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Bernie vs. Hillary – The Clearest Distinction in a Generations

Part I, The Progressive Era

by Brian T. Lynch, MSW

The distinction between Democratic presidential candidates Bernie Sanders and Hillary Clinton couldn’t be sharper. If this doesn’t seem obvious, it is because Beltway media coverage of the candidates obscures more than reveals. Financial considerations of the for-profit news media creates short time horizons and shallow perspectives. The historical context of current events is often lost. To clearly see how different our choices are between these two Democratic Party candidates we need a little more information.

The two biggest areas of contrast between Bernie Sanders and Hillary Clinton are centered around two words that are very much in the public debate. These words are, “progressive” and “electability.” This essay is broken into two parts, each dedicated to these significant differences.

The Progressive Era

The term “progressive” as it relates to politics is not as vague a term as current usage suggests. The “Progressive Movement” was an historical development leading to a particular political philosophy. Born out of the Gilded Age, it held that the irresponsible actions of the rich were a corrupting influence on public and private life in America. It’s most influential period was between 1900 and 1920, although its influence continued throughout the 20th century. Progressivism was both a political and a social movement. It held that advances in science, technology, economics, and social organization could improve the conditions in which most citizens live, and that government had a role to play in promoting these advances.

Progressivism was a rejection of Social Darwinism (arguably a forerunner of Aya Rand’s Objectivism). It was a reform movement with goals considered radical in their time. Progressives sought to curb the power of big business and US corporations. It brought about laws to regulate fair commerce and break up monopolies. It fought to eliminate bribery and corruption in politics and to bring about political reforms. It fought against the extreme social injustice and inequality of that time, including opposition to child labor, widespread illiteracy, and horrible working and living conditions. It sought to improve lifestyles and living condition of all Americans and to establish health and safety standards both in the workplace and the communities where people lived. The progressive movement was also for the conservation and protection of our natural resources.

Among the activists in the movement were people such as Thomas Nast, Upton Sinclair, Charlotte Perkins Gilman, Eugene Debs, Jane Addams, who founded Hull House and pioneered the field of social work, Booker T Washington, W. E. B. DuBose and many more. They and the muckrakers of the day found a sympathetic ear in Theodore Roosevelt, a Republican President. This is an important point as Progressivism was a sweeping and transformational movement supported by candidates in both political parties. The Progressive Movement ushered in the modern, middle-class oriented society we enjoy today.

Rise of Conservative Movement

Fast-forwarding for the sake of brevity skips a lot of important history, but it is fair to say that a strain of Progressive Movement philosophy has been baked into our political DNA. It remains most prominent in the Democratic party while largely disappearing from the establishment wing of the GOP. It’s disappearance is roughly correlated with the rise of our current income inequality and the growing power of the super rich. But a progressive element within the GOP is still not entirely absent even in conservative voters as evidenced by the continuing popularity of Medicare and Social Security among Tea Party Republicans.

On the Democratic side, the progressive vein of the party suffered though a crushing political loss with the landslide victory of Richard Nixon over George McGovern in 1972, followed a decade later by the rise of the conservative movement capped by the landslide election of Ronald Reagan in 1980.

President Reagan’s election marked the beginning of a successful and synergistic partnership between the Republican Party and private corporate wealth. This partnership began a decade earlier with the conscious decision to create ideologically conservative public media platforms and apply modern business marketing techniques to promote conservative causes, including a successful anti-union marketing campaign that turned workers against unions. The power of organized labor was also challenged by newly organized industry advocacy groups. These industry trade groups gave rise to the powerful corporate lobbies we have today. Among the early successes of industry trade groups was a law that created political action committees, or PAC’s where corporations were able to provide substantial campaign contributions to political candidates of their choosing, and their candidates were all conservative and mostly Republican. The influx of money, the marketing prowess and the organizing clout of this marriage between the GOP and big business overwhelmed the Democratic Party. The effectiveness of massively coordinated conservative messaging cannot be overstated. It began the shift of America’s political center to the right. The power of this massively coordinated messaging, rather than the strength of conservative ideas, continues to power this rightward movement of our electoral center today.

