The Global Economic Divide

With wealth rising at probably the fastest pace on record, the world’s richest 1 percent own nearly 50 percent of global assets.

The Credit Suisse Research Institute’s 2014 “Global Wealth Report” finds that the world’s financial elite has recovered from the 2008 financial crisis and is back to accumulating more capital than ever. The financial crisis wiped out 15 percent of global wealth at the time. But global wealth is now 20 percent above the pre-crisis peak and 39 percent above the low in 2008.

North America is the region with the largest share of total wealth – 34.7 percent – followed by Europe, with its larger population, accounting for 32.4 percent. Forty-one percent of the world’s millionaires reside in the United States.

Over the past year, total wealth increased 8.3 percent worldwide, buoyed by a strong housing market and stock market prices.

In one year, the United States recovered all the assets lost in the financial crisis of the 2000s. Average wealth is 19 percent above the pre-crisis peak in 2006, and 50 percent above the post-crisis low in 2008.

The Top 1 Percent Hold 48.2 Percent of Global Assets

The economic divide in the world is astounding:

· The top 1 percent control 48.2 percent of global assets. A mere 0.7 percent of the world’s 4.7 billion population, including 35 million U.S. dollar millionaires, hold 44 percent of household wealth. Within that group, 128,200 “ultra-high net worth individuals” enjoy a wealth of more than $50 million, and just 45,000 have over $100 million.

· The richest 10 percent of adults own 87 percent of the world’s wealth.

· A billion adults – the 21 percent of the global population making up the world’s middle class – are worth $10,000 to $100,000.

· At the bottom, 3.3 billion people – 69.8 percent of the global population – have a wealth of $10,000 or below. They are concentrated in Africa and Asia.

The Credit Suisse report does not discuss political and moral concerns about global inequality. But it does suggest that the rising inequality is bad for the world’s economy.

The report notes, for instance, that that wealth is growing at a faster pace than disposable income. Today’s ratio of wealth to income basically matches that of the Great Depression. “This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past,” the report says.

French economist Thomas Piketty, in his bestseller “Capital,” suggests that inequality is inherent in capitalism, and expresses concern over the fact that capital has grown at a faster rate that the growth of the economy in recent years. He warns that the accompanying growing inequality threatens our long-term political stability.

Inequality and Ideology

Years of neo-liberal policies and austerity in Europe and the United States have fueled inequality. This process has been accompanied by a restructuring of the economy so that stagnant wages, poorly-paid jobs and long-term employment instability have become the norm.

But growing inequities of income and wealth does not generally concern conservatives.

They argue that that inequality does not matter as long as our living standards are increasing. From a social Darwinist perspective, they justify inequality, contending that the wealthy deserve what they earn because of their contribution to the economy. The conservative view seems particularly callous in light of the depth of global poverty in the Third World.

But progressives and many economists point out that excessive inequality is bad for the economy because the accumulation of capital is not accompanied by enough investment to spur strong economic growth. Indeed, corporations are now hoarding capital. Inequality, furthermore, harms the economy by causing a reduction of the purchasing power of the poor and middle class. The skyrocketing social divide undermines people’s faith in democracy and results in economic instability.

“Inequality will be a fact of economic life in the foreseeable future,” said Marshall Steinbaum, a research economist at the Washington Center for Equitable Growth. “It means that in the future, children who don’t come from wealthy families will be stuck in place.”

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The Greening of the Labor Movement


Thousands of union members participated in Sunday’s People’s Climate March, which is believed to be the largest demonstration by environmental activists ever to take place in the United States.

National, statewide and local unions played a big role in organizing the New York City march, and unions contributed significant resources to guarantee its success.

A New Movement?

Green activists are hopeful that the march marks the beginning of a movement that will unite a broad alliance of labor, community and traditional environmental groups dedicated to protecting the environment. Unionists who marched say the demonstration shows that the decades-old division between environmentalists and labor over the issue of jobs is finally breaking down.

“I would hope that a new movement will grow out of this,” said Jon Forster, a vice president of District Council 37, the largest public-employee union in New York City. Forster, who heads the union’s newly formed Climate Change Committee, worked with the 70 unions that helped organize the march.

“Building new community alliances is important, not only for creating jobs to but also to address social justice issues,” he said. “Climate change discriminates. Hurricane Sandy hurt the city’s minority and poor communities disproportionately.”

“This is really a class issue,” said Joshua Barnett, who works for the New York City Pubic Housing Authority. “The communities of New York City are unequally affected by asthma and pollution. The highest percentage of garbage dumps, sewage treatment plants and lead paint are in poor communities.”

Labor activists gathered for a lively rally at Broadway and 57th Street before the march kicked off in the late morning. Organizers estimated 350,000 workers, parents and children, human rights and peace advocates, youths, students, people of faith, politicians, celebrities and community activists participated the march, which filled dozens of blocks and extended over 2 miles until the demonstrators gathered between 34th and 38th streets for a block party.

Union leaders and rank-and-file members underscored how climate change is an existential issue for workers.

“Our members work and live in the coastal cities of the East of the United States,” said Hector Figueroa, who is the president of Local 32BJ, which has 145,000 members, who work in the city’s buildings as cleaners, maintenance laborers, security officers, window cleaners, building engineers and doormen. “They all are at risk with climate change.”

As noted by Figueroa, buildings account for a significant part of the city’s gas emission and electrical output. The local, an affiliate of Services Employees International Union, set up a training program for its supervisors to make the buildings they work in more environmentally friendly by conserving water and using electricity more efficiently.

Henry Garrido, an associate director of DC 37, which is an affiliate of the American State, Federation of State, County and Municipal Employees, recalled how Hurricane Sandy devastated the union’s downtown headquarters, which was closed for nine months because of damage. Many DC 37 members were among the thousands of residents displaced by the hurricane.

But while DC 37 members were direct victims of the storm, they also were on the frontlines in helping residents, Garrido said.
EMS workers tended to people injured in the storm. Members in the public hospitals evacuated patients. Social workers and clerical employees ran shelters. And mobile libraries became outposts to help residents of storm-ravaged communities charge their cell phones, learn about emergency services, and find shelter and shower facilities.

The Profit-Motive Leads to Environmental Devastation

Some unionists expressed little hope that addressing climate change is possible without significant political and economic changes.

