Chapter Twelve: The National Economic Security Program: A 10-Point Bill of Rights

In March, 1990, the 509 Cultural Center, located in San Francisco's low-income Tenderloin district, issued an open invitation to residents and workers in the neighborhood to participate in a "Solutions to Poverty Workshop" to develop guidelines for national antipoverty legislation. Over the course of the next year, 25 volunteers, with no paid staff, met regularly to discuss research reports and draft recommendations. In early 1991, the workshop circulated its report throughout San Francisco for review and comment, and gathered endorsements for an Antipoverty Congress to debate and vote on its recommended 10-point program. Endorsers of the congress included about 35 community organizations, 35 community leaders, and several elected officials, including Congresswoman Nancy Pelosi. After extensive discussion, an overwhelming majority of the participants in the congress adopted the proposals presented by the Solutions to Poverty Workshop. Following the congress, congress participants formed the Campaign to Abolish Poverty and obtained endorsements for this 10-point program from a broad range of advocacy organizations and elected officials.

The positive response to this effort illustrates that a small group of dedicated volunteers can tackle issues of national economic policy and formulate credible proposals for how to establish economic security for all. The track record of the Solutions to Poverty Workshop suggests that a similar process, as proposed in the previous chapter, can occur nationwide.

The 10-point program formulated by the Solutions to Poverty Workshop is presented here for consideration by all who are concerned about this issue. Hopefully, some or all of the action/study groups discussed previously will evaluate this proposal along with alternatives, prior to formulating their own recommendations. As presented in this chapter, this 10-point program retains the original wording adopted in San Francisco except that the name has been changed from "National Program to Abolish Poverty" to "National Economic Security Program." In addition, specific dollar amounts have been updated for inflation, as was intended from the outset.

This National Economic Security Program (NESP) defines what is necessary to establish economic security for every citizen in the United States. This program includes only those national policies that are absolutely essential to achieve this goal. Social and political changes that are needed to mobilize political pressure, for example, are not discussed in this chapter. Likewise, policies that would improve the general welfare in other ways but are not necessary to guarantee economic security are not included.

Specific numbers, such as the proposed minimum wage, are used to clarify what is being proposed and to estimate the cost of implementing the program. These numbers are based on conditions in 1994 and will need to be adjusted each year for changes in the cost of living - as is currently done for a number of federal programs, such as Social Security.

The full program is presented below, followed by an explanation of each of the 10 points:

1. Guarantee every adult 18 and over the opportunity to work by expanding public-service employment and increasing federal support for needed private economic development.

2. Establish affordable national health care with comprehensive benefits available to everyone.

3. Invest $55 billion per year for 10 years to increase the supply of permanently affordable, non-profit housing.

4. Guarantee that quality, affordable child care is available to every child up to 14 years-of-age.

5. Raise the minimum wage to $6.90 per hour.

6. Give working families a wage supplement up to a maximum of $1,200 per month as necessary to avoid poverty.

7. Increase minimum social-security payments to $945 per month for people sixty-five and over.

8. Increase minimum social-security payments to $945 per month for people with disabilities who are unable to work and provide needed support and access for those who are able to work.

9. Guarantee that minimum crop prices be above the costs of production.

10. Pay for these programs by increasing taxes paid by the richest 10 percent to, on average, 37 percent of their gross income and by redirecting one-half of the military budget.

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1. Guarantee every adult 18 and over the opportunity to work by expanding public-service employment and increasing federal support for needed private economic development.

Guaranteeing everyone who is willing to work the opportunity to do so is essential in order to institute economic security. The most direct way to achieve this goal is to gradually expand federal funding for regular public-service jobs until those jobs go begging due to lack of applicants. At that point, it will be clear that the human right to living-wage employment has been established.

In Chapter Four, we concluded that as many as 30 million people might work if living wage jobs were available for everyone. But most of these 30 million new jobs that are needed can be created by private businesses. First of all, increasing the number of public-service jobs will stimulate the creation of new private-sector jobs. New public employees will spend most of their incomes on goods and services offered by private businesses, who in turn will use their new revenues for purchases from other businesses, and so on. Secondly, other measures included in the National Economic Security Program (such as increasing the minimum wage, the Earned Income Tax Credit, and Supplemental Security Insurance payments and stabilizing farm incomes) will also boost consumer demand and foster the creation of additional private-sector jobs. Moreover, the federal government can promote private-sector jobs by funding community-development banks and providing technical assistance to new businesses, especially environmentally-conscious, worker-owned enterprises in low-income areas. Reducing the work week and requiring double pay for overtime can also serve to expand employment opportunities. Moreover, the federal government can compel the Federal Reserve Bank to maintain interest rates at a reasonably low level. In these ways, rather than severely curbing the economy as it does now, the federal government can encourage dramatic job growth, while protecting and enhancing the environment. These combined measures can create an estimated 20 million new full-time private sector jobs, approximately a 20 percent increase, which is similar to the increase achieved during World War II. Assuming such an increase, the federal government will have to fund about 10 million new public-service jobs to guarantee jobs for the 30 million people estimated to need employment.

If the private sector creates more than 20 billion new jobs, or if less than 30 million people want full-time jobs when they are available, the number of public-service jobs required will be less than 10 million. Conceivably, a new private charity campaign could expand the availability of private-sector jobs. Such a campaign could focus on funding entry-level jobs as a way to increase job opportunities for low-income people. The United Way, for example, might support an Entry-Level Job Fund that would direct contributions to non-profit corporations to hire low-income people in human-service and environmental jobs. The more individuals support private job creation in this manner or otherwise boost the incomes of people living in poverty, the less will be the need for public-sector job creation. Unless a religious awakening focused on reducing poverty sweeps the country, however, the need for government action will remain compelling. Until then, the estimated number of 10 million new public-service jobs enables us to get a handle on the most that might be needed to guarantee the right to living-wage employment.

