SAJE Guide to Economics Education

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SAJE Guide to Economics EducationA Peoples Curriculum for a Healthy and Fair Economy

Prepared for Casey FamilyProgramsJanuary 9, 2009


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CONTENTS

I. Introduction Why Economics? Credit Where Credit is Due 2

II. Values and EconomicsIntroduction 4Values Script

The Economy is a Human Creation 4The Myth of Scarcity 5The Myth of the Level Playing Field 5Competition 6

How Do Different People React to Competition 6Fairness 7

III. Understanding Economic InequalityIntroduction

What is a Live Illustration? 9Ten Chairs: Purpose and Setup 10Ten Chairs Script

Introduction 11Wealth 11

Some Key Points About Wealth 13Inequality is Glocal (Local and Global) 13The Primary U.S. Housing Subsidy is Not for Poor People 16

Wages and Work 17

Taxes 19Personal Income Tax 19

Figure 1: Just Economics 20Capital Gains Tax 22Corporate Tax 22Estate Tax 22Taxes for Everyone Else 23

Supply Side and Demand Side Economics 23Figure 2: Just Economics 24

Demand Side Economics 25Supply Side Economics 25

Policy Solutions 26Conclusion 26

IV. Forces Behind the New InequalityIntroduction 28

Reduced Public Sector 28From War on Poverty to Criminalization of Poverty 28Elimination of Union Jobs 29Elimination of Social Safety Net 29Big Cities Become Command Centers for Global Economies 29


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Speculation in Urban Land 29Fiscalization of Land Use 30

V. Strategies for Change and HopePolicy, Negotiated Agreements, and Democratic Institutions 30Stories From the Field 32

Cecilia's Story 33Closing Thoughts 35


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I. Introduction

Why Economics?

At the present moment we are facing an economic crisis of internationalproportions that has led to the loss of homes, jobs, credit and public resourcesfor thousands of people in Los Angeles.

These real world conditions have led more people to the understanding thatsomething is seriously wrong with the way that the economy is organized andthat economic policy is too important to our families, our communities, and the

world to be left to a handful of experts, policy wonks, billionaires, andcorporations.

In a real democracy, all of us should have something to say about the basicvalues behind how jobs are distributed, the purpose of taxes, and the role thatthe public sector should have in determining who should benefit from ourcountrys economic resources.

And sometimes it takes a crisis for social workers, child care workers,organizers, health promoters, workers, parents and young people to understandthat as long as the economy is not working for large numbers of people, then itsreally not working at all.

But before we claim our rightful place in economic discussions and debates, weneed some preparation and practice.

The purpose of this curriculum is help educators, organizers, and facilitatorsbuild a foundation for these discussions -- to help people connect their valuesand experience with economic concepts and ideas so that they can gain theclarity and confidence that is necessary to collectively produce solutions forchange.


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Credit Where Credit is Due

Before we start, it is important to acknowledge that this curriculum is built onthe shoulders of many others. Here are a few who really stand out in my own

experience:

Just Economics was a womens economicscollective organized by Ellen Teninty in the 1980s.Just Economics designed and produced engagingpopular economics education for all kinds oforganizations around the country for about 10

years. I was a member, of the group, and anothermember, Marlene Kim, came up with the originalidea for the Ten Chairs live illustration that is

included in this packet. Ten Chairs has been used somuch since then that many dont know its roots -- atrue sign of success.1

United for a Fair Economywas co-founded by Chuck Collins and FeliceYeskel in 1995. United for a Fair Economyprovides workshops, trains trainers,and publishes popular economics education training guides and othermaterials. They have a great website http://www.faireconomy.org with links to alot of resources, including their own animated powerpoint of the Ten Chairs

exercise.

1FiveJust Economics members recently reassembled to create a new workshop about thecurrent financial crisis, its causes, and solutions. Available early 2009.

Just Economics 1996

United for a Fair Economy 2008


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Right to the Cityis a national alliance that I co-founded in January 2007 along with GihanPerera of the Miami Workers Center and JonLiss of Tenants and Workers United inAlexandria. Right to the Cityapplies a human

rights frame to urban problems, is grounded inlocal organizations and struggles, and iscommitted to coalescing them into nationalimpact. I created the "economic forces" exercisethat is included in this packet as a result of many discussions about the roots ofgentrification and displacement in our cities with Gihan and Jon. Like the TenChairs exercise, this presentation has a life of its own and has been used,improved, and altered by many. For more information aboutRight to the City,go towww.righttothecity.org.

Strategic Actions for a Just Economy(SAJE) is an economic justice andcommunity development organization that is based in Los Angeles. I am itsfounding Director who started the organization with about 50 other people in1996. SAJE is dedicated to building economic power for working class peoplein Los Angeles, to reduce the Citys economic inequality, and to establish aright to the city for all. We believe that people who are most affected byeconomic problems are the best people to collectively devise solutions, and werecognize that this takes preparation. LikeJust Economics, United for a FairEconomy, andRight to the City,SAJEis a big advocate of popular education,

which we see as the education that is necessary for democracy to work. It is inthat spirit that these materials are offered. For SAJE's online version of theeconomic forces exercise, see "What's Behind the Gentrification of Our Cities"atwww.saje.net.

To a more just economy for all,

Gilda Haas

Executive Director


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II. VALUES AND ECONOMICS

Introduction

I used to be in an economics education collective calledJust Economics. Wetaught thousands of people -- community and organization leaders, socialservice agencies, activists, philanthropists, all kinds of people -- economics andeconomic policy analysis using popular education methods. Our signaturemessage was, and still remains for me, about how values are front and center tounderstanding economics.

What follows is a version of theValues Script that I have been using mostrecently. You will want to adjust the content to suit your audience, personalstyle and the context of your presentation.

Values Script

The Economy is a Human CreationWe are going to talk a little about economics as a baseline for thinking aboutcommunity economic development just to set some ground rules, get somebasic points straight.

Rule number one: Any discussion about economics and any conversationabout economic policy must dispel the myth that economics is essentially aneutral math-based science.

It is not. The economy is a human creation.