DLC Transforms The Democratic Party

To many Democrats it was clear that the Party had to change strategy. Progressive causes were no longer winning elections. The diagnosis, unfortunately, was that the progressive agenda was the problem rather than copious amounts of corporate money, more effective marketing techniques, and the rise of conservative funded media outlets with their focus group tested propaganda.

A Democratic political operative name Al From believed that economic populism was no longer politically viable. He founded an organization named the Democratic Leadership Council (DLC) to move the Democratic Party away from progressive and socialist influences. The DLC sought more conservative alternatives that could appeal to the rightward shifting center of the American electorate. This required a willingness to compromise progressive values and embrace some conservative ideas. It was a strategy that triangulated politicians and the political party base on both the right and the left to win broad appeal for more “centrist” proposals. It also meant shifting Democratic Party allegiance towards big business interests and away from the poor and working classes. (The impact that this shifting focus had on the Democratic electorate will be explored more in Part 2).

More and more Democrats joined the DLS and adopted its ideas, which became known as the Third Way. It’s adherents became known as New Democrats. Their willingness to compromise and pass corporate friendly legislation, in combination with corporate lobbying, brought in the donation needed to fund successful campaigns. The crowning success  of the New Democrats was the popular election of their candidate, President Bill Clinton. From then till now Democratic Party has hitched a ride on the shifting center of the American electorate. The DLC’s New Democrats became the establishment wing of the party.

Under Bill Clinton the New Democrats schemed and compromised their way with Republicans to pass a mixed bag of legislation, from a progressive stand point. Clinton got passed a the Family and Medical Leave Act, welfare reform legislation, legislation to deregulate banks and insurance companies so they can compete with investment banks, to list a few accomplishments. The DLC’s  had to push ever further to the right to follow the shifting electoral center, but it was winning elections again.  To better compete with GOP success, the Democratic party began adopting Republican style marketing strategies and ever closer ties to big corporate donors. Still, the electorate slide to the right continued. The Party was locked into a strategy that kept Democratic candidate competitive but left no room to challenge the conservative movement or corporate media more broadly. There was always the danger that directly confronting the right wing conservatives would dry up the corporate donation that Democratic candidates came to rely on.

It’s work on transforming the Democratic Party done, the DLC dissolved in early 2011, and on July 5 of that year, DLC founder Al From announced on the organization’s website its historical records had been purchased by the Clinton Foundation. The DLC had become the Democratic Party establishment.

Democratic Establishment Today

Today, New Democrats are simply called Democrats. They still claim the title of  progressives, but it is a more relative term today.  Those most closely associated with the former DLC, however, hold important policy positions that are considerably more conservative than before the DLC was founded. For example, former DLC activist oppose single-payer universal healthcare. They are more hawkish. They supported the Iraq War and are in favor of stronger military interventions in areas of active conflict. They are in favor of charter schools and “No Child Left Behind”. They are more aligned with Wall Street and market-based solutions to economic problems. They support free-trade agreements including NAFTA, and now the Trans-Pacific Partnership Agreement (TPP). They continue to fear that economic populism is not politically viable and while they have come late to addressing income and wealth inequality, their are less aggressive in their approach

This is the current state of the Democratic Party establishment, of which Hillary Clinton is the heir apparent. If she doesn’t see that she is an establishment Democrat, it is because a true progressive alternative has not presented itself in a long time. Today’s Democratic Party is progressive in name only. Hillary Clinton revealed more than she realized when she recently said some call her a centrist and she is proud to wear that label. Capturing the electoral center remains at the heart of her campaign strategy.

What she and other establishment Democrats haven’t realized is that they have chased the electoral political center far to the right of actual political sensibilities of most ordinary citizens.  For decades Democratic and independent voters have given up on the electoral process. They are not among the likely voters the Party targets to win elections. And the Party has stopped listening to the families they represent. They haven’t notice just how rigged the economy has become. They have stopped talking about the poor and the term “working class” has disappeared from the Party’s vocabulary. They compete instead, with Republicans on the issues of the GOP’s own choosing while conservative operatives successfully frame every debate to benefit wealthy donors. Establishment Democrats have not stopped to notice just how painful the nearly 40 year decline in wages has been for the middle-class .