To guarantee this human right, the federal government should steadily increase revenue sharing to state and local governments for entry-level public-service employment. The amount of such work that needs to be done is enormous, especially in the area of human services. In calling for the creation of a "caring society," Suzanne Gordon wrote: "...[W]e, as human beings, are entitled both to the time it takes to care for ourselves and others and to the social and financial supports that make caregiving possible." Throughout the country, many human and environmental needs are being severely neglected. These conditions can be improved by hiring more child-care workers, teacher's aides, nursing assistants, recreation staff, peer counselors, social rehabilitation staff, drug and alcohol counselors, in-home caregivers, community-center staff, tree planters, recyclers, community gardeners, environmental-cleanup workers, housing-rehab workers, and others. Private businesses are not meeting these needs because it's not profitable; it's hard to make money caring for the environment or providing services to people who have no disposable income. Federal action is as necessary to meet these ongoing emergencies as it is to respond to natural disasters. In this way, everyone who is able and willing to work will be given the opportunity to help make this country a better place to live. Two needs will be met at once: the unemployed and underemployed will be fully employed; and living conditions for all will be improved.

2. Establish affordable national health care with comprehensive benefits available to everyone.

Without health-care insurance, illness or injury can easily lead to destitution. The high costs of hospitalization can ruin anyone without insurance. Yet forty-three million Americans currently do not have health insurance, and that number is growing faster than the total population. Many other people are not fully covered by health insurance. To establish economic security, therefore, it is necessary to assure that everyone has access to affordable health care.

The United States and South Africa are the only two industrialized countries without a national health-care system. As the United States moves toward managed care and health maintenance organizations, increasing numbers of poor people are going without healh care. A 1994 study conducted by the Project Hope Center for Health Affairs found that 33 percent of poor, uninsured people had no access to medical care, compared to only 23 percent in 1982. From 1981 to 1983, the number of public hospitals, traditionally a valuable resource for poor people, declined by more than 25 percent. As fees to doctors and hospitals in the private sector decline, private hospitals have taken more steps to attract Medicaid patients. As Medicaid patients shift away from public hospitals, these providers of care to the poor often have trouble keeping their doors open.

Countries with national health care provide it in various ways. The pros and cons of these different models are being hotly debated as the pressure for fundamental reform in the United States increases. Although most advocates agree that no system from any other country can simply be copied in the United States, there is growing support for certain features of the Canadian model. The key point is that there should be an integrated national system with a single source of funds, the federal government. Under this approach, private health-insurance companies will vanish or be made illegal. The federal government will provide health insurance for all, much as it does now with Medicare for the elderly. Instead of paying premiums to private insurance companies, private businesses will pay taxes to the federal government. Middle- and upper-income taxpayers will pay taxes equal to what they now typically pay for private insurance. And health-care monies now spent by local and state governments will be re-channeled through the federal government. All of the funds currently spent on health care will thus go to the federal government, which will distribute the money to state governments. Standards will be uniform throughout the country. The same package of medical benefits will be provided everyone. Higher-income people, therefore, will use their clout to demand quality care for everyone. To discourage over-use, patients can be charged a fee for each visit according to ability-to-pay. Payments to physicians and hospitals will be controlled more easily than is currently the case. The federal government, being the sole source of payment, will be able to negotiate reasonable payment schedules and capital budgets for expansion of buildings and equipment. This approach will eliminate administrative overhead and profits for private insurance companies. The money saved in this manner can be used to offer insurance to those who are uncovered. According to many experts, including the Congressional Budget Office, by the year 2000 this approach can provide universal coverage at less total cost than the current system, which provides coverage to only 85 percent of the total population.

This single-payer approach makes sense, in part because it will provide universal coverage without any increase in the nation's total health-care expenditures. The Canadian model is not the only option, however. We can pick-and-choose from among every other industrialized country, other than South Africa. Germany, for example, has a distinctive approach that has attracted considerable support in this country. Whether or not the single-payer approach is adopted, one way or the other quality health care must be guaranteed in order to protect everyone against being forced into poverty.

3. Invest $55 billion per year for 10 years to increase the supply of permanently affordable, non-profit housing.

Avoiding poverty requires decent housing. Unfortunately, one-third of the people in this country either live in substandard or overcrowded housing, or have no housing at all. Families in Appalachia live in shacks without running water. Senior citizens are confined to single rooms in rundown hotels filled with cockroaches and rodents. Four- and five-person families share one-bedroom apartments. Children sleep in closets. The visible homeless sleep in doorways and alleys. The less-visible homeless sleep in cars or in the living rooms of friends and relatives. At any one time, there are only about one million vacant rental units affordable to people near the poverty line. Almost half of the officially poor spend up to 70 percent of their income on private-sector housing. If the some thirty million households now living in poverty suddenly receive non-poverty incomes, there will not be enough decent, affordable housing for them to move into. To enable people to live decently, the supply of affordable housing must be greatly expanded. The simplest and most effective way to create affordable housing is to invest public money in non-profit housing - both limited equity cooperatives owned by the residents and buildings owned by non-profit corporations. In either case, the property remains off the speculative market permanently, which prevents it from constantly being sold and re-sold at higher and higher prices. Top priority should be assigned to the outright purchase of land and buildings, rather than subsidizing for-profit speculators, which requires paying mortgage fees. Two-thirds of the occupancy costs of housing is consumed by mortgages - payments on loans. This waste can be avoided by investing public money to buy and build housing. The Institute for Policy Studies Working Group on Housing has proposed detailed housing legislation based on these principles that will dedicate about fifty-five billion dollars a year for ten years to expand the supply of affordable non-profit housing. During the first year, eight million affordable units will be added to the nation's supply. The proposal on housing presented here is based on their program, which has been endorsed by Congresspersons Henry Gonzalez and Ron Dellums.