Barbara Bowen, president of the Professional Staff Congress, which represents professors and other staff in the city’s public universities and colleges, said that because “capitalism cannot solve the climate problem,” it is up the unions to be a leading force in advocating the public policy and economic changes that are needed to deal with environmental problems.

“It’s our for-profit system that will lead to the devastation of our planet,” Judy Sheridan-Gonzalez, president of the New York State Nurses Association. She recalled that the administration of former Mayor Michael Bloomberg was unprepared for Hurricane Sandy in 2012. It was up to public employees like nurses and community activist groups like Occupy Sandy to come to the aid of residents in the first week after the storm, she said.

Stanley Sturgill, a retired underground coal miner from Kentucky, was one of the speakers at the People’s Climate March press conference in the morning.

“We have already lost thousands of jobs,” Sturgill responded when asked about the historic rift between labor and environmentalists over the issue of jobs. His observation suggested that with the decline of traditional industry, the union movement is better off focusing on creating green jobs and other employment.

Organizers of the march pointed out that 20 percent of the world’s electricity now comes from clean energy sources. Uruguay, Norway and Germany have adopted carbon-free policies. In May, Germany reached a landmark when nearly 75 percent of its peak power demand was met by renewable sources of energy.

In the United States, the Environmental Protection Agency seeks to cut carbon dioxide emissions of coal plants by 30 percent by 2030. Nearly 200 coal-fired plans have closed in the United States.

More than 1,500 organizations organized the People’s Climate March in New York City. On Sunday, more than 2,700 marches took place around the world.

The People’s Climate March was timed to pressure world leaders who will gather this week at the United Nations for a climate summit. The meeting will set the groundwork for the Paris United Nations Climate Summit in 2015, when world leaders are supposed to sign a new international climate treaty.

Fight Corporate Greed by Creating Green Jobs

“In New York City, labor can help create new programs to protect our infrastructure, protect the environment and develop alternate sources of energy,” said Juan Fernandez, president of DC 37’s Local 154, whose members include human rights workers. The city’s big public sector—with engineers, scientists, public health workers and emergency services workers—is uniquely qualified to help the city become safer by adopting green policies and projects to help protect the infrastructure of the local economy, according to labor activists like Fernandez.

“Labor is always on the frontline when there is a disaster,” said Jeremy Sanders, president of Zoological Employees Local 1501, whose members include workers at the world-famous Bronx Zoo. “We are going to be on the ground when the next disaster hits. Without the public employees, the city would grind to a halt.”

“We have to fight greed and create green jobs,” said Natasha Isma, who heads a committee of young activists in Local 1549, which represents city clerical workers.

“We need more environmental-friendly products. We have to protect our children and our children’s children. If we don’t act, we’re not going to have any planet left.”

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An Economic Recovery for the 1 Percent


The evidence just keeps coming in: The country’s economic elites are the only ones who have benefited from the so-called economic recovery.

The triennial Survey of Consumer Finances by the Federal Reserve Board, released this month, offers a treasure trove of data that documents the uneven recovery and the persistence of inequality in the United States.

The study of these and similar data tell an all too familiar story—a story of the decline of our standard of living.
But the exercise is always worth it because this storyline will continue until the U.S. voters wake up and support progressive politicians and a political agenda directed at working families that includes such polices as a national jobs program, redistributive taxes, fair trade policies, labor law reform to promote unionization, a higher minimum wage, the strengthening of Social Security and retirement security, and national health care.

Widespread Income Loss

About the only good news for consumers in the Fed report is that Americans are chipping away at their debt. But that also means they are cutting back on spending, which can’t be good for the economy. And while housing and credit card debt are declining, educational debt is increasing substantially.

Except for the top 20 percent, all families experienced a drop in median income from 2010 to 2013, the years covered by the report. Only families at the very top of income distribution saw widespread gains during that period. Families at the bottom of the income distribution “saw substantial declines in average incomes, continuing the trend observed between the 2007 and 2010 surveys,” the report says.

Overall, average income increased by 5 percent during 2010 to 2013, but median income fell. That points to an increasing concentration of income, as the economic elite captured most of the economic gains during that period. That observation is consistent with the findings of French economist Thomas Piketty, who found that a staggering 93 percent of the pre-tax income growth in 2010–the first year of the recovery—went to the top 1 percent.

Retirement Insecurity

The retirement security of most Americans continues to decline.

With employers failing to offer and continuing to drop traditional retirement plans, the participation of families in the bottom half of the income distribution has declined substantially from 2007 to 2013.

In 2013, only 40.2 percent of families actually participated in a retirement plans. That’s down from 48.2 percent in 2007.
But even the families that do participate in retirement plans generally aren’t on track to saving enough to be able to maintain their current standard of living during their retirement years.

The typical combined balance of Individual Retirement Account and defined-benefit pension for the lowest-income group with those assets was $39,100 in 2013. The average balance for the upper-middle group was $147,300.

The ownership of retirement savings accounts dipped below 50 percent in 2013. These accounts include IRAs, Keogh accounts, and certain employer-sponsored accounts, such as 401(k)s, 403(b)s and thrift savings accounts.

The report documents how lousy these retirement vehicles are. The average account had $201,300 in 2013. Half of account holders had $59,000 or less. Try living off that.

The low retirement savings show the need to expand Social Security rather than reduce the benefit. The easiest and most equitable way to do that, of course, is by scrapping the $117,000 cap on the income taxed for Social Security, an option that’s gaining support.
The report notes that, “the shares of income and wealth held by affluent families are at modern historical highs.” And among high-income groups considerable inequality exists.

Increasing Inequality

The income share of the top 3 percent amounted to 30.5 percent in 2013, with this group recovering the hit it took during the Great Recession.

But the share of income received by the next highest group (percentiles 90 through 97) has not budged for a quarter of a century, amounting to just less than17 percent in 1989 and 2013.

The “rising income share of the top 3 percent mirrors the declining share of the bottom 90 percent in distribution,” the report says. Translation: Productivity is not shared equally, and inequality reflects a direct transfer of income and wealth to the 1 percent from the rest of us.

The Wealth Divide

The bottom 90 percent of families has seen its share of wealth plummet to 24.7 percent in 2013 from 33.2 percent in 1989.
The inequality in our country becomes particularly striking when you look at net worth—the gross assets and liabilities of families.
The median net worth of all families fell by 2 percent to $81,200 from 2010 to 2013 while the mean (overall average) net worth—propped up by the gains of the affluent–remained at $534,600.