The Contrast

Bernie Sanders, on the other hand, has never stopped listening to the people or noticing what is happening to poor and middle class Americans. He retained his progressive values as an independent representative from Vermont. His record on this is clear. He continues to  to promote progressive values and even retains the “socialist” tag that became associated with progressive philosophy in the 1960’s. When Hillary Clinton challenged him in the recent debate by asking what made him the gatekeeper of who is a progressive, Bernie couldn’t reduce his answer to a pithy sound byte. The question is breathtaking for those familiar with the transformation of the Democratic Party over the decades. There are very few champions of true progressives left in politics today. How could anyone answer her in question in a short few words? It requires too much context because so much of the history of the Party has been lost. But once the context is understood, the stark contrast between Clinton and Sanders is between:

1. A candidate who will continue to ride the electoral center wave to the right in exchange for small but more certain gains that improve our lives, or

2. A candidate who awakens the vast number of disaffected voters to challenge right-wing ideology directly, sweep conservatives from office and make way for bold ideas that will greatly benefit most people.

Un-Taxing the Rich is the Root Cause of the Public Pension Crisis

by Brian T. Lynch, MSW

What follows is a letter I wrote to New Jersey’s principal newspaper, which is constantly trying to convince us that the huge pension deficits created by bad public policy decisions (or perhaps by intentional public union busting strategies) can’t be fixed without dismantling the whole system and starting over. All options to do this create great sacrifices by hard working servants of the people who were promised pensions in exchange for lower lifetime wages than the private sector would be paid for comparable work.

What makes this relevant beyond New Jersey’s boarders is that public employee pension systems are under similar financial assaults in nearly every state. It is a pattern so powerful that it has to be part of a bigger plan.

Dear editor:

“Taxing the rich won’t solve pension problems” claims the Star-Ledger in its editorial. Their point is that the “millionaire’s tax” vetoed by Gov. Christie wouldn’t plug the current pension gap.

This is true, but the larger point is that the “un-taxing” of the rich and the wealthiest companies in New Jersey is the real reason we have a crisis. Stack up all the tax money not collected due to corporate tax breaks and tax cuts given away since the Whitman administration until now and it would tower over the cash it would have taken to pay pension obligations from the beginning.

Money is fungible. Whenever tax revenue is deleted from the budget, someone’s ox has to be gored. For decades that ox belonged to State employees. Their pensions is part their wage package and the reason their overall compensation is roughly parallel with the private sector. Not funding it was a deliberate choice.

Another fact hidden in plain view is that revenue deleted from the budget doesn’t have a line item to remind us of what’s missing. We end up blindly subsidizing profitable corporations instead of properly compensating ordinary folks who work for us.

It’s disingenuous for politicians (or the Star-Ledger) to speak of pension reform without also discussing the massive tax breaks that created this crisis. If tax cuts for businesses and people who don’t need it were rescinded, there would be plenty of revenue to fund the pensions.

BLOG NOTE: If this is happening in your state, of if you are from New Jersey and want to do something about the pension mess, feel free to use this as a template for your own letter to the editor or to your representatives in government.

Should Living Wage Minimums be Based on Individuals or Families?

by Brian T. Lynch, MSW

FDR

 
“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country… By living wages, I mean more than a bare subsistence level — I mean the wages of a decent living.” (1933, Statement on National Industrial Recovery Act – Franklin Delano Roosevelt)
 

Question:  In looking at the Living Wage calculator, I see that $10.83 for a single adult in Morris County, New Jersey  where I live. This seems fair to me for a single person, but when you add one child to that scenario the rate jumps to $22.12 per hour. This raises a serious question.  Does the Living Wage Movement suggest that wages should be adjusted according to need? [ http://livingwage.mit.edu/ ]

Answer:  That’s a great question. I am not a spokesman for, or advocate of, the living wage movement as an organization. I do believe that living wages should be the minimum wage in this country.  Minimum living wages should be what we pay summer college help or student interns, not full-time employees. It might also be appropriate for part-time seasonal help. It shouldn’t be what we pay permanently hired employees.

