Poverty among plenty -- and it's getting worse


Check out the news this week:

The Associate Press reports that there are increasing numbers of homeless and poor people in Silicon Valley. The piece almost sounds like something I would write:

Simply put, while the ultra-rich are getting even richer, record numbers of Silicon Valley residents are slipping into poverty. "In the midst of a national economic recovery led by Silicon Valley's resurgence, as measured by corporate profits and record stock prices, something strange is going on in the Valley itself. Most people are getting poorer," said Cindy Chavez, executive director of San Jose-based Working Partnerships USA, a nonprofit advocating for affordable housing, higher minimum wages and access to health care.

That will come as no surprise to people who lived through the last tech boom in San Francisco and are struggling to live through this one. Great wealth does not trickle down around here; it sucks up housing, drives up costs, and creates homelessness and poverty for the most vulnerable:

The causes for the growing disparity are complex, but largely come down to one thing: a very high cost of living. The median home price is $550,000, and rents average just under $2,000 a month for a two-bedroom apartment in this region that is home to many of the nation's wealthiest companies including Facebook, Apple Inc., Hewlett-Packard Co. and Google. For a family of four, just covering basic needs like rent, food, childcare and transportation comes to almost $90,000 a year, according to the nonprofit Insight Center for Community Economic Development. "The fact is that we have an economy now that's working well only for those at the very top," said Lawrence Mishel at the Economic Policy Institute in Washington, D.C. "Unless we adopt a new approach to economic policy, we're going to continue going down this path, which means growth that does not really benefit the great majority of people in this country."

Meanwhile, there’s a new study out, using a new approach to economic data, that shows that almost a quarter of all California residents live below the poverty line. The raw data, which is a bit thick, is here. There’s a state Senate report on it here. Sen. Leland Yee (D-SF) held a hearing on the data -- but uncovering the facts, while valuable, isn’t going to get anyone off the streets. And I don't understand why this isn't on the front page of every major newspaper in the state.

Before my trolls tell me that I hate the rich, let me repeat: I don’t hate anybody and I don’t blame rich people for what this country has created. That’s the fault of the policymakers who, since Ronald Reagan too office in 1981, have allowed the United States to embrace increasing social inequality.

Great wealth can make a country, well, wealthy. But if it’s allowed to stick entirely to the top, then if can do more harm than good.

And the reality is that, particularly in the South and the West, tax policy is designed to help the wealthy at the expense of the poor:

The fact is, the more the poor are taxed, the worse off they are, whether they are working or not. We all pay a huge price for this shortsightedness. Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net.

In other words, it’s not the Invisible Hand of Adam Smith causing the poverty in California. It’s not laziness that causes poor people to live on the streets. And it’s not just happening in San Francisco.

Now, some of the people who like to comment on this blog suggest that poor people just move somewhere else, that it’s too expensive to live in San Francisco and that’s just the way it is.

That's a bit of a harsh approach, and undermines the entire idea of a city as a community, where people of different income levels can live. But it’s also impractical; one of the reasons people come here, besides the weather and the scintillating level of intellectual dialogue (present company excluded) is that there are jobs here. Oh, and most poor people can' t just pack up, hire a moving van, relocate to another city, pay first and last month's rent, and live on savings until they find a new job.

There was a time when the federal government taxed great wealth, and used the money to invest in cities, building (and subsidizing) housing and infrasructure and funding jobs programs. Much of that is now gone; revenue sharing is a ghost of the past, eliminated in the Reagan era.

So now we have almost a parody of American economic news: The New York Times reports that the Dow Jones Industrial Average is setting new records, and on the same page notes that the numbers of homeless people and people living in poverty are also setting records.

This is by far the biggest issue, the most serious crisis, facing the country, and (unlike wealth) it trickles down to every level of government. And it seems as if nobody is paying attention.


Who are the 300,000 people killed by corporations each year?

Posted by Guest on Mar. 13, 2013 @ 3:18 pm

Ever heard of BP? Fukushima (or General Electric who designed those reactors?), Fracking? (the people killed drinking poisoned water), Mining operations? (29 killed in Virginia mine alone), Nuclear waste dumps leaching into ground water? The list goes on...


Posted by Guest on Mar. 13, 2013 @ 3:39 pm

If we thoughts that was a proble, we would not build cars, trains, planes, ships, factories, refineries, power stations etc. etc.

Posted by anon on Mar. 13, 2013 @ 4:49 pm

How many people have died? 300,000 sounds like a made up number. Do you have any evidence for this outlandish claim?