Interest rates dont fall like rain. They are set. By people. Economic eventsare the result of human decisions. And with that comes some basic humanstuff -- where those decision-makers are coming from. Their beliefs abouthuman nature. Their prejudices about people. Their ideas about fairness.Their values. The math comes later.

And, if their values are different than the ones that we hold dear, then theresults will not work for us either.

This understanding compels us to dispel some cultural myths that skew ourconversations and are hidden assumptions behind a lot of economicconversations. They affect how we think about other people and how we think


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about ourselves -- about whether economic success or failure has only to dowith individual decisions and actions or whether it has something to do withthe way the system is structured.

The Myth of ScarcityOne description of economics is the system by which we distribute scarceresources. This is based on the idea that there is simply not enough to goaround. Is that true? What do you think?

Over the past twenty years, billions of dollars have gone into real estate andinto the stock market. But when it comes to affordable housing or education --there never seems to be enough money to go around. Recently, billions of ourtax dollars were issued to the very banks who got us into the current crisis byspeculating on the economy. But where is the money to help people with their

mortgages, evictions, and rents?

Is this a question of scarcity? Or is it simply a matter of who is given resourcesand who is not.

The Myth of the Level Playing Field

Another favorite is the myth of the level playing field -- the notion that anyonecan realize the American Dream if they pull themselves up by their bootstrapsand apply themselves. (Forgive the clichs, but they are clichs because

everyone either believes them or at least goes about their business as if theywere true.)

This belief is a prerequisite for figuring out who in the economy is deserving--the winners -- and who is undeserving-- the losers.

But we all know that some people have done well because they were born onthird base -- not because they hit a home run. And others -- well they even gotinto the ball park. Just as a question of birth. Of race. Of class.

This kind of thinking skews how we view policy. For example, public housingis supposed to be bad for people. That subsidy to poor people is consideredundeserved, bad for them, and bad for the country. It takes away theirinitiative by giving them something for nothing. But giving a much larger


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subsidy to homeowners2 is considered good for them and good for the country.Not to mention the banks.

CompetitionCompetition is a key element of economic theory. The basic assumption is that

competition brings out the best in us by making us work harder, innovate, andexcel. But hidden here are assumptions about human nature. As though ifthere was not enough competition we would become lazy. If we are made tocompete, then we are more productive and improve quality. This is the logicalpremise for cutting welfare programs. Helping people might breed laziness.

Im actually not against competition. But it seems clear to me that wheneveryou have a system that creates winners and losers it is important to figure outwhere competition makes sense. Great for football. Maybe even great forscience. But do we really think it is a good idea for children to compete for agood education? Or for food? Dont we all benefit if everyone has a goodeducation? And healthy nutrition?

Once we understand that we can make our own rules about competition andthat what is important is how we structure competition we can have a betterdiscussion about economic policy. This idea is central -- how westructure

competition matters.

2In 2005, over $90 billion was lost to our tax roles because homeowners can deduct property taxes andmortgage interest from their income taxes. Most of these deductions go to wealthy people who have large

mortgages. Over half of the homeowners in the U.S. don't take the tax deductions because they don't earn

enough to use them. Sources and more information is in the callout box on page 16.

How Do Different People React to Competit io n?How do job-seekers react when they see 1,000 people in line to apply

for 100 jobs? some people get in line and wait some people try to figure out how to get further ahead in the line some people look at the line, think whats the use, and walk on

by.

Is this how we want to structure competition in L.A.?


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For example, we can structure competition so that we have a whole lot ofworkers competing for very few jobs, and then, as a consequence, pay lowwages. Or we can have a highly skilled work force with companies competingfor them -- for higher wages.

We can have health care companies competing for the highest quality, lowestcost health care. Or we can have them compete for the greatest profit toshareholders even if that ends up producing less access and bad workingconditions.

What matters about competition is how we structure it. And when we do, wehave to ask some questions. What makes someone a winner? What does thatcost society? What makes someone a loser? What does thatcost society?

FairnessFinally, most economic systems and policy include a theory offairness.

Fairness is about justice. Our economic policies should be about what webelieve to be fair or just, and we tend to think that fairness can be an objectivestandard. Lets play with that for a minute.

For example,what is fair for pay?

For each example, ask people what they think. Is it fair? Why do people think its

fair? Why not?

Equality? Should we all get paid the same? Need? Should people who have families to support get paid more? Seniority? Should people who have worked here longer get paid more? Productivity? Should people who produce more per hour get paid more?So, you see, justice isnt only about numbers and facts. It is s a complexdiscussion.

When we think about the rules that underly the economy, we make trade-offsbetween how we want to balance risks, rewards, and responsibility. There arealso tradeoffs to be made between personal freedom and the public costs ofthose freedoms. We will discuss these ideas more later.However, the real question before us is that we rarely get to talk about theseissues, because, increasingly, decisions about the economy occur outside of thepublic sphere. We need to change that. We need to take it back.


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(To transition into the Ten Chairs exercise, add):

But before we do, lets look at what the economy looks like today.


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II. UNDERSTANDING ECONOMIC INEQUALITY

Introduction

The purpose of the Ten Chairs live illustration is to physically demonstrate theunequal distribution of wealth in the U.S. today, how that is even more unequalby race and class, and to show the dramatic increase in inequality that occurredbetween the 1970s and today.

Our goal is to build a foundation of understanding that will help us think aboutsolutions.

As presented below, the exercise takes about one hour, but can be adjustedwith more or less discussion and interaction, depending on the amount of timeyou wish to allocate to this session in your program.

What is a Live Illustration?People inJust Economics used the term live illustration to describe this kind ofexercise. AsJust Economics founder Ellen Teninty explains:3

The methods I have used over the past two decades have been called popular(education). Maybe it would be more accurate to say that our style is engaging,hopefully never boring. Just Economics evolved from The Center for Ethics and SocialPolicy, housed in the Graduate Theological Union in Berkeley, and we used theministers rule, People can listen no more than 20 minutes, even if you are talkingabout how to get into Heaven. We were guided by the idea that we wanted theparticipants to gain the courage to become outspoken, not to be once again intimidatedby experts. We understood that participants will remember what they say more readilythan what they have heard, so they have to talk.