4. Guarantee that quality, affordable child care is available to every child up to 14 years-of-age.

If living-wage employment is to be the key to an economic-security program, a major expansion of quality, affordable child care is necessary so all parents can work. Many parents are unable to work because they can't find child care or can't afford what is available. Until recently, the basic idea of child care met with strong resistance from those who argued that it is best to keep young children at home. But this opposition has dwindled considerably. Once a child is three years old or so, interaction with other children about the same age is crucial to learning social and intellectual skills. Almost everyone now agrees that expanding and improving quality child care is an urgent necessity.

Nevertheless, about six million children three- to four-years-old are cared for full-time in their own homes or in the homes of a friend or relative. Another three-and-a-half million school-age children under fourteen are left home alone to care for themselves before or after school. Of these, almost one million are left unsupervised most of the time their mothers are working. Most of the 750,000 children aged fourteen to seventeen with working mothers "are on their own after school - often in cars and empty houses," according to The Wall Street Journal. This lack of supervision by adults and/or limited interaction with peers often results in serious difficulties later in life. These complications often impose costs on society. A wise investment in proper care for children will not only prevent these avoidable financial costs; it will also make possible a more productive workforce and a more harmonious society. The lack of quality, affordable child care is a national disgrace, damaging the development of millions of children and limiting the ability of their parents to pursue their own advancement. The main problem is that many parents cannot afford decent child care. Child care for preschoolers costs an average of about $300 a month; higher quality child care costs even more. Low-income families, therefore, are unable to pay for child care and still put food on the table. A recent study by the General Accounting Office found that children in families with incomes above $63,000 were about twice as likely to go to preschool as were children in poor or near-poor families. In another study, the Census Bureau found that families with monthly incomes of $3,750 or above were more than twice as likely to have children in organized child care compared to families with monthly incomes less than $1,250. The number of employed women, the fastest-growing segment of the workforce, almost doubled from twenty-nine million in 1969 to fifty-six million in 1994. The percentage of married working women with children under six has increased from 19 percent in 1960 to 60 percent in 1992. The number of working mothers would be even larger if adequate child care and more jobs were available. For example, about 25 percent of non-working mothers of infants and toddlers recently reported that they would work if they could find child care. And during the course of one investigation, more than three-fourths of mothers receiving Aid to Families with Dependent Children (AFDC) reported that they had stopped looking for work due to child care problems. By the year 2000, four out of five infants under one-years-old will have working mothers. With these changes in nature of households, the need for more child care, already overwhelming, will become even greater. Many of those who are enrolled in child-care programs are subjected to inferior conditions. A particular problem is inconsistent care. About one in four children of working mothers receive two or more kinds of child care during the week. In one study, almost one in ten working mothers reported that they had been unable to work at some point during the previous month due to a breakdown in child-care arrangements. Such inconsistency is often disturbing to the children involved, who have trouble adjusting to rapidly changing caregivers. The quality of child-care services requires adequate compensation and good working conditions for child-care workers. Yet the majority of child-care workers earn the minimum wage or less and only one-third have health-care coverage. Largely as a result of this low compensation, there is a 40 percent turnover rate among child-care workers. More than two-thirds have been on the job for less than three years. Given these circumstances, the quality of child care suffers severely. A 1990 report from the National Academy of Sciences concluded that only a small percentage of child-care centers offer good care. The decline of both religious institutions and the extended family in an increasingly mobile and scattered society have complicated the situation. Today, relatives or friends are less available to help. In addition, as people live longer, the burden of caring for elderly parents has increased, adding stress to what remains of the traditional family structure. As the baby-boom generation ages and seniors live longer, this problem will worsen. European countries, however, prove that modern societies can provide decent child care. France, in particular, provides an example of how quality care can be provided by well-trained workers. The following description of child care in France is taken from a report on a visit to France by fourteen child-care experts from the United States:

Public programs for young French children are remarkably comprehensive. Free preschools serve nearly 90 percent of all children three, four and five years old, and publicly subsidized private schools serve the remainder. Several types of good infant-toddler care (including centers, day care networks, and independent licensed family day care providers) are already available to a large proportion of working parents' infants and toddlers.... Family day care providers are entitled to employee benefits and social security once they become licensed.

Most of the major policy issues concerning child care in the United States were resolved in federal legislation enacted in 1990. This legislation provides funding for a mix of public and private programs. Child-care centers based in private homes, community centers, schools, and churches are supported with federal funds. State agencies monitor these centers to make certain that they meet federal standards. Very low-income parents can qualify for child-care slots subsidized with these federal funds. Although this approach seems headed in the right direction, adequate funds have not been appropriated to expand this system to the degree that is needed. As a result, many parents who need subsidized child care cannot qualify under the present standards. With an additional annual federal expenditure of $16 billion, this country will reach the level of public support for child care now seen in France. As with health care, families should be charged according to their income, so that child care will be free or virtually free to families near the poverty line.

5. Raise the minimum wage to $6.90 per hour.

Assuming affordable housing, child and health care, and guaranteed employment opportunities, what wages will make it possible for workers to make ends meet? The answer to this question depends on whether the worker has children. As discussed in Chapter Four, in 1994 a single person working full-time needed to earn at least $1,200 a month, or $6.90 an hour, to obtain basic necessities - assuming free or virtually free health care and an adequate supply of affordable housing. Increasing the minimum wage $6.90 an hour and indexing it to inflation will enable unrelated individuals and couples without children to earn non-poverty incomes. The current minimum wage of $4.25 an hour is not a living wage. Yet one of every four full-time workers earns less than $6.90 an hour and the percentage of such workers with low earnings is growing. Consequently, the ranks of the working poor swell. The minimum wage has failed to keep pace with inflation since 1967. If it had, it would now be $6.25 an hour. So boosting it to $6.90 an hour will not be far outside the realm of historical precedent. Raising the minimum wage will not only benefit low-wage workers; it will also stimulate the economy. Over time, as each new dollar in personal income due to a higher minimum wage circulates through the economy, it will multiply. Total purchases of goods and services, corporate profits, and governmental tax revenues will increase. The entire economy will benefit. To say that poverty wages are "training wages" or "entry-level wages" and that young workers can soon move up to a non-poverty wage is no excuse. Millions of employees work for years at poverty-level wages and most of these workers are twenty-five years-of-age or older. Anyone eighteen or older who works full-time should earn enough to be self-sufficient immediately, not if and when they get promoted.

