Report: Conn. among worst for home ownership, credit card debt

A new report from an economic advocacy group ranks Connecticut among the worst states for affordable home ownership and credit card debt, and it raises some interesting economic disparity issues about the state. Listen to the story here:

The national study from the DC-based Center for Enterprise Development found that in Connecticut, 37% of households don’t have enough money to cover basic expenses for three months if they lose their income.

“What I think is surprising is how far up the income scale liquid asset poverty reaches,” says Jennifer Brooks, director of state and local policy at CFED. She says 15% of Connecticut households that earn between $65K and $107K a year don’t have three months worth of savings.

Where Connecticut really stands out in the report is home ownership. The state ranks 42nd on the study’s measure of home affordability, which compares household income to median housing value. And the report says 41% of households in CT are paying more than a third of income for mortgage & other housing costs. And more than half of renters are using up that much of their income on housing. Brooks says there’s a huge disparity in home ownership based on income. She acknowledges it’s not surprising that high income families are more likely to own homes than low income families.

“I think that fact that Connecticut ranks 46th on this disparity measure is important, so the gap in CT is much bigger than it is in many other states,” she says.

The report shows there are also home ownership disparities based on race and family structure. It also says the average credit card debt in Connecticut is $15,000, second only to Washington DC.

CFED recommends a dozen policy recommendations in its report, including suggestions on how to reduce credit card debt and improve homeownership rates.

Nobel laureate Joseph Stiglitz: Inequality is holding back the recovery (Paul Krugman disagrees)

The New York Times launched a new blog this week called The Great Divide, looking at inequality in the U.S. The blog is moderated by Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank. Stiglitz wrote the initial post in the blog, entitled “Inequality is holding back the recovery.”

“Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined,” Stiglitz writes. “Inequality stifles, restrains and holds back our growth.”

Stiglitz argues there are four major reasons inequality is squelching the recovery:
– The middle class is too weak to support the consumer spending necessary to drive growth
– The middle class is unable to invest in the future through education or starting/growing businesses
– The weak middle class holds back tax receipts needed for infrastructure, education, health, etc.
– Inequality leads to boom-and-bust cycles that make the economy more volatile and vulnerable

Stiglitz blames the economic policies of both the Obama and Bush administrations for making things worse.

“Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up. We could have enabled homeowners who were ‘underwater’ — those who owe more money on their homes than the homes are worth — to get a fresh start, by writing down principal, in exchange for giving banks a share of the gains if and when home prices recovered. We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.”

He offers suggestions for President Obama’s second term.

“What’s needed is a comprehensive response that should include, at least, significant investments in education, a more progressive tax system and a tax on financial speculation.”

A lot to talk about here. Do you agree with Stiglitz’s arguments? Do you think inequality is holding us back from an economic recovery? What about his prescription for fixing it? Would education investment or a more progressive tax system make a difference?

Economist and New York Times columnist Paul Krugman (also a Nobel laureate) disagrees with him. In two responses to Stiglitz (Jan. 20 & Jan. 21), he says he’d love to blame slow growth on inequality. “But I couldn’t and can’t convince myself that the theory and evidence really support that view,” he writes in the second piece. “Inequality is a huge problem – but not for employment growth in 2013 or 2014.”

President Obama’s inaugural speech: “Our country cannot succeed” without addressing economic disparity

In his second inaugural address, President Obama directly commented on the issue of economic disparity in the U.S. Hear his comments here:

Here’s the transcript of his remarks:

“For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it. We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class. We know that America thrives when every person can find independence and pride in their work; when the wages of honest labor liberate families from the brink of hardship. We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else, because she is an American, she is free, and she is equal, not just in the eyes of God but also in our own.”

Within the President’s comments is the suggestion that we are NOT being “true to our creed,” since that little girl doesn’t have the same chance to succeed. What, if anything, can or should be done to meet the President’s goal? Please share your thoughts and suggestions.

Conn. inequality compared to Bangkok in “The Great Divide” series

International media outlet and NPR partner GlobalPost is doing a series on income inequality around the world called “The Great Divide”, and they’ve just released a print story and video comparing inequality in Connecticut and in Bangkok. Both areas have similar GINI index scores. (Here’s a Conn. State Data Center map of GINI scores across the country and comparing them internationally, and here’s one looking at the scores withing Conn. cities and towns). Check out this GlobalPost video about Connectictut and Bangkok:

The GlobalPost print story describes the impact that the ending of county governments had on increasing economic disparity. The reporters spoke with Bridgeport resident (and sometime mayoral candidate) Jeff Kohut:

“In Connecticut, this process was supercharged when, in 1960, the suburban interests succeeded in changing the state constitution to abolish Connecticut’s eight county governments, eliminating any hope that the affluence surrounding Bridgeport or other struggling cities could be harnessed for redevelopment. Bridgeport natives like Kohut view this as a betrayal. The migration of more prosperous residents that fed the growth of neighboring towns like Stratford, Trumbull and Fairfield — ‘colonies of Bridgeport, if you will,’ says Kohut — encouraged a selfishness that exacerbated his hometown’s decline.”

The companion print story about Bangkok is online here.

Report says Conn. poor taxed more than rich

A new report by the advocacy group Connecticut Voices for Children says 180,000 households benefited from Connecticut’s Earned Income Tax Credit last year. And the report’s authors say the state taxes poor people at a higher percentage than the rich.

You can hear Will Stone’s story on the EITC report here:

Governor Dannel Malloy launched the EITC in 2011 as a supplement to the federal tax credit. It’s designed to help working families, especially those with children. On average, households that filed for the credit were making $18,000 a year and received a credit of $600. The credit depends on income and number of children, though, which means a family with two children, could receive a maximum credit of about $1,500.

Wade Gibson of Connecticut Voices for Children is one of the authors of the report. He says these families are already shouldering a heavy tax burden.

“These folks are the highest taxed people in Connecticut in terms of state and local taxes because in Connecticut we actually tax poor people more as a proportion of their income than we tax rich people. About twice as much actually”

Gibson says this discrepancy results from the way property and sales taxes affect different communities. For example, he says a family making 18,000 dollars a year will spend more of its money on goods. And as a result about 5% of their income will be spent on sales taxes alone. The state credit is currently 30% of the federal income tax credit. He says the two credits will continue to be crucial in keeping Connecticut families out of poverty.

A lack of mental health services in the middle

WSHU’s coverage of disparity issues in Connecticut was necessarily interrupted by coverage the tragic school shooting in Newtown. We plan to share more disparity-related stories soon. In the meantime, there was one story following the Newtown tragedy that raised an issue of disparity. Reporter Melinda Tuhus covered a news conference about mental health services for children, in which Yale professor Steven Marans, Director of the National Center for Children Exposed to Violence, said there was a disparity in the access to mental health coverage for kids.

“The poor have a certain baseline level of services and the wealthy can pay privately, and the middle class has very limited access,” he said.

Here’s Melinda Tuhus’ story:

It’s an interesting parallel to our recent story about half-day vs. full-day kindergarten. Sometimes the people at the top of the economic spectrum in Connecticut can afford services, those at the bottom get financial assistance, and it’s tough to be stuck in the middle.