Wide disparities exist among different income and demographic groups:

· The bottom 20 percent of families had a median net worth of less than $50 in 2010 and 2013. Their average net worth was actually negative in 2013, as they carried a debt burden of $13,400.

· Families between the 75th and 90th percent groupings experienced a 20 percent decline in their average net worth, which fell to $505,800.

· The median net worth of the top 10 dropped to $1,871,800 in 2013, but their average net worth rose a little to just over $4 million in 2013, pulled up by the upper tier in this group.

· The average worth of non-white or Latino families fell 2 percent to $183,900.

The report points to the lingering impact of the housing crash.

Overall, the ownership rate of nearly every type of asset declined from 2010 to 2013. The drop in homeownership and home prices explains most of the decline.

The percentage of families who own a primary residence decreased from 69.1 percent in 2004 to 65.2 percent in 2013. The median family’s house was worth $170,000 in 2013. That is down from $182,200 three years earlier.

The survey is discussed in September issue of the Federal Reserve Bulletin, which is available at the Federal Reserve System’s website, where you can also find a video about the survey.

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Municipalities Face Obstacles as They Seek to Address Inequality


Rising inequality is a permanent fixture of our economy.

That bleak assessment of our economic landscape is one of the troubling conclusions of a new report by the United States Conference of Mayors.

“Unless policies are developed to mitigate these trends, income inequality will only grow larger in the future,” said the report’s author, Jim Diffley, who is the director of US Regional Economics at IHS, a global markets information and analysis company. What remains to be seen is how successful local initiatives can be in the face of federal inaction and anti-labor and anti-government initiatives in state legislatures.

The Abysmal Economic Recovery

The study found that inequality is rising in more than two of three metropolitan areas and that new jobs are paying nearly 25 percent less than the jobs lost during the Great Recession.

The annual wage in sectors where jobs were lost during the recession was $61,637. But the new jobs gained through the second quarter of 2014 showed an average gain of only $47,171. That gap represents a wage loss of $93 billion, according to the report,
“U.S. Metro Economies: Income and Wage Gaps Across the US.”

A similar report by the U.S. Conference of Mayors also found that many of the jobs lost during the 2001-2002 recession were replaced with lower paid ones. But the wage gap back then was 11 percent compared to the more recent 23 percent difference. Today’s twice as high wage gap is a clear sign that inequality continues to rise.

“While the economy is picking up stream, income inequality and wage gaps are an alarming trend that must be addressed,” said the president of the U.S. Conference of Mayors, Sacramento Mayor Kevin Johnson, when the report was released on Aug. 11.

The report describes the country’s “ongoing increase in income inequality” as a “structural feature of the 21st century economy.” Actually, as the report itself shows, the trend began decades ago:

• The share of income captured by the richest 20 percent of households increased from 43.6 percent in 1975 to 51 percent in 2012.

• Most of the gain went to the top 5 percent of households, whose income share rose from 16.5 percent to 22.3 percent during that period. For those households, the gain amounted to $490 billion in 2012 income.

The lowest 40 percent of households took in just 6.6 percent of the country’s income growth since 2005. The share of the top 20 percent of households was 60.6 percent while that of the top 5 percent was 27.6 percent. The report forecasts that middle-income households will continue to fall behind as the top households captures a greater portion of the income growth.

Income inequality is rising while the purchasing power of most households is declining.

From 2005-2012, average household income fell 3.0 percent. Median income—the amount that divides the country’s income distribution into two equal groups—fell 5 percent during that period.

The conference has set up a task to address inequality. The action comes as Washington is in a state of gridlock, failing to act on President Obama’s proposal to increase the federal minimum wage. The annual minimum wage ($47.25 an hour) has eroded, plummeting by 32 percent from $22,235 in 1968 to $15,080.

The Conservative Attack

Around the country, some states and municipalities are adopting increases in the minimum wage in the absence of federal action.

Yet Republican-controlled statehouses have also passed legislation to ban local governments from approving laws setting mandatory wages and benefits, including health care and paid sick leave. The anti-government American Legislative Exchange Council has provided conservative legislators with blueprints for such legislation.

Since 2011, eleven states have banned localities from passing mandatory sick leave legislation, according to the Center for Media and Democracy. Alabama and Oklahoma enacted bans this year. Forty million workers, or 40 percent of the work force, are unable to take paid sick leave, according to the U.S. Bureau of Labor Statistics.

In 2013, state legislatures introduced nearly 200 bills– apparently based on model legislation crafted by ALEC–to restrict wages, benefits and worker rights, according to the Center for Media and Democracy.

“As working Americans speak out for higher wages, better wages and respect in the workplace, a coordinated nationwide campaign to silence them is mounting–and ALEC is at the heart of it, according to “ALEC at 40: Turning Back the Clock on Prosperity and Progress,” a 2013 report by the Center for Media and Democracy. “ALEC, corporations, right-wing think tanks, and monied interests like the Koch brothers are pushing legislation throughout the country designed to drive down wages; limit health care, pensions and other benefits; and cripple working families in the political and legislative process.”

The Economic Policy Institute in 2013 also issued a report on the legislative assault on labor standards, unions and workplace protections.

The report—“The Legislative Attack on American Wages and Labor Standards, 2011–2012”– said that, “In 2011 and 2012, state legislatures undertook numerous efforts to undermine wages and labor standards:

▪               Four states passed laws restricting the minimum wage, four lifted restrictions on child labor, and 16 imposed new limits on benefits for the unemployed.

▪               States also passed laws stripping workers of overtime rights, repealing or restricting rights to sick leave, undermining workplace safety protections, and making it harder to sue one’s employer for race or sex discrimination.

▪               Legislation has been pursued making it harder for employees to recover unpaid wages (i.e., wage theft) and banning local cities and counties from establishing minimum wages or rights to sick leave.

▪               For the 93 percent of private-sector employees who have no union contract, laws on matters such as wages and sick time define employment standards and rights on the job. Thus, this agenda to undermine wages and working conditions is aimed primarily at non-union, private-sector employees.”

“The consequence of this legislative agenda is to undermine the ability of workers to earn middle-class wages and to enhance the power of employers in the labor market,” the report said. “These changes did not just happen but were the results of an intentional and persistent political campaign by business groups.” Besides ALEC, those groups include theU.S.Chamber of Commerce, National Federation of Independent Business, National Association of Manufacturers, and corporate-funded lobbying organizations, such as Americans for Tax Reform, and Americans for Prosperity, both supported by the billionaire anti-government Koch brothers.

