Thursday, January 29, 2015

Wealth disparity and no charity

From page A10 | January 19, 2014 |

By Mark Rollins

There are a lot of good arguments being made in the media about the inequities and perils of the growing disparity of wealth in this country and how it is wrong to make drastic cuts to food stamps, and fail to raise the minimum wage or extend the unemployment insurance for people struggling to find jobs in this dire economy.

It also has been pointed out by many smart economists how it would be good for the economy to help the poor.

I am down with all of that — as is the new pope — but I would like to add two points of science to the national discussion.
The first point has to do with research in behavioral economics about the effects of poverty on people, which helps us to understand their plight.

It shows that being poor can have the same effect as losing 13 IQ points, or being an alcoholic. It reduces cognition and impairs decision-making in various areas of a person’s life. It also impairs optimism and therefore ability to make plans to improve one’s life financially or otherwise. Poverty makes people forget to take medication or take care of their children. It makes them more prone to anger, forgetfulness and neglect of basic functions in life.

It has been shown that poverty has deleterious effects on the brain both long-term and even seasonally in one study. In other words, there was a shortage of cognitive bandwidth found in the brains of farmers before they brought in a harvest and were experiencing temporary poverty as compared with normal mental ability when their harvest brought money in and they were lifted out of poverty temporarily.

This study demonstrates that these symptoms are not making people poor. The data show that it is not the person’s fault but rather the predicament that they find themselves in, that causes the lack of cognitive capacity. It’s like being hit when you’re down.

The studies also showed that this effect is not from stress. Stress levels were monitored and were not found to be correlated.
When people are lifted out of poverty, it frees up a good portion of the executive decision-making ability in their frontal cortex of their brains. And you can think of that in terms of better collective decision-making, which has to benefit all of society.

“Benefit all of society” is the key phrase here. It seems as though only one of our great political parties want to put in place government policies that will benefit everyone. The other party gives only lip service to that notion and prefers to help only those few who don’t need any help, or make those who are already happy even more happy.

That brings me to my second observation, this one about the science of the effects of money on happiness.

The top 40 hedge fund managers in the United States brought home a total of $16 billion last year, according to economist Jeffrey Sachs. That is an average of $400 million apiece. They were taxed at only 15 percent, a much lower rate than most people. If you taxed them at a normal rate, you would have $3 billion a year in revenues to help feed the poor.

That would leave each of these managers with thousands of times more money than is required to be happy, according to a Princeton study several years ago. It found that as your income rises you become happier up to an income of $75,000 a year. Happiness does not increase with income above that.

Why do these plutocrats need 5,333 times more money than is required for happiness? Is not 4,320 times more enough for them?

It’s bad enough that the average CEO has gone from making 20 times as much as the average worker to making 500 times the average worker. But a person who is earning more than minimum wage, or $1,250 a month, is making only one-fifth as much as a person needs to be happy, or 26,667 times less than these tycoons.

Of course, my calculations here are a little tongue-in-cheek but the main idea I am putting forward is a valid one.

There is an unfortunate trend in this country, in recent years, of less philanthropy among billionaires and more and more use of obscure “charities” to help them keep vast fortunes in their families. Huge treasure troves get passed on to their grandchildren tax-free and very little is actually given to charity.

Some very well-known multi-billionaires on the Forbes 400 list are using these trust funds not just to avoid taxes but to actually get richer because the funds grow a lot faster than money is given out to charities.

Washington’s tax policies are hurting the poor and the working class. Look at the billions of dollars that the super-rich are making by hiring lawyers and lobbyists to avoid paying inheritance taxes (more than a trillion dollars a year). But after all, they have lots of grandchildren who need to have exponential happiness.

It is staggering, the amount of money that is being kept on the sidelines of the economy and forming a giant immoral bottleneck, because of our regressive tax policy for the top tiers.

The Wall Street elites, the Cayman Island tax evaders and the radical-right, anti-science, know-nothing crowd say there is no money to raise the minimum wage or extend unemployment insurance or give food stamps to the working poor, the elderly, or veterans or hungry children. And they say that affordable health insurance for all will hurt the economy.

Democrats, independents and non-radicalized conservatives know the truth. These neo-confederate insurrectionists don’t believe in these things, never have and never will, and they don’t really give one whit about the economy or the state of the union.

— Mark Rollins is a Davis resident.



Special to The Enterprise