We use what we call live illustrations, which differ from traditional role-plays. Wedeveloped ways to show statistics that were visual and used bodies from the audience sothey became active and memorable. If the topic is one with which the audience has alot of personal experience, we create an analytical framework and then interview theaudience to connect and explain their personal stories in a big picture.When we need to tell a complex story about which the audience will have littleinformation, like the Savings and Loan scandal or structural adjustment programs, wecall players from the audience and adorn them with props and hats and walk throughthe tale. That way they can follow the money trails and see where policy choices weremade.

3from Ellen Teninty and Just Economics, Experiences with Popular Economics Education,Teaching for Change: Popular Education and the Labor Movement, Center for Labor Research andEducation, UC, 2002.


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Ten Chairs: Purpose and Setup

Goals Define concepts of wealth and assets. Dramatize wealth inequality in the U.S. (and provide some local context) Make it clear that scarcity is created that our economy directs a lot of

wealth to very few people. Show the pressure on families due to stagnant wages and shifting tax

burdens and how this pressure differs by income and racial groups. Show that the distribution of wealth used to be more equal -- that there

has been a dramatic shift in wealth between 1976 and the present. Provide an understanding that public policy (tax policy, development

policy, etc.) can increase or decrease inequality.

Technique Live Illustration an interactive story told by the trainer using audience

members as active participants.

Time About 60 minutesParticipants 10 peopleMaterials 10 chairs in a row at the front of the room graduated income tax chart tax bracket cake chart tax credit and deduction definition chart

General notes on script format Italics indicate instructions for the trainer only. Underline indicates a question from the trainer to the workshop

participantsnot a rhetorical question.

Bold indicates new terms being defined or a point to emphasize.


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Ten Chairs Script

IntroductionWhat Id like to do is illustrate the status of the economy in the United Statesright now. This illustration will help us understand some of the economic

pressures affecting working families today.

WealthFirst, I am going to illustrate the distribution of wealth in the United States. Ihave here ten chairs, which will represent the total net private wealth in theUnited States.

Now, I need ten people to come up and sit in these chairs. (Quickly takevolunteers or select people from the audience and have them sit in the chairs.)

What is wealth? (Let audience answer, and then continue) Right now I am talkingabout material things not spiritual wealth. I am talking about the thingspeople own. Cars, Boats, Jewelry, Buildings, Machines, Cash, Bonds, Stocks,etc.

I am not talking about income. I am not talking about your paycheck. I amonly what ends up in savings.

Now what do I mean byprivate wealth? The fact that this is private wealth

means that it is the wealth owned by individuals and corporations not thegovernment. It doesnt include the national parks. But it does include all ofthe business assets in the United States.

Finally, we need to remember that the chairs represent net wealth.Anyone havean idea of what that means? Net wealth means all of the assets minus all of thedebt that is owed.

Example: If you have a $10,000 car with a $7,000 loan, your net wealth in thecar, the value of your asset is just $3,000.

So, if you have lots of assets, but you also have lots of debts, you dont havemuch net wealth. Thats most of us right?

The people sitting in the chairs represent the family population of the UnitedStates (a family in this case is a household a group of people who pool theirincome and live together). Each person represents one tenth (10%) of all the


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U.S. households. Each chair represents one tenth (10%) of the total net privatewealth of the United States.

Right now, each person has one chair the wealth is equally distributed.4

If you are transitioning from the values script you can build from the earlier discussionabout what is fair for pay? by quickly asking the audience a few questions: Whatkind of economy is this? Is it fair? Get a couple of answers and then cut the discussionoff by saying something like, We can talk about this all day, but it doesnt matterbecause this isnt what our economy really looks like...

Actually, the real economy looks very different. So, I need you, you, you, you,and you to stand up and move behind the chairs over here. (Skipping the firstperson on your right the audiences left tap the next six people in the row of chairs.Have those six people stand up, leaving three people at your far left still sitting down.)

As of 2004, 10% of American families owned 71% of the net private wealth.That means you (indicate the person at your far right) own all seven of thesechairs. Stretch out and enjoy!

Actually, this unequal distribution of wealth is even more dramatic, because in2004, the top 1% wealthiest families in the United States own 34.3% of the

wealth about three and a half chairs! Thats more chairs than the bottom 90%have combined!

Today, wealth is more concentrated at the top than at any time since 1929.

18% of all families had zero or negative net wealth. That means that 2 of ourfolks are standing up they have no chairs at all. (Take 2 of the displaced peopleand stand them behind and to the right of the chairs on the audiences far right)

The rest of you just over 70% of the families in the U.S. you have to sharethese 3 chairs. (Indicate the 3 chairs on the audiences far right.) I dont know how

you are going to work this...sit on laps or sit on the floor with your arms on thechairs or what. You work it out among yourselves. (This is funny pause to let

them scramble).

4If wealth were evenly distributed, each household in the U.S. would have a net worth of about$380,000. Source: United for a Fair Economy.


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Some Key Points About Wealth

Wealth is what you own minus what you owe. Income is your paycheck or government benefits check like welfare or social

security, or what you earn on your investments. Wealth is what you have in the bank and the value of the assets that you own. 18% of the people who live in the U.S. either have zero wealth or negative

wealth -- they owe more than they own. Some of these people might live in bighouses and drive big cars and have a lot of possession, but they have no wealthbecause they have so much debt.

Inequality is Glocal (Local and Global)

About two years ago, our hometown, Los Angeles, was awarded the dubiousdistinction of being the most unequal city in the country. That means that thedistance between the richest people and the poorest people in L.A. is bigger than anyother place.

In 1970, 52% of L.A. Neighborhoods were considered middle class.

By 2000, that dropped to 28%.

By then, Los Angeles had achieved an economic inequality index equivalent to that ofMexico.

Most major cities are moving a similar direction.

Growing inequality is a national trend and the Gini Index, how economic inequality ismeasured, is at an all time high in the United States.

Now we can talk some math. In the Gini Index, perfect equality is measured at 0. Atzero, everyone is equal. Complete inequality is measured at one. One person ownseverything. So the larger the number is between 0 and one, the greater the inequality.

