PART 2:Strategies in Todays Economy to Reduce Poverty:

A Presentation of the White Paper

January 7, 2015 New Year for Action, Winter Meeting,

Dana Point, California Jim Masters: CCAP, NCRT. jmasters@cencomfut.com

Allen Stansbury, Senior Associate. Allen@Stansbury.net Center for Community Futures

SEEKING A NEW APPROACH• Poverty is now Mainstream• America’s Frayed Safety-Net• 7 Trends to Watch • Partnership’s New Year for Action• Draft White Paper Discussion• Nation-wide Survey Questionnaire

POVERTY IS NOW MAINSTREAM

The Decline of Upward Mobility

Poverty and the US Economy• Poverty rates decline from its

high in 1959, on the upswing since 2005

• In 1969 the official government rate was 13.7%.

• In 1989 it was at 13.1%• In 2009 with the slide of the

middle class into poverty the rate was at 15%

• 2011 the poverty rate for women in 2011 was 16.9% and for children over 20%.

Poverty has become mainstream• Nearly 40 % of Americans between the

ages of 25 and 60 will experience at least one year below the official poverty line during that period ($23,492 for a family of four)

• 54 % will spend a year in poverty or near poverty (below 150 %of the poverty line).

• If related conditions like welfare use, near-poverty and unemployment were added, four out of five Americans will encounter one or more of these events.

• Half of all American children will at some point during their childhood reside in a household that uses food stamps for a period of time. Source: Wall Street Journal

Economic Insecurity continues to Grow At least 79% of all Americans between 25-60 will experience at least one year

of poverty in their lifetime.

Source: Chasing the American Dream: Understanding What Shapes Our Fortunes, Apr. 1, 2014by Mark Robert Rank , Thomas A. Hirschl , Kirk A. Foster

40 Years of Rising Economic Risk According to the research published in Chasing the American Dream: Understanding What Shapes Our Fortunes• Rising Economic Risk most

pronounced at ages 35-55• While the poverty rate of the last 40

years has not changed significantly but risk has risen

• There has been more turnover in the poverty population during the 90’s and 2000’s than in the 70’s and 80’s

Upward mobility in the 50 largest metro areas comparing the top 10 and the bottom 10 areas

Rank Location

Odds of Reaching Top 5th

Rank Location

Odds of Reaching Top 5th

Starting from Bottom Fifth Starting from Bottom Fifth

1 San Jose, CA 12.90% 41 Cleveland, OH 5.10%

2 San Francisco, CA 12.20% 42 St. Louis, MO 5.10%

3 Washington DC, DC 11.00% 43 Raleigh, NC 5.00%

4 Seattle, WA 10.90% 44 Jacksonville, FL 4.90%

5 Salt Lake City, UT 10.80% 45 Columbus, OH 4.90%

6 New York, NY 10.50% 46 Indianapolis, IN 4.90%

7 Boston, MA 10.50% 47 Dayton, OH 4.90%

8 San Diego, CA 10.40% 48 Atlanta, GA 4.50%

9 Newark, NJ 10.20% 49 Milwaukee, WI 4.50%

10 Manchester, NH 10.00% 50 Charlotte, NC 4.40%

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Source: NBER-Where Is The Land Of Opportunity? The Geography Of Intergenerational Mobility In The United States

Social Mobility in the US Less Likely When Born to a Lower Income

Source: Brookings Institute Saving Horatio Alger

America’s Frayed Safety Net

Declining Support of the National Safety Net

America’s Frayed Safety-Net• SNAP: November 2013, food benefits were cut for approximately 48

million an average of 7 %, costing the typical recipient about $9 a month. March 2014 another round of cuts impacting 10%. FY 2013 76 million vs FY2014 70 million benefited from SNAP.

• Unemployment Insurance: January 2014, 1.3 million jobless workers stop receiving an unemployment check, after Congress’s refusal to prolong the extension of emergency jobless benefits to up to 73 weeks, from 26. While unemployment rates have trended downward significantly, more are no longer seeking work.