With a strong conservative anti-labor legislative push already underway, municipalities will clearly encounter obstacles to their initiative to combat inequality.

But the Mayors’ Cities of Opportunity Task Force potentially represents a major political initiative against the decades-long assault on the living standards of working families. The policies promoted by the task force include universal pre-kindergarten programs, increasing the minimum wage, retraining for displaced workers, expanding skills training in junior colleges and increasing the Earned Income Tax Credit, which would boost the after-tax earnings of low-wage workers.

“The inequality crisis facing our cities is a threat to our fundamental Americans values,” said New York City Mayor Bill de Blasio, who chairs the conference’s Cities of Opportunity Task Force. “The Cities of Opportunity Task Force is bringing mayors from all corners of the country together to work together and leverage the power of municipal governments to advance a national, common equity agenda, and to also encourage action on the federal level.”

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Civil Rights and Union Organizing


With unions nearing extinction in the private sector and under relentless attack in the public sector, making union organizing a civil right could help revive the battered U.S. labor movement.

A bill recently proposed by Rep. Keith Ellison (D- Minn.) and Rep. John Lewis (D-Ga.) would extend that right to union organizers.

By defining organizing a fundamental right, the bill would provide workers with the protection against discrimination now enjoyed by minorities. Under the legislation, workers who are fired for organizing would have the right to sue their employers for damages in federal court.

“Most people want a union, but they need a job,” Ellison said on July 30, when he and Lewis introduced the bill.

He said that the legislation would help make union organizers less fearful about retaliation by employers, who often fight organizing drives by hiring anti-union law firms, firing and disciplining organizers, and holding captive meetings to persuade workers to vote against forming a union in their workplace.

“Too often, employees seeking to unite with their co-workers to demand better wages, benefits and workplace safety provisions face aggressive and often illegal anti-union campaigns coordinated by their employer,” said Mary Kay Henry, president of Service Employees International Union, in a statement backing the bill. “Intimidation, illegal firings, wrongful discipline and other tactics aimed at breaking workers’ will are commonplace when they seek to join together on the job.”

Today, union organizers can file a complaint with the National Labor Relations Board if they are fired. But the best remedy they can hope for is to be reinstated with back pay. By allowing for punitive damages, the Ellison-Lewis legislation would open up employers to very costly lawsuits and embarrassing publicity.

“The unfortunate reality is that discrimination in the workplace persists and employees are still wrongly fired or demoted for union activity while employers have ample resources to intimidate workers for organizing,” said Lee Saunders, president of the American Federation of State, County and Municipal Employees, in a statement. The legislation, he said, “will enhance workplace protection by allowing victims to receive remedies, including back pay and damages….Workplace discrimination hurts all workers, and disproportionately hurts minorities and women.”

Strengthening the Labor Movement

The blueprint for the Ellison-Lewis legislation comes from “Why Labor Organizing Should Be a Civil Right: Rebuilding a Middle-Class Democracy by Enhancing Worker Voice,” a 2012 book by Richard D. Kahlenberg, a senior fellow at the Century Foundation, and Moshe Z. Marvit, a labor and job discrimination lawyer.

“By making labor a civil right, the hope is to make the labor movement itself stronger,” Marvit said in an interview with With the court option, unions should be able to embark upon more sophisticated and aggressive organizing campaigns, he said.

By extending protections of Title VII of the Civil Rights Act to union organizers, Ellison and Lewis’ Employee Empowerment Act would presumably make employers less likely to use illegal tactics to try to thwart organizing campaigns.

“The penalties now are extremely weak,” Kahlenberg said. He noted that when the National Labor Relations Board orders workers to be reinstated and receive back pay, employers are allowed to subtract any earnings the employees received after their firing.

Under the Employee Empowerment Act, aggrieved workers would be covered by Title VII of the Civil Rights Act, allowing them to seek substantial damages in federal court. They’d be able to force their boss to testify in court. They would also have the right to discovery, which means they could demand to see employers’ files and e-mail messages. Today, they don’t enjoy any of those rights, Kahlenberg pointed out.

Both Kahlenberg and Marvit acknowledge that the United States ultimately needs to carry out more far- reaching reform of its labor laws to address the imbalance of power between workers and employers. But over the past half-century, Democrats have been unable to enact labor law reform during four presidencies in which they have also controlled the House and Senate, suggesting comprehensive reform is unlikely anytime soon.

“One reason law reform has never passed is that it is very complicated and it doesn’t excite the general population, “Kahlenberg said. “A civil rights approach is something that is very easy for everyone to understand. People study the civil rights movement in school, but they aren’t taught about labor rights.”

During the Eisenhower years in the 1950s, employers generally accepted the right of workers to organize unions. But as labor unions declined and power shifted to corporations in subsequent decades, employers felt—correctly–that they could get away with more aggressive anti-union practices.

Changing the Political Discourse

Making the right to organize a civil right would help alter the political discourse in the country, Marvit said.

“Labor law now exists in a sort of black hole,” Marvit said.

“Thinking of labor as a civil right changes the conversation,” he said. “With the new law, labor organizing would come to seen as a basic right like freedom of speech and freedom of association.”

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Criminalization of Immigration Causes Warehousing of Thousands in Inhumane Privatized Prisons


Thousands of immigrants are locked up in a shadow private prison system as a result of the criminalization of immigration over the past decade, according to a recent report by the American Civil Liberties Union.

The 101-page report, “Warehoused and Forgotten: Immigrants Trapped in Our Shadow Private Prison System,” is a stinging indictment of prison privatization in the United States.

Immigrants incarcerated in privatized facilities receive poor medical care, live in overcrowded conditions, don’t have ready access to legal representation, lack education and vocational training opportunities, and are often housed far away from their families.

The act of illegally crossing the border into the United States used to be treated as a civil offence resulting in deportation. But the decision of the federal government several years ago to treat illegal crossings as a criminal offence has led a mass incarceration of immigrants in segregated facilities.

Illegally entering the country is a federal misdemeanor punishable by up to six months in prison. Re-entering the United States after deportation is a felony that can lead to two years in prison for a person without a criminal record. People with serious criminal records who re-enter the country can be locked up for 20 years.

