Tag Archives: Inequality

Which America Do You Live In?

My father was called up for service in World War II when I was a toddler, and when the war ended, I was still far too young to comprehend what “war” really meant. But one of the most vivid memories I have of those days was coming across my mother reading something called “The Black Book,” and crying.

The book was a compendium of Nazi atrocities. My mother said I was too young to hear about such things (as I recall, I was about five) but that I should always remember how lucky I was to live in the United States.

Years later, I read multiple historical and sociological analyses in an effort to understand how the Nazis came to power, how otherwise good people could participate in–or turn a blind eye to–what was happening. The lesson I took away began with an economic reality: when people are experiencing economic insecurity and privation–especially if they see that others are flourishing– resentments suppressed in better times surface, and the very human need to find someone or some group to blame for loss of status and/or security becomes incredibly easy for demagogues to manipulate.

There’s a reason that loss of the American middle class is so dangerous.

A recent book by an MIT economist paints a very troubling picture: America is now two countries, and one of those countries looks a lot like the third world.

 Peter Temin, Professor Emeritus of Economics at MIT, believes the ongoing death of “middle America” has sparked the emergence of two countries within one, the hallmark of developing nations. In his new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Temin paints a bleak picture where one country has a bounty of resources and power, and the other toils day after day with minimal access to the long-coveted American dream.

In his view, the United States is shifting toward an economic and political makeup more similar to developing nations than the wealthy, economically stable nation it has long been. Temin applied W. Arthur Lewis’s economic model – designed to understand the workings of developing countries – to the United States in an effort to document how inequality has grown in America.

Temin describes multiple contributing factors in the nation’s arrival at this place, from exchanging the War on Poverty for the War on Drugs to money in politics and systemic racism. He outlines the ways in which racial prejudice continues to lurk below the surface, allowing politicians to appeal to the age old “desire to preserve the inferior status of blacks”, encouraging white low-wage workers to accept their lesser place in society.

Temin lists policies that could begin to ameliorate the economic divide: Expanding education, updating infrastructure, forgiving mortgage and student loan debt, and programs to encourage social mobility for all Americans.

Right now, of course, the clear priority of Congress–let alone the current, deranged occupant of the Oval Office–is tax reduction for the wealthy at the expense of the already disadvantaged.

What’s that famous Santayana quote? Those who who fail to learn from history are doomed to repeat it.

 

Another Unequal New Year?

This is the last day of 2016, a year that most definitely will not be missed. It’s hard to know whether people of good will can make 2017 any better.

The United States will begin the new year by ushering in a President who promises to “make America great again.” Unfortunately, with every utterance and tweet, it becomes more obvious that his definition of “greatness” is an autocratic wet dream unconnected to either the common good or reality.

As discouraging as it may be to admit, the truth is that a significant percentage of the American public is equally delusional, especially when it comes to accurate assessments of the extent of current inequality, and America’s past economic “greatness.”

A 2015 article in Scientific American took a look at both myth and reality. It was titled “American Inequality: It’s Much Worse Than You Think,” and subtitled, “The great divide between our beliefs, our ideals, and reality.”

The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%. The Walton family, for example, has more wealth than 42% of American families combined.

Remember this infographic video that went viral several months ago? According to the article, it has been watched more than 16 million times.  I was one of those who was shocked by the distribution of wealth it showed, and I actually follow these matters fairly closely.

The great virtue of the Scientific American article, however, was not in schooling readers about the present chasm between the rich and the rest; it was in puncturing our ahistorical and fanciful belief that in America, success is an artifact of effort and hard work, that anyone willing to invest the necessary grit and determination can “make it,” and that American meritocracy means that entrepreneurial workers are not doomed to remain in whatever poverty or class they are born to.

It’s a lovely belief. The brutal reality, however, is very different.

In a study published early in 2015,

researchers found Americans overestimate the amount of upward social mobility that exists in society. They asked some 3,000 people to guess the chance that someone born to a family in the poorest 20% ends up as an adult in the richer quintiles. Sure enough, people think that moving up is significantly more likely than it is in reality. Interestingly, poorer and politically conservative participants thought that there is more mobility than richer and liberal participants…. We may not want to believe it, but the United States is now the most unequal of all Western nations. To make matters worse, America has considerably less social mobility than Canada and Europe.

This belief in American economic mobility doesn’t simply ignore the immense importance of family wealth and social connections, access to educational equality, and a wide range of discriminatory obstacles and structural social barriers.