6. Give working families a wage supplement up to a maximum of $1,200 per month as necessary to avoid poverty.

Even with a minimum wage of $6.90 per hour, virtually free health child care and affordable housing, many parents still will not earn enough to avoid poverty if they work full-time at or near the minimum wage. The Earned Income Tax Credit (EITC), an existing cash-rebate program currently utilized by 20 million low-income households, can be increased to assure these families a non-poverty income. Chart One below shows the wage supplements required by couples with children working at two $6.90 minimum wage jobs. The first column shows the number of children. The second column shows the size of the household, including the two parents. The third column shows each household's poverty line - the monthly income that households of various sizes need to avoid poverty (as explained in Chapter Four). The fourth column shows the wage income that will be earned if each parent is employed at $6.90 an hour: $2,384 a month. The fifth column shows the wage supplement needed by each household - the poverty line (third column) minus wage income (fourth column). So the maximum supplement is for couples with three or more children - $452 a month.

Chart Two below presents the same information for single parents. Not surprisingly, single parents need considerably more support, for there is only one wage earner. In this case, the maximum subsidy is for single parents with three or more children - $1,200 in wage supplements to bring their monthly income up to $2,396.

As with the minimum wage, these wage subsidies will be adjusted annually to keep up with inflation. A monthly wage supplement of $1,200 is substantial, about four times greater than the maximum that current law authorizes for 1996. But it is impossible for single-parent families to live decently with less.

7. Increase minimum social security payments to $945 per month for people 65 and over.

The right to retire at the age of sixty-five is widely accepted, as is the obligation of society to assure that low-income seniors are able to live in dignity. Unfortunately, the federal government does not back up these principles with adequate funds. As defined in this book, more than twelve million people sixty-five or over, 40 percent of the total elderly population, have poverty-level incomes - less than $945 a month after taxes for a single person.

Most seniors living in poverty rely on Social Security as their main source of income. These payments are generally too small to keep people out of poverty. Benefits, which vary according to how much taxes are paid, average only $600 a month. People who had worked at or near the minimum wage receive less than $500 a month from Social Security. More than 90 percent of all seniors receive Social Security. To be eligible for Social Security, retirees must have paid a minimum amount of social security taxes for a total of 40 quarters, or the equivalent of 10 years - or have been married to someone who did. Social Security provides almost half of all seniors' total income. Many have other sources of income, including payments from private retirement plans (though many private businesses are cutting back on these retirement plans). Those with annual incomes below $10,000 receive 75 percent of their income from Social Security. People sixty-five and over with low-incomes are also entitled to receive Supplemental Security Income (SSI). Seniors qualify for SSI even if they do not qualify for Social Security retirement benefits. The federal government provides each SSI recipient with $434 a month if they have no other income. Each state is free to add to the federal minimum, so the amounts vary from state to state. California, for example, provides SSI recipients an additional $169, for a total of $603 a month. Many states provide very little in addition to the federal minimum. But even the California minimum falls short of what is required to avoid poverty. Seniors should not be rewarded for a lifetime of service to society by being forced to live on $600 a month. If provided the opportunity to work as proposed here, many seniors will choose to work, at least part-time, and supplement their incomes in that way. But they should not be required to do so. The hard-won right to retire must be strengthened by increasing the minimum SSI payment to $945 per month.

8. Increase minimum social security payments to $945 per month for people with disabilities who are unable to work and provide needed support and access for those who are able to work.

Given the opportunity, most disabled people are able to work. An effective antipoverty program should assure disabled people who can work the assistance they need to maximize independence. At the same time, the federal government should guarantee non-poverty incomes for those who unable to work. The 1990 Americans with Disabilities Act made it illegal for employers to refuse to hire disabled people simply because they are disabled. This law also requires employers to make reasonable accommodations in the workplace to enable disabled people to work. This legislation has been widely hailed as a major step forward in the battle for human rights. But the law leaves a serious gap: many disabled people require in-home caregiving. Disabled people often need assistance with tasks such as eating, cooking, shopping, dressing, personal hygiene, housecleaning and transportation. Without this support, they cannot work. When friends and relatives are unable to provide this daily care, paid in-home care is essential in order to hold down a job. Advocates forthe disabled believe that with proper support and training, most of the 15 million people under sixty-five with a work-disability can work. Advances in technology, including computers, will continue to make it easier to incorporate disabled people into the workplace. To dismiss the potential of people with disabilities is not only an injustice; it undermines the nation's productivity. Given the many problems confronting us today, we cannot afford to waste the talents of anyone. The ability of disabled people to get the support they need is hampered by the fact that most state-provided attendants are paid at or near the minimum wage of $4.25 an hour. Consequently, turnover is high and service is often inadequate. Increasing the minimum wage will improve this situation. Since in-home caregivers will at least earn a non-poverty income, turnover will decline and morale will improve. Even with maximum in-home caregiving and workplace accommodations, a number of disabled people - an estimated two million - will still be unable to work. They are entitled to a decent income.

As with senior citizens, disabled people whose income falls below a certain level can receive SSI. The minimum guaranteed by the federal government is the same, $434 a month. So the proposal here is the same as with seniors: increase the minimum SSI payment so that disabled people will be assured a non-poverty income.