Posted by Guest on Mar. 13, 2013 @ 7:42 pm

Just as an example, there are 443,000 tobacco-related deaths PER YEAR, 85,000 deaths per year from alcholism, 80,000 pollution-related deaths per year, and 65,000 from work-related stress. And that's just the tip of the iceberg.


Posted by Guest on Mar. 14, 2013 @ 12:16 pm

Does it ever! Read all about in Matt Taibbi's latest piece Secrets and Lies of the Bailout:


Posted by Guest on Mar. 13, 2013 @ 3:24 pm

Just an isolated incident. Right.

Posted by Guest on Mar. 14, 2013 @ 11:21 am

Never happened before.

Posted by Anon on Mar. 14, 2013 @ 1:00 pm
Posted by Guest on Mar. 14, 2013 @ 1:31 pm
Posted by Anon on Mar. 14, 2013 @ 1:53 pm

But the result is the same: a shattered economy. There's nothing isolated about it, since it is generally caused by speculation and corruption by the financial elites. Right now, the bond bubble is close to popping. And when it does, it'll be far worse than the real estate bubble ever was.

Posted by Guest on Mar. 15, 2013 @ 12:26 pm

If you're not in the market, you cannot suffer investment losses.

Posted by Guest on Mar. 15, 2013 @ 2:10 pm

that's the best joke I've heard all day

Posted by Guest on Mar. 15, 2013 @ 2:18 pm

Nobody had been stupid enough to serialize mortgage loans so that they were taken off of banks' books before. That ruptured the implicit guarantees that historically governed underwriting.

Further, nobody had been stupid enough to wrap the entire abortion in hundreds of trillions of dollars in unsecured derivatives, a sort of economic nuclear booby trap, blatant blackmail, either we get bailed out or your economy explodes.

Posted by marcos on Mar. 15, 2013 @ 12:44 pm

Au contraire, it wasn't stupid at all. It was a calculated means of capitalizing on the ignorance of others, as a way of generating massive wealth before the bubble finally popped. This was preceded by a period of deregulation and intense lobbying that left the fox in charge of the chicken coop. To this day, no one has been prosecuted and the lax regulatory climate remains much the same as it was before the crash. I'd say they made out like bandits.

Posted by Guest on Mar. 15, 2013 @ 1:38 pm

It all depends on whether the gains (salary & options) are earned in an honest fashion (say, you work as a public defender, etc.) or derived from corrupt corporate practices. And whether you pay your fair share of taxes. But perhaps you are someone who kicks back and does nothing but collect rents, in which case you are just a slimy bottom feeder of the worst kind.

Posted by Guest on Mar. 12, 2013 @ 3:14 pm

determining anything. What you should instead be asking yourself is this. Does the fact that some people make 300k pa make you poorer, richer or make no difference at all?

The idea that the amount of money is constant and so that, if i have more, you must have less, is a myth.

Posted by anon on Mar. 12, 2013 @ 3:40 pm

You do realize that "someone who kick back and does nothing but collect rents" describes pretty much everyone who receives a pension, including all public employees. Just sayin...

Posted by Guest666 on Mar. 13, 2013 @ 12:31 pm
Posted by Guest on Mar. 13, 2013 @ 1:27 pm

Public employees and working hard. You don't see those together often

Posted by Guest on Mar. 13, 2013 @ 1:42 pm

Yes, they are hard at work at doing that.

Posted by Guest on Mar. 13, 2013 @ 2:00 pm

"With the recent spate of attacks on climate science and evolution it should not be a surprise that traditional defined benefit pensions in the public sector are now also under attack. There are powerful political actors in this country who are anxious to build a bridge back to the 19th century; taking us to a time where working people enjoyed few protections and could not count on sharing in the gains of economic growth.

"The effort to weaken or destroy public sector unions and take away their pensions is the latest battle in this larger war. As usual, the right has been busy making things up to push its agenda, confident that the media will not expose untrue claims.

"At the center of the right's story is the view that governments are somehow being reckless or irresponsible when they provide guaranteed pensions for their workers. They tell us that these guaranteed benefits will bankrupt state and local governments, imposing impossible burdens on future taxpayers.

"This story can be easily shown to be untrue. While the right has been scaring the public with talk of a trillion dollars in unfunded liability in state pensions, this sum can also be expressed as about 0.2 percent of state income over the time-frame in which the liabilities will have to be paid.

"In other words, if states raise 20 cents in taxes or cut 20 cents in other spending for every hundred dollars of future income, they will be able to meet their current pension obligations. This is not a trivial sum, but it doesn't seem likely to bankrupt our youth either."