In 1968, the Gini Index for the United States was about .38. Today it is approximately.46, and rising. Scary stuff.

Inequality is growing internationally. The growth of inequality is the number onepolicy discussion in Japan. And the Japanese Gini Index today is where our was in1968.


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Lets talk about the wealthiest families for a minute.5

(Go over and stand next to the person with 7 chairs.)

What about this top 1% wealthiest families (thats about 1 million families in

all). Who are these people? Be specific. Name names. (Rockefellers, Bushes,Kennedys, Bill Gates, Oprah Winfrey, Ross Perot).

What do they look like...are they white, black, male, female?

They are mostly white families. As of the early 1990s, about one 10th of thesetop 1% wealthiest families were female-headed households.

How did they get here? About half of the wealthy inherited their wealth.What kind of assets (wealth) do they have?

Some of their wealth is their homes, and other possessions, etc.but most of itcomes from investments and businesses. Very wealthy people use their moneyto make more money. They can also move their money around from country tocountry pretty easily.

Now lets talk about the middle 70% Walk over to the 7 people who are assembledaround the three chairs.

These are the 7 people down here trying to hold onto a chair. They all have

some wealth.

What do they look like?

They are all races, but white families do better than families of color.

Race does matter. The median white familys net wealth in the U.S. is:$140,7002. (That means that if you took all white families and lined them upfrom the poorest to the wealthiest and picked the middle family, their wealth is$140,700. In other words, half of the families have less, and half have more.)

In comparison, the median African American familys wealth is just $20,600.Half of all African American families have less!

5 "The richest 1% of Americans currently hold wealth worth $16.8 trillion, nearly $2 trillionmore than the bottom 90%. A worker making $10 an hour would have to work for over 10,000years to earn what one of the 400 richest people in the U.S. earned in 2005." Source: JohnCavanaugh and Chuck Collins, "The New Inequality," The Nation, June 30, 2008.


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The median Latino familys wealth is $18,600.

Unfortunately, the Federal Reserve Bank, which compiles these statistics,doesnt track wealth for Asian or Native American families, so I cant give those

numbers to you.6

What kind ofassets do they have?

Maybe a little bit of net worth in their home.

Homeownership in the U.S. hit a record 69% in 2004 ...but for people under 55years of age, homeownership is lower now than it has been in about twodecades.

Why do you think that is? What situation did people over 55 have that the restof us didnt?

Housing prices were lower in the 50s and 60s.

Whose incomes have been pushing up the cost of housing in the 80s and 90s?Thats right. People with very high incomes at the top of the economy.

Plus, in the 50s and 60s we had programs to encourage homeownership foryoung families like the GI bill. We also had Savings and Loans financial

institutions that made home loans at low rates. You might not remember theSavings and Loan scandal in the 1980s, because we are having a bankingscandal now. But it is enough to know that those conservative, communityoriented lending institutions are not a resource anymore.

Today the main housing program that this country offers its people is the homemortgage income deduction a tax break for folks who own homes. We spentabout $90 billion dollars on this deduction in 2005 but more than half went topeople who earn over $100,000 a year. 20% went to the 2% of the population

who earns more than $200,000 a year.

6One thing to remember here is that the Asian American community is very diverseeconomically. The economic situation of most Japanese Americans for example, is verydifferent from the average Vietnamese or Cambodian American.


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The Primary U.S. Housing Subsidy is Not for Poor People

The federal tax code allows homeowners to deduct all property tax and mortgage interestfrom their income taxes.

According to a report by the Congressional Joint Committee on Taxation, this cost thefederal government almost $90 billion in lost revenues in 2005 alone.

More than half (53.7 percent) of the 2005 $89.5 billion homeowner subsidies went to the11.8 percent of taxpayers with incomes over $100,000. More than one-fifth (20.6 percent)went to the wealthiest 2.3 percent of taxpayers with incomes over $200,000.

Even wealthier people with bigger mortgages get the most benefit from this subsidy.

Half of all U.S. homeowners do not claim these deductions at all because they dont earnenough income to claim deductions.

Tenants, of course, dont even qualify.

Source: Peter Drier and John Atlas, Washington Monthly, Feb 1990;Peter Drier,Shelterforce, 2005.

What other assets might the people in these three chairs have?

Maybe a little bit of a pension for their retirement?

Only if they are lucky. Fewer and fewer jobs offer a pension and those that doincreasingly offer a savings program rather than a guaranteed check afterretirement. Only 18% of the bottom fifth lowest paid workers in the US have apension plan (indicate the folks standing up) compared with 73% of the top fifthhighest paid workers (indicate the person with the 7 chairs). African American

workers are less likely than whites to have a pension plan, and Latino workersless likely than African Americans. Women are less likely than men to have apension plan.

So the point is that it is getting harder and harder to have the kind of assetsthat our grandparents had like homes and pensions. Young families today havea much harder time accumulating a little bit of wealth, and this category ofpeople who are standing up without chairs is growing.

So lets talk about the people who are standing up.


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Who are they?

These are not all homeless people and welfare recipients.

These are families where both parents work, where the income just barely

covers all their payments so they arent able to save.

In fact, most of the people over there trying to hold on to a chair are in prettymuch the same situation.

What does it mean to have no savings that could cover your debts, no wealth?It means that you are living without a safety net, living from pay check to paycheck. It gives you a tremendous feeling of insecurity. Most people in theUnited States are not prepared for the current economic crisis. Here's a break-down of families whose savings would run out in three months or less: 38% of

white families, 79% of black families, 73% of latino families (source: MelvinOliver and Thomas M. Shapiro, Black Wealth, White Wealth, 1995) That wasabout 10 years ago. Things have become more perilous today.

Wages and Work(It may be necessary to remind participants that they are still looking at the distributionof wealth, but we are going to talk briefly about income and taxes not the distributionof income, just what has happened to the incomes/tax bills of the segments of societyshown in our distribution of wealth illustration.)

How do the top 10% make their money?Right, they make most of their money from their investments they earninterest and dividends, they speculate, they buy and sell assets to make what arecalled capital gains.

