The Price Of Economic Inequality?

A report on the rising number of incarcerated Americans provides a disturbing look at the unspoken impact of economic inequality and the high cost we pay for perpetuating it. At the same time, during each election cycle, politicians from both parties accuse each other of practicing suspect fiscal discipline.

For this discussion, I want to look at the costs of incarceration in relation to providing universal health care as well as the Bush tax cuts. Time and again, the GOP points out the exorbitant costs that might be associated with providing universal health care. From what I’ve read, the plans being pushed by Senators Clinton and Obama are reported to cost 10 to 15 billion dollars annually. That’s a big expense…but before one concludes we can’t afford it, one must consider the burgeoning costs of incarceration and the distribution and impact of the Bush tax cuts.

From The Seattle Post-Intelligencer:

NEW YORK — For the first time in U.S. history, more than one of every 100 adults is in jail or prison, according to a new report documenting America’s rank as the world’s No. 1 incarcerator. It urges states to curtail corrections spending by placing fewer low-risk offenders behind bars.

Using state-by-state data, the report says 2,319,258 Americans were in jail or prison at the start of 2008 - one out of every 99.1 adults. Whether per capita or in raw numbers, it’s more than any other nation.

The report, released Thursday by the Pew Center on the States, said the 50 states spent more than $49 billion on corrections last year, up from less than $11 billion 20 years earlier. The rate of increase for prison costs was six times greater than for higher education spending, the report said.

So in the course of 20 years, we have increased our annual corrections spending by a whopping $38 billion dollars. That is roughly three times the projected annual cost to provide universal health care…health care that would help elevate the very people who are disproportionately represented in the prison population. Factor in the following data on the Bush tax cuts and one will begin to see the larger picture.


WASHINGTON - Since 2001, President Bush’s tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers — whose incomes averaged $51,500 in 2001 — saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.

Unfortunately, these percentages are deceptive. Let’s look at a practical explanation of what these tax cuts meant to the working poor.


Imagine you are a waitress, married, with two children and a family income of $26,000 per year. Should you be enthusiastic about the tax cuts proposed by President Bush? He certainly wants you to think so. He uses an example of a family like yours to illustrate the benefits of his plan for working Americans. He boasts that struggling low-income families will enjoy the largest percentage reduction in their taxes. The income taxes paid by a family like yours will fall by 100% or more in some cases. This is true–but highly misleading.

President Bush fails to mention that your family pays only about $20 a year in income taxes, so even a 100% reduction does not amount to much. Like three-quarters of working Americans, you pay much more in payroll taxes–about $3,000 a year–than in income taxes. Yet not a penny of the $1.6 trillion package of Bush tax cuts (in reality, closer to $2 trillion over 10 years) is used to reduce payroll taxes. Moreover, should your income from waitressing fall below $26,000 as the economy slows, your family could be among the 75% of families in the lowest 20% of the income distribution that stand to get absolutely zero from the Bush plan.

The President claims that the “typical American family of four” will be able to keep $1,600 more of their money each year under his plan. Since you won’t be getting anything like that, you might be tempted to conclude that your family must be an exception. Not really. The reality is that the President’s claim is disingenuous. Eighty-nine percent of all tax filers, including 95% of those in the bottom 80% of the income distribution, will receive far less than $1,600.

In other words, when a 100% tax cut is the equivalent of $20.00, a family of four might be able to translate that twenty dollars into a meal at McDonalds…one time in 365 days. On the other hand, if one is lucky enough to be in the top one percent (those with $915,000 in pretax income…and first class health care) of earners and receive a 20% tax reduction, I suspect the savings would buy more than one fast food dinner over the course of a year. The skewed advantages…and disadvantages…suddenly become obvious.

If that isn’t bad enough, let’s return to the costs of incarceration and look at future cost projections.

From The New York Times:

By 2011, the report said, states are on track to spend an additional $25 billion.