9. Guarantee that minimum crop prices be above the costs of production.

The well-being of rural communities is closely linked to the vitality of agriculture. Self-sufficient farmers who purchase goods and services locally stabilize rural economies. Without a stronger agricultural base, small towns throughout the country will continue to decline.

Over the past 20 years, the number of Americans living on farms has been cut in half. At the same time, rural poverty has worsened, to the point that typical rural residents are now almost as likely to be as poor as those who live in the nation's inner cities. If these trends hold, rural children, who already are poorer, less healthy and less educated than the nation's average, face a bleak future. Increasingly, hard times and the loss of long-held roots in rural America create great anguish and profound sadness. A 1985 study, for example, reported that rural adolescents are three times more likely than the national average to attempt suicide. It is imperative to act quickly to enable hardworking, competent farmers to avoid bankruptcy. Fortunately, there is a proven method for strengthening family farming. For 20 years, until the early 1950s, the "farm parity" program worked exceptionally well at no cost to the taxpayer. Under this program, based on normal production costs, the federal government determined the crop price that enabled farmers to make a minimal profit. Then, if market prices on a particular crop fell below that level, the federal government loaned farmers funds equal to the cost of production and placed that crop in storage. This decrease in supply forced prices back up above the cost of production. At that point, farmers repaid the loan plus interest, took the crops out of storage, and sold them on the open market. Contrary to the current subsidy program, the government actually made money from the interest payments it charged farmers for the loans. Corporate food processors, however, wanted to buy products from farmers more cheaply. In addition, powerful commodity speculators, who benefit from rapidly fluctuating prices, objected to the relatively stable prices produced by the farm parity program. So political pressure was brought to bear and this successful program was weakened in the mid-1950s. Since then, crop prices have often been below the cost of production, forcing a decline in the number of families farming. During the 1980s, for example, the number of farm residents in the United States fell more than 20 percent to about 4.5 million people. In 1987, Senator Tom Harkin and Representative Richard Gephardt introduced the Family Farm Act to protect America's family farmers. This legislation proposed a return to the original parity program and provided that farmers would vote regularly on supply-management quotas that would prevent ecologically destructive over-production. In contrast to current policies that encourage the use of chemicals to maximize production (as would a totally free-market approach), the parity program would encourage farmers to minimize the use of costly chemicals when they could produce their quota without them. Although this legislation received strong support in Congress, it did not pass. The farm plank of the National Economic Security Program (NESP) is based on reviving this legislation.

10. Pay for these programs by increasing taxes paid by the richest 10 percent to, on average, 37 percent of their gross income and by redirecting one-half of the military budget.

The final question is: what will this program cost and where will the money come from? The bottom line is that implementing the National Economic Security Program (NESP) will initially require an additional $175 billion annually. The gross cost of the program, in both private and public funds, is $495 billion. But the program itself will generate some $320 billion in revenues, reducing the net cost to $175 billion. As NESP is implemented over the course of several years, transferring funds from existing programs will more than cover this $175 billion requirement.

The estimated costs of implementing NESP are:

• Lifting the incomes of those living in poverty to a non-poverty level will require $230 billion. These funds can be generated by raising the minimum wage, creating ten million public-service jobs, increasing SSI payments, and increasing the Earned Income Tax Credit.
• Administrative costs and operating expenses for public-service jobs will be about $10 billion and $30 billion respectively.
• Salaries for about two million non-poor people who will take the new public-service jobs will be $35 billion.
• Public support for private economic development is set at $15 billion.
• $20 billion and $55 billion is allocated for child care and non-profit housing respectively.
• $100 billion for yet-unidentified costs, including Earned Income Tax Credit payments to people above the poverty line. These payments are necessary to avoid discouraging people from taking higher payer jobs: if people can earn just as much by earning less and receiving a tax credit, they will be encouraged to do so. The cost of these payments to non-poverty households will depend in part on the "phase out rate." Estimating these costs precisely is beyond the scope of this book. The $100 billion estimate of yet-unidentified costs used here is substantial enough to assure that it will cover these costs as well as any other unforeseen expenses.

All of the costs discussed above are shown on the chart below:

These costs can be met through both the public sector - by increasing taxes or transferring funds from other programs - and the private sector - by increasing the minimum wage. Since the nation need not increase its total expenditures on health care (see section on health care above), but rather only needs to transfer funds from the private to the public sector while cutting waste, health care is not included as a new cost requirement. Most of the money needed to implement NESP will be generated by the program itself, as listed below:

• Increasing the minimum wage to $6.90 an hour will reduce the income deficit by placing about $45 billion in the hands of people now living in poverty.

• The employment of another thirty million workers will increase federal income-tax receipts by at least $75 billion a year. Additional federal revenues resulting from the multiplier effect on the economy will equal at least another $200 billion.

Combined, these sources are $320 billion. Eventually, the $175 billion still needed can come from existing federal programs. To start with, we can transfer at least half the annual $270 billion military budget. The reason given for the largest peacetime military buildup ever was the Cold War with the Soviet Union. Nevertheless, though the Cold War is over, military spending continues largely unabated. The United States spends "more than the world's next ten largest military establishments combined," according to Lawrence Korb of the Brookings Institution. Military spending adjusted for inflation is still 92 percent of the Cold War average and more than the amount spent in the mid-1970s. The United States spends 40 percent of the world's total military spending.

The loss of jobs that would result from reducing military spending is no reason not to use these funds more productively. On September 9, 1995, when the House rejected an effort to reverse the next round of base closings, The New York Times reported that these plans to shut down seventy-nine bases and reorganize twenty-six others would result in savings of $19.3 billion over twenty years and the loss of 43,742 military and civilian jobs and about 49,000 dependent jobs, like dry cleaners and restaurants. At that same rate, a reduction of $135 billion, as we propose, would cost 660,000 jobs - a relatively small number compared to the thirty million new jobs that are needed to assure full employment.