How were they doing in terms of income before the current economic crisis?

Pretty well. Which means the have enough wealth to withstand it. Until thisyear, the stock market was doing pretty well and the high interest rates of the

late 80s and early 90s were very good for people who use are investors.

86% of the benefits of the stock market boom of 10 years ago went to the top10% of the nationa's wealthiest families. 42% of the benefits went to the top 1%ALONE.


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They do pretty well from their jobs too. The top 20% highest income workersare the only workers in the US economy whose wages have done UP in the last20 years. In 2004, CEOs, the executives of large corporations, earned 431times more than the average factory worker. That explains a lot aboutinequality. In 1960 people in those same jobs made only 40 times more than

your average worker. Since 1980, average corporate CEO pay went up about743% (from an average of $1.4 million in 1980 to an average of $11.8 million in2004).7 At the same time, the average hourly wage for workers during the sameperiod, pretty much stayed the same. At the same time, worker productivityincreased tremendously -- up by about 70% during the same period.

How about the rest of these people? What kind of jobs do the folks standingup have?

Increasingly they work in service jobs (restaurants, stores, insurance

companies, janitors, hair dressers, banking).

Increasingly they have what are called contingent jobs (self-employed, contract,part-time, temporary). One third of all jobs are now contingent.

African American workers are twice as likely as white workers to have atemporary job.

What does it mean to have a contingent job? What is your life like? Cant plan,cant save, cant work out child care, cant spend time with your family.

A report released by by the Working Poor Families Project (October 2008)revealed that 28% of working people with one or both parents employed areliving in poverty. That is over a quarter of all the workers n the country. Earlyreports indicated that 33% of women workers earn a poverty level wage ForAfrican American workers the number was 36%, and for Latinos its is a

whopping 45%!

Race still makes a huge difference. The median family annual income forwhites is just almost $60,000 (2003 census). Again, that means that half of all

white families make less, half make more. For Latino families the medianincome is just over $34,000, and for African Americans families the medianincome is about the same.

7 Measured in 2003 dollars.


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However, the single biggest factor in how much income you can make is stillwhether you were born a boy or a girl. In 2003, the median hourly wage forwomen was $12.49. The median hourly wage for men was $15.26.8

TaxesSo...What about taxes? Did the tax bill for the top 10% wealthiest families goup or down?

It went down.

Wealthy families got tax breaks in three different areas their personal incometaxes, their capital gains taxes, and their corporate taxes.

Personal Income TaxThe personal income tax system in the US is what is called a graduated incometax its like a layered cake.

We have 6 income layers, and each one gets taxed at a different rate.9 Here is anexample of a distribution of taxes for an individual.

(Show and explain layer cake chart)

8 United for a Fair Economy, "The Growing Divide: Inequality and the Roots of IncomeInsecurity", October 2006.9 Joint Committee on Taxation, "Overview of the Federal Tax System as in Effect for 2008,"April 15, 2008. Current federal income tax rates for head of household:

Heads of Households TaxNot over $11,450............................................10% of the taxable incomeOver $11,450 but not over $43,650................$1,145 plus 15% of the excess over $11,450Over $43,650 but not over $112,650..............$5,975 plus 25% of the excess over $43,650Over $112,650 but not over $182,400...........$23,225 plus 28% of the excess over $112,650Over $182,400 but not over $357,700...........$42,755 plus 33% of the excess over $182,400Over $357,700 ............................................$100,604 plus 35% of the excess over $357,700


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Figure 1 Just Economics


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So, at the first layer, from 0 up to a certain dollar amount, depending on howmany people in your family and so forth, you pay no taxes.10 After you reachthe limit of the first layer you start paying 10 percent on each dollar that youearn. This is the tax rate on the lowest tax bracket or layer of income...and

when you reach another level of income, you pay 25% on each ADDITIONAL

dollar, if you make enough to reach the next layer you pay 33% on eachadditional dollar, and so on up to 35%, which is the top rate for the highestincome bracket on this chart it is $295,550 and over.

(If you took your total tax bill at the end of all these calculations and divided itby your income, you would get your effective tax rate sort of like the averageof what you pay on all the layers that apply to you. That is how your estimatedtaxes are calculated for payroll deduction.)

Lets look at what has happened to the top tax rate - this is the tax applied to

income of $295,550 or more. If you are lucky enough to earn this much, this isthe tax rate that applies to each dollar you earn OVER $295,550 not the entireearnings.

In the 1950s (when I was a little child) the top tax rate was 91%. That meansthat after $400,000 (at that time, worth a lot more today) people paid prettymuch every dollar they earned back to the government. When Ronald Reagancame into office in 1980, the top rate was 70%. By the end of his first year inoffice, it was just 50%. Tax reform in 1986 brought it down to 28%. It wentup a little under Bush, and in 1993, Clinton put it back up to 39.6%. The new

Bush Jr. Tax Plan reduces the top rate to 35%.

Highest Income Tax Rates 1950-2001

1950 91%1980 70%1986 28% Reagan1993 39.6% Clinton2008 35% George W Bush

People said that the Clinton tax increase was the largest tax increase in

history. But they usually dont mention the largest tax decrease in historyunder Reagan. Our income tax is not high. The 86 countries in the world withan income tax charged an average top rate of 47% in 1989.

10 Many people at this level are eligible to receive the Earned Income Tax Credit -- whereworking people with very little assets and low incomes qualify for receiving tax money back.Millions of eligible people do not receive this every year, something for all of us to consider.


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So one of the reasons that there is less money for social programs today thanthere was in earlier decades is because we stopped collecting money frompeople who have a lot of it.

Capital Gains TaxThe other tax that got cut was the Capital Gains Tax. (Tax on money earned onmoney) The capital gains tax rate in the past has been as high as 45%. In the80s it got cut to 28%, and is more complicated now, but is never over 28%.That means we pay more taxes on the money we earn from working than on themoney earned from investments.

Keep in mind that 90% of the capital gains taxes collected are paid by the top10% of wealthy families. Contrary to rumor, this is NOT a tax that affects many

low/middle income people. (Many people know that capital gains taxes apply tothe profit made when selling a house but it is important to note that thesetaxes only apply if you dont invest the profit in a new house within two years.Since most of us who own homes buy another when we move, then we dontpay capital gains taxes.)