Our stubborn belief in an American economic mobility that doesn’t exist creates an unwarranted optimism—an optimism that, ironically, is more prevalent among those at the bottom of the income distribution. And because we are optimistic—because we see opportunities that aren’t really there—we don’t get serious about correcting the social and financial structures that keep poor people poor.

The people who agreed with Trump that America was “great” at some indeterminate point in the past but is no longer so blessed seem to fall into two not mutually exclusive categories: those who resent the advancements of women, people of color and immigrants (America was great when “they” knew their place); and those who believe the mythology of a “lost” American mobility.

What would be great would be to make 2017 the year we began to restore content to our belief in American mobility and civic equality. A girl can dream….

Happy New Year.

 

 

 

 

 

Back Home in Indiana

As critical as this year’s Presidential and Senate races are, people will also vote on Tuesday for important state offices. Here in Indiana, the Republican candidate for Governor has doubled down on Mike Pence’s policies, especially his insistence that “the gays” don’t need no damn civil rights protections. He has also parroted Pence’s rosy, fact-free evaluation of Indiana’s economy.

Last Wednesday, I spoke about Indiana’s appalling levels of poverty and inequality to members of Shepherd’s Center at North United Methodist Church. I have shared much of the information in this speech previously on this blog, but it might be well to review what the data reveals about economic and human conditions in the Hoosier State in advance of Tuesday’s election. Here, then, is the text of that speech.

___________

I was asked to talk today about the United States’ growing problem with income inequality. There’s a lot to talk about—more than we have time for—because the causes and the consequences of growing inequality are complex and very troubling.

In 2007, I wrote a book called God and Country, in which I examined the religious roots of ostensibly secular policy preferences—things like climate change, foreign policy and economic systems. It was when researching that book that I came to appreciate the longstanding effect of Calvinism on American attitudes toward income inequality.

As I wrote in that book, the theological belief that arguably had the greatest effect on colonial economic activity was the Calvinist doctrine of predestination, which held that God had decided the ultimate fate of each person at the moment of creation. Predestination included the belief that the faithful discharge of one’s calling—the diligence with which a person worked– was evidence of the depth and sincerity of that person’s faith. Predestination, especially when coupled with the doctrine of original sin, convinced believers that the suffering of the poor must be intended by God as a spur to their repentance.

In other words, the poor were poor for a reason, and helping them escape poverty might actually thwart God’s will.

The belief that people are poor because they are somehow morally defective wasn’t universal, but it was widespread–and   that suspicion of poverty, that belief that poor people are somehow lacking in moral fiber or responsible for their own condition, has profoundly influenced American culture. Understanding that attitude about poverty is central to any effort to understand today’s arguments about income inequality.

There are cultural attitudes, and then there are facts. The facts are that, aside from children, the elderly and the disabled, poverty in the United States is experienced primarily by the working poor. Most poor people in the U.S. work forty or more hours a week; they simply don’t make enough money to live.

Let’s look at Indiana. ALICE is an acronym that stands for Asset Limited, Income Constrained, Employed. According to the United Way, ALICE families are those with income above federal poverty levels, but below what it actually costs to live in their communities. In Indiana, 36% of all households live below the ALICE threshold. About 14% are below the poverty level. To put that another way, there are 908,000 households in Indiana that cannot make ends meet. I want to emphasize: these are families and individuals with jobs, and most of them don’t qualify for social services or income supports.

The United Way’s ALICE report calculates the cost of living for each county, and takes differences in cost of living into account. In Marion County, a single individual living needs $18, 396 a year, or 9.20 an hour, to survive; a family with two adults, an infant and a preschooler needs $51, 972, or 25.99 an hour. In Indiana, 68% of jobs pay less than $20/hour, and three-quarters of those pay less than $15/hour.

If you are interested in learning more about ALICE families and their demographics, I encourage you to go to the website of the Indiana Association of United Ways and access the entire report. It’s an eye-opener.

