The True State of the Nation:
How is America Really Doing?

by Anuradha Mittal, National Co-Director of Food First

Food First - Backgrounder, Spring 2001

Each year the president gives the "state of the union" address. This speech, coupled with key economic indicators (gross domestic product, the stock market, the index of leading economic indicators, the balance of trade, and the inflation rate), determines how we measure our national well-being. But is this really a good measure of how we are doing?

Warnings resonate throughout the media when Nasdaq or the Dow Jones falls few dozen points. But bells never went off when the proportion of children living in poverty reached twenty percent or when the number of Americans without health insurance reached 44.3 million. Yet such events are milestones in the development of a society.

THE TRUE STATE OF OUR UNION

In recent years the media has boasted of economic growth, reporting the lowest welfare rolls in 30 years, the lowest poverty rates in 20 years, the lowest unemployment rates in 30 years, and other similar indicators. These figures suggest astounding prosperity. But behind the numbers is a much harsher reality, one virtually ignored by the mass media and policy makers. This growth has been based on a growing gap between rich and poor, as more Americans toil for poverty wages. While politicians brag about shrinking welfare rolls, millions of Americans suffer hunger and homelessness-violations of their basic economic and social human rights guaranteed by international treaties.

"The True State of the Nation: How is America Really Doing?," is an alternative account of our nation's economic "progress" over the last several decades, and a call to take back our nation for the working poor. It serves as a barometer of America's social health and challenges the new administration to replace self-congratulatory complacency with meaningful reforms to combat the inequality, poverty, and hunger that ravage our nation.

THE REAL INDICATORS

Hunger and Food Insecurity

For a nation endowed with the world's greatest acreage of arable land, the United States is plagued with hunger in the midst of plenty. A survey of 25 cities conducted in December 2000 by the US Conference of Mayors showed an increase of 17 percent in requests for emergency food assistance (the highest increase since 1992),with 83 percent of the cities registering an increase.' According to the survey, the leading causes of growing food insecurity are poverty, low-paying jobs, high housing costs, unemployment, food stamp cuts, and welfare reform.

Who's Hungry in America

* According to USDA estimates, 10.5 million American households did not have access to enough food to meet their needs in 1998. Thirty-six million people lived in these households, including 14 million children under age 18, who make up 40 percent of all food insecure individuals.

In 1998, households with children were more than twice as likely to be food insecure than households without children (15.2 percent versus 7.2 percent).3 In 60 percent of households with children under 12 experiencing hunger, at least one member is employed. Overall, in almost half of hungry households there is at least one full-time worker. Other households vulnerable to food insecurity include single mothers with children (31.9 percent), Hispanics (21.8 percent), African Americans (20.7 percent), and households with incomes below the poverty line (35.4 percent).3

Food Assistance Providers

'And in the next bold step of welfare reform, we will support the heroic work of homeless shelters and . . . food pantries. . . Government cannot do this work. My administration will give taxpayers new incentives to donate to charity. . . "

-George W. Bush, acceptance speech at the Republican National Convention, August 3, 2000

Cutbacks in federal food programs since the mid 1990s have created a tremendous pressure for private food assistance programs to fill the void.

* In 1998, more than 25.7 million people were served by America's Second Harvest, the national food bank network of emergency food providers. Most of the people requesting emergency food assistance were children and their parents. Thirty-nine percent of the adults who asked for food were employed.

* In 1996, $20 billion was cut from the food stamp program. This cut paid for half of the costs of welfare reform. The present program will be supplemented by a meager $100 million a year over the next seven years. The gap left by the federal food stamp program each year is four times the amount that America's Second Harvest could provide in a "best case" scenario.

Poverty

"We can have a democratic society or we can have great concentrated wealth in the hands of a few. We cannot have both "

-Supreme Court Justice Louis Brandeis, 1941

Poverty in America in 1997 was 13.7 percent higher than in 1989, despite seven years of nearly uninterrupted growth.' In these so-called "boom times," most American households had a lower net worth than they did in 1983. The inflation-adjusted net worth of the median household fell from $54,600 in 1989 to $49,000 in 1997."

Who is Prospering?

* Sixty of the world's richest 225 people live in the United States. Their combined wealth is $311 billion, equal to the combined annual income of more than 19 million American families.' For just $42 billion a year, every poor child in America could be lifted above the poverty line.'

* In 1999, the richest one percent of Americans had as much after-tax income as the 38 percent of Americans with the lowest incomes. Wealth was more concentrated at the top than any time since the Depression, with the wealthiest one percent of households owning nearly 40 percent of the nation's wealth. The bottom 80 percent of households owned just 16 percent of the nation's wealth.'