The criminalization of immigration is enriching for-profit companies that operate privatized facilities. The privatized prisons aren’t subject to many of the policies and regulations of government-run prisons and are therefore largely unaccountable to outside oversight.

“The tipping point came in 2009, when more people entered federal prison for immigration offenses than for violent, weapons, and property offenses combined—and the number has continued to increase every year,” the report says. That year, the Federal Bureau of Prisons awarded contracts to two contractors to run two prisons in California and New Mexico housing up to 7,500 low-security, non-citizens inmates.

On a daily basis in 2012, the Bureau of Prisons held 23,700 people convicted of immigration offences. The number of people charged with federal immigration offenses increased by 367 percent from 2003 to 2013, when 97,384 people were prosecuted.

Foreign federal prisoners are mostly sent to thirteen “Criminal Alien Requirement” (CAR) prisons. Today, more than 25,000 “low-security criminal aliens” are locked up in these prisons. The ACLU report, released in June, focuses on the five CAR prisons in Texas.

The CAR facilities, which are among a group of federal prisons operated by for-profit companies instead of the Bureau of Prisons, exclusively house non-citizens. They have lower security requirements than medium- and maximum-security institutions run by the bureau.

Shocking Abuse and Mistreatment

“Our investigation uncovered evidence that the men held in these private prisons are subjected to shocking abuse and mistreatment, and discriminated against by BOP polices that impede family contact and exclude them from rehabilitative programs,” the report says.

Among the report’s findings:

• Private prison contracts provide incentives that result in overcrowding.

The contracts reviewed by the ACLU have occupancy quotas that require facilities to operate at least 90 percent capacity and provide incentives to house additional prisoners until the rate reaches 105 percent.

The bureau’s contracts for the Texas facilities require the five prisons to use 10 percent of their bed space for isolation cells—which is double to rate in government-run prisons. The requirement leads private prisons to put prisoners into isolated cells for minor and even bogus infractions, allowing additional detainees to be housed in the low-security space.

• Medical understaffing and cost-cutting limits prisoners’ access to emergency and routine medical care. In one facility, prisoners reported that a single doctor was responsible for attending to 2,000 inmates.

• Prisoners live in overcrowded and squalid conditions.

At the Willacy Count Correctional Center in Texas, for instance, prisoners live in Kevlar tents in which 200 inmates sleep on bunk beds spaced only a few feet apart. Detainees report that the tents are dirty and filled with insects. Foul odors come from toilets that frequently overflow.

“Sometimes it smells,” a prisoner told the ACLU. “They just don’t have enough space for all of us here. Sometimes it makes me go crazy.”

“[Our families] don’t know that we suffer, that we’re not treated with respect, or that we sometimes lack food or blankets,” said Vicente, a prisoner at the Willacy. “We don’t tell our families. I just don’t want my kids to see me like this.”

• Many prisoners have family ties in the United States, but they have far more limited access to drug rehabilitation and work opportunity than U.S. citizens in other federal prisons.

“I had the idea: I have three years,” said Jaime, a prisoner at Big Spring Correctional Center in Big Spring, Texas. “I will do something so I have something to make of myself…. But there’s nothing to do here.”

A Multi-Billion Dollar Business

Mass incarceration has fueled the growth of the private prison industry in the United States.

The “War on Drugs” and harsher sentencing led the U.S. prison population to increase by 700 percent between 1970 and 2009—faster than population growth and the crime rate. The United States has 5 percent of the world’s population but accounts for 25 percent of the world’s prisoners.

The multi-billion-dollar private prison industry has taken advantage of the explosion in the prison population.

From 1990 to 2009, the private prison industry grew by more than 1,600 percent.

In 2012, the three corporations that operate the 13 CAR facilities—Corrections Corporation of America, the GEO Group (GEO) and MTC—reported nearly $4 billion in revenue, according to the ACLU report. The political action committees and employees of the three companies have spent more than $32 million on federal lobbying and campaign contributions since 2000.

The companies operate a “shadow prison” that is largely free of public scrutiny. The Corrections Corporation of America has spent some $7 million since 2007 in a successful lobbying campaign against legislation that would subject it to the same open-records obligations as facilities operated by the federal government.

The Bureau of Prisons monitors the facilities, but it rarely cancels contracts, even in egregious circumstances, according to the ACLU report.

The bureau, for instance, has renewed its contracts with the GEO Group to run the Reeves County Detention Center in Pecos, Texas, where detainees make up nearly half of the local population, despite prisoner protests of inhumane living conditions, two major uprisings and negative reports by BOP monitors.

“In addition to failing to cancel contracts in response to underperformance, BOP policies turn a blind eye to prisoner grievances from these private prisons,” the report says.

The privatized facilities apparently lack the uniform administrative policies of government-run prisons that determine the procedures for prisoners to voice grievances.

Geographic isolation, barriers to access to attorneys and advocacy organizations, and legal barriers to accountability limit the prisoners’ ability to receive help, according to the ACLU.

“Prisoner after prisoner described how BOP’s decisions to incentivize overcrowding and abuse of extreme isolation, turn a blind eye to inadequate medical care and other forms of neglect, and deny rehabilitative programming have created dangerous, squalid, and tense conditions in these private prisons,” concludes the report, which calls for a federal investigation of the private prisons and a return of immigration enforcement to civil immigration authorities. “And despite multiple protests and uprisings, little seems to change.”

“They don’t take us seriously,” said Dominic, a prisoner in isolated confinement who spends 23 hours a day in cold cell at Big Spring. When the ACLU interviewed him, he continued to suffer from a severely injured wrist three months after an emergency room physician said he needed surgery.

“It’s all money for them,” Dominic said.

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Lousy Job? It’s Your Fault!


Technological change and inadequate education are often cited as the principal causes of our wage crisis.

This argument, in a certain sense, blames workers for their plight. They are unwilling to invest sufficiently in their education, and they lack the necessary skills for complex jobs in the Information Age.

Similarly, conservatives charge that the unemployed leach off the taxpayers, content to get by on generous unemployment benefits and to allow unskilled immigrants to do the low-wage work that they should be doing.

Blame the individual. It’s a very American concept. As the title of a song from the musical “Into the Woods” by Stephen Sondheim puts it: “Your Fault.”

Another argument is that we can’t do much about the wage decline.