Posted by Guest on Mar. 13, 2013 @ 2:18 pm

cheap municipal suit can live large?

Doesn't sound like a good deal to me.

Posted by anon on Mar. 13, 2013 @ 4:58 pm

You claim to "live large" (an inflated claim, no doubt), but still, why do you begrudge a schoolteacher or a cop a decent retirement? Especially when the average public worker draws a fairly modest retirement salary: A couple thousand per month. That's peanuts when you consider the cost of living in the bay area.

Posted by Guest on Mar. 14, 2013 @ 1:23 pm

being paid what the free market deems someone to be worth.

There is a problem with rigged markets, however.

Posted by Anon on Mar. 14, 2013 @ 1:55 pm

is a mistake the left accuses the right of doing. People who make a lot of money from salary and options are not corporations - they pay tax. A lot of it. Those in a lower tax bracket think there are all these tricks you can use to not pay tax on high salaries and options - there's not really. I generally pay around 40% of my income in income taxes even with itemization and more when I exercise options. And that doesn't include FICA or Medicare.

Posted by Lucretia Snapples on Mar. 12, 2013 @ 2:09 pm

lergely irrelevant anyway as it simply gets passed thru to their customers i.e. us.

Posted by anon on Mar. 12, 2013 @ 3:07 pm

because most profits are sheltered overseas then repatriated when enough government officials decide to allow a "tax holiday." Corporations do pay less tax than people - of that there is no doubt.

Posted by Lucretia Snapples on Mar. 12, 2013 @ 3:19 pm

for once, you're telling the truth

Posted by Guest on Mar. 12, 2013 @ 3:30 pm

overseas is precisely because of the high US corporate tax rates.

If the US reduced the rate of corporate tax, much of those profits would be repatriated, helping our domestic economy.

High taxes are a job killer.

Posted by anon on Mar. 12, 2013 @ 3:44 pm

The real job creators are working Americans who spend money and create demand. By contrast, the rich tend to hoard their money. Read on:

"Right now America's corporations are sitting on close to $2 trillion in cash that is not being used to build factories, create jobs, or anything else, but acts as an insurance policy for managers unwilling to take the risk of actually building the businesses they are paid so well to run. (That cash hoard, by the way, works out to nearly $13,000 per taxpaying household.)

"A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses who don't want to pay taxes to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes."


Posted by Guest on Mar. 13, 2013 @ 1:10 pm

while the general economy sucks. Corporate profits can do well even if many people are underpaid or out of work. Corporations only require enough people to be profitable - they do not have to employ everyone, and nor should they.

Posted by anon on Mar. 13, 2013 @ 4:59 pm

"A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses who don't want to pay taxes to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes."

If this was an actual quote in the EBX and wasn't clarified (I didn't follow the link), it's not very accurate on many levels.

1) If the business is subject to tax then it doesn't matter if anything is paid to the owners or reinvested in the business. Taxes are paid on net business income and neither dividends nor most reinvestments are an allowable expense.

2) Dividends have been taxed quite low in the past few years and most businesses (other than fast-growing high-tech and growth companies) have been biased towards paying out some of the net business income as dividends. The business owners (other than pension funds, university endowments, etc.) are taxed on the dividends distributed. Many companies paid out fairly large dividends this past December after it looked like dividend tax rates were headed higher. This turned out to be a great move for the shareholders of those companies that used this strategy.

3) Every financial decision has an "after-tax" impact. But I've never heard of any business evaluate simultaneously whether to pay dividends or hire more people. Any business manager who thought this way would be likely fired or demoted. Hiring people is based on whether the business needs them for growth. If the business is stable, there's no reason to hire new workers. Dividend paying is a completely separate analysis based on the cash available after operations and future investment needs.

I think economics must be like religion or politics or sports teams. Once committed to a particular viewpoint most rationality concerning opposing ideas flies out the window. Our rigid ideologies make it a difficult discussion and almost always unproductive. I'd be more impressed with the "left" if they could at least admit when they are a little unsure about certain concepts rather than spout off their ignorant opinions as fact.

Also, anyone who says "...a corporate tax rate..." is assuming the current method for taxing corporations is somehow fair or rational. If it's true that corporations have much more influence over politicians than regular voters, we should be leery of the assumption that the current corporate tax system is anywhere near fair or worth keeping.

Corporations are sitting on a lot of cash for many reasons. To prevent larger companies from swallowing them up. To make future acquisitions. To wait for cheaper tax rates.