Corporate TaxAdditionally, the wealthy got a big break on corporate taxes. Taxes oncorporations affect the top 10% because the top 10% wealthiest families own

81% of all corporate stocks, and 91% of all business assets.

Corporate taxes were drastically reduced by 1981 tax policy changes. In 1960corporations are contributing 23% of the total federal revenue almost aquarter of the all the taxes collected by 2004 corporations were onlycontributing 10% of all taxes collected.11 Many corporations got huge taxrefunds in early 80s. Today, corporations contribute about 9% of all taxescollected.

Estate TaxThis is really the only tax on wealth. It is only levied on dead rich people (as akind of inheritance tax). It used to tax people who died with over $675,000 innet wealth. Now, under the George W Bush tax cuts it will be eliminatedentirely in 2010 and in 2009 only impacts estates with a taxable value of at least$3.5 million.

11 Congressional Budget Office, "Revenues by Major Source, 1962-2004."


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Taxes for Everyone ElseSo what happened to taxes for middle and low income people before George WBush?

They went up.

It is true that income taxes have been cut a little for middle and low incomepeople, but then what happened?

What taxes went up?

Sales taxes, property taxes, social security taxes, and also users fees like parkfees, licenses, traffic tickets etc.

Government services also got more expensive bus fares, some places nowcharge for library cards, etc.

What happened to taxes for middle and low-income people after George W?

The total effect of the changes made in the Bush Administration tax cuts is that71% of the more than 1.6 trillion dollars of cuts go to the highest earning 20% offamilies.

Only 29% of the benefits go to the bottom 80% of families. The richest 1% willget more than a third of the benefits.

27% of all taxpayers will get absolutely NOTHING no tax cut at all.

(ask the volunteers to take their seats in the audience)

Supply Side and Demand Side EconomicsBefore we end the session, and have a short discussion about solutions, I just

want to briefly go over the ideas, values, and beliefs behind the policies thatdrive our economy. There was one set of values that moved economic growthfor everyone between 1947 and 1979. During this period, when the economy

was doing well, it was doing well for everyone, for workers and corporationsalike.


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There was another set of values and ideas that dominated the period between1979 and the present. This is when economic benefits were pushed upwardtowards the richest people and corporations in our country.

(Show the chart, and go over the main points)

Figure 2 Just Economics


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Demand Side EconomicsThe basic idea behind demand side economics is that the engine of theeconomy is the consumer. If all consumers can afford to buy the things thatothers produce, pay rent, buy homes, etc., then the economy grows. Followingfrom this logic, demand side economists advocate for taxing very wealthy

people and corporations to pay their share of public needs; then use thatmoney for public investment in things like education, roads, etc. -- to meet ourexpensive collective needs. This model also sees that higher wages for workingpeople benefit everyone -- because then consumers can drive economic activity

with their purchasing power.

Supply Side EconomicsProponents ofsupply side economics hold that the engine of the economy isthe investor. For this reason, they advocate for lower taxes for wealthy people

and corporations, with the notion that this will free up money for investment.For similar reasons, they argue against living wage laws and for the privatesector to provide for our needs through unfettered markets. To accomplishthis, supply side policies favor privatization.

Which one of these strategies has been dominant in the past decade or two?

Supply side.

In fact, the Ten Chairs exercise shows us that supply-siders met their goal of

moving dollars to investors.

That was bad news for working people because it did not benefit them.

But the policy lesson here is that when we collectively set an economic goal,such as supply side policy, we can accomplish it.


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Policy SolutionsYou can use the image of the Ten Chairs to think about economic policy andspecific ways to address our current economic situation.

Suppose you wanted to change the distribution of wealth. To improve the

situation of the folks standing up.

You have some choices.

Broadly, you can enact policies that:

1) Help people grow their own chairs. In other words, look for strategies thatwill build new wealth in low-income communities a local credit union mighthelp folks take their little bit of savings and invest in each other to grow theircommunity. You could help people start small businesses.

2) Help "level the playing field" by producing policies that give more people anopportunity to succeed in the economy, but more investment in publiceducation, affirmative action, job training, etc.

3) Use tax policy to redistribute some of the chairs that the top 10% haveaccumulated. This can occur if we raise taxes on the top and use the money tohelp people at the bottom.

4) We can also accomplish redistribution with wage policy -- if we made sure

that the profits being made by the owners of stocks and businesses arereinvested into decent wages for the workers in those companies.

What policies do that? Raising the minimum wage, requiring living wages,maybe government mandated employer payments for health care, orretirement, encouraging the growth of unions, etc.

ConclusionEven before the current economic crisis, the average American family was

under a great deal of economic stress. The Ten Chairs exercise shows us thatthe starting point for the crisis was enormous and growing economic inequalitythat was produced by policy decisions. People had already been workinglonger hours for less pay, they have less job security, they have huge debts, andthey are paying higher taxes. Even when the economy was supposed to bedoing great, most people are not.


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This anger and frustration has tremendous power, so it is very important whereand how we direct it.

Who was being blamed? Immigrants, welfare moms, the homeless. Weblamed the Japanese for competing with our car industry. And of course even

though many immigrants are white, the word immigrant means Latino to manypeople. And many people think of welfare moms as African Americans, eventhough the majority are white.

So a lot of who we blame, without economic education, results in reproducingpredjudices and beliefs and scapegoating rather than facts.

It is rare that the blame is placed on the way that we have structured the wealththat we produce to flow up to the top 10%, rather than throughout oureconomy to benefit everyone.

One advantage of the current economic crisis, painful as it is, is how it hasexposed where wealth is, how it has been allowed to be used in unproductive

ways, who gets hurt by those private decisions, and the absence of publicaccountability. These problems, at least in this moment, are easier to see andtouch and feel.

What we need to do now is not to blame and scapegoat individual rich people,but to rather reflect on the policies, systems and values that we saw in the TenChairs story, and figure out what would be better decisions and policies -- a

better system -- that will produce a fair economy for all.


