police brutality debate is concern over broader inequality. Is ‘big government’ to blame?
A block of abandoned homes is seen in East Baltimore in 2012. Protests against police brutality, like those in Baltimore, have taken particular hold in places struggling with socioeconomic inequalities.
With Baltimore becoming the latest city to draw national scrutiny after allegations of police brutality, conservatives are arguing the city’s long-standing poverty is an indictment of the public assistance programs it has championed for decades.
Rep. Paul Ryan, the Wisconsin Republican who heads the House Budget Committee and has long been an advocate of dialing back entitlement programs, was the latest on the right to connect the current unrest in Baltimore to what he sees as the failure of big government to eradicate poverty.
“We just did 50 years of the War on Poverty. We spent trillions of dollars and we still have 45 million people living in poverty. Deep poverty is among the highest on record,” Ryan said Thursday, when asked by a reporter at a breakfast sponsored by The Christian Science Monitor to comment on the focus the Baltimore protests have brought to public investment in cities.
“We need to do another round of welfare reform – not as an exercise to save money, but as an exercise to save lives and to get people from welfare to work,” Ryan later added.
Riots broke out in Baltimore following the death of Freddie Gray, who suffered a severe spinal injury while in police custody and en route to booking last month. On Friday, Baltimore City State’s Attorney Marilyn Mosby announced a slew of charges – including second-degree depraved-heart murder, involuntary manslaughter and assault – against the various officers involved in Gray’s arrest and transport.Gray’s was but the latest in a string of high-profile deaths of unarmed citizens at officers’ hands, which have prompted a broader debate over policing and race in the U.S. However, many see the outrage being driven in part by socioeconomic inequalities, particularly affecting communities of color. Thus the role of social welfare programs has entered the conversation.
“There’s so much untapped potential in this country among our nation’s poor that we need to help figure out how to tap that potential, team up, partner, collaborate, and what I would call have bottom-up, organic, grass-roots, poverty-fighting strategies,” Ryan said. “Because this top-down, one-size-fits-all bureaucratized approach isn’t working.”
Over at National Review, Michael Tanner, a senior fellow at the libertarian Cato Institute, wrote that “big government has failed Baltimore” and argued that “if we learn nothing from what just happened – if we simply go back to throwing money at the same tired old programs – it will be just a matter of time until this happens all over again.”
Meanwhile, a Republican state lawmaker in Maryland entertained the idea of withholding public nutritional assistance from the parents of young people involved in looting during the protests.
“I think that you could make the case that there is a failure to do proper parenting and allowing this stuff to happen: Is there an opportunity for a month to take away your food stamps?” Patrick McDonough said on a radio show in response to a caller offering the idea.
The facts in Baltimore, however, don’t easily fit the national narrative. Some have pointed out that the rioting occurred mainly among high schoolers, who may have been encouraged by social media to imitate a movie, “The Purge,” in which crime is legalized for a 12-hour period. Following the initial violent melee, a number of peaceful protests were organized featuring local Baltimore celebrities and community activists who attempted to separate themselves from the group branded as “thugs” by the city’s African-American mayor, Stephanie Rawlings-Blake.
The comments of conservatives come as a number of states already have been considering changes to their welfare regulations. As the country slowly pulls itself out of the Great Recession, welfare critics argue that the persistent dependence on public assistance programs like Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program (more commonly known as food stamps) are evidence that the current systems aren’t effective in lifting families out of poverty.
Federal lawmakers also are considering a budget that would cut funding to government housing programs meant to revitalize cities like Baltimore, Politico reported Thursday.
Protests against police brutality have taken hold particularly in places where poverty and unemployment rates are high, suggesting that socioeconomic inequality exacerbates tensions with law enforcement and also fuels the unrest.In Baltimore, poverty rates soar where African-Americans are concentrated. The neighborhood where Gray grew up is 96.6 percent African-American and has an unemployment rate of 24 percent, compared with 8.2 percent in the wider city and 5.5 percent nationwide, according to a report cited by Al Jazeera.The medium household income for a white family in Baltimore is nearly double that of a black family,census data collected by CNN shows.
These disparities occur in a place that has become an emblem for “decades of big-government liberalism,” as Tanner put it, and which also has a long history of African-Americans participating at the highest levels of city government.
He noted that even as the state is among the most generous in the country in the welfare benefits it offers, the poverty rate in Baltimore has increased from 10 percent in 1960 to nearly a quarter now.