To answer your question, I researched what a living wage is in the 130 cities that have living wage laws. It turns out that their wage base is for a single employee, not including any dependents. A living wage in Manchester CT equals $15.54/hour (the highest) while it is $8.50 in Orlando FL (the lowest).  It would appear that the Living Wage Movement is looking to index a minimum living wage minimum to local economies based on one adult with no dependents.

That said, the minimum wage in 1986 was $10.86/hour  as opposed to its current level of $7.25/hour.  If it had been indexed to inflation in 1986 the current minimum wage today would be $23.59/hour today. That clearly was intended to provide for a worker with a family. The current median family size is 2.54 persons per household. That inflation adjusted wage equals about $47,000 per year while the current median family wage is a little over $51,000 per year (and still declining, I might add).

Here’s the thing, we have only been talking about wage adjustments to keep pace with inflation. We have not been talking about raising wages to reward workers for our growing productivity. We have not been talking about sharing the wealth that workers help create so everyone keeps pace with America’s growing economy. Cost of living adjustment are important, but they shouldn’t be confused with a productivity, or merit raise.

America is $1.7 trillion richer today than it was in 1976. Our economy has doubled, yet the share of all that new wealth created by American workers in this same period of time is insignificant.

In the 1960’s my father was an appliance repairman at Sears. His salary was enough that my mother could stay home to raise my sister and me. Her role as mother to the next generation of citizens was valued. Today, a typical family of four making about $51,000  does so because both parents work. And they are only able to make ends meet because of easy access to credit to shift their financial burdens onto their future earnings.

When I speak about a living wage I am thinking about getting back to a point where one breadwinner can hold one full-time job and still raise a small family without needing government assistance to do it. That’s what we had, and that should be our goal as a country.

Minimum Wage is a Moral Question

by Brian T. Lynch, MSW

The White House put out a brief video on why we should raise the minimum wage to $10.10/hour. It is OK as far it goes, but it is still a little disappointing to me.

Click here to see the video. [ https://www.youtube.com/watch?v=PqtLQgkcUFM ]

Even the White House is looking at minimum wage law though the modern day pro-business bias that has infected all of civil government. Even though raising bottom wages creates an economic stimulus that would boost spending, increase demand for goods and services and create more jobs, this isn’t the most important aspect. The main reason to raise minimum wages is because it’s simply the right thing to do.

The question of minimum wage is actually a moral question. There is no good rationale for paying a full-time employee less than a self-sufficient wage. What is almost half of a human beings waking moments worth? What is the minimum compensation they should receive for devoting that time to enrich their employers? Why should it be less than what is required to survive with human dignity?

From a social perspective, should profitable businesses be held in high esteem as models of efficiency for paying wages so low that full-time employees require taxpayer subsidy to keep from becoming homeless or having their children taken away from them? Should we have to subsidize the labor force of wealthy corporations like Walmart? Should the federal income taxes of those who make more than minimum wage have to be used to supplement the other employees who takes out the trash at night or mow the lawn? Why should any healthy corporation be allowed to boost their profits at public expense through subsidized labor?

If small businesses or start-up company need government subsidies or tax breaks to help pay their help, let these business owners apply for government assistance rather than make their employees feel inadequate by having to beg for government assistance. No man or woman who works hard all day long should have to apply for housing assistance or SNAP or KidCare or childcare assistance or HEAP or any other government subsidy. Let the business owners apply for government aid to help pay employees the self-sufficient wages all full-time workers should have. Let the means testing process for government subsidy programs fall to the employers. Let’s get it off the backs of the working poor and eliminate the social stigma they don’t deserve. Let the minimum cost of self-sufficient labor wages be part of the cost of doing business in America.

Profits for CEO’s and share holders should not come before self-sufficient wages for laborers. Exploiting workers and taxpayers to boost profits for investors and chief executives is immoral.

Inequality on a Global Scale (literally)

The cartoon below is from the great editorial cartoonist Stuart Carlson. It highlights with humor a very serious global economic condition, growing wealth inequality.

http://www.gocomics.com/stuartcarlson/2014/06/20#.U9Zns_ldXfJ (Go and enjoy his other cartoons.)