As long as we are talking about Indiana, let me share some additional statistics, courtesy of the Indiana Institute for Working Families:

  • Indiana has a “jobs deficit” of 108,400—that’s the number of additional jobs we need due to population growth
  • The Annie E. Casey Foundation ranks Indiana 30th in child well-being—we’ve slipped two slots since 2014.
  • With respect to the status of women, Indiana ranks dead last overall. We are 39th in women’s employment and earnings, and 37th in poverty and opportunity.
  • Indiana’s minimum wage is not sufficient to support even a single adult in any county in the state, but Indiana’s legislature refuses to raise the wage and prohibits cities and counties from doing so. The state has ranked 38th in personal income for the past three years, and 33d in income growth last year. Even accounting for our relatively low cost of living, personal income in the state is 5.5 points below the national average. We have the tenth most regressive state tax system and the 2d highest sales tax.
  • Looking at inequality, rather than just poverty, people in the top 1% in Indiana make on average $717,688 a year, or about 16.5 times the state’s average income of $43,426. The much-hyped 2013 tax cut saved the wealthiest Hoosiers an average of $1181 and the lowest-income Hoosiers an average of $10 each.

If over a third of Indiana households can’t make ends meet, there must be programs to help them bridge the gap, right?

Wrong. In fact, the number of households receiving government aid—what most of us call welfare—totaled about 9,000 families in 2014—and emergency payments from local welfare offices like the Township Trustees actually declined by 13%.

Just to sum up: the total gap between sufficiency and actual income—that is, the amount of money that would be needed every year to bring all Hoosier households up to the ALICE threshold—was $34.2 billion in 2014. Those households earned $15.8 billion. They received $15.1 billion in combined charity and government assistance. That left a gap of $3.3 billion dollars. It would take 3.3 billion dollars of additional wages or government welfare or charitable support to bring all Indiana families up to subsistence.

The numbers are staggering, but they only tell part of the story. The human costs of poverty and inequality to both individuals and society are immense. A White House study released in May of this year found that raising the minimum wage reduces crime by 3 to 5 percent. Education research has demonstrated that poor classroom performance is affected more by poverty than any other factor. There are a number of other social pathologies that are caused or exacerbated by poverty.

Speaking of education—Awhile back, the Washington Post’s Wonkblog reported on an experiment in Ft. Lauderdale that holds so many lessons—not just about inequality, but about institutional and unintentional racism, the waste of human capital, and the human difficulty of seeing things that lie outside more comfortable worldviews.

In 2003, the head of the school system’s gifted program asked her staff to make a map showing where every gifted student lived in Broward County, Fla. She called the result an “atlas of inequality.” All of the then-identified gifted students were from the suburbs and wealthier communities, where parents were more involved in education. The map was virtually void in other areas.

The map convinced the district to work harder to identify gifted children from impoverished areas, and in 2005, it began giving a short test to all students in the second grade. Children who scored well on the test were then evaluated to determine whether they should be enrolled in the system’s gifted program. The district ended up identifying an additional 300 gifted children between 2005 and 2006—and 80 percent more black students and 130 percent more Hispanic students entered gifted programs in third grade.

The school district had previously relied upon referrals by teachers—a system used by many, if not most, school districts around the country. (Not, I am pleased to report, in IPS, which uses a system similar to the one now used in Ft. Lauderdale.) And that’s the problem: those programs amplify inequality because they disproportionately recruit children from high-income families — another example of how opportunity accrues to those who are already privileged.

This is how systemic bias operates. People who dismiss the notion of structural racism or advantage do so because they see bias as intentional, and success or failure solely as a measure of individual effort and/or merit. (Calvinism again!) They look around and no one is burning a cross on that black family’s lawn, or otherwise displaying hurtful antisocial behavior, so they draw the not-unreasonable (albeit inaccurate) conclusion that bias is absent.

The Ft. Lauderdale teachers who failed to identify precocious poor children weren’t bigots—they wouldn’t have been in those classrooms, working with poor children, if they were. But like most of us, they’d been socialized to connect intellectual capacity to certain markers of behavior—markers that children from disadvantaged families are less likely to exhibit.

A similar phenomenon occurs when businesses have job openings. Positions tend to be filled through “networking.” The word gets out to people already in those networks, who mention the opportunity to their friends, and to people with whom they feel comfortable. People who look and sound and act like them. It isn’t intentionally nefarious—it’s human. It’s the way the world works.

But in the aggregate, these otherwise innocent social networks operate to keep advantage where it is, and to exclude access to those whose talents and abilities are less recognized, because they are expressed differently. There are the “old boy’s networks” that continue to constrain women’s progress, the continuing friendships of alumni from elite schools disproportionately populated by the offspring of wealthy families, and the many other “communities of interest”—professional or social—where, as the old saying goes, “birds of a feather flock together.”

America cannot afford to lose the contributions of talented citizens simply because that talent comes from unfamiliar places.