• Affordable Care Act. Despite its success of registering a significant number who did not have health care insurance in 2013, states and members of congress war against the program continues unabated.

• Temporary Assistance for Needy Families (TANF) Despite a decline of 60% in its case load since 1998, it is positioned as a disincentive to finding work.

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Trends in Unemployment Rate and Employment- Population Ratio 2000-2014

12Source: Federal Reserve Economic Data

Declining Areas in the Safety Net

Monthly Participation in the SNAP food stamp program 1990-2012 actual

and 2012-2020 projected

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7 Emerging Trends to Watch Impacting Low-Income Communities

Some Good News:1. Workers in 21 states will see the minimum wage rise in 2015,

– Improving wages of 7 million workers, – By end of 2016 29 states will have minimum wages above the federal minimum, – Overall will generate $838 million in new economic growth. – But, 3.3 million still are at or below minimum rates.

2. Potential wage-salary increases as labor market tightens.3. As more low-income gain access to health care - health costs will be more contained (see

graphic)However:4. Will the long-term unemployed , those who have been out of work six months or longer,

successfully transition into new jobs?5. Without changes to tax code, most likely, inequality will continue to worsen6. More automation and big data continues – less manual labor, greater demand for

technical knowledge and skills.7. Inflation continues to moderate – but will oil prices remain below normal? Will the US

economy slide into stagflation?

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Some Possible Long Term Trends 1. Increase in Federal Reserve Bank interest

rates-possible damping of business and consumer spending

2. Further reduction of trade barriers – Two major treaties are in negotiation (Atlantic and Pacific Rim)

3. Immigration Reform can lead to a younger workforce that can sustain the current pension levels of retiring baby boomers

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Obamacare on the Road to Success:Spreading Health Care Costs and Capped Admin Costs• More than 11 million previously uninsured Americans are now covered by a health care plan, • Nearly half of them Medicaid recipients at the bottom of the economic ladder. • Another 16 million Americans who were previously insured also signed up • Many with substandard plans that were upgraded as a result of the A.C.A.

The Partnership’s Year for Action

Strategies to Change the Landscape

Selected Anti-Poverty Strategies

1. Inequality: Piketty, Stiglitz, and Reich2. Center for American Progress: “Half in Ten”

Campaign 3. Economic Policy Institute 4. New American Foundation5. Tax Reform Strategies

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2020

Piketty “solution” to inequality

• Global wealth tax– Inherited wealth– Top incomes– Capital gains

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Stiglitz: Least Equal Opportunity• America has become the country with

the least equality of opportunity of any of the advanced industrial countries.

• That means children that are born of poor parents or poorly educated parents are not living up to their opportunities.

• We’re wasting our most valuable asset – our human resources.

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Stiglitz: A Tax System Stacked Against the 99 Percent• “The richest 400 individual taxpayers, pay less than 20

percent of their income in taxes — far lower than mere millionaires, who pay about 25 percent of their income in taxes, and about the same as those earning a mere $200,000 to $500,000.

• “In 2009, 116 of the top 400 earners — almost a third — paid less than 15 percent of their income in taxes.”

• “… as the top 1 percent has grown extremely rich, the effective tax rates they pay have markedly decreased.

• “Tax fairness has gotten much worse in the 30 years since the Reagan “revolution” of the 1980s.”

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Reich: “The Poor are… US”• “Now, a significant percentage of the poor are working but not earning enough to

get themselves and their families out of poverty. • And a growing portion of the middle class finds itself in the same place - often in

part-time or temporary positions or in contract work.”• “…sudden and unexpected poverty has become a real possibility for almost

everyone these days. And there's little margin of safety. • “With the real median household income continuing to drop, 65 percent of

working families are living from paycheck to paycheck.• “Race is no longer a dividing line, either. According to Census Bureau numbers,

two-thirds of those below the poverty line at any given point identify themselves as white.

