The Story Behind The Problem Of Income Inequality

Jeff Jacoby posted an article at in November of this year entitled, “The Real Cause of Rising Income Inequality.” Income inequality has increased under President Obama, and Mr. Jacoby points out a few reasons why.

Before I get to Mr. Jacoby’s article, I want to refer to Senator Daniel Patrick Moynihan’s 1965 report on “the breakdown of the Negro family.”

Senator Moynihan’s report stated:

The Breakdown of the Negro Family Has Led to a Startling Increase in Welfare Dependency.

The majority of Negro children receive public assistance under the AFDC program at one point or another in their childhood.

At present, 14 percent of Negro children are receiving AFDC assistance, as against 2 percent of white children. Eight percent of white children receive such assistance at some time, as against 56 percent of nonwhites, according to an extrapolation based on HEW data. (Let it be noted, however, that out of a total of 1.8 million nonwhite illegitimate children in the nation in 1961, 1.3 million were not receiving aid under the AFDC program, although a substantial number have, or will, receive aid at some time in their lives.)

Again, the situation may be said to be worsening. The AFDC program, deriving from the long established Mothers’ Aid programs, was established in 1935 principally to care for widows and orphans, although the legislation covered all children in homes deprived of parental support because one or both of their parents are absent or incapacitated.

In the beginning, the number of AFDC families in which the father was absent because of desertion was less than a third of the total. Today it is two-thirds. HEW estimates “that between two-thirds and three-fourths of the 50 percent increase from 1948 to 1955 in the number of absent-father families receiving ADC may be explained by an increase in broken homes in the population.”10

A 1960 study of Aid to Dependent Children in Cook County, Ill. stated:
“The ‘typical’ ADC mother in Cook County was married and had children by her husband, who deserted; his whereabouts are unknown, and he does not contribute to the support of his children. She is not free to remarry and has had an illegitimate child since her husband left. (Almost 90 percent of the ADC families are Negro.)”11

The steady expansion of this welfare program, as of public assistance programs in general, can be taken as a measure of the steady disintegration of the Negro family structure over the past generation in the United States.

I would argue that the ADC program has actually encouraged the breakdown of families of all races. When the government subsidizes a behavior (in this case, fatherless families), that behavior increases. The welfare programs as currently written are a perfect example of this.

Now, back to Mr. Jacoby. The article states:

One report, aptly titled “For Richer, For Poorer,” is by sociologist W. Bradford Wilcox of the American Enterprise Institute and economist Robert I. Lerman of the Urban Institute. It documents the profound links that connect family structure and financial well-being, and underscores what decades of empirical data have shown: Families headed by married couples tend to be much stronger economically than those headed by unwed single parents.

“Anyone concerned about family inequality, men’s declining labor-force participation, and the vitality of the American dream should worry about the nation’s retreat from marriage,” the authors write. The steady fall in the percentage of married two-parent households — from 78 percent in 1980 to 66 percent in 2012 — goes a long way toward explaining why so many ordinary families have trouble climbing beyond the lower rungs on the economic ladder. Correlation isn’t proof of causation, of course. But there is no refuting the strong association between growing up with both parents in an intact family and achieving higher levels of education, work, and income as young adults.

Basically, intact families are economically stronger than broken families.

The article at concludes:

Income inequality may or may not be “the defining challenge of our time,” as Obama and others have proclaimed. But the most significant driver of that inequality — the biggest impediment to upward economic mobility — isn’t hard to identify. The higher the fraction of children not being raised by their married parents, the more of our fellow citizens for whom the American Dream is likely to remain beyond reach.

The family is one of the building blocks of our society. Unless we strengthen that building block, our society will crumble. Our compassion needs to be combined with wisdom. Children from broken families are more likely to commit crimes and less likely to finish their education. The government needs to find a way to strengthen marriage–not undermine it.

Never Forget

If you read this site regularly, you know that I try to summarize articles that may not have been widely reported and that I think are important. I tend to cite a few quotes from an article and then add some comments on my reasons I think the article is important or relevant. In this case, I will make an exception. I have no comments, I just strongly suggest that you follow the link below and read the entire story. Never forget.

Posted by Jeff Jacoby on April 7, 1994, in the Boston Globe on the 50th anniversary of the events related:  The day the Nazis came for my father’s family.

The Mortgage Settlement

It’s easier for the government to blame the banks than to take responsibility for their own role in the housing meltdown. CNN Money posted an article today about the settlement reached with five of the largest home loan lenders.

The article reports:

Participating banks: The five mortgage servicers that are parties to the settlement — Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — will pay a total of $5 billion to the states. Some of that money will go to foreclosed homeowners and the rest to the states.

Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.

I am not in any way connected to a bank (although I do use them), but this makes me totally furious. On September 28, 2008, Jeff Jacoby at stated:

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and “redlining” because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to “meet the credit needs” of “low-income, minority, and distressed neighborhoods.” Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms,Fannie Mae andFreddie Mac, encouraged this “subprime” lending by authorizing ever more “flexible” criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

I commend the effort to make home ownership available to more people; I object to putting pressue on banks to make bad loans. The fact that the government is now going after the banks they put at risk is the height of chutzpah. Going after the lenders they forced to make bad loans is simply another example of the anti-business attitude of the Obama Administration.

Enhanced by Zemanta

Tackiness Prevented

Jeff Jacoby at the Boston Globe posted an article today about the decision last week by US District Judge Richard Leon to block a Food And Drug Administration (FDA) rule that would require cigarette manufacturers to put graphic images on cigarette packs showing the dangers of smoking.

A few disclaimers here–I don’t smoke–never have–I hate the smell of cigarette smoke, but I don’t think smokers should be forced to stand in the freezing snow outside a restaurant to enjoy a cigarette. (However, they do need a separate section of the establishment with a separate ventilation system,)

However, required graphic images on cigarette packs is a bit much even for a non-smoker like me.

The article points out:

The FDA’s gruesome new labels are not designed to provide consumers with useful information about the hazards of smoking. After 45 years of mandatory Surgeon General’s warnings, every non-comatose American knows perfectly well that cigarettes are a noxious health risk. That’s why the share of Americans who smoke at least occasionally has fallen to an all-time low of 19.3 percent, or less than 1 in 5 — a far cry from the more than 42 percent who were smokers in 1965. No one, not even Big Tobacco, disputes Washington’s right to require cigarette makers to disclose pertinent facts about their product’s dangers. Those disclosures, it’s clear, have been effective.

The government has no power to require the cigarette companies to put graphic images on their cigarette packs. To me, the requirement that there be an anti-smoking warning is a stretch.

Enhanced by Zemanta