The cost of medical care is growing by 10 percent annually, the report said, and will accelerate as the prison population ages.

In less than four years, we will spend another $25 billion annually (more than enough to pay for universal health care) to incarcerate more and more Americans…the bulk of which come from the economically underprivileged.

More From The New York Times:

Incarceration rates are even higher for some groups. One in 36 Hispanic adults is behind bars, based on Justice Department figures for 2006. One in 15 black adults is, too, as is one in nine black men between the ages of 20 and 34.

The report, from the Pew Center on the States, also found that only one in 355 white women between the ages of 35 and 39 are behind bars but that one in 100 black women are.

Let me be clear…crime is wrong…and it should be punished. However, we cannot ignore the factors that facilitate crime. Failing to provide opportunities to those most lacking in resources is also wrong…and it often leads to a lack of education and therefore a susceptibility to participating in crimes that are driven by poverty.

We have likely exceeded the point at which it will cost us more to punish and incarcerate those who commit these crimes of poverty than it would have cost us to insure their education, to raise the minimum wage above the poverty level, and to grant them the dignity and peace of mind that comes with knowing one’s family members can receive health care when it is warranted; not just when it is necessary to prevent death.

Instead, under the guidance of the GOP, we have elected to ignore the fact that 47 million Americans lack health care and to focus upon further enriching the wealthiest…all the while being forced to endure asinine arguments that doing so will create jobs and thus facilitate a rising tide to float the boats of all Americans. It simply isn’t true.

At a savings of $20 a year, millions of Americans can’t even buy a seat in the boat…let alone stay afloat by treading water in the midst of the steady deluge of ever more ominous waves. If the number and availability of life preservers continues to dwindle, we are fast approaching the point at which our society will collapse under the weight of the inequity we chose to ignore.

If that happens, it will be as my grandfather argued many years ago, “They can eat you, but they can’t shit you”. The cannibalism has begun. What follows will not be pleasant.

Cross-posted at Thought Theater

4 Responses to “The Price Of Economic Inequality?”

  1. manapp99 Says:

    Daniel, I am curious about this assertion:

    “So in the course of 20 years, we have increased our annual corrections spending by a whopping $38 billion dollars. That is roughly three times the projected annual cost to provide universal health care…”

    I looked up the amount spent on health care currently by the feds and found this:

    “The total 2008 budget for federal health care, administered by the U.S. Department of Health and Human Services, would be nearly $700 billion for the fiscal year that begins Oct. 1, an increase of more than $28 billion over 2007. Medicare makes up 55.4 percent of the HHS budget, while Medicaid accounts for 29 percent”

    If we are spending 700 billion on current health care programs that cover only a relatively small portion of the population, how could 38 billion be 3 times the projected cost of providing health care to 100% of the population.

    Perhaps I misunderstood your point but I am curious as to where you get projected cost of universal health care at 12 or so billion a year?

  2. manapp99 Says:

    As far as projecting costs of universal health care look what is happening in Mass where they recently inacted their own:

    “Spending on the state’s landmark health insurance initiative would rise by more than $400 million next year, representing one of the largest increases in the $28.2 billion state budget the governor proposed yesterday”

    “But the long-term cost of the insurance initiative continues to concern pol icy makers and analysts, who are worried that it may become unaffordable.

    “These increases are more than anticipated, so we absolutely have to find ways to hold down the rate of growth in future years,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog that has supported the initiative.

    This year the state is expected to exceed the initial budget for the health insurance initiative by about $245 million, and next year’s budget would boost spending by another $400 million.”

    And from this article:

    “Subsidized care plan’s cost to double
    Enrollment is outstripping state’s estimate

    Globe Staff / February 3, 2008
    The subsidized insurance program at the heart of the state’s healthcare initiative is expected to roughly double in size and expense over the next three years - an unexpected level of growth that could cost state taxpayers hundreds of millions of dollars or force the state to scale back its ambitions.”