Allow me to breakdown the math for you. These figures work out to an average of $486 per poor person vs. $20 billion per rich person. This is not a measure of income but a measure of wealth, or capital.

Another important math fact from this illustration: If you have $20 billion in capital and earn an average return on investments of 4% a year, and if you lavishly spend $1 million per month on your lifestyle, at the end of 50 years you will still have $140 billion left for your children to inherit. That’s right, if you have seven children they would each get close to the 20 billion that you started out with.

This is the crisis of capital that we face. This fact is among the findings of economist Thomas Piketty in his recent book, Capital in the Twenty-First Century. Within just a few generations almost all the wealth on the planet will be handed down from parents to children. Almost no new fortunes will be made through the earnings of those who have to work for a living. We will effectively return to a feudal system even here in the United States and abroad. The phenomenon is global. The quicker national and global population stabilize or decline the faster wealth will concentrate among the wealthy.

All we have to do to return to a feudal society is… do nothing.

Someone on facebook asked me, “Is it really the zero-sum game that these breakdowns of wealth distribution always seem to imply?”  Good question! Is it the case that the growing wealth of the wealthy must come at the expense of growing poverty Or, doesn’t the growth of capital lift all ships?

When you look at national and global income-to-capital averages you see what looks like fairly stable ratios. Growing capital wealth and growth in income seem to balance. But look a littler closer and you see that more of the population falls into poverty as the value of capital grows at compounded rates. So yes, there is more national income, but there is an ever larger percentage of income coming from capital investments and going to the wealthy.  As capital becomes the main source of income, the real earnings of wage earners stretches and collapses at the lower end of the economic scale.  For the middle class, it is like being caught between the gravitational fields of two black holes… one created by poverty and  the other by capital wealth

Our Chronic Wage Stagnation, Symptoms and Treatments

by Brian T. Lynch, MSW

Decades of frozen wages relative to our expanding wealth is the root cause of many economic problems. More people falling into poverty, a shrinking middle class, declining retirement savings, increased welfare spending, higher unemployment, more aid to working families, declining government tax revenues, diminished funding for Social Security and Medicare, a sluggish economy (despite a record high stock market), slow job growth and heighten social tensions along the traditional fault lines of race, ethnicity and gender are among the many issues influenced by decades of wage stagnation.

Beginning in the late1970’s most American workers received only cost of living adjustments in their paychecks while their real earnings gradually diminished each year. Employers increased hourly wages to keep pace with inflation, but they suddenly stopped raising wages to reward workers for their productivity. Earned income has declined for most Americans as a percentage of our gross domestic product (GDP) This amounts to a dramatic and intentional redistribution of new wealth over the last 40 years. Nearly all this new wealth has gone to the rich and powerful.

The visual evidence of wage stagnation relative to hourly GDP is apparent in one powerful graph (below). You may have this it before.

hourly GDP vs Wage graph

 

SYMPTOMS

The effects of wage stagnation on our economy have been gradual and cumulative. Its impacts don’t raise red flags from one year to the next, but the cumulative effects are obvious. The trending rise in income inequality, for example, was missed entirely for 25 years, and then it still took another decade for it to catch the public’s attention.

According to USDA data on the real historical GDP and growth rates[i], the U.S. economy grew by $368 trillion between 1976 and 2013. That is a 109.4% rise in national wealth, more than a doubling of the national economy. Almost none of that wealth was shared with wage earners. If hourly wages continued to grow in proportion to hourly GDP, as it had for decades prior to the mid-70’s, the current median family income today would be close to $100,000 a year instead of the current $51,017 per year.[ii]

Think about that for a moment, and about all the implications for wage based taxes and payroll deductions. For simplicity sake, let’s say wages would have double if the workforce received productivity raises. That would significantly reduce the number of families currently eligible for taxpayer subsidies such as SNAP (food stamps), housing assistance, daycare and the like. At the same time the workforce would be generating much more income tax revenue.