Americans simply can’t compete with the low-wage workers of China and developing countries. This presumes a certain inevitability about our falling standard of living. So, let’s just give in.

But how true is this? Can we put a brake on our declining and stagnating wages?

Rising Inequality is No Accident

A recent study by the Economic Policy Institute, “Raising America’s Pay: Why It’s Our Central Economic Policy Challenge,” suggests that the economic squeeze on the middle class and the poor isn’t an accident. Largely it’s the result of a shift of greater economic and political power to the wealthy. Public policies account for much of our rising inequality and the wage crisis. And therefore public policies can address most of the problem.

“The causes of stagnant wages for the vast majority and unequal wage growth are, in our view, related to intentional policy decisions,” write the authors of the report, EPI President Lawrence Mishel and economists Josh Bivens, Elise Gould and Heidi Shierholz. “The connecting principle among them is that nearly every policy change had the completely predictable effect of reducing the bargaining power of typical workers (individually and collectively), and boosting the bargaining position of capital owners and corporate managers.”

The EPI report identifies several policies at the root of falling and stagnating wages, including:

(1) the dramatic drop in the top rate of taxes since the late 1970s: This has increased the pretax income share of the top 1 percent, and it has slowed the income growth of everyone else.

(2) skyrocketing corporate pay: In 1993, corporate tax law was changed to allow corporations to deduct only the first $1 million of executive salaries from corporate income taxes. But pay above the $1 million threshold could continue to be deducted as long as it was “performance based,” allowing corporations to boost executive compensation through stock options and profit-related bonuses.

(3) economic globalization: Trade agreements have protected corporate profits but done little to protect domestic wages.

(4) macroeconomic policy: The Federal Reserve Bank has focused on keeping inflation, rather than unemployment, low.

(5) regulatory policy: Financial deregulation has led the financial sector to double its size compared to the rest of the economy. The financial sector is overrepresented in the 1 percent. And,

(6) labor market policy and business practices: The decline in the minimum wage explains about two-thirds of the wage gap between low- and middle-wage workers. And weakened unions account for a fifth to a third of the rise of wage inequality from the 1970s to the late 2000s.

The Decline of Workers’ Share of Productivity

Progressive public policy must address the divergence between productivity growth and worker compensation.

From 1979 and 2013, productivity grew eight times faster than the typical worker’s compensation, according to the report. During that period, productivity went up 64.9 percent while the compensation of production and non-supervisory workers grew a mere 8.2 percent.

“Much of this productivity growth accrued to those with the very highest wages,” the EPI report says. “The top 1 percent of earners saw cumulative gains in annual wages of 153.6 percent between 1979 and 2012—far in excess of economy-wide production.” Between 1979 and 2007, the wages of the top 1 percent of earners increased by 156.2 percent—nearly 10 times as fast as the bottom 90 percent of the work force.

What steps should we take to restore share prosperity in the United States? We could simply begin by changing the policies cited by the EPI report.

Strengthening unions, boosting the federal minimum wage, supporting full employment, maintaining the competitive value of the U.S. dollar, adopting fair trade policies that protect workers, and implementing fairer taxes would significantly help reduce inequality.

Immigration reform would raise wages by bringing undocumented workers into the formal economy, where labor standards are higher than in the shadow economy.

Protecting government programs–Social Security, Medicare, Medicaid and unemployment benefits—must be a key priority. Public policies that aim to address inequality and our threatened standard of living should also include steps to restore pensions, resolve the foreclosure crisis and relieve the debt burden of college graduates. Creating good jobs and greater economic equality are the foundation of a shared prosperity.

“Inequality fueled by a broad wage stagnation is by far the most important determinant of the slowdown in living standards growth over the past generation, and it has been enormously costly for the broad middleclass,” the EPI report says.

Inequality is now at Great Depression levels and only seems to be getting worse. If we don’t support a progressive change in our public policies, how long will it take for our society to reach a boiling point?

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How Outsourcing Whacks the Middle Class


In his best-selling book “Capital in the 21st Century,” French economist Thomas Piketty identifies privatization as one of the causes of global inequality.

Indeed, the sell-off of public assets in the former Soviet Bloc, Europe and Latin America has lined the pockets of the wealthy as the wages of workers have stagnated and dropped.

In the United States, privatization is also exacerbating the gap between the 1 percent and the rest of us. But privatization in the United States refers more to the contracting out of public services than to the sale of public assets.

A report by In the Public Interest released on June 3 takes a critical look at privatization in the United States. It describes how outsourcing by state and local governments is causing the erosion of the middle class.

“Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class” examines case studies from across the country that show how contracting out public services in effect forces taxpayers to contribute to income inequality and the lowering of the quality of services in their own communities.

“Unfortunately, when these services are outsourced to private companies, the subsequent contracted positions offer lower wages, reduced benefits and little or no retirement security,” the report says.

“Too many times, these positions turn into poverty-level jobs because companies pay workers low wages and provide little or no benefits in an effort to reduce their own operating costs. These jobs that provide vital public services and are paid for with taxpayer dollars, yet the men and women working for contractors are provided with wages that do not allow them to support their families.”

Proponents claim they want to save taxpayer dollars by doling out public services to contractors and non-profits. But the evidence of savings isn’t conclusive; in reality, privatization is about shrinking the role of government in our society.

Most states and local governments do not track how many contractors they employ. But a lot is at stake with privatization.

State and local governments award an estimated $1.5 trillion in contracts every year, which means millions of jobs are created through state and local contracting, according to the report by In the Public Interest, a Washington, D.C.-based resource center on privatization and responsible contracting. Experts estimate that there are three times as many contracted employees as federal civil servants.

Destroying a Pathway to the Middle Class

Too often, though, the contracts go to union-free employers who pay lower wages and provide fewer benefits than public-sector employers. This elimination of public-sector jobs is destroying the pathway to the middle class that government has historically provided to women and minorities.

In New Orleans, Carol Sanders worked as a cook in the public school system for 28 years until cafeteria services were outsourced to the facility management company Aramark in 2010.

Sanders decided to take a job with the contractor even though that meant her pay would be cut from $28 an hour to $9 an hour and her hours would be reduced from full-time to 20 hours per week. She lost her medical care, because she couldn’t afford the plan offered by her new employer, and she needed to rely on $200 a month in nutritional assistance to get by. Then, two years later, Aramark laid her off.