Poverty and inequality also have society-wide economic ramifications. Research studies confirm that economic inequality and economic growth are inversely related.  Economies with less inequality grow more strongly than those with more.

When you think about it, this makes sense. The American economy relies on consumer demand to fuel economic growth. Moderate levels of inequality don’t matter, so long as there is a sufficiently large middle-class with sufficient disposable income to spend. So long as those with less still have “enough”–defined as income left over after life’s necessities have been covered–and so long as they continue to purchase goods and services with that income—the economy can be expected to grow.

However, when the distribution curb is what economists describe as “bimodal,” with lots of people barely eking out a living and a few others sitting on piles of money, the economic picture changes. The poor have little or no disposable income with which to purchase goods and services, and the rich can meet their needs and desires without depleting a significant portion of their assets. (For that matter, there aren’t enough rich people to drive economic growth, even if they spent lavishly.)

When people don’t buy, manufacturers don’t make. When manufacturers don’t make, they don’t hire workers (or keep the ones they have). Retailers close or downsize. Eventually, the assets held by the 1% lose their value, which is why the politics of greed are so shortsighted.

There is another consequence when the degree of inequality reaches or exceeds levels seen during the Gilded Age—as it is now. That consequence is social and political instability. Political scientists tell us that countries with deep divisions between rich and poor experience mass upheavals and various social pathologies. A wealthy friend of mine once remarked that he’d prefer paying higher taxes to watching angry mobs take to the streets, or worrying about someone kidnapping his children for ransom.

We are already seeing significant evidence of social discontent from young people who see income inequality as profoundly immoral—especially in a country that maintains a huge and expensive military, and lavishes gigantic salaries on the so-called “banksters” and others in the 1%. There was a reason so many young people flocked to the message and campaign of Bernie Sanders.

A lawyer I worked with once told me there is really only one question, legal or otherwise: what should we do? If poverty and income inequality are as corrosive to our social fabric and political health as most observers think they are, how can we ameliorate them? What should we do?

In the short term, we should certainly support efforts to improve America’s frayed social safety net. Things like expanding family and medical leave and paid sick days, improving benefit portability and similar measures will make a difference—and when someone is struggling, every little bit helps.

We should also raise the minimum wage. Economists at Goldman Sachs recently conducted a simple evaluation of the impact of state minimum-wage increases by comparing 13 states where the minimum wage had increased with states where it didn’t, and found that—despite preconceptions– the states where the minimum wage went up had faster job growth than the states where it didn’t. The Bureau of Labor Statistics reported the same pattern: employment growth was higher in states where the minimum wage went up.

This is counter-intuitive, I know. It has always seemed logical that raising wages would depress job creation.  What that simple logic missed, however, were the many factors other than wage rates that influence the decision to hire or fire employees. The Goldman Sachs study joins an overwhelming body of evidence that the simple equation—however logical—is wrong. When low-wage workers are paid more, they spend more, and that spending generates job growth.

It isn’t only low-wage workers who would benefit from a higher minimum wage, either: American taxpayers would save a bundle. We currently provide $6.2 billion in public assistance, food stamps, Medicaid and the like to low-wage Walmart workers, and another $7 billion to McDonald’s employees, among many other large, low-wage employers. Those subsidies are particularly galling, because we taxpayers are in effect paying a portion of the wages of those employees, and enriching the shareholders of those huge corporations.

We can talk a lot more about the minimum wage and other near-term measures we should investigate, but let me end by talking about a longer-term idea that is beginning to get some traction.

Most of us understand that without economic security, guarantees of personal, political and religious freedom aren’t worth much. If your day-to-day existence is consumed with the struggle for survival, the fact that you have freedom of speech—or even the vote—is small comfort.

Several countries have considered proposals for a guaranteed basic income. There are a number of variations, but the basic idea is that government would eliminate the various forms of social welfare that are currently in place, and would instead send each citizen an annual amount sufficient to cover basic living expenses.

A practical argument for a guaranteed income is efficiency—there would no longer be a need for the massive bureaucratic apparatus currently required to administer social welfare programs, no need to determine eligibility under the different standards for different programs. (Many years ago, conservative economist Milton Friedman proposed something similar: a “negative income tax” that would require payment from those earning above a certain amount, and send remittances to those below that threshold.)

Social science scholars see other benefits. As automation steadily displaces what were once middle-class jobs, receipt of a stipend sufficient to cover basic living expenses would allow people to go back to school, or to train for alternative employment, or work part-time. It would give new mothers—or fathers—the option to take time off to care for newborns; it would similarly facilitate caretaking for gravely ill spouses or parents.

