January
2011

Vol. 10 - No. 7


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LETTER FROM U.S.A.


 


Thanksgiving in Camp, wood engraving, Harper’s Weekly, 1862 | Wikimedia Commons

Wide Income Gap Creating Two Americas

BY ERNEST COREA (IDN)

 

Another day, another year. Thanksgiving, the national holiday celebrated on the fourth Thursday every November, has come and gone once more. The rash of pre-thanksgiving announcements heralding "sales" that offer great and sometimes dubious bargains has ended. So have the sales.

When November gave way to December, shopping malls began assuring anybody who cared to listen that "it is beginning to feel a lot like Christmas." As the days wore on, that message gave way to an urging: "have your self a merry little Christmas." All this at a time when some have much to be thankful for, and be merry about, and so many do not.

The U.S. Bureau of Labour Statistics has reported that the unemployment rate, having remained unchanged for three months, rose to 9.8 percent in November. That would mean more deprivation, more disappointment, and increasing disquiet. Hard-working, conscientious and competent working people are dropping back from achieving their various goals.

In November, the Thanksgiving month, when the public mood is for the most part warm and fuzzy, a majority in Congress coalesced to vote down legislation that would extend cash benefits for the unemployed into 2011. Frantic efforts to save the unemployed from further deprivation followed and yielded an agreement between the Obama Administration and Republican leaders.

The Senate adopted that agreement by a vote of 81 to 19 on Dec. 15. It now goes over to the House of Representatives where some representatives oppose those aspects of the agreement which, while extending benefits to the jobless, prolong a Bush-era bonanza for the rich.

CUTS PROTECTED

Under the agreement as adopted by the Senate, a package of provisions includes extension of unemployment benefits for 13 months. The maximum period during which benefits will be paid remains at 99 weeks. The pre-recession maximum was 26 weeks.

The payroll tax which sustains Social Security will be reduced by 2 percent, for one year. Savings to tax payers could range from $1000 to over $2000.

At the same time, the package extends the Bush-era tax provisions, such as income tax cuts for wealthy families earning over and above $250,000, for two years. The estate tax which was temporarily suspended and becomes operational again in 2011, has been set at 35 percent for individual inheritances of more than $5 million. Liberal Democrats are particularly opposed to this provision which they consider too low.

A number of investments that are potentially capable of expanding the economy and accelerating job growth will be tax deductible. Tax credits that will support middle class tax payers, such as a tax credit for university tuition, are also part of the package.

MIND THE GAP

The need to extend jobless benefits as well as other aspects of the bipartisan package serve as a reminder that whatever the days of fun and frolic in November and December might bring to many Americans, the widening gap between rich and poor is sharply in focus.

New Census figures show the income gap between America's richest and poorest has never been as wide as it is now. Based on that assessment, the Associated Press news agency has reported that "the top-earning 20 percent of Americans -- those making more than $100,000 each year -- received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line."

Asked about the disparity, Federal Reserve Chairman Ben Bernanke said very recently on the television program 60 Minutes: "It's a very bad development. It's creating two societies. And it's based very much, I think, on educational differences; the unemployment rate we've been talking about.

"If you're a college graduate, unemployment is 5 percent. If you're a high school graduate, it's 10 percent or more. It's a very big difference. It leads to an unequal society, and a society which doesn't have the cohesion that we'd like to see."

Bernanke did not point out that in many inner city areas another gap exists as well: often, too often, unemployment among African-Americans and other ethnic minorities is above the average.

REACHING OUT

For substantial numbers across the country, there would be nothing to be festive about, but for the concerted efforts of civil society groups who reach out to the disadvantaged and disconnected. Many but not all these groups are faith-based, but the beneficiaries of their actions are from a broad spectrum of faiths.

In 2010 as before, different forms of relief and support -- cooked food, dry goods, gift cards for the purchase of groceries -- were provided to those who would otherwise have been unreached by the festive spirit. In the Washington area, for instance, a consortium of civil society groups, including faith-based organizations, supported by a grocery store, provided food to 5000 indigent families at Thanksgiving.

The effort continues with numerous civil society organizations gearing up to carry the message of "peace and goodwill" to men, women, and children would otherwise be disconnected from the rest of society.

An "army" of volunteers, including the First Family, have devoted time and energy to putting together packages of food for the poor, hungry and homeless; as well as new toys ands clothes for their children.

HEAVY BURDEN

These ennobling activities are widely appreciated, but the truly effective support for the unemployed is job creation. Despite strenuous efforts to end the recession that the Bush Administration left behind, job creation has been a slow and agonizing process, while other signs have pointed to a steady if slow upturn in the economy.

Home sales increased by some 10 percent in October/November. Retail sales were higher than in October and final numbers are expected to put them at a pre-recession level. Car sales have rebounded.

On the job front, however, non-farm employment rose by a meagre 39,000 in November. The figure was 172,000 in October; higher, no doubt than it was in November but still inadequate to create a jobs-based recovery. A generally accepted estimate is that the U.S. will need to add 200,000 new jobs a month if unemployment is to drop below 8 percent over the next two years. Reaching that goal or getting somewhere near it is going to be tough and burdensome.

FAT CATS

The tactic of making an extension of jobless benefits contingent on an extension of tax cuts for the fat cats already lapping up the cream of wealth is wrong. That, however, is likely to happen although some Democrats in the House of Representatives insist that they will vote against any provisions that are weighted in favor of wealthy Americans who have benefitted from Bush-eras concessions.

President Barack Obama, who was personally involved in some of the negotiations and deal making, has acknowledged that protecting the Bush-era tax benefits for the wealthy was the "holy grail" for Republican negotiators. Without that it would not have been possible to craft an agreement which included benefits for the jobless as well as a number of provisions that could actually stimulate the economy to grow faster.

Thus, while some important provisions are included in the agreement, the gap to which Bernanke referred remains intact.

Shortly before Thanksgiving, the New York Times published a commentary by Adam Goodheart on an illustration of Thanksgiving drawn by Winslow Homer. The illustration could well apply to Christmas, too.

The artist divided his drawing into two sections. One depicted the profligacy of ‘those with more dinners than appetite." The other showed the state of "those who have more appetite than dinners."

That depiction was first published on December 1, 1860. One hundred and fifty years on and, as the French like to say, the more things change, the more they stay the same.

 

[Source: IDN-InDepthNews | Analysis That Matters]

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The writer has served as Sri Lanka's ambassador to Canada, Cuba, Mexico, and the USA. He was Chairman of the Commonwealth's Select Committee on the media and development.

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