Kevin
December 11, 2007

Field Guide to the U.S. economy

Chapter one from Field Guide to the U.S. Economy analyzes the distribution of wealth between the family and the structures of corporate power. The idea that the wealthy, usually become wealthier is stressed in this chapter. Most of the United States income is distributed to the wealthy; “The richest ten percent of all households own eighty percent of the financial wealth in America (1)”. Average families have most of their wealth invested in their homes. As for the wealthiest, most of their wealth is invested in the form of business equity, real estate, stocks, bonds, mutual funds, and trusts. This chapter also stresses that wealth does not only create a higher standard of living, but that wealth influences political outcomes. The economic power of the United States is held in large corporations with single corporate owners. Chapter two expands on the information given in chapter one and expands on welfare and education. The main point of the chapter is poverty hurts kids. I will be expanding on the ideas in the two chapters to show that the gap between the wealthy and poverty is extreme and how it effects households, welfare, and education. Section 1.1 concentrates on who owns how much in America, showing the difference between the worker and owner income. “The rich are different from you and me (3)” said F Scott Fitzgerald. The richest ten percent of U.S households own eighty percent of the countries financial assets, such as cash, bank deposits, corporate stocks, and private or public bonds. It is beneficial to be wealthy because you have a cushion that protects you from the fluctuating business cycle. The ups and downs of the business cycle put the working poor and lower middle class at risks when investing in such financial assets. Section 1.2 emphasizes that the very rich, get richer. Its emphasis is that people, who already have money, receive more money. Throughout the years 1983 and 2001, the value of financial wealth increased by $20 trillion. The richest one percent of households received $10 trillion, and the next richest nineteen percent received the remaining $10 trillion. This example of unfair distribution of U.S income is sometimes the reason why less wealthy households have as much debts as assets. Section 1.3 focuses on what wealth is made of. It focuses on the fact that your home is a huge financial asset. A home does not only hold and accumulate wealth, but it puts a roof over a families head. Another point this section focuses on is that in times of financial emergency, homes can be hard to sell quickly. When interest rates rise, mortgage debt can be lethal to a family’s financial situation. On the other hand, rich households own much liquid assets such as savings accounts, bonds, and mutual funds. The richest ten percent owned eighty five percent of individual stocks. However, fifty percent of households own corporate stocks through pensions or mutual funds. Wealth is made of financial assets and the liquidity of the assets a household owns. Section 1.4 takes a look at how colorful wealth can be. Having savings relieves stress “In times of stress, wealth makes a crucial difference. A sudden income drop due to job loss or illness can mean poverty (6)”. This section also looks at savings between whites, Hispanic, and black households. Typically, when hard times hit, white households have reserves (savings) to support them. This is 38 times the financial wealth of black households and 210 times that of Hispanic households. For example, when hurricane Katrina hit New Orleans, most predominantly black people lacked the means to evacuate the area. People did not have reserves, or enough reserves to rent a hotel or transportation, so they stayed in New Orleans facing fatal situations while waiting for government assistance. Section 1.5 clarifies the enormous salaries that Chief Executive Officers collect annually. This section clarifies the gap between the working poor and corporate owners; “The average retail clerk in the U.S. would have to work for 419 years to earn what the average corporate chief executive officer (CEO) makes in a single year (7)”. Between 2003 and 2004, the working poor had an average pay increase of 2.2 percent. During the same year, CEO’s saw a pay increase of 15 percent. Many benefits come from being company owners, such as the ability to purchase company stock at better-than- market prices. For example, “When Oracle CEO Lawrence Ellison exercised his stock options in 2001; he made over $700 million (7).” The main question here is, are CEO’s worth it? In the past higher paid CEO’s did not guarantee superior performance. Often times, companies with the highest paid CEO’s do worse then firms with lower paid CEO’s. This was the case for Oracle with Lawrence Ellison. The firm fell fifty seven percent and nearly 1,300 workers were laid off. Although most believe in the American dream and that hard working people will achieve a wealthy status, section 1.6 states that social and family connections play a significant role in acquiring wealth. Section 1.6 explains how wealthy people in America earned their money. Forbes magazine shows the 400 wealthiest people in the United States. Out of the 400 wealthiest people profiled in 2004, ten of the new people on the list inherited wealth. Inheriting a large sum of money is certainly the easiest ticket to becoming wealthy. “Many people live from paycheck to paycheck, year after year, without much to show for it (9).” Section 1.7 once again expands on the idea of the working poor and how people with less money accumulate less wealth than people with more money. Between the years 1983-2003, the top 5 percent of U.S. households income increased $108,987. Throughout the same twenty years, the lowest fifth percent of U.S. household income increased only $839. The difference of $108,148 reflects the fact that people with high incomes can accumulate wealth, which generates additional income. The phrase “money talks” is well respected in section 1.9 which looks at influences money makes in politics. “Everyone knows that money talks, but in American politics it positively screams (11).” Individuals, cooperation’s, and Political Action Committees gave money to favored political parties and candidates in the 2004 elections. The influence of money can make specific political parties and candidates more powerful in elections. The power of political parties and candidates in elections generates more votes; therefore the money donators favored politics win elections. This point is proved in section 1.10, “American Democracy is the best money can buy: in 2004, winners of seats in the House of Representatives spent 3.7 times as much as losers did. Winners in the Senate spent an average of over $7.6 million, more than double what losers spent (12).” In 2004, there were only five corporations that exposed the media to the United States. The five corporations were Time Warner, Disney, News Corp., Bertelsmann, and Viacom. Section 1.11 shows how five cooperation’s work together, sometimes like a monopoly, when exposing news, information, and entertainment available to the public. “In 2004, the five corporations engaged in 141 joint ventures and conducted hundreds of millions of dollars of business among themselves (13).” Once again, wealthy corporations rule out and control smaller, less wealthy businesses in the United States. Many Giant corporations in the United States have the potential to become multinational. Section 1.13 expands on the idea that “Multinational Goliaths” such as Wal-Mart, British Petroleum, and ExxonMobil have the ability to ship American work to foreign nations for cheaper labor. This power of giant corporations restricts the government from improving labor laws or environmental codes that will improve working conditions because the corporations can leave. If the giant corporations leave, this could drastically decrease the U.S. GDP. Wal-Mart is able to offer low prices for consumers because it pays low wages to workers. Generally speaking, Wal-Mart is not good for small business and its employees because it forces smaller, local businesses to potentially become bankrupt, and it has the ability to pay low wages and discriminate against women workers. Working for a company has many cons when considering wealth, but workers can indeed show ownership in a company. Section 1.16 focuses on how workers can become partial-owners in companies. Employee stock ownership plans establish a trust fund where workers can purchase company stock. Owning company stock means workers partially own a company. Although workers invested in the company, their voting rights are still restricted, and they are not allowed to make governed company decisions. The control factor of workers and owners are often still dominated by owners. The gap between the wealthy and working class is huge. Chapter one makes this gap extremely evident by proving the power of giant corporations like Wal-Mart, investing options, government and media control, and the restriction of American workers in corporate companies.