• “This new face of poverty - a face that's both poor, near-poor and precarious working middle class and simultaneously black, Latino and white - renders the divide-and-conquer strategy obsolete.

• Now most people are now on the same losing side of the divide. • Since the start of the recovery, 95 percent of the economy's gains have gone to

the top 1 percent.23

“Half in Ten” Campaign Success Stories:• Child Care• Food and Nutrition • Education• Health • Housing• Income Assistance• Jobs training• Low-income tax credits• WIC• Unemployment Insurance• Minimum wage

Call to Action July 21, 2014 Re: New House Child Tax Credit Bill Leaves Behind Millions of Low-Income Working Families• While it permanently extends the Child Tax Credit

higher up the income scale so more families with six-figure incomes will benefit.

• It fails to make permanent the 2009 reduction in the CTC’s earnings threshold, set to expire at the end of 2017.

• If this provision expires, a single mother with two children who works full time throughout the year at the minimum wage and earns $14,500 would lose her full CTC of $1,725 in 2018.

• It indexes the current maximum credit of $1,000 per child to inflation. This provision would not help most working families with low or moderate incomes, because it benefits only those with incomes high enough to receive the maximum credit.

Economic Policy Institute (www.EPI.org)

Issues Focus:• Labor Laws – Examples– Extend Unemployment Benefits -

State Cuts to Jobless Benefits – Tipped Workers and Minimum Wage (by the end of 2015

29 states will have increased their minimum wage)• Tax Credits –Examples– The Earned Income Tax Credit – Child Tax Credit

• Immigration reform - Example– Overloaded Immigration Courts

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New American FoundationAsset Building Program: issues and papers • Children's Savings Accounts• Solving the Retirement Puzzle• Rebalancing the Scales• The Financial Health Check• Connecting Tax Time to Financial Security

California Civic Innovation Project technology to influence local government • “Public Pathways: A Guide to Online Engagement Tools for Local Governments

Economic Growth Program research papers such as: • The Wizard of Jobs a US labor status report on the first 6 months of 2014 and its continued jobs

slump. • America's Debt Problem discusses the impact on middle and low income classes due to excessive

private debt and its consequences. • Pay More, Get Less that takes a look at the cost of health, medical, education, basic financial

services and communications

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Tax Reform Strategies

• Background• Simplification and Tax Reform Measures• Reform of the Tax Expenditure System

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Tax Reform - Background• Last overhauled of the federal tax code: 1986• Tax Cuts, i.e. lowering of capital gains to 15% have

benefited the wealthy, however• Middle and Low Income have been hit by increased

“payroll” taxes• Tax reform is the best way to tackle “income inequality”• One tax reform strategy: raising taxes on high-income

earners and corporations to pay for expanded benefits to low-income Americans.

• Second alternative: classic tax reform of “broaden the base, lower the rates.”

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Tax Reform and SimplificationThree recommendations for reform and simplification: • National Commission on Fiscal Responsibility and

Reform Simpson-Bowles 6 Part Budget Plan• Urban and Brookings Institute Tax Policy Center • US Senate Committee on Finance Tax Reform List• Reform of The

Distribution of Major Tax Expenditures in the Individual Income Tax System

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Recommended Reading

Website References

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Please visit our Blog Site: Decline of the US Middle Class, America’s New Working Poorhttp://declineofusmiddleclass.blogspot.com/?view=sidebar

Learning Communities Resource Center Contacts

• Denise Harlow – CEO dharlow@communityactionpartnership.com, 202-595-0660

• Barbara Ledyard – Project Director, Learning Communities Resource Centerbledyard@communityactionpartnership.com, 202-449-9775

• Sonji Dawson Johnson – Program Specialistsjohnson@communityactionpartnership.com, 202-769-5524

• Cashin Yiu – Program and Event Coordinatorcyiu@communityactionpartnership.com, 202-683-9090

This publication was created by the National Association of Community Action Agencies – Community Action Partnership, in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Grant Number 90ET0436. Any opinion,

findings, and conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

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