Military cutbacks over the last several years have already greatly reduced troop levels, while the Pentagon has protected lucrative contracts for military hardware that directly or indirectly benefit Pentagon officials. In 1995, according to Vanity Fair contributing editor Andrew Cockburn:

The Army has lost about 40 percent of its combat battalions since 1990. Air Force combat strength is down by almost 50 percent.... Yet Defense Secretary William Perry, his former deputy, John Deutch, who is now Director of Central Intelligence, and Paul Kaminski, the Pentagon's Under Secretary for acquisitions and technology, controlled a Virginia high-tech company called Cambridge Research Associates when it received an $825,000 defense contract - its first ever - in May.

Because recent cuts have focused on force levels, future cuts will have to be directed more heavily at non-personnel expenditures. Considering that those funds can be used to create more jobs than are lost, a broad range of military analysts have concluded that some 50 percent of our military budget can be used instead to hire the unemployed and underemployed to help meet many social and environmental needs that are being neglected.

In addition to transfers from the military budget, once NESP is fully implemented, $45 billion a year in non-cash food and housing benefits can be transferred to help fund NESP. And $20 billion annually devoted to farm-income stabilization will no longer be needed if the original farm parity program is restored. Combined, these sources provide $200 billion annually, $35 billion more than the $175 billion net cost. But some of these revenues will not be available immediately. We will have to transfer funds from existing programs gradually, partly because living-wage employment opportunities must precede the elimination of non-cash benefits to the poor. And some of the increased tax revenues that have been identified will not be collected during the first year of implementing the program, but rather in subsequent years.

For these reasons, somewhat higher taxes on the wealthy will be necessary, at least initially. The richest 10 percent, who take almost 40 percent of the nation's total personal income, have the means to contribute more of their fair share to the common good. A tax program based on ability-to-pay could generate the additional funds need to implement NESP.

The "effective tax rate" is the total amount of taxes actually paid - including income taxes, payroll taxes and excise taxes. As shown on the chart below, even after Congress slightly raised taxes on the wealthy in 1994, the top 1 percent still paid only 33 percent of their income in federal taxes. The next 4 percent paid 28 percent, and the next 5 percent paid 26 percent. The national average was 24 percent. If graduated according to ability, as shown in the second column on the same chart, a more equitable tax program will require:

• the top 1 percent to pay 45 percent of their income in federal taxes;
• require the next 4 percent to pay 35 percent of their income in federal taxes;
• require the next 5 percent to pay 30 percent of their income in federal taxes.

This plan will provide a fair and reasonable "sliding scale"; people will pay progressively higher taxes as their income increases.

Under this plan, the richest 10 percent combined will pay 37 percent of their income in federal taxes, an increase of $135 billion in new revenues. Again, these numbers are based on the situation in 1994. If the incomes of the wealthy continue to increase more rapidly than inflation, as they have over the last fifteen years, in future years these proposed effective tax rates will generate more money than estimated here. This tax program will immediately result in the average after-tax incomes reflected on the graph below.

As this graph demonstrates, these tax increases will stop far short of equalizing personal incomes. The wealthy will still be wealthy. The top 1 percent will have annual after-tax incomes of $315,000. Those in the 96-99 percentiles will average $88,000 after taxes. And the last group, those in the 91-95 percentiles, will see their incomes fall only slightly - from $65,000 to $62,000.

REVENUE SOURCES (billions)
Self-generating revenues

Increased revenues from the wealthy can be generated by any number of methods, including higher income taxes, a tax on Wall Street speculation, limiting tax deductions on mortgages, increasing inheritance taxes, a wealth tax, and "a Federal tax on financial transactions that would simultaneously reduce the profitability and volume of speculative trading," as recommended by Republican strategist Kevin Phillips. According to Citizens for Tax Justice, the wealthy benefit from $456 billion a year in tax breaks, many of which can be eliminated to increase total taxes actually paid without changing marginal rates. Concerning a wealth tax, in The New Republic, Michael Lind reported "most other democracies tax overall wealth in addition to income" and cited an estimate by Edward Wolff, author of a Brookings Institution study titled Top Heavy, in which he estimates that a modest wealth tax based on the Swiss model would generate $40 billion annually. Regardless, the wealthy are able to share some of their enormous resources to help make this country a decent place for all its people. In addition, corporate taxes can be increased to help finance NESP. Combined, as shown in the table below, all the revenue sources identified above total $655 billion.

This $655 billion is more than enough to cover the estimated $495 billion required to establish economic security. So after two or three years, the federal government could reverse the tax increases on the wealthy, lower taxes across-the-board, lower taxes on low- and middle-income people, and/or use the money for some other purpose, such as lowering the deficit.

Although these figures are necessarily approximations, they demonstrate that providing economic security is financially feasible. The National Economic Security Program, or a similar program, is reasonable and achievable. But a complete evaluation of this proposal requires considering the arguments that are presented in opposition to proposals of this sort, the subject of the next chapter.

Suzanne Gordon, "A National Care Agenda," The Atlantic Monthly, January 1991, 64-68.

Adam Clymer, "An Accidental Overhaul," The New York Times, 26 June 1995, A1/A10.

David Rothman, "A Century of Failure: Health Care Reform in America," Journal of Health Politics Policy and Law, 18:2 Summer 1993, 271.

Dana Priestly, "Canadian Style Plan First in Cost Cutting," The Washington Post, 25 July 1993, Compuserve on-line Post edition.

Mary Hudson, Health Care Reform: Critical Analysis of Alternatives, San Francisco State University Department of Public Administration, 1994.

Chester Hartman, "One-Third of a Nation Is Still Ill-Housed," San Francisco Chronicle, 13 March 1990, A23.

According to Tables 1228 and 1234 of the Statistical Abstract of the United States: 1992 (Bureau of the Census), in 1990 there were 30 million renter-occupied units and a 7.2% vacancy rate, which means that there we 2.14 million vacant units. Allowing for the fact that some of these units were substandard and that some were not affordable, it is estimated here that no more than one million were decent and affordable, and that the situation is roughly the same now.