    “Even with federal backing, the state may not be able to afford the insurance initiative as designed, because the law did not make any attempt to trim wasteful health spending, said Alan Sager, a Boston University professor who specializes in healthcare costs.”

    “In a statement, however, the governor’s spokesman, Joseph Landolfi, said, “It is clear that paying for healthcare reform will pose a much greater fiscal challenge than was anticipated by the previous administration. ”

    Beware of costs estimated by government, they are usually wrong to the downside.

  3. steve Says:

    Whoa…. you did not just say:

    “Failing to provide opportunities to those most lacking in resources is also wrong…and it often leads to a lack of education and therefore a susceptibility to participating in crimes that are driven by poverty.”

    How would you know? I mean seriously. How? I mean, you obviously like to point out my lack of reading comprehension and incapable analysis of your terse diatribes of Bush’s legacy. But shit I made it and I am fucking stupid.

    With all do respect to Tyson, who’s expertise in Economics far exceeds anyone… the hypothetical, $26000 family with two children argument is bullshit. The waitress would most likely be the single wage earner and the father would be incapacitated in some fashion. (more on that in a second) That is assuming the waitress is reporting all over her tips to the IRS. In that profession, it is unlikely the waitress is so she is taking advantage of the system.

    And as far as taxes are concerned. This is what the biweekly pay of 26,000 annual income employee looks like with 3 dependents:

    Your Pay Check Results

    Bi-weekly Gross Pay

    Federal Withholding

    Social Security


    Net Pay

    Calculation Based On

    Tax Year

    Gross Pay

    Pay Frequency

    Federal Filing Status
    Head of Household

    # of Federal Exemptions

    Additional Federal W/H

    Now… On April 15th, this wage earner files taxes and with those two kids probably gets the bulk of fed taxes she pays back. Because if the Dad isn’t working or is… some one has to be watching those kids and if not the government probably subsidizes her kid’s daycare especially if the kids need it for her to work since she makes far below the federal max income for dependent care. So yours and Ms. Tyson’s $20 savings is moot. This lady gets benefits that far and away exceed any taxpayer up the chain, which the middle class person on up to that $915,000 wage earner pay for. You and Ms Tyson are worried about a whopping $20 bucks. Big whoop! She gets a helping hand elsewhere so Alice can work. (Not to mention cash tips)

    But in this hypothetical argument, where is Dad? If he is in jail then i feel sorry for the mom working so hard. But I got to say at 26K someone here is working hard and some is sitting at home playing Xbox with their thumb up there ass and doesn’t deserve a tax break. Or they have a drug problem… and who’s fault is that? The government’s?

    In further research here, I found that Tyson worked for the Clinton Administration and in London which means she is already well schooled on socialism and is seeking quietly to impose that on us here.

    So… my suggestion Danny is the following. Ask the next administration to stop defending the world (Europe, the Far East, Africa) from rogue nations and terrorism. Hell, pull our troops out of Europe and Korea and Japan, close the bases… bring all those boys home (to wait alongside their fellow Americans unemployment lines because all those people who work in supporting the department of defense… like those at Ford and GM would be out of work too) then raise taxes on whom ever has a job. By your thinking, you would have a glut of money to not only pay for all the unemployment our nation would have but a helluva nice health care proposal right before our nation turned to shit from our diminished power in the world and fuel that costs 8 bucks a gallon at the pump instead of 3.50.

    Better yet, why don’t you ask France and Germany and Korea and Japan to pony up and pay for our health care while we continue to defend them from the evil communists?

  4. steve Says:

    Oh by the way… those two kids get Medicaid.

    The poverty level for a family of 4 with two kids is 21,000. Children under 18 qualify for medicaid when the household income is 133% of the poverty level. So….. the waitress by profession is taking advantage not claiming tips so the kids can get health care… Maybe she’ll go join the other 1:100 people in jail!!! LOL!!!

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