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Weekly Audit: EFCA, tax cheats and the racial wealth gap

The U.S. economy may finally be bottoming out. But if the worst is really behind us, we are likely facing a painful period of “growth” that looks very much like the present. Without increasing unionization and mitigating racial inequality, our economic progress will prove as hollow as it is slow. While the economy may improve in a dry, statistical sense, the foundation for a productive economy has been decimated over the past three decades.

The economy has shown some encouraging signs of strength lately. Home prices have actually increased and the pace of layoffs slackened quite a bit in July. But that data doesn’t signify a strong recovery, as Andrew Leonard notes in a pair of blog posts for Salon. Even in areas where there is some good news—housing and the job market—there is plenty of contradictory bad news. First, mortgage delinquencies are at an all-time high, and the souring loans are not just subprime. Even people with relatively affordable mortgages have problems paying when they lose their jobs, and with the unemployment rate at 9.4%, a lot of people are losing their jobs.

What’s worse, Leonard notes, new claims for unemployment benefits escalated in August, suggesting that last month’s job market improvements may have been a fluke. And while home prices may be ticking up slightly, they have been abysmal for the past two years. Since many households accumulated debt based on higher home values, the overall ratio of consumer debt to household net worth is perilously high.

Household net worth is a crucial statistic and is often overlooked by a focus on day-to-day measurements of worker well-being, like wage growth. While wages matter for paying the rent and buying groceries, our long-term economic security is defined not by what we make each week, but by the value of the things we own. In a piece for The American Prospect, economists Derrick Hamilton and William Darity Jr. detail the massive racial disparities in household net worth in the U.S. While the median white family has roughly $90,000 to its name, the median Latino family has just $8,000, while the median Black family has only $6,000.

Centuries of discrimination have resulted in today’s inequality, but Hamilton and Darity propose a simple, straightforward solution: The government should establish savings accounts for children born into poor families, and fund it with a relatively small amount of money. Children will not be able to access the accounts until they turn 18, but over the years, interest will accrue on the accounts to the point where children should have between $50,000 and $60,000 by the time they can withdraw funds. Since so many people of color are born into households with relatively low net-worth, establishing a policy to use government money to boost the wealth of those born without it would have the effect of promoting racial economic equality.

But we also have to worry about jobs. President Barack Obama’s economic stimulus package has succeeded in creating or saving hundreds of thousands of jobs since going into effect earlier this year, but it is important to focus not only on creating jobs, but on creating good jobs. As Laura Flanders of GritTV emphasizes in a roundtable discussion with key academics and labor representatives, our increasingly hostile attitude towards unions has created major barriers to a sustainable economic recovery.

The legislation critical to ending this intimidation is known as the Employee Free Choice Act, one of the most important bills presented to Congress in decades, although it has been overshadowed by the debates surrounding health care reform and financial regulatory overhaul. Flanders’ panelists include Kate Bronfenbrenner, a Columbia University Professor who wrote a recent paper for the Economic Policy Institute examining 1,000 attempts to establish unions all over the country, and found that employer opposition to unionization is more aggressive than ever. A full 30 million workers want to be part of an organized union, but only 70,000 workers successfully organize each year.

“It’s always been hard to organize, but employers now have made it harder than ever. They’ve literally have said to workers that, ‘If you try to organize, we will go after you in every way possible,’” Bronfenbrenner said. “They threaten workers, they harass them, one in every three employers fire workers for union activity . . . . There literally is a war on workers who try to organize.”

Another panelist, Mark Winston Griffith, Director of the Drum Major Institute, notes that the decline of unionization has weakened the economy. In the 1950s, when one-third of all U.S. workers belonged to a union, the potential foundation for the economy was strong. Workers were well-paid and had excellent job security, which created a strong source of demand. With less than 8% of U.S. workers unionized today, our economic demand is fueled by household debt, which has left families struggling for financial security and has injected a heavy dose of instability into the entire economy.

Writing for The Nation, Sarah Jaffe details the difficulties faced by a group of security officers in Philadelphia trying to unionize under current labor laws.

But while the workers who form the foundation of our economy are gasping for air, the elite have almost never had it better. A recent study found income inequality to be deeper than any period since World War I, and this absurdity plays out in public policy. While workers struggle to get a fair shake from their employers, executives and managers evade taxes through elaborate international financial deception. Swiss banking giant UBS recently agreed to turn over the names of thousands of its clients who allegedly used the company’s banking operations to skip out on the bill for Uncle Sam.

UBS has been caught with its hand in nearly every cookie jar labeled “bank scandal” over the past two years, from the subprime mortgage crisis to phony securities peddling to diamond smuggling. But as Robert Scheer explains at Truthdig, former senator and deregulation hawk Phil Gramm (R-Texas), has been an executive at the firm while the company has been destroying its reputation. Gramm helped pass some two key anti-regulation bills later years of the Clinton administration, and was unabashed about jumping to UBS immediately after leaving office. Scheer notes that the public knows almost nothing about Gramm’s role at the company, including any potential involvement in its laundry list of scandals.

Real economic progress in the U.S. is impossible without a stronger base of unionized workers. But it’s just as important to invest in our future by giving the children of poor families an even economic playing field.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

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