Destroying Good Jobs

Besides looking at the impact of contracting out on school cafeteria workers, “Race to the Bottom” examines how it has hurt the livelihood of waste and recycling workers, correctional officers, custodial workers, transit employees, and health-care support staff. In virtually all instances, the contracting out of those public-service jobs has resulted in lower wages and reduced benefits. For example:

•The Metro School Board in Nashville, Tenn., outsourced the work of nearly 700 custodial and grounds keeping jobs to GCA Services Group in 2010. As a result, the compensation (wages and benefits) of those jobs fell by 32 percent.

• In 2009, Milwaukee County contracted out the work of nearly 90 housekeepers responsible for cleaning public buildings.

The county housekeepers earned between $13.95 and $15.75 an hour. They also received paid vacation, health care and dental care. Contracted housekeepers are paid $8 an hour without benefits.

Services sometimes also suffer.

For instance, compared with publicly-run prisons, private prisons have fewer correctional officers, a higher turnover rate and more escapes and drug use, according to a report by the Federal Bureau of Prisons. Several studies show that the rate of inmate recidivism is higher in privately run prisons.

In the Public Interest recommends that state and local governments adopt policies to put the brakes on the race to the bottom resulting from contracting out. These includes:

• requiring governments to do cost-benefit analysis studies before pursuing contracting

• forcing contractors to pay their workers a living wage and provide them with decent benefits

• making the contracting process more transparent to keep track of contracts and to study the impact of contracting on the wages and benefits of employees, and

• requiring governments to study the economic and social impact of contracting proposals before doling out the work.

“By implementing these policies, state and local governments can rebuild those ladders to the middle class that have eroded over the years,” the report concludes. “Instead of engaging in a race to the bottom, cities and states can ensure that taxpayer dollars used to pay people to perform public work result in solid family-supported jobs.”


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Book Review: When Government Helped


The New Deal era beginning in the 1930s set up the government structure we enjoy today. But ever since, conservatives have waged a protected war on “Big Government.”

The assault on government deepened with the presidency of Ronald Reagan, and more recently deficit phobia greatly hindered the Obama administration’s policy response to the Great Recession. The Republican campaign to destroy Obamacare is not so much about health care as chipping away at the size of government.

“When Government Helped: Learning from the Successes and Failures of the New Deal” (Oxford University Press: 2013), edited by Sheila D. Collins and Gertrude Schaffner Goldberg, examines how President Franklin D. Roosevelt’s government policies established our welfare state and helped the United States recover from the Great Depression. Collins is a professor emerita of political science from Williams Paterson University and an executive committee member of the National Jobs for All Coalition. Goldberg is a professor emerita of social policy from Adelphi University and chair of the national Jobs for All Coalition.

Lessons from the New Deal

Drawing lessons from the New Deal, the book’s contributors also study the accomplishments and shortfalls of the Obama administration in dealing with the Great Recession. They argue that more activist government is needed today as the country continues to face a long-term jobs crisis, economic malaise and growing inequity.

The depth of the crisis that the country faced during the Great Depression was, of course, greater than what it confronted when the financial implosion occurred in 2008. Still, the contrasting policy responses of FDR and Obama speak to the changing American attitudes about the role of government in our society.

When FDR came to office in 1933, unemployment was 25 percent, the Stock Market had crashed, the banking system had collapsed, thousands of businesses had failed, homeless Americans lived in shanties known as “Hoovervilles,” and bread lines were common in major cities, as Collins notes.

The economic crisis of the 2000s is widely viewed as the country’s worst since the Great Depression. But when Obama became president in January 2009, unemployment, while high at 7.9 percent, was only a third of that of the Great Depression. The Bush administration’s $700 billion bailout of the banks and subsequent action by the Federal Reserve Bank stabilized the banking system, arguably preventing the 2008 financial meltdown from morphing into a depression.

The triumph of conservatism since the 1970s significantly constrained Obama’s policy options, though his centrist ideology and ineffective political skills also limited the reforms he sought. About 40 percent of the Obama stimulus package consisted of tax cuts. Assistance for homeowners who were victims of corrupt mortgage practices was lacking while banks were given access to billions of credit from the Fed. For ordinary Americans, the blow of the economic downturn was weakened by New Deal reforms like unemployment insurance and food stamps, as well as by Medicare and Medicaid.

Economic assistance to the states initially helped prevent widespread layoffs in the public sector, but hundreds of thousands of public employees eventually lost their jobs as states and municipalities coped with falling tax revenue. The Obama administration provided funds for several hundred thousand jobs, but most of those were in “shovel-ready” projects already in the works.

By contrast, FDR helped millions of unemployed and underemployed Americans through federal jobs programs like the Civilian Conservation Corps, the Federal Emergency Relief Act, the Public Works Administration and the Tennessee Valley Authority. The administration’s projects included reforestation, dams, a public banking system, building and loan associations, rural electrification, and infrastructure development (tunnels, roads, bridges, highways, sewer systems, highways, waterworks, low-income housing and college dormitories).

FDR’s government activism was influenced deeply by the social unrest and dissent in the country in the 1930s. His economic reforms and the establishment of the modern welfare state saved U.S. capitalism. Ultimately, it was the Keynesian full-employment and government spending policy of World War II that turned the economy around.

The support for FDR’s strong government intervention would be out of sync with today’s political climate. The Right, especially tea baggers, relentlessly attacks Obama, accusing him of being a “socialist,” and deep-pocketed Republicans like the Koch brothers are out to cripple government. As Goldberg points out in a chapter on popular movements and the New Deal, FDR faced pressure from Communist-backed groups, the unemployment workers movement, jobless veterans, organized labor, African-American workers, southern tenant farmers, the elderly and levelers, such as Sen. Huey Long and Father Charles E. Coughlin, who pushed for a more equal distribution of wealth. This pressure helped create the political climate for the creation of Security and the passage of the Wagner Act and the National Labor Relations Act. Progressives have largely given Obama a pass despite his centrist policies.

Within the administration itself, FDR was influenced by a progressive “Brain Trust,” appointees and advisors like Labor Secretary Francis Perkins, Harry Hopkins, Harold Ickes, Henry Wallace and Henry Morgenthau Jr., with backgrounds in social work and progressive politics. Many of Obama’s team, in contrast, were Clinton era appointees with Wall Street ties and shaped by what Goldberg describes as a “deregulatory and anti-government ethos” that contributed to the 2008 financial meltdown.