We also might expect that with a lessening of abject poverty, a number of the social ills that accompany privation would improve, saving tax dollars.

As positive as all that sounds, however, there are reasons why efforts to implement a guaranteed income have fared badly. In Switzerland last year, a basic income proposal on the ballot was overwhelmingly defeated; in 2013 ,the German Parliament debated a similar proposal and rejected it.

The first—and most obvious—negative is cost. Although economists argue about the actual net cost, after savings from eliminating our current expensive patchwork of social programs—any such approach would undoubtedly require tax increases. In the United States, where taxes have become a dirty word even when they are earmarked to support basic services, this fact alone probably presents a politically insurmountable barrier.

There is also the question whether receipt of a guaranteed income, no matter how modest, would reduce the incentive to work. There is very little empirical data on that issue; however, there was an interesting experiment in Manitoba, Canada, during the 1970s, called Mincome. It was intended to assess the social impact of a guaranteed annual income, including whether it would be such a disincentive, and if so, to what degree. Apparently, only new mothers and teenagers worked substantially less. Mothers with newborns stopped working because they wanted to stay home longer with their babies, and teenagers worked less because they weren’t under as much pressure to help support their families, which resulted in more teenagers graduating. However, participants knew the project was not permanent, and it is impossible to know whether—and how—that knowledge affected the results.

There are a number of other legitimate concerns about so drastic a shift in the way we discharge our obligations to our fellow-citizens.

Given American cultural attitudes that valorize work and demean those who rely on public assistance (thanks, Calvin!), it’s safe to say that the United States is unlikely to institute a guaranteed income program (it certainly won’t happen in my lifetime). But even if a guaranteed income isn’t the answer, it is worth asking what it should mean to be a member of a political community. What are the reciprocal obligations of the citizen and the state? If membership has its privileges, what should those privileges be?

I’ll leave that question to you. Thank you.

The Price of Justice

The fact that politicians seem to get away with incredibly slanderous and libelous comments has been a particular annoyance during this election campaign. Granted, it’s hard to match the invective of Donald Trump, but if we’re honest, we have to admit that he has simply normalized and amplified the growing nastiness of too much of American politics and culture.

Seen any Senate ads lately?

Of course, candidates know what they are getting into, and I suppose they can slug it out (although it does make you wonder how many nice, qualified people who would do a good job simply decline to get down and dirty), but other objects of vitriol and unsubstantiated accusations are rarely in a position to fight back.

Think about the women (I believe the number is currently 12) who summoned their courage and shared their “Trump experiences” following disclosure of the appalling “pussy tape.” They probably anticipated his rage and bluster and denial, but those reactions have been accompanied by threats of lawsuits. Trump is clearly someone who issues empty and even ludicrous threats (see: letter to the New York Times), but he has also been involved in literally thousands of actual lawsuits, and not always as a defendant. In fact, as Ed Brayton reports, 

The New York Times reports that the American Bar Association prepared a report calling Donald Trump a libel bully for his decades-long use of defamation suits to stifle criticism of him, but they chickened out on releasing it because — drumroll, please — he might sue them.

The New York Times can take care of itself, but if the threat of litigation can chill and intimidate the ABA, think of the effect on even the most blameless and resolute accuser. If you lack the financial wherewithal to mount an adequate defense to a lawsuit, no matter how unfounded, the person pursuing that lawsuit starts out with a grossly unfair advantage. Even a loss is a win, when the real goal is to inflict damage.

This problem goes well beyond the antics of the spoiled brat running for President, and it isn’t simply relevant to libel cases. Ask any lawyer who has defended  or sued on behalf of a “little guy” against a large corporation represented by a major law firm. For that matter, ask the twenty-year-old stuck in the Marion County Jail awaiting trial on a relatively minor charge, who doesn’t have money to post bail and is represented by an overworked public defender because he can’t afford private counsel.

In far too many situations–not all, but too many–justice is something only the affluent can hope for.

Americans talk a lot about the obvious problems with our justice system: (1) inexcusable delays in the federal courts because there aren’t enough judges (thanks to Mitch McConnell and the GOP lawmakers who simply refuse to fill judicial vacancies so long as Obama is nominating the candidates for those positions), (2) unarmed people getting killed because police departments’ training programs–especially in smaller communities– are spotty at best and nonexistent at worst, (3) hundreds of thousands of people–mostly black– suffering mass incarceration and lifelong stigma thanks to a Drug War that we now know had little to do with controlling drugs and lots to do with continuing Jim Crow practices (I urge everyone reading this to watch Netflix’ documentary, “13th.” It gives chapter and verse.)

