January 2016

New Mexico Can Do Better

Fred Harris

Unlike the nation or the states that surround New Mexico, our state is a long way from “recovery” from the recent Great Recession. And there is a lot we must do about that. New Mexico needs a jump-start!

But first, we must put New Mexico’s situation into context and deal with the fact that the national economic recovery itself has been dramatically uneven. There is a terrible—and worsening—inequality of income in this country.

Here’s a quick recitation of today’s bald facts:
For the three decades after WWII, the top 1 percent of American earners got between 9 and 10 per cent of total income; now, that figure is 20 percent.

The top 20 percent of American earners now get one-half of total income, the bottom 20 percent, get 3.2 per cent.

Since the recent Great Recession, the top 1 percent of earners has captured a whopping 95 percent of all income gains in this country.

The result of all this? Comparing the incomes of the richest 10 percent of the people with the poorest 40 percent, the United States ranks 44th out of 86 countries, well below every other developed country in the world and even one spot below Nigeria, for goodness sake!

How did things get this bad? One cause may not be so obvious: new technology. A lot of the old blue-collar jobs that used to put—and keep—American workers in the middle class don’t exist anymore.

But other causes of our serious income inequality are quite obvious. We’ve cut taxes for rich people and corporations. And while CEO compensation has skyrocketed, worker’s wages have stagnated or fallen, one reason being that the portion of American labor represented by unions has sunk to only 11 percent—and just 7 percent of private jobs.

Most American workers have no union to fight for them, and they are unable themselves to make demands for fear their employers would turn their jobs over to some of the great numbers of unemployed people who are willing to take a job at almost any wage—the median wage having stagnated since 2000 and, for the lower one-fifth, having declined 4.5 percent. American workers should have been protected by the federal minimum wage, but they weren’t because the federal minimum wage, with inflation, had lost much of its purchasing power and had become more of a ceiling than a floor, and Republicans in Congress blocked any action that would have brought it up to date and kept it current.

We’ve shipped a lot of American jobs overseas to unbelievably low-wage countries. Tax subsidies have actually encouraged this flight. Free trade agreements have allowed our own runaway plants, as well as indigenous local foreign-country industry, to penetrate America’s great market with goods, the lower prices for which result from the fact that they are, in effect, subsidized by the home country through a low-wage system and a lack of environmental controls that come nowhere near matching our own. This unfairly competitive pressure has put a lot of American workers out of jobs here at home and has held down, or depressed, the wages of those who still have jobs here.

We took important federal safeguard regulation off the big banks and the financial industry, and many of them crashed, taking the rest of us with them and precipitating the recent Great Recession.

Finally, when our national economy was in desperate need of jump-start stimulus, President Obama couldn’t get enough of it out of Congress—and still can’t.

What difference does it make that we have so much inequality of income and so much poverty in America—aside from the great harm it means for so many real people (a pretty big “aside”)?

America’s middle class has shrunk and shrunk even more, as so many millions of our people have fallen out, or have been forced out, of the middle class and into poverty, while the ranks of the rich have swollen. Most authorities think it is difficult to even have a true democracy without a large and stable middle class. Economic power translates into political power. Daniel Webster said that if we’re to preserve our kind of democratic system, no person should be so rich as to be able to buy other people, and no person should be so poor as to have to sell. Think of the rich and archly right-wing Koch brothers or the giant corporations whom the U.S. Supreme Court has said are “people,” with freedom of speech and, therefore, who cannot be limited in how much they can spend of their special-interest money in political campaigns.

Our widening inequality of income suppresses economic growth. Why? It’s middle-class people—if we still had them all—who would spend more of their income than rich people. But, as Nobel economist Joseph Stiglitz has written, “Our middle class is too weak to support the consumer spending that has historically driven our economic growth.”

Rich people live longer than poor people because of material and social conditions and the fact that they get more food and better nutrition and medical care. Talking about the top and bottom 10 percent in this country, in the 1980s, rich people lived an average 2.8 years longer than poor people. By the 1990s, that gap had nearly doubled, to 4.8 years, and it’s continued to grow since then.

Income inequality produces education inequality. This starts early. Children from low socioeconomic families begin kindergarten more than a year behind children of college graduates. And nine years later, that gap will have grown by one-half to two-thirds. These kids are far less likely to go to college. And speaking of higher education, of people born in America in the 1960s, 5 percent of poor people went to college and 36 percent of rich people did. One generation later, of people born around 1980, the number of rich people going to college jumped by 20 percent, while the number of poor people doing so grew by only 3 percent. Just 30 percent of American adults today have a higher level of education than their parents did.