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IV. FORCES BEHIND THE NEW INEQUALITY

Introduction

The Ten Chairs illustration helps us see how national policies can bring peoplecloser together and produce more equality, or move people apart, and createthe kind of inequality we see today.

What about our local experience, where we live and work every day?Remember that we saw that Los Angeles is considered the most economicallyunequal city in the nation? How do these policies play out in our localeconomies? What other factors influence the outcomes -- technology, markets,etc.?

The purpose of this next presentation is to help us get an aerial view of howL.A. and other big cities around the country have changed as a result of theseforces. So let's take a quick look.

(Use the "Economic Forces Arrows" powerpoint to illustrate these points)

Reduced Public SectorIn the 1970s we still had a fairly robust public sector that benefited our citiesand communities. Since then there has been about an 85% reduction offederal urban programs.

From War on Poverty to Criminalization of Poverty40 years ago the administration declaredwar on poverty. Today, our cities havedeclared a war on the poor and are constantly seeking ways to criminalizepoverty.

This has caused our prison population to swell threefold over the past 20 years.Witness Skid Row in Los Angeles where 50 officers have been deployed to a 50block area.


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Elimination of Union JobsIn 1960, unions represented almost one third of American workers. Today,they represent just over 10%. Core industries were the backbone of unionizedsectors. Until 1980, Los Angeles was second in auto production to Detroit,second in tire production to Ohio, and had steel plants. All of those jobs were

unionized and allowed working class people to be middle class, to buy a home,have a pension, and send their kids to college. 100% of those plants and jobsare gone, and with them, the wages and benefits.

Elimination of the Social Safety NetThirty years ago the United States had a social infrastructure that could helppeople out in hard times. Today, much of that social infrastructure has beenmoved to the private sector or stripped away completely.

Big Cities Become Command Centers for Global EconomicsYesterday's urban economies had local and regional roots. Today theeconomies of most major cities respond to global demands, and act ascommand center for global economies or respond to command centers.This skews who developers build for, who cities court (creatives) and createscities of high paid professionals who are served by low-wage service sectors,

where most job growth resides. This kind of economics makes big cities likeLos Angeles logical places for sustained and high levels of inequality.

Speculation in Urban LandThirty years ago much of the nation's investment and speculative capital wentinto stocks. A few years ago, when the high tech bubble burst and the stockmarket became unstable, billions of investment dollars moved into real estate.This escalated prices and created new "hot" markets, which are now in crisis.The continued result is that fewer and fewer people can afford housing in ourcities as more and more are renters, rents remain high, and wages remainstagnant. Now that real estate bubble has burst, and with it, the entireinternational financing house of cards.


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The Fiscalization of Land UseWith less public money, cities are trying to cash in on the real estate boom byusing real estate development to raise funds and replace taxes. Conventioncenters, stadiums, tourist hotels, and huge auto malls produce sales, tickets andbed taxes that keep city hall doors open. Analysts call this trend the

"fiscalization of land use."

What that means is city administrators look at land in terms of how muchrevenue it can produce rather than what communities really need--like housing,community-serving-retail, parks, and good jobs. The address of a sisterorganization in San Diego is located on Mile of Cars Drive. That gives you aclue as to what city hall was thinking when they created an auto mall to bring insales tax on high-ticket items.

V. STRATEGIES FOR CHANGE AND HOPE

Policy, Negotiated Agreements, and Democratic Institutions

How do we flip this script? We first have to get clear on our goals. Based onthe facts, I would suggest that our community economic development goal hasto be to increase peoples control over economic resources.

To accomplish that, we need to move economic decisions into the publicsphere.

That is a political problem as much as an economic problem.

So how do we accomplish that?

Our first choice is policy. Bad policy got us in this mess. Good policy can getus out. It can help restructure competition, it can bring back infrastructure, itcan reduce inequality. But it took thirty or forty years to run this country, atleast my city, into the ground. Its going to take a while to bring it back. Howdo we build the will, the capacity, the constituency for policy? We can build

that road by walking.

One interim strategy is to negotiate with the private parties that control mosteconomic resources today. Community benefits agreements, communityreinvestment agreements, collective bargaining agreements with employers andlandlords are asserting peoples desire for accountability and justice and


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demonstrating that this can be done. It can be policy. Nobody has gone out ofbusiness.Another is to build our own public spheres in local economies. To createdemocratic economic institutions that prefigure the country we can be.Community development credit unions, community land trusts, cooperative

housing are examples.

I dont believe that any of these strategies are possible without organizing. Weneed to organize to build constituencies for new policy to create the will.Policy that moves social change is not the product of policy wonks. It is theproduct of movements and action, and then when we get to the issue on thetable, we need the wonks, the lawyers, and the experts. And it certainly helpsto have them accompany and inform us as we move forward. We cannot createa bargaining table for a community benefits or collective bargaining agreementunless we have organized the power to make us interesting and necessary to

talk to. We cant build democratic economic institutions unless we organizeand educate people into decision-making bodies, economic units that can makeeconomic decisions together. To effect change I dont think that everyorganization has to use all these strategies (although SAJE does) but thesestrategies need to be aligned for change to occur.

Here is a little snapshot of what Im talking about.

Here we are in the Figueroa Corridor in Los Angeles, where SAJE is located.Several years ago we found out that the city was fast-tracking a redevelopment

plan that would ultimately displace our members. We went to all the meetings,built common cause with others. That didnt work. We held a peopleshearing with over 500 people and had our electeds come. That didnt work.

We pooled our resources, built a set of demands, researched where those hadbeen implemented successfully, wrote our own white paper, and still could notimpact the plan. Finally we joined a law suit. Our settlement agreement buildsfrom our demands, our white paper, our vision of a just redevelopment policy.That took about four years.

A few years prior we had formed a coalition of about 30 organizations and

organized several hundred residents to ensure that development in ourcommunity would meet our needs rather than displace us. We ultimatelynegotiated the Staples Agreement that turned the $2 billion, 4 million squarefoot L.A. Live Project into living wage jobs, local hiring, and affordablehousing. The negotiation took several months. But the project got delayed anddidnt break ground for about seven years. Good thing our Coalition had


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decided from day one that they were in this for the long haul. Last month weplaced 300 people in living wage jobs. Their incomes went up by about 30%.