Consider next the impact wage stagnation has had on payroll deductions. Social Security and Medicare premiums have not financially benefited from the growing economy. Double current wages and you double current revenues for these programs as well. Moreover, the economy has grown at an annual rate of 2.9% since 1976. If Social Security and Medicare had benefited from this new annual wealth, the effect on current revenue projections would be profound. We would not be looking at a projected shortfall any time in the future.

The impact of wage stagnation on consumer spending is perhaps the most insidious problem. While worker wages have stagnated, the production of goods and services has grown. How is that possible? Some of this production is sold in foreign markets, but domestic markets are still primary. And it is here where economic theories have done a disservice.

A generation of economists and business leaders have treated consumers and workers as if they were not one and the same. This has fractured how we look at the economy and given rise to the notion that labor is just another business commodity. It disguises the fact that labors wages fuel consumer spending. Wages help drive the whole economy while wage stagnation reduces consumption over time.

To overcome this effect we have seen the need for mother’s to enter the workforce in mass, and for banks to invent credit cards to bolster consumer spending. These and other creative measures can no longer forestall the decline in worker spending. So while the financial markets ride the tide of America’s growing wealth, the fortunes of those who have been cut off from that new wealth continue to slip beneath the waves.

As for social tensions among different racial, ethnic and gender groups, the effect of stagnant wages relative to the nation’s growing wealth creates a lifeboat mentality and zero sum thinking. For the first time in many generations parents are worried that their children will have less in life than they had. When the whole pie is shrinking a bigger slice by one person means a smaller piece for others. This thinking exists because for over 95% of wage earners the economic pie hasn’t grown in 40 years.

TREATMENTS

You may not be ready to accept chronic wage stagnation as “the syndrome” underlying our economic woes, but it’s also true from my experience that having solutions (or “treatment options”) at hand often makes it easier to identifying the problems they resolve. With that in mind, I want to offer some solutions to America’s low wage conundrum.

One direct approach to raising worker wages is the one currently being discussed in the public dialogue, raising the minimum wage. This benefits the lowest paid workers and also puts pressure on employers to increase pay for other lower wage earners. The current target of $10.10 per hour would still leave many families at or below the poverty line. Workers making the new minimum wage would still be eligible for some public assistance for the working poor. While passing a minimum wage law is at least possible, this option is not a systemic solution to wage stagnation. Even index the minimum wage to inflation would not compensate for declining wages relative to GDP growth.

Another direct approach to ending wage stagnation is to pass a living wage law. This would set the minimum wage at a level that would allow everyone working full-time to be financial independent from government assistance, including subsidized health care. A living wage law could be indexed to the local cost of living where a person is employed. This is idea because it takes into account local economic conditions which are determined by market forces rather than government edict. But passing a living wage law in the current political climate is unlikely.

There are other ways of encouraging wage growth that don’t involve direct wage regulation. One idea would require the federal government to recoup, through business income tax rebates, the cost of taxpayer supported aid to working families from profitable businesses that pay employees less than a living wage. Employee wages are easily identified through individual tax returns. Eligibility for taxpayer supported subsidies are relatively easy to estimate as well, so recouping public funding to support a company’s workforce is a practical possibility. A portion of the recovered money could be paid into Social Security and Medicare to make up for lost revenue due to substandard wages.

A welfare cost recovery plan could gain popular support given the growing public resentment towards taxpayer funded social programs. At least 40% of all full-time employees in America currently require some form of taxpayer assistance to financially survive. More importantly, this plan places the burden of supporting the workforce back on profitable businesses where the responsibility lies.

Another solution has been suggested by former US Labor Secretary, Robert Reich, and others. They support proposed legislation, SB 1372, that sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break. Those with high ratios get a tax increase. This would effectively index worker wages to CEO compensation in a carrot and stick approach to corporate taxes. The details and merits of this approach is outlined elsewhere.[iii]

Do U.S. businesses have the financial capacity to offer higher wages to their workers? I would like to answer that question with another graph that you may also have seen before.