Median-income families are working longer and harder than ever before, yet living paycheck to paycheck. Section 6.1 of chapter six focuses on this problem and family income. Married couples who are both employed earn more income than a female householder with no spouse present. This is evident in the line graph labeled Median family income, 1950-2001 (in $2004) on page 93. Generally speaking, a married couple generates more benefits as far as reducing the unemployment rate and working towards the equilibrium of full employment. More employed women in the job market will boost the gross domestic product of the U.S. Once again, section 6.2 takes a look at the wealthy becoming wealthier. In 2000, the top five percent claimed more household income than the bottom forty percent. Since that year, inequality has increased. The results of inequality have caused social stress, contributing to more crimes and insecurity at work. Since it is so hard for the poor to get money, they become criminals by drug dealing and stealing. Also, most inner city kids are surrounded by the less wealthy in schools, so they do not see investing there time in education important, nor achieving wealth as an option for them. They do not have successful role models who can show them that education is an investment that is achievable and results in wealth. “The poverty line, designated by the U.S. Census Bureau, varies according to family size and composition. In 2003, it was $18,660 for a four-person family with two children. In the same year, the median income for all family households was $53,991 (95).” The poverty line as expressed in section 6.3 means that if a household falls below this threshold they are considered poor. If a household meets these requirements, I would consider them relatively poor because they meet basic needs but have high levels of insecurity. The problem with this income is that people will be stuck in the cycle of poverty because they will just make ends meet. People’s social mobility will be restricted and there will be no hope in achieving wealth. In the case of a child living in families that receive little or no financial support from an adult male, the family is supposed to receive government benefits. I believe that the government has the primary responsibility for the “social welfare” of its citizens. Government benefits such as social welfare are there to aid families with dependent children. This is federal cash to needy women and their children. Often, single parent and two parents have to work two jobs to meet the poverty line. In this case, the child is left at a daycare, reducing the time spent with parents. If the child is not being regulated by parents and pushed to succeed in school, then the child’s chance of a better education is minimized. Other results of children living in poverty are performances on standardized tests, obesity, vulnerability to neglect and abuse, and separation from parents. The primary and secondary schools kids attend is crucial to their future as far as wealth is concerned. Kids are more likely to go to college if they attended a suburban school rather than an urban school. The school you attend makes a difference by the access of resources, advising, and mentors. Also, the curriculum is more rigorous which promotes college preparatory for majority of students and will affect SAT score. Another reason is that colleges rate public and private schools. Being un-wealthy and living in an urban area restricts a students potential to go to college. Writing this essay on chapters one and six was important because I wanted to learn how poverty can restrict education. Chapter one taught me that the wealthy become wealthier and the poor remain poor. Using the information in chapter one I was able to expand my ideas on welfare and education. I concluded that inequality in education is mainly in urban areas where the majority of residents rent homes. Some issues of urban communities and schools are the overall environment, allocation of resources, quality of teachers, vocational vs. college preparatory classes. College is a sure investment in increasing wealth and if students cannot make it into colleges they will be stuck in the cycle of poverty.