* Almost 90 percent of the value of all stocks and mutual funds owned by American households is held by the richest 10 percent. An estimated 86 percent of the benefits of increases in the stock market between 1989 and 1997 went to the top 10 percent of households, with 42 percent going to the richest one percent.'

More Americans Join the Ranks of the Poor

The tremendous growth of the US economy between 1989 and 1998 failed to increase the income of poor households in America.

* Poverty among families with at least one parent working is at an all-time high. The poorest families are getting poorer: the lowest paid female heads-of-household have lost 14 percent of their income. Even after counting benefits such as food stamps, housing subsidies, and the earned income tax credit, female-headed families earned just 75 percent of the federal poverty line. Not counting these benefits (which are not actually received by many working poor), the yearned just percent of the poverty line, down from 35 percent in 1995.

_ The racial wealth gap grows. The median Black household had a net worth of just $7,400 in 1995, about 12 percent of the $61,000 in median wealth for whites. The median Hispanic household had a net worth of only $5,000 in 1995, just eight percent of whites.''

Poverty Wears a Child's Face

America's children under the age of six are more likely to live in poverty than Americans in any other age group. Poverty among young children increased by 20 percent from 3.5 million in 1979 to 5.2 million in 1997.' According to the 25-nation Luxembourg Income Study, the US child poverty rate is higher than in almost all countries of Western Europe and Canada.'

* In the United States, one out of every five children (18.9 percent) under age 18 live in poverty. Seventy-four percent lived in a household where at least one person worked. Sixty-two percent were white, and more lived in suburban and rural areas combined than in central cities.

* At any given time, 1.1 million children are living in emergency shelters. According to a 1997 study by the US Conference of Mayors, the actual number of homeless children is higher because an estimated 32 percent of requests by homeless families for shelter go unmet.'

Unemployment: Who is Not Counted in the Official Rates?

In 1999, the US Bureau of Labor Statistics published an official unemployment average of 4.2 percent, representing 5.9 million people. This number represents the lowest unemployment rate in 30 years. However, the official unemployment rate excluded people forced to work part-time, those who have given up seeking jobs, and full-time-year-round workers earning less than the poverty level. Yet all of these people are involuntarily unemployed or are severely under-employed. In Figure 2 we show a different number that includes involuntary unemployment and under-employment, making the total more than 30 million people.

These numbers do not include our vast and rapidly growing prison population-which reached two million in 2000-disproportionately composed of young and unskilled minority men. If inmates were counted as unemployed, the official jobless rate would rise by over one percent.

Wages are Falling for Most Americans

Today the US dominates the global marketplace and American corporations are growing at an unprecedented rate. This would indicate a strong and healthy economy, but a closer examination indicates that the "trickle down" theory has thus far failed.

* Adjusting for inflation, average weekly wages for workers in 1998 were 12 percent below those in 1973. American workers are earning less than they did when Richard Nixon was president.

* From 1990 to 1998, CEO pay skyrocketed by 481 percent. Meanwhile, worker pay rose only 28 percent. According to Business Week, the disparity between the highest paid and the average worker in the US has increased from 40 to one in 1980 to 419 to one in 1998.

* Some 46 percent of the recent growth in employment has been in jobs that pay less than half of a living wage.

· One-third of those who earn between $5.15 (current minimum wage) and $6.15 are their family's sole breadwinner; 75 percent are 21 or older; and 60 percent are female. In the past 25 years, minimum wage earners have seen their incomes drop 19 percent.

* Seventy-two percent of minimum wage workers are adults. About half are full-time workers and one-third work at least 20 hours a week. Their family incomes are about $15,000 below the national average.

A CALL TO ACTION

Whose job is it to guarantee that the basic and essential needs of the American people are met? The government of the United States needs to recognize that poverty and hunger in America are inhuman and intolerable, and require the implementation of a comprehensive and purposeful undertaking to remove this malady. The suffering experienced by America's working poor should propel our nation from outrage to collective action. Solutions are entirely achievable. It is time for America to get its priorities right.

Make Minimum Wage a Living Wage

Recognizing that the federal minimum wage is insufficient for any American family's survival needs, over 50 US jurisdictions have enacted their own local improved wage standards. San Francisco recently approved a $9.00 per hour minimum pay scale for 21,000 workers, with increases to follow in 2001 and beyond. City officials recognize that the health insurance provision, which is part of their living wage plan, is just as important as the wage increase to workers and their families.