Credit: Blue Point Trading http://www.blue-point-trading.com/blue-point-trading-market-view-june-07-2012

There is a clock ticking somewhere in the background on this issue. There is a point somewhere in the future where it will be too late to fix wage stagnation through the normal democratic processes. History has proven this to be true. We are not at that point now, but we are past the point treating wage stagnation earnestly.

______________________________________________________

[i] Link: Real Historical Gross Domestic Product (GDP)

[ii] As of 2013 the median family income of $51,017 x GDP growth of 109.4% = $104,796 per year

[iii]  Link: Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs

New Jersey’s Regressive Public School Funding

by Brian T. Lynch, MSW

New Jersey recently published the annual “Taxpayers Guide to Educational Spending”. The headline in the Star Ledger was that school spending is up 5% over last year. This is hardly news given that inflation alone accounted for 1.7% of the increase.

Much of the remaining 3.3% increase in school spending is structural by design. Consider that new teacher salaries start low and increase annually as they gain experience. We also compensate teachers as they obtain higher educational degrees as a means of improving the quality of our teachers. Add to this the fact that the total number of teachers gradually increase as student enrolled numbers creep up a little every year. Then there is the higher than inflation increases in fuel costs that drive up the cost of student transportation each year. The retirement of higher paid teachers and administrators don’t quite balance out these other factors.

What irks the public most about this 5% increase is really the story behind how we fund public education in New Jersey. It just seems unfair. And when you look under the hood, it really is unfair. Wealth based public school funding is regressive in nature. It favors the wealthy and disfavors the poor. What it costs to educate a child doesn’t vary that much between wealthy and poor school districts, but the value of property and therefore the tax base varies a lot. In today’s economy especially, the prosperity in wealthy school districts is growing rapidly relative to per pupil costs while property values in less prosperous school districts are in decline.

To understand the disparity of wealth based public education funding, let’s take affluent Morris County as an example (located in the central most area of the Northern half of the State). Morris County has many wealthy school districts, such as Harding where the average home sells for over a million dollars. It also has districts like Wharton where the average home sells for a quarter of that amount, or about $251,000. Property values in Dover are a bit higher, but the median family income in the Dover school district is just $59,000 compared with $160,000 per year in Mountain Lakes. (Fig.1 below)

One way to gain some perspective on property based school funding is to compare what it costs to educate a student with what it costs to buy a home in the same district. In the eleven wealthiest districts of Morris County, home prices are 30 to 50 times more than the educational cost per pupil. Home values are just 16 to 18 times more than per pupil costs in the 12 poorest districts. As a general rule, the higher a district’s property values, the lower the tax rates. The reverse is usually true in poorer districts. Districts with lower property values, and lower income levels, generally have higher tax rates. While the 11 wealthiest districts in Morris County pay a little more to educate children in their district, their property tax rates are about one-third less than in the 12 poorest districts. (Fig. 2 below)

The dramatic contrast between home values and per pupil costs is partially masked when just comparing tax rates because, in the suburbs, wealthier districts tend to have fewer households. Fewer household to share the tax burden mean higher tax rates to generate sufficient revenue. Despite this fact, tax rates in 8 or the 11 richest districts is among the lowest in Morris County. Only three of these wealthy districts have higher per pupil costs while three have among the lowest per pupil costs. This highlights the fact that education costs are similar across the county. The average district cost per pupil is $17,730, plus or minus $2,038. There are a few outliers in either direction.

Educational costs vary far less than home values from district to district, so families in wealthier districts have a far easier time affording public education than families at the lower end of the economic ladder. While New Jersey’s State School Aid formula is supposed to help balance school funding across all districts, it does little to correct the underlying inequality and unfairness of wealth based educational funding.

Sources

Taxpayers’ Guide to Educational Spending 2013: http://www.state.nj.us/education/guide/2013/

General Tax Rates : http://www.state.nj.us/treasury/taxation/pdf/lpt/gtr13mor.pdf

Average Home Sales : NJ Spotlight News @ http://www.njspotlight.com/stories/13/02/28/average-home-sales-prices/ For March 1, 2013

Median Income and # Households: http://www.njspotlight.com/stories/13/12/19/median-income/

Figure 1

Figure 2