“While some of the increase since then is a result of demographic and other structural changes, we’ve clearly been throwing a lot of money at poverty in the city without much result,” he wrote.
But Stefanie Deluca, a professor of sociology at Johns Hopkins University who has studied poverty in the field in Baltimore, says recent media coverage of the economic conditions in Baltimore doesn’t capture the way low-income families are living and how they are using their benefits.
“It gives the impression that the extreme is the norm, and it makes it difficult [to see] that poor families and their children want what everyone wants,” she says. Little attention is paid to the more “boring aspects” of everyday life for poor families when the focus is on isolated incidents of violence and looting, she says.
“You have this narrative that all the families in the community and all their children are like this,” she says, adding that criticisms of welfare programs distract from problems related to housing segregation, lack of employment opportunities and the criminal justice system.
Republicans would like to see states have more flexibility in how they implement federally funded assistance programs; Ryan’s most recent anti-poverty plan would do so by consolidating various government programs into single block grants for states. Conservatives would also like to bulk up some of the work requirements put in place through the welfare overhauls enacted in the 1990s under the Democratic administration of Bill Clinton.
“We had some success in reducing poverty and helping people get into work with welfare reform,” says Richard Doar, a fellow in poverty studies at the American Enterprise Institute, a free-market think tank. “I don’t think we have had the success with Great Society programs that are more based on entitlement.”
He says some entitlement programs continue to disincentivize work.
There indeed is debate over whether the entitlement programs enacted under President Lyndon Johnson’s Great Society were effective in reducing poverty. A report by Ryan’s Budget Committee staff points out that the official poverty rate has inched down by only about 2 percent in the last 50 years, despite hundreds of billions of dollars spent by the government on welfare annually.
However, a 2013 Columbia University study incorporating a different measure of poverty suggests that tax credits, food stamps and other government welfare programs brought down the poverty rate by 40 percent since the late 1960s. Children and the elderly in particular have benefited from the social safety net, though working adults continued to struggle at similar rates.
“What has become dramatically clear is that actually helping people put food on the table and meeting their most basic needs does help children succeed,” says Arloc Sherman, a fellow at the Center on Budget and Policy Priorities, a progressive think tank.
Research also has shown the federal food assistance program has not only improved children’s short-term prospects, but had a positive economic and health impact on their lives over many years as well. However, the success of nutrition benefits hasn’t been able to counteract the rise in extreme poverty among the groups most affected by the 1990s welfare reforms, as shown by a National Poverty Center study.
Other experts say attempts to make welfare programs more effective will continue to be hindered by a labor landscape in which many in the workforce still struggle to make a living wage, an issue that’s been the target of campaigns like Fight for $15.
Robert Barbera, co-director of Johns Hopkins’ Center for Financial Economics, points to a recent studythat shows 73 percent of recipients of public assistance nationally belong to households in which at least one member works, often in industries known to pay low wages. More than half of fast-food workers receive public assistance; the portion of child care and home care workers that depend on benefits is almost as high, according to work done by researchers with the University of California-Berkeley’s Center for Labor Research and Education.
“I too agree that Medicaid and food stamps are bad news,” Barbera says. “But if you had the same person getting their compensation from their employer rather than government, they would be feeling a lot better about themselves.”
Unfortunately, as a nation we continue to exercise the same failed initiatives to address poverty with a myriad of welfare programs funded by taxpayer incomes redistributed as the funding source. It unsurprisingly builds resentment and pits those who see themselves as contributing to society and paying their own way as they support themselves and their families against those seen as freeloaders who expect society to take care of them.
The ONLY solution to this dilemma is to ensure absolute equal opportunity to earn income by contributing to society. The reality is that fundamentally, economic value is created through human and non-human contributions––the human and non-human productive inputs. The human factor is, of course, all forms of labor exercised through jobs. The non-human factor is the result of human ingenuity that creates technological change, making tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The role of physical productive capital, the non-human factor, is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets.
While productive capital always serves to do ever more of the work, the solution most often advocated is to create jobs. Yet full employment is not an objective of businesses, which people rely upon to provide jobs. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.
Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.
Today’s techniques of finance are designed to make the rich richer by financing the acquisition of ALL capital asset growth by an already wealthy ownership class. None are designed to make the poor richer. That’s why the poor are poor. The reason they are poor is because they do not have viable capital ownership. Thus, we need to focus on revising today’s techniques of finance to broaden capital ownership.