Opponents of increasing the minimum wage predict a range of negative consequences, but these fears cannot be supported by the data:

* A ballot initiative in Oregon raised the minimum wage in 1996 to $5.50 and then to $6.50 in 1999. Not only did workers' real income increase despite inflation, but preliminary data showed that unemployment simultaneously fell and the proportion of welfare recipients moving into employment actually rose from 1996 onward.

* The federal minimum wage was raised in two stages, in 1996 and 1997, to a level of $5.15. Opponents of the increases made dire predictions of job losses, but during that period unemployment came down steadily, and most dramatically among the very groups most affected by the minimum wage-minorities, teenagers, and people without college degrees. In 1999, the unemployment rate among Black men hit its lowest level ever.'

Reform of the Welfare Reform

On August 22, 1996, President Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act, better known as Welfare Reform, the most sweeping change in the US welfare system in 60 years.

Leaving welfare for low-paid work is not a direct path to improved well-being. Research shows that two out of five former welfare recipients around the country neither have jobs nor currently receive cash assistance. Many are worse off than they were before the new law was enacted. More than a million women and two million children have been forced off welfare or denied help when they went to the welfare office to ask. When the full effects of the time limits in the 1996 law are felt, these numbers are going to get bigger.

State and federal policies should allow for earned income tax credits, wage subsidies, job training, child care, transportation, and health care insurance for those who leave welfare for low wage jobs, but few, if any, earn these benefits.

For nearly four decades, food stamps provided a safety net to fight hunger in the US. In fiscal year 2000, the program cost $20 billion and accounted for only 1.1 percent of the federal budget. About 80 percent of food stamp benefits go to families with children. With welfare reform, the percentage of poor children whose families received food stamps dropped from 94 percent in 1994 to 75 percent in 1998.

The federal food assistance program, called the Special Supplemental Nutritional Program for Women, Infants, and Children (WIC) has never been fully implemented. WIC reduces infant mortality, low birth weight, and anemia. The government saves $3.50 in future Medicaid and special education costs for each dollar spent on WIC for pregnant women.

A recent study shows that an estimated 12 million people-including at least one million children are not receiving food stamps even though they are eligible. The recent dramatic decrease in food stamp participation must be reversed through policies that reduce bureaucratic barriers to participation and ensure that working poor families are aware of their eligibility.

States must be compelled to use federal anti-poverty funds for their intended purpose. As part of the Welfare Reform Act of 1996, the federal government provided block grants to states to support anti-poverty efforts. A recent study revealed that 45 states and the District of Columbia have left $7 billion of these funds languishing in state coffers. Worse yet, six states (including New York and Texas) have diverted these funds to other programs that provide no benefits to poor families.

While welfare reform pushes more families below the poverty line, corporations continue to receive special subsidies. Special tax breaks and incentives offered to corporations drain $125 billion every year from the American treasury.

Protect Social Security from P'ivatization

Lobbyists and lawmakers driven by major financial corporations are urging the privatization of Social Security. Wall Street stands to make a fortune from managing the accounts, and about half of America's vulnerable seniors will be the losers. Social Security is the basic income guarantee for a large part of America's elderly. It guarantees payments adjusted for inflation that last as long as they live. Social Security's administrative costs are below one percent, compared to the 12 to 14 percent for private insurance.

Social Security is not just a retirement system. Social Security provides a measure of basic income security to many Americans and their families. Of the 45 million Americans receiving benefits, more than 14 million are children, disabled adults, or the spouses of deceased workers.'

The crucial point in evaluating Social Security is that all "rate of return" calculations, and all projections of possible Social Security "bankruptcy," fall into the same trap. They inappropriately apply free market criteria to a non-market institution, in this case the most successful one in the economic history of our country. Social Security is part of the public sector, which, in a capitalist society, is the last resort for sustaining many different people with common basic needs. As the late economist Robert Eisner put it, "If we want to bolster Social Security, the best way is to. . . increase the wages that finance Social Security."

Challenge Bush's Tax Cut Fever

The focus of the new Bush administration is to provide further relief to the rich with a $1.6 trillion tax cut. The Bush proposal would rewrite the tax code by targeting only federal income and estate taxes, which are paid mostly by the rich. It makes no cuts in federal payroll taxes, like those of Social Security and Medicare, which fall mostly on working class and poor households. When all federal taxes are counted, the Bush plan would give the wealthiest one percent of households 36 percent of the cuts, even though they pay only 20 percent of federal taxes.

The Bush tax plan would force cuts in the prescription drug program for retirees, lower child care programs by $200 million and child abuse prevention by $15.7 million, and cut the program to train doctors for children's hospitals. Budget documents show that President Bush is also planning to eliminate the entire $20 million that Congress provided for an "early learning fund" to improve the quality of child care and education for children younger than five years old."

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