There’s much more.

The good news is that there finally seems to be a bipartisan recognition of at least some of these problems and even some evidence of a willingness to address them.

Bottom line: your chances of achieving justice–whether that’s redress of a wrong done to you, or the fair and timely resolution of a charge against you–shouldn’t depend upon  who is in office or what’s in your wallet.

The American justice system needs to be fixed, sooner rather than later.

 

 

 

Connecting the Dots–Inequality Edition

I am one of those tiresome academics who has repeatedly criticized the so-called privatization of government functions.

I say “so-called” because what Americans call privatization is no such thing. Actual privatization would require government to sell off or otherwise abandon a particular activity, and let the private sector handle it. (Much like Margaret Thatcher selling England’s steel mills to private-sector interests.)

What Americans call privatization is more accurately described as contracting out; government retains responsibility for a service and the obligation to fund it, but delivers the service through a third-party surrogate, either for-profit or not-for-profit.

There are certainly instances where choosing such a surrogate makes sense; unfortunately, we Americans tend to embrace fads in government as elsewhere. So rather than engaging in analyses of risk and reward for each proposal to contract, too many public entities have accepted the argument that nongovernmental actors will do a better job, or be less expensive, no matter what is to be outsourced.

Research results strongly suggest otherwise. Sometimes, contracting is appropriate; often it is not.

With the publication of a new in-depth report, In the Public Interest has illustrated the often pernicious effects contracting can have on equality. The report centers on five ways in which contracting out exacerbates inequality:

User-funded contracting. Public budgets have tightened all across the country, largely due to the American public’s unwillingness to pay taxes to support services we continue to demand. As a result, some jurisdictions are allowing contractors to charge fees to end-users to subsidize or completely fund an outsourced service.

This is increasingly happening in areas where citizens have little to no political voice. In private probation, for example, offenders are expected to pay for everything from their own drug testing to the costs of ankle-bracelets, despite the fact that as a group they lack the resources to do so.

Rising rates. Residents of places that have privatized critical public services such as water or transit have experienced steep increases in their rates. Some of these increases can be attributed to the profit motive, but in other jurisdictions—like my own—the increases mask desperate, clandestine efforts to shift the costs of public infrastructure from taxpayers to ratepayers. (In Indianapolis, the city sold the water company, which—thanks to deferred maintenance needs—had a negative value of several billion dollars. As part of the deal, the purchasing entity, a nonprofit, “adjusted” its payments in lieu of taxes (PILOT) obligation, upward. That allowed the city to float bonds, repayable from the artificially increased PILOT, and use the proceeds to pave deteriorated streets. The result was to shift the costs of infrastructure repair from general tax revenues to utility ratepayers. It would be hard to think of a more regressive strategy.)

Cutting the social safety net. Programs like Medicaid and food assistance are often subjects to privatization experiments, and the report notes that the impact can be
tragic. Contractors have increasingly taken over critical social services like child foster care services, welfare, the distribution of food assistance, Medicaid, and child support services. But as the report details, the complex social problems faced by families and children who utilize these services are difficult to address using a privatization model, and many social services contracts have financial incentives that inadvertently perpetuate cycles of poverty and divert money from critical programs to corporate profits.

Indiana, again, provides an example. Then-Governor Mitch Daniels attempted to outsource welfare intake; as a result, many recipients were denied benefits to which they were clearly entitled, and others endured long waits and confusing, burdensome processes. The results were so negative that the effort was discontinued, but the ensuing lawsuits cost the state millions of dollars that might otherwise have provided needed services.

A race to the bottom for workers. One of the recurring criticisms of privatization has been that, when private companies take control of a public service, they often slash wages and benefits to cut costs, replacing stable, middle class jobs with poverty-level jobs. The report confirms the criticism.

Similarly, the report underlines increasing recognition that privatizing schools, especially, increases socioeconomic and racial segregation. As the text notes, introducing private interests into things like schools and public parks can—and often does–radically impact access for certain groups.

The report is a sobering reminder that there is a critical difference between procurement—government purchases of such things as street paving or computers—and contracting out delivery of core governmental responsibilities. It turns out that “Weakening democratic control over public goods and services increases economic, political, and racial inequality.”