FDR responded to the needs of workers by supporting legislation that strengthened collective bargaining rights and policies that contributed to a more vibrant labor movement, according to contributor Richard McIntyre. But, McIntyre also argues that the New Deal labor system has limited the ability of unions to push for radical change and “made labor vulnerable to the politics of class fragmentation pursued by the New Right.”

Over 50 years, labor’s ties to the Democratic Party have failed to produce a legislation to promote representation in the workplace. Unions are virtually nonexistent in the private sector, and they are under siege in the public sector, where about a third of workers enjoy collective bargaining rights. Obama, while promoting an increase in the federal minimum wage, pay equity and a more labor-friendly National Labor Relations Board, betrayed the labor movement by not using his political muscle to push the Employee Free Choice Act (which would have made it easier for workers to join unions) through the Democratic-controlled House of Representatives and Senate during his first term.

Obstacles and Hope

The path to progressive change that would lead to good jobs and improve the lot of the poor and middle class in our country faces great obstacles: globalization, an anti-government ideology, disappearing unions, deindustrialization, the pension crisis, deficit hysteria, as well as rising inequality and the resulting weakening of our democratic institutions.

But, as the contributors to “When Government Helped” argue, the record of the New Deal offers a framework for change. FDR’s unfulfilled “Economic Bill of Rights,” for instance, speaks to our current needs. It called for the right to a job at a livable wage, as well as the right to adequate health care, housing, old age security and quality education.

Today’s progressive movement is promoting a number of reforms that reflect the spirit of the New Deal: a Robin Hood tax, an expansion of social services, an improvement in unemployment insurance, the reduction of the military budget to free up funds for domestic spending, green policies and infrastructure development. But without a rethinking of the role of government in our society, these proposals will likely remain illusory.

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Three sentenced for $100 million fraud in botched automated payroll project in New York City


The conviction of three consultants charged in a $100 million fraudulent scheme involving a project to modernize the payroll system in New York City offers yet another lesson of the perils of contracting out.

On Monday, the three defendants each received sentences of 20 years in prison for their role in implementing the automated payroll system known as CityTime, whose cost mushroomed from an initial budget of $63 million to more than $700 million over more than 10 years.

“It’s a classic tale of greed and corruption,” U.S. District Judge George Daniels said. “It’s the largest city corruption scandal in decades. It is unparalleled in its amounts.”

The corrupt contractors lined their pockets with millions of dollars as they accepted kickbacks, funneled huge sums into shell companies, deposited stolen money into overseas accounts, inflated bills and maintained a bloated payroll with excessively paid and even fired employees.

The defendants include Gerald Denault, 52, who was the project manager of the prime contractor, Science Applications International Corp. SAIC is a Fortune 500 company that generates more than 90 percent of its business through government contracts. Under an agreement with the federal prosecutor in 2012, SAIC paid the city $466 million for the CityTime fraud.

Also sentenced were Mark Mazer, 50, a former consultant of the city’s Office of Payroll Administration, and his uncle, Dmitry Aronshtein, 53, who worked for a subcontractor.

The CityTime scandal was a major embarrassment to former Mayor Michael R. Bloomberg, who promised to bring a business ethos and the latest technological know-how to New York City.

During his 12 years in office, the portion of the city’s budget devoted to contracting increased by about a third to more than $10 billion.

From the start, CityTime encountered opposition from unionized workers, who, concerned about privacy, objected to the new payroll system’s use of hand scanners for clocking in.

Daily News reporter Juan Gonzalez broke open the scandal with a series of articles about CityTime that included revelations about cost overruns and excessive payments to computer consultants who earned as much as $400,000 a year, easily four times the pay of city information technology workers.

The municipal union District Council 37 ran a series of white papers that called attention to wasteful spending on contracting out, including the CityTime debacle and another project to upgrade the city’s emergency communications system. The original cost of the 911 upgrade overseen by Hewlett Packard was $380 million, and it skyrocketed to $666 million by 2011.

“Politicians have given out contracts like candy,” said Lillian Roberts, executive director of District Council 37, which represents tens of thousands of municipal employees in New York City. More than a year ago, Bloomberg and former New York City Comptroller John C. Liu agreed to assign the CityTime work to computer workers represented by DC 37.

Roberts said the CityTime scheme—perhaps the greatest municipal theft in the city’s history– pointed to the need for greater oversight of contracting out, which she blamed for vast waste of tax dollars, the loss of civil service jobs and the siphoning off of funds for social services. Recently, the new comptroller, Scott Stringer, announced steps to monitor contracting out more closely.

Kickbacks and Money Laundering

Between 2003 and 2010, the city paid SAIC more than $628 million. SAIC used over $464 million of those funds to pay a subcontractor, Technodyne to hire IT personnel.

The principals of Technodyne LLC, Reddy and Padma Allen, who face charges of wire fraud and money laundering, fled to India, according to the United States Attorney’s Office of the Southern District of New York. Denault, the former CityTime project manager, was charged with receiving $5 million in kickbacks from Technodyne and its principals.

Denault received a $5 kickback from Reddy Allen and Padma Allen for every hour Technodyne billed the city for labor, according to the prosecutor.

Mazer received kickbacks by channeling $65 million to a subcontractor controlled by Aronshtein and $23 million to another subcontractor controlled by Victor Natanzon, who earlier pled guilty along with four other defendants.

On the day of the sentencing, Manhattan U.S. Attorney Preet Bharara said in a statement, “These defendants are being justly punished—through lengthy sentences and forfeiture of over $40 million in cash and property—for orchestrating one of the largest and most brazen frauds ever committed against the city. This Office’s CityTime prosecutions have held accountable culpable individuals, as well as SAIC, the contractor at the center of the scheme, and through penalties and restitution of over $55 million, has made the City economically whole.”

An Invitation to Waste and Corruption

After sentencing the defendants and sending them away to prison, Judge Daniels criticized the procurement process in New York City.

“The city’s contracting process has created an atmosphere that lacks adequate and effective oversight,” he said. “It is an invitation for not just waste, but corruption and fraud.”

Last year, on his weekly radio program, Bloomberg remarkably said the city in a sense is “lucky” that the fraud happened.

“The whole system cost us something like only $100 million, and it should have been many times that,” he said, as quoted by “We were lucky because of the fraud… In the end it turned out that because of the recovery that we save a lot of money. And it certainly works.”

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