As for day-to-day operations, most companies are thinking about how they can increase "revenue per employee," which usually means trying to get the same output with fewer people. Many companies in Silicon Valley are helping businesses across the globe do just that. Oracle became a behemoth mainly because its software allows companies to fire millions of back-office workers and instead use technology that can do the same jobs faster and more accurately at a fraction of the cost.

Posted by guest on Mar. 13, 2013 @ 5:30 pm

Guest, you said, "If the business is subject to tax then it doesn't matter if anything is paid to the owners or reinvested in the business. ... Dividends have been taxed quite low in the past few years ... Dividend paying is a completely separate analysis based on the cash available after operations and future investment needs."

Ever heard of the Reinvestments Tax Allowance"? How about the Dividends-received deduction (DRD)? That's a deduction of between 70% to 100%! Hardly "quite low", as you put it. (btw, I'd be more impressed with the "right" if you'd own up to that, at least.) And dividend paying is a normal part of operating expenses, part of the cost of running a Business. Now perhaps you can explain why the "right" is so ignorant about economics, if not downright duplicitous.

Posted by Economic Bullshit Detector on Mar. 14, 2013 @ 11:42 am

The DRD only applies to *corporations* that own a significant percentage of another corporation from which it receives dividends. The DRD doesn't apply to individual shareholders, pension funds, mutual funds, or hedge funds that ultimately own all of the top-level corporations. Besides, the DRD doesn't help the dividend *paying* corporation since the company is taxed on its annual net income and doesn't get any DRD deduction for dividends it PAYS to one of its corporate shareholders. The article mentioned a deduction for dividend payments, not dividend receipts. (ESOPs are of of the few exceptions for deducting dividends, but these entities are fairly rare.)

I qualified "reinvestments" by saying "most." It's true that if the corporation spends some of its current earnings on purchasing tangible property it may get a partial depreciation deduction in the current year. A small business may even get an immediate 100% tax write-off for reinvestment of tangible property up to certain dollar limits. But this deduction generally doesn't apply to the very large companies that account for much of the US and world's economic production activity. And no company will "reinvest" no matter if they get a tax deduction or not unless it makes economic sense. The article said the "reinvestment deduction" was a rationale for hiring more labor, and I questioned the veracity of that statement.

I stand by the basic assertion. Companies hire labor or make investments in new plant and equipment only if the labor or investment will bring additional growth and profits. But most companies are looking to reduce labor costs to boost profits, or shift production to lower labor cost locations. A high or low tax rate doesn't really change this basic calculus each business thinks about every day to determine if it should hire or fire workers, or move production to less costly locations if they're able depending on the business.

Posted by Guest on Mar. 14, 2013 @ 12:58 pm

Then why are firms like Twitter and Zynga so hell bent on getting tax breaks?

Posted by Guest on Mar. 15, 2013 @ 2:22 pm

Because "capitalism" and "greed" are synonyms.....

Posted by Troll Killer on Mar. 16, 2013 @ 9:19 am

Ahhh, "Revenue Sharing"
--haven't heard that in decades. I recall when Reagan chopped it up and tossed it overboard.
Nobody said a word. It was like being at a park when a mugging happens and everyone just looked the other way. That's because it was still the 1980's and everyone thought it didn't matter because we were all gonna be zillionaires someday.
I knew right then we were screwed.
...and the screwing never stopped except to bring in new screwers.

Posted by The Dude Abides on Mar. 12, 2013 @ 11:38 am

and profit sharing than every left-wing think tank added together. The model is almost Marxist in it's essence. Every worker gets a share of the profits, via bonuses and stock options (listed or putative).

The power hierarchy is incredibly flat comapred with any union-influenced "old school" business. Management is distributed and communication lines are lateral rather than hierarchical.

If Marx or Engels were alive today, they'd be management consultants in Silicon Valley, saying the same things but getting paid big bucks.

Posted by Guest on Mar. 12, 2013 @ 11:45 am

That's management speak, and their sorry game is the same as ever. It's all about union-busting.

Posted by Guest on Mar. 12, 2013 @ 1:41 pm

For the very simple reason that if you're holding stock options worth six or seven figures, why would you ever want a union in there redistributing it?

These days you mostly see unions in "rank and file" businesses where rote is still the order of the day.

Knowledge workers have no use for unions. Individuality trumps any such need.

Posted by anon on Mar. 12, 2013 @ 4:32 pm

Read on:

"Unions have called the electronics industry "unorganizable." Corporations like IBM, Hewlett-Packard, Intel and National Semiconductor told their workers for years that the company regarded them as a family and that they needed no union. Healthy bottom lines, they said, would guarantee rising living standards and secure jobs. Economists painted a picture of the electronics industry as a massive industrial engine fueling economic growth, benefiting workers and communities alike.