The purpose of production in a market economy is the consumption of products and services by the consumers who make up the economy. But without income, the non-capital ownership class, the 99 percenters, cannot afford to purchase the products and services they desire. But when incomes rise among consumers who have the need and desire to improve their material standard of living, the market demand for products and services strengthens, which in turn increases production and results in a growth economy that, as a byproduct, creates REAL jobs, not the government style make-work that has become so prominent.
Abraham Lincoln said that the purpose of government is to do for people what they cannot do for themselves. Government also should serve to keep people from hurting themselves and to restrain man’s greed, which otherwise cannot be self-controlled. Anyone who seeks to own productive power that they cannot or won’t use for consumption are beggaring their neighbor––the equivalency of mass murder––the impact of concentrated capital ownership.
The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
We cannot balance the budget without cutting out coerced taxpayer-dependent redistribution of the earnings of capital owners contributing their “tools,” which if we did at this juncture would collapse the economy and ruin lives, resulting in social strife, personal suffering and degradation, the erosion of freedom, and ultimately anarchy, which will bring on totalitarian government. While welfare, private charity, boondoggle employment and other redistribution measures are now seen as necessary, they do not have to be sustained indefinitely. There are policies that can be adopted and executed to reverse the ultimate direction of collapse of the American market economy system. Such policies are based on the recognition that as the production of products and services changes from labor intensive to capital intensive, the way in which every human being––not just a few, but every person––earns his or her income must change in the same way. At the core of this quiet revolution is the understanding and commitment to broadening the ownership of productive capital.
Economic democracy has yet to be tried. We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.
The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly—if at all—and at a livable earnings level, that the value of their homes will rebound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital owners contributing their “tools,” as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone, as President Obama stated, “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” The REAL solution is to build an economy of universally productive individuals and households through broadened wealth-creating, income-producing capital ownership.
Binary economics and the various credit mechanisms derived from its understanding are not “socialist” or “communist” solutions but are based on the principles and dynamics of a free market economy. When understood, the current system is exposed as a system rigged to continually concentrate the ownership of capital in the 1 to 5 percent of the population. Also exposed are the dire moral implications of the current system, which is presently propelled by greed in our society. A new system that would ensure equal opportunity for every child, woman, and man to acquire productive capital with the earnings of capital and broaden its ownership universally does not require people to be any better than they presently are, but it does enable our society to leverage both greed and generosity in a way that honestly recognizes and harnesses productive capital as the factor that exponentially produces the wealth in a technologically advanced society.
The resulting impact of our current approaches has been plutocratic government and concentration of capital ownership, which denies every citizen his or her pursuit of economic happiness (property). Market-sourced income (through concentrated capital ownership) has concentrated in individuals and families who will not recycle it back through the market as payment for consumer products and services. They already have most of what they want and need so they invest their excess in new productive power, making them richer and richer through greater capital ownership. This is the source of the distributional bottleneck that makes the private property, market economy ever more dysfunctional. The symptoms of dysfunction are capital ownership concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the 99 percent majority of people who depend entirely on wages from their labor or welfare and cannot survive more than a week or two without a paycheck. The production side of the economy is under-nourished and hobbled as a result.
While Americans believe in political democracy, political democracy will not work without a property-based free market system of economic democracy. The system is the problem, but it can and must be overhauled. The two prerequisites are political power, which is the power to make, interpret, administer, and enforce laws, and economic power, the power to produce products and services, whether through labor power or productive capital.
Binary economist Louis Kelso wrote: “In the distribution of social power, whether it be political power or economic power, all things are relative. The essence of economic democracy lies in the elimination of differences of earning power resulting from denial of equality of economic opportunity, particularly equal access to capital credit. Differences of economic status resulting from differences in advantages taken and uses made of differences based on inequality of economic opportunity, particularly those that give access to capital credit to the already capitalized and deny it to the non- or -undercapitalized, are flagrant violations of the constitutional rights of citizens in a democracy.”
We need to reevaluate our tax and central banking institutions, as well as, labor and welfare laws. We need to innovate in such ways that we lower the barriers to equal economic opportunity and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, every citizen can begin to accumulate a viable capital estate without having to take away from those who now own by using the tax system to redistribute the income of capital workers. What the “haves” do lose is the productive capital ownership monopoly they enjoy under the present unjust system. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”