Valerie Polakow, "On a Tightrope Without a Net," The Nation, 1 May 1995, 590.

Richard Applebaum, A Progressive Housing Program for America, Institute for Policy Studies, 1987, 14.

Ibid., 14. Also, press release by Congressman Ron Dellums, 1989.

According to Table 13 of the Statistical Abstract of the United States: 1992 (Bureau of the Census), there are 7.4 million children 3-4 years old. According to the Population Profile of the United States: 1991 (Bureau of the Census, 10), there are 2.2 million preschoolers in organized child care, 60% (1.3 million) of whom are 3-4 years old. Thus, about 6 million are not in organized child care.

"Lacking Child Care, Parents Take Their Children to Work," The New York Times, 23 December 1994, A1/C2.

U.S. Bureau of the Census, Population Profile of the United States: 1991, 10.

Ellen Graham, "Working Parents' Torment: Teens After School," The Wall Street Journal, 9 May 1995, B1.

Kenneth Eskey, "U.S. Child-care Costs Surprisingly Modest," San Francisco Examiner, 15 September 1992, A2. Reports an average of $63 per week in 1990. This average is adjusted for inflation to derive the $300 per month estimate.

United States General Accounting Office, Poor Preschool-Aged Children: Numbers Increase but Most Not in Preschool, July 1993, 6.

U.S. Bureau of the Census, Current Population Reports, Series P-23, No. 173; Population Profile of the United States: 1991, Table B-34.

Economic Report of the President: 1994, U.S. Government Printing Office, 1994, Table B-34.

Statistical Abstract of the United States: 1993, Table 633.

Ford Foundation, Early Childhood Services: A National Challenge, 2.

Ibid., 2.

U.S. Bureau of the Census, Who's Minding the Kids? Child Care Arrangements: Winter 1984-85, U.S. Government Printing Office, Introduction.

Ibid., Introduction.

Camille Colatosti, "Child-care workers Fight for Worthy Wages," Z Magazine, June 1993, 54-57.

Tamar Lewin, "Panel Asks $5 Billion To Improve Child Care," The New York Times, 15 March 1990, B1.

French-American Foundation, A Welcome For Every Child, 1989, 12-14.

Ibid., 15.

According to this report, the United States needed to increase its expenditures on child care by $15 billion in 1989 to equal the French commitment. Adjusted for inflation, the cost in 1993 dollars will be $16 billion.

U.S. Bureau of the Census, Workers With Low Earnings: 1964 to 1990, Current Population Reports, Series P-60, No. 178, U.S. Government Printing Office, 1992, Table 3.

U.S. Bureau of the Census, Poverty in the United States: 1991, Current Population Reports, Series P-60, No. 181, U. S. Govt. Printing Office, 1992, Table D.

The minimum wage in 1967 was $1.40 an hour (Ralph Smith and Bruce Vavrichek, "The Minimum Wage: Its Relation to Incomes and Poverty," Monthly Labor Review, June 1987, 86). Consumer prices in 1994 are 4.5 times greater than 1967 (Table B-56, Economic Report of the President: 1993. So if the 1994 minimum wage had kept pace with inflation, it will have been $6.24, rounded off to $6.25.

U.S. Bureau of the Census, Workers with Low Earnings: 1964 to 1990, Table 5.

"The earned income tax credit is a tax credit for families that work, live with their children, and have low or moderate incomes. It is a 'refundable' credit, which means that even working families whose incomes are too low to owe income tax receive it. If these families file a federal tax return and one additional tax form, the Internal Revenue Service sends them a check in the amount of the credit for which they qualify.... EITC benefits rise with earnings, thereby encouraging more work.... In recent years, the EITC has become increasingly important for poor and near-poor working families. EITC benefits have grown. Today, nearly 14 million families receive the credit." The Clinton EITC Proposal: How It Will Work and Why It Is Needed, Center on Budget and Policy Priorities, April 1993, 2. "...nearly 15 million families and 4.5 million childless workers who received earned-income tax credits last year....": Sara Rimer, "Cutting Tax Credit Means Much to Those With Little," The New York Times, 16 October 1995, A1/A8.

Robert D. Hershey Jr., "U.S. Pays More Low-Earners for Working, IRS Reports," The New York Times, 17 April 1994, National, 12.

U.S. Bureau of the Census, Poverty in the United States: 1991. According to Table 6, 12,353,000 people sixty-five years and over have incomes less than twice the official poverty line. A poverty threshold twice the official one roughly equals the poverty line used here.

U.S. Bureau of the Census, Statistical Abstract of the United States: 1992, Table 574.

Jason DeParle, "Complexity of a Fiscal Giant: A Primer on Social Security," The New York Times, 11 February 1993, A17.

U.S. Bureau of the Census, Money Income of Households, Families, and People in the United States: 1991, U.S. Government Printing Office. According to Table 34, those people sixty-five and over with Social Security income averaged $6,465 in income from that source, which was 42.7% of the $15,130 average income for all seniors.

Statistical Abstract of the United States: 1994, Table 594. At Labor Secretary Robert Reich's confirmation hearing on February 3, 1993, Senator Tom Harkin, author of the Americans with Disabilities Act, stated: "Most people with disabilities are able to work." Peter T. Kilborn, "Big Change Likely As Law Bans Bias Toward Disabled," The New York Times, 19 July 1992, A1.

Barbara Vobejda, "Who's Down on the Farm?", Washington Post National Weekly, 15-21 June 1992, 37.

Poverty in Rural America: A National Overview, Center on Budget and Policy Priorities, April 1989, 3-4.

"Poor Kids in Rural Areas Have Toughest Time of All," San Francisco Examiner, 18 December 1991, A14.

Guy Gugliotta, "It's Depressing Down on the Farm," San Francisco Chronicle, Sunday Punch, 27 January 1991, 4.