"The promises were worthless. Today, many of those giants of the industry own no factories at all, having sold them to contract manufacturers that build computers and make chips in locations from China to Hungary. In the factories that remain in the Valley, labor contractors like Manpower have become the formal employers, relieving the big brands of any responsibility for the workers who make the products bearing their labels.

"While living standards rise for a privileged elite at the top of the workforce, they've dropped for thousands of workers on the production line. Tens of thousands of workers have been dropped off the lines entirely, as production was moved out of the Valley to other states and countries. Companies long ago eliminated their no-layoff pledge. Permanent jobs became temporary and then disappeared entirely. The image of the clean industry was undermined by toxic contamination of the Valley's water supply and a high occurrence of chemically induced industrial illness.

"Despite these obstacles, however, for three decades Silicon Valley was as much a cauldron of new strategies for labor organizing as it was for corporate management of the workforce. Workers developed important tactics to oppose inhuman conditions."


Posted by Guest on Mar. 13, 2013 @ 12:18 pm

People who want to be in a union are generally those with no bargaining power, i.e. have skills that nobody wants or can get elsewhere more cheaply.

Thats why unions have beend eclining for 50 years. Irrelevant.

Posted by anon on Mar. 13, 2013 @ 5:01 pm

The decline of union was a result of McCarthyism and the rise of a right-wing corporate backlash against the working class between the 50s and the 70s. Then Reagan delivered the coup de grace with his unionbusting against the Patco strikers.

Posted by Guest on Mar. 14, 2013 @ 11:45 am

I let poor people stay in my unfinished basement for $20/night. The doors are locked from the outside every night at 9:00, and opened every morning at 5:00. No women, no children -- that's asking for trouble. Two buckets, marked #1 and #2, which is self-explanatory. I usually make $100 a day, tax-free, even though I don't really need the money.

Posted by Chromefields on Mar. 12, 2013 @ 12:39 pm

$100 to $150 a night, without depriving the poor of affordable housing, as I would never let a poor person live in one of my houses anyway. They cannot afford it.

Posted by Guest on Mar. 12, 2013 @ 12:58 pm

is most disappointed in you. Some day he'll get so angry that he'll actually read a book on basic economics.

Posted by Chromefields on Mar. 12, 2013 @ 1:05 pm

simply because other people are rich.

But there are structural impediments to him realizing that, or at least admitting that.

Posted by Guest on Mar. 12, 2013 @ 1:20 pm

Or if you just paid attention to some world-renowned, award-winning economists, you wouldn't be so pififully ignorant. If you care to educate yourself, read on:

"Emmanuel Saez and Thomas Piketty have spent the last decade tracking the incomes of the poor, the middle class and the rich in countries across the world. More than anything else, their work shows that the top earners in the United States have taken a bigger and bigger share of overall income over the last three decades, with inequality nearly as acute as it was before the Great Depression. [...]

"Mr. Saez, a professor at the University of California, Berkeley, has won the John Bates Clark Medal, an economic laurel considered second only to the Nobel, as well as a MacArthur Fellowship grant. Mr. Piketty, 40, of the Paris School of Economics, has won Le Monde’s prize for best young economist, among other awards.

"Both admire, even adore, the United States, they say, for its entrepreneurial drive, innovative spirit and, not least, its academic excellence: the two met while re-searchers in Cambridge, Mass. But both also express bewilderment over the current conversation about whether the wealthy, who have taken most of America’s income gains over the last 30 years, should be paying higher taxes.

“'The United States is getting accustomed to a completely crazy level of inequality,' Mr. Piketty said, with a degree of wonder. 'People say that reducing inequality is radical. I think that tolerating the level of inequality the United States tolerates is radical.'

"As much as Mr. Piketty’s and Mr. Saez’s work has informed the national debate over earnings and fairness, their proposed corrective remains far outside the bounds of polite political conversation: much, much higher top marginal tax rates on the rich, up to 50 percent, or 70 percent or even 90 percent, from the current top rate of 35 percent.”


Posted by Guest on Mar. 12, 2013 @ 2:07 pm

The fact that more inequality occurs does not in any way imply that the poor are poorer. They may in fact be better off even while the income gap increases.

Left-wing politics always focuses on envy of the rich without regard to whether the poor are in fact helped or hindered by wealth creation.

Posted by anon on Mar. 12, 2013 @ 3:05 pm