Sept. 2: What happens if inequality grows unchecked?

Sept. 2: What happens if inequality grows unchecked?

With income inequality growing in the U.S. since the 1970’s, Nobel Laureate Robert Shiller considers the potentially catastrophic consequences if the trend continues.

With income inequality growing in the U.S. since the 1970’s, Nobel Laureate Robert Shiller considers the potentially catastrophic consequences if the trend continues. Certainly, the struggle to pay the rent and keep up with bills already takes a large toll on those struggling the most to get by. But Shiller is pessimistic that we will be able to adequately address accelerating inequality. He explains in a recent piece for The New York Times’ Upshot blog:

No one seems to have an effective plan to deal with the possibility of much more severe inequality, should it develop. In the disturbing book “Poverty and Famines: An Essay on Entitlement and Deprivation,” (Oxford, 1983) Amartya Sen, a Harvard professor, documented an extraordinary thing: In each of four devastating famines in different parts of the world, there was enough food to keep everyone alive. The problem in each case was that the food was not shared adequately. Systems of privilege and entitlement permitted hoarding of food by people of status whose lives went on much as usual, except that they had to brush off starving beggars and would occasionally see dead bodies on the street.

Optimism lies in public perceptions on poverty and income inequality. The Washington Post reports on an opinion poll by the Los Angeles Times and The American Enterprise Institute, conducted in 1985 and 2016 . More people today believe that the poor are hard working and that government has the greatest responsibility to care for families below the poverty line, behind “the poor themselves” and churches.

Government isn’t judged up to the job. Both surveys asked whether government knew enough to eliminate poverty even if it could “spend whatever is necessary.” In 1985, 70 percent said no. In 2016, the negative response was 73 percent. What emerges is an ambiguous consensus. Government can and should help, but it can do only so much. The poor themselves — along with their families, churches and charities — must play the starring role.


Louisiana leans on the federal government

A new study shows Louisiana trails only neighboring Mississippi in the percentage of its overall budget that comes from the federal government. The Advocate’s Stephanie Grace reports on a Pew Charitable Trusts report that shows the Pelican State gets 40.1 percent of its “general revenue” from Uncle Sam, compared to 40.9 percent for Mississippi. The reason? States with higher rates of poverty tend to draw more federal aid.

That translates into more residents on Medicaid — and in Louisiana’s case, many more in the future now that Gov. John Bel Edwards has accepted a largely federally-funded expansion under the Affordable Care Act— and fewer paying income taxes.

Caught by safety nets

Government safety net programs are effectively lifting hundreds of thousands of Louisiana residents above the poverty line. The Center on Budget and Policy Priorities created profiles detailing real impacts of federal and state programs. Beyond the immediate outcome of reducing the poverty rate from 32.2 percent to 14.4 percent, safety net programs have countless long term benefits. The factsheet can be found here:

The findings suggest … that SNAP and the Earned Income Tax Credit help reduce infant mortality and low birth weight, and improve children’s reading and math test scores, high school completion, college entry, and expected future earnings. The findings also indicate that housing assistance that helps low-income families move to safe, low-poverty neighborhoods with better schools can enhance their children’s long term prospects.

Waistline expansion

Louisiana is getting fatter, according to new data from the Centers for Disease Control reported in the Robert Wood Johnson Foundation’s State of Obesity. That translates into chronic medical conditions, like diabetes and heart disease, that are expensive to treat. Obesity is closely correlated to poor nutrition, food insecurity and education.’s Jed Lipinski has more:

Among the reasons for the high number of obese adults in Louisiana may be poor access to healthy food. More than 17 percent of children in the state live in “food-insecure” households, the report said, meaning they have limited access to food and nutrition due to price and proximity. The report includes a list of “priority policy recommendations” state can use to reduce their rates of obesity, such as improving school nutrition programs, prioritizing health in transportation planning, and covering obesity prevention and treatment under public and private health plans.

Bending the rules

The Internal Revenue Service is allowing residents affected by the recent flooding to take hardship withdrawals and loans from their employer-sponsored retirement accounts. Be attentive when exploring these options, because you may trip over red tape. Withdrawals will incur regular income tax and are subject to a 10 percent early withdrawal fee. Cory Schouten of CBS news gives details and advice:

Design a plan to replenish retirement savings as quickly as possible. It’s a strategy the IRS is helping in its own right by waiving, for Louisiana flood victims, the six-month ban on contributions to your retirement plan that normally follows a hardship withdrawal. Another strategy those who must take a distribution should consider is whether to change the remainder of their retirement portfolio to be more aggressive in hopes of earning higher returns that would more quickly replenish your retirement savings.

Number of the Day:

$40 million – Federal money Louisiana will receive to finance I-10 improvements (Source: The Advocate)