Between 1979 and 2012, the annual gap between what an American family with two college graduates and a family of high school graduates make grew by $30,000 after inflation. So, it’s a cycle. Since those with more and better education wind up earning more, inequality of income produces inequality of education, and, in turn, inequality of education produces more inequality of income.


What is to be done?

The major causes of income inequality are obvious, and so are most of the major solutions: a more progressive tax system; making rich people and giant corporations pay more of their fair share; stopping tax and spending subsidies that now redistribute wealth and income in the wrong direction; strengthening unions and eliminating the legal and other barriers that now impede the organization of America’s workers; and raising the federal minimum wage. Consider: Raising the federal minimum wage to just $10.10, as President Obama has proposed, would give 30 million American workers a total increase of $51 billion in new income, which would also be a giant boost to the nation’s economy, while at the same time cutting billions of dollars in federal safety-net programs. And raising the minimum wage would not just help the working poor; it would bump up the wages of the middle class, as well.

We need reregulation of big banks and big finance, more stimulus, and jobs, jobs, jobs. We also need more investments in ourselves; that is, investments that will help right now and also bring about sustained and permanent economic growth, investments in education (especially early-childhood education), and investments in training, science, alternative energy and technology.

We should join President Obama in working to hold down increases in college tuition, and we should join Sen. Elizabeth Warren in finding a way to forgive or ameliorate the existing and crushing student debt—37 million people owe $1 trillion, a great drag on our economy—and we must seriously rein in future interest rates and borrowing costs for college students.


But what about New Mexico, particularly?

Our state has great assets. Land. Wind. Sun. Wonderful environment. Diverse population. Marvelous recreational and tourist attractions. Strategic central location. I have been all over the world, and I would rather live here than anywhere else. People want to live here.

What we don’t have, of course, are jobs. We have about the same terrible inequality of income as the nation as a whole, but we have much more poverty and too many poor people.

High levels of poverty make us less attractive to industry looking for new locations. New Mexico is 49th among the states in the quality of life for children, and poverty is the primary reason. Poverty is the primary cause, too, of bad education outcomes for so many of our children and young people, and of our failing schools.

There are two ways we might do something about our great numbers of poor people: Heartlessly, we might try to get rid of some of the poor people. Or, more humanely, we might get rid of the poverty.

One trouble with the first approach is that it’s not poor people who are moving out of New Mexico. Most of them can’t leave. That’s not really an option.

It is true, though, that bad health and shorter life expectancy do reduce the numbers of poor people. And, believe it or not, some New Mexicans say that the solution to New Mexico’s problem of so many of our people being on Medicaid is to cut Medicaid funds. I don’t believe that is a solution worthy of what New Mexico and America stand for.

The other approach—reducing poverty and reducing our terrible inequality of income—is not only the “right” thing to do, but it is also in the best interests of all of us who are not poor because it can absolutely be shown that “everybody does better when everybody does better.”

We know how to reduce poverty and inequality of income—as outlined earlier—and we have the ability to do it. It takes national action on a wide front, but New Mexico can and should act, too.

What poor people need is money. And the best way for them to get it is by working. We need more jobs. Cutting taxes for corporations and those in the higher brackets and slashing programs that help the middle class and the poor don’t produce economic development. Consider Kansas and Ohio, where this was tried in recent times—to very bad effect. And that approach, quite obviously, hasn’t worked in New Mexico, either, and ought to be reversed. New Mexico is in a downward spiral—economically, in our expectations and hopes, and in our national image.

What if we adopted a strong and meaningful infrastructure-investment program, in schools, highways, alternative energy—paying for it with bonds, if necessary, while interest rates are still so low?

What if we substantially raised our own minimum wage and the earned-income tax credit?

What if we made a huge increase in our investment in education at all levels—particularly in early-childhood education, taking a small portion of the income from the Land Grant Permanent Fund for this purpose? What if we made community colleges free? What if we simultaneously slashed higher-education administration expenses and cut student tuition and fees?

People would say New Mexico is back! Going places! Things are looking up! We’d say it ourselves.

And it would be true.

Former U. S. Senator Fred Harris (Oklahoma) is professor emeritus of political science at the University of New Mexico, where he still serves as director of the UNM Fred Harris Congressional Internship Program. He is the editor of the new University of New Mexico Press book, New Mexico 2050.



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