See Mark Ritchie and Kevin Ristau, "Agricultural Policy: Back to the Future," in Winning America: Ideas and Leadership for the 1990s, Marcus Raskin and Chester Hartman (eds.), South End Press and Institute for Policy Studies, 1988, 245-253.

U.S. Bureau of the Census, Statistical Abstract of the United States: 1992, Table 1073.

See "Family Farm Act of 1987," National Save The Family Farm Coalition.

See Chapter Four for an explanation of the income deficit.

It is assumed that most the 10 million public-service jobs will pay about $7 an hour, some will pay somewhat more, and that all of the jobs will average $8 an hour, for a total cost of $166 billion. According to Philip Harvey (Securing the Right to Employment, p. 40), 15 percent of total WPA expenditures for community service jobs was devoted to non labor costs. This rate is the basis of the $30 billion estimate for operating expenses. The $10 billion for administration is five percent of total cost for the processing of revenue-sharing grants to state and local governments. Supervision of the new employees will be provided by current employees and by some of the new employees who are paid at higher wages.

Based on an average wage of $8 an hour.

See discussion on these points earlier in this chapter.

According to Tables A and 5 of Workers With Low Earnings: 1964 to 1990, (Bureau of the Census), in 1989 there are about eleven million full-time workers who earned less than $5.79 an hour. Assuming an average wage of $4.90 for these workers, their earnings will increase by $2.00 an hour under the National Economic Security Program, for a total of $45 billion.

Conservatively estimated at an average wage of $8 an hour and an effective tax rate of 15 percent.

Sheila Collins, Helen Lachs Ginsburg and Gertrude Schaffner Goldberg, Jobs for All: A Plan for the Revitalization of America, The Apex Press, 1994: "For example, according to the CBO, if unemployment had been 5.5 percent in FY 1992 instead of 7.3 percent, the nation will have benefited from an additional $271 billion in GDP..." Thus, each increase of one million jobs corresponds to about $125 billion in increased GDP. Since federal receipts equal about 18 percent of GDP, this means that each increase of one million jobs corresponds with an increase of $22.5 billion in federal revenues. At this rate, an increase of 30 million new jobs will result in an increase of $675 billion in new federal revenues. Robert Eisner, The Misunderstood Economy: What Counts and How to Count It, Harvard Business School Press, 1994, 94: "The Congressional Budget Office indeed estimates that each percentage point of unemployment adds, in the short term, $50 billion to the [annual] deficit.... By those estimates, if unemployment in 1993 were back at the 5.0 percent level it attained in March 1989 at the beginning of the Bush administration [a 2 percent shift, equaling approximately 2 million workers], the deficit would be $100 billion less." Thus, according to this analysis, each additional million workers adds $50 billion to total federal revenues, which means that the employment of 30 million new workers under NESP could add $1,500 billion to the federal treasury, more than twice the estimate above. Since $75 billion of the total increase in new income tax receipts have already been counted and listed separately, and since many of the new jobs funded by NESP will be relatively low-paying jobs, and in order to be extremely conservative, the estimate of new federal revenues used here is only $200 billion. Almost certainly, however, genuine full employment would generate substantially greater revenues than is included in this estimate, which would provide funds for other purposes, such as deficit reduction.

The Economic and Budget Outlook: An Update, Congressional Budget Office, August, 1995, p. 22, reports that 1994 defense spending will be $282 billion and projects that it will be $270 in 1996 and 1997. The Congressional Black Caucus and others have long advocated a 50 percent cut in military spending (see Congressman Ronald Dellums, "A Four-Year Plan To Cut Military Spending By Half," San Francisco Examiner, 29 March 1993, A22).

Peter Passell, "Economic Scene," The New York Times, 14 September 1885, C2.

Mark Thompson, "Why the Pentagon Gets a Free Ride," Time, 5 June 1995, 26/27. "Bunker Bill," The Nation, 25 December 1995, 812.

"House Action Assures Closing Of 79 Military Bases in U.S.," The New York Times, 9 September 1995, 7.

Andrew Cockburn, "Swords Into Stock Shares," The New York Times, 5 October 1995, A19.

Creating a Common Agenda: Strategies For Our Communities, U.S. Bureau of the Census, Statistical Abstract of the United States, 1993, No. 583.

Ibid., No 514.

The following numbers for 1994 are provided via telephone on August 26, 1993 by Rick Kasten at the Congressional Budget Office:Income Group # of Families Ave. Income Effective Tax Rate Top 1% 1.1 million $566,876 33.2 Next 4% 4.4 " $135,096 27.7 Next 5% 5.5 " $88,342 26.3 Top 10% 11.2 " $152,952 29.2 Next 10% 11.2 " $68,209 24.9Top Quintile 22.4 " $111,314 27.92nd " 22.4 " $48,972 22.33rd " 22.4 $33,654 19.54th " 22.4 " $20,742 14.9Bottom " 22.4 $8,467 5.0Total 112.0 " $44,236 23.7From these numbers, the following can be derived: 1994 tax revenues, the tax revenues that can be generated under higher tax rates, and the difference between the two, in billions of dollars. Income Group 1994 Proposed Rates Proposed Taxes Difference Top 1% $207 .445 278 70 Next 4% 168 .35 213 44 Next 5% 130 .30 148 18 Top 10% 506 .37 639 133 Next 10% 190 .249 190 0Top Quintile 695 .333 829 1332nd " 245 .223 245 03rd " 147 .195 147 04th " 69 .149 69 0 Bottom " 9 .05 9 0Total 1166 .26 1299 133

Quoted in: Adam Clymer, "The Stultification of Washington," The New York Times Review of Books, 23 October 1994, 14/15.

John Connor, "Tax Breaks to Cost US $456 Billion in '95, Report Says," The Wall Street Journal, 25 April 1995, B13.