And with a now developed base of local residents and organizations who shareda vision we built on that to create a proactive organization, to create our own

public sphere extended our circle to include development partners and formedthe Figueroa Corridor Community Land Trust.

All of these efforts are aligned. They include people and organizations whohave aligned with each other to build power and change the nature of

economic relations in place. That alignment is community economicdevelopment.

An important point I need to make is how important it was to build and sustainsocial infrastructure for this to occur.

You dont have to do that yourself. You dont have to do all these things. Youjust have to, as the Rock says, know your role in the alignment and take yourplace. And accompany others.

Stories From The Field

Im now going to take about 10 minutes to pull all these pieces together in astory. To offer you some stories about how this all plays out, values,

economics, history, and strategy in a community, and what happens when abunch of these local efforts align with each other. How this plays out in my lifeand work and history as well. I hope you find it useful.

For the past 10 years I have been working to build urban land reform in a partof L.A. that is large by organizer standards, but tiny with respect to the globalnature of its problems. My turf is South Central Los Angeles, or morespecifically, the neighborhoods that are South of downtown and surround thestaples center and the University of Southern California.

200,000 people live in the 10 or 11 square mile area we now call the FigueroaCorridor. Once entirely occupied by working class people of color it hasgradually and uncomfortably begun to accommodate both economic poles ofthe most unequal city in the nation, pushing out the low end to make room forthe high. For the present time, both extremes coexist, dancing on the samefloor. But they are different dances.


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Change has been rapid -- property values have quadrupled in this period. Andto our enormous frustration, the change has produced a new common sense.

Buildings that still housed poor working people were then surrounded bybuildings and people that looked like themselves.

But now, adjacent to a 7,000 seat live theater, a stadium, and loft dwellings, thepervasive common sense by the guy on the street is that these buildings havegot to go. They dont belong. They dont fit in.

Part of common sense is produced by what you can see with your eyes and partof common sense is the consciousness with which you see it. Consciousnessincludes patterns, imprints, ideas, and biases that belong to culture toexperience to ideas. If you cannot see or know the injuries that moved thatbuilding from norm to anomaly, you cannot imagine a need for reconciliation

or reparations. In order to determine what is fair and what is right in theeconomy you need to witness and know and believe that human decisions weremade in the face of or in the service of injustice. This is important. Becauseonce you know this, once you know that it wasnt the market that it wasnt anatural cycle that it wasnt inevitable, then you can believe in change. Youcan witness and know and believe that other human decisions can make itright, take it back, and produce justice.

So this is my job. Im in the business making the invisible, the history, thepossibility visible. And I believe this might be your job as well. You can call it

urban planning, you can call it community organizing, you can call it socialwork or health promotion or community economic development. But knowthis. We all have steady work, as do many, many others who are not in thisroom. And we should all be proud of that. And to the extent that we bringothers along with us, we will be successful, like Cecilia Nunez.

Cecilia's StoryCecilia Nunez was born in the Figueroa Corridor. Shes about my age. Whenshe was a child she lived across the street from where SAJE is located now in asweet little duplex which no longer exists. When she walked to school, she

watched the houses in her neighborhood, nice houses she thought, get torndown and replaced by brick and concrete warehouses and factories that housedlow-wage jobs.

The school district threatened to take her neighborhood by eminent domain tobuild a new school. Cecilia couldnt see the racial expulsive zoning that


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replaced residential land uses with industrial ones, as was common in workingclass communities of color around the country. But she knew it was wrong.

With quiet determination she stayed in her neighborhood. She became a legalsecretary, proud of her professional status, and managed to transcend redlining

and gender discrimination and bought a house -- although she did have to payinterest rates of 16% or 17%.

She was there when the MTA bought a several mile strip of land as a right ofway, traversing peoples back yards as a geographic wound, accumulatinggarbage, debris, and trouble when it lost its purpose, but not its owner.

She was there when the redevelopment agency, to accommodate USCsexpansion, took nearby stores and homes by eminent domain, tore them down,and left the rubble in place for four years. She was there when USC held

community meetings about a commercial development to be built at the cornerof Figueroa and Jefferson, promising 2,000 jobs to the community only to bekept as a university parking lot for 13 years and then the site of the USC Galensports arena.

The whole time she watched, she talked to neighbors, determined to take herneighborhood back.

Cecilia organized her neighbors into Neighbors for an Improved Community.They joined the Figueroa Corridor Coalition for Economic Justice. She is on

the Board of the Figueroa Corridor Community Land Trust. She is a PlanningCommissioner. She and her neighbors got the MTA to landscape and fence theright of way. They got the school to be built on the site of an abandoned dairy,saved the neighborhood, and now neighborhood kids can go to the school.

Cecilia is only one of many grassroots urban planners who are taking back theland, the plans, the ideas of who and what the city is for. She is at the edge ofhistory.

So because of all the Cecilia's in L.A. and around the country -- please know

that there are national alliance being built from the grassroots to take our citiesback, such as the Right to the City Alliance that SAEJ helped start -- as westand here together barely balanced at the pinnacle of bad policy, where publicsector, public sphere, public money has been stripped so bare that it seems asthough very little is left but private property rights, we have fantastic hope.


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We have in neighborhoods across L.A., in cities across the country, in countiesacross the world place-based organizing demanding a right to the city, to anaccountable economy, and to a genuine democracy.

Closing Thoughts

I just want to end with a few offerings, to basically turn the lessons Ive learnedthrough these experiences and stories towards you. Please accept them in thehumble spirit that they are offered -- it is the same advice I would give myself.

If we choose to commit to each other, to build a strategy for economic change,let us remember that organizing and alignment are key ingredients for success.

You have heard repeatedly that it took decades to mess up the economy, to

produce the current crisis. There is no quick fix. This is why the hundreds ofbillions of dollars poured into the huge financial institutions that are stillstanding have not turned our economy around.

So choose long-term goals, seek authentic and deep collaboration withothers, and be prepared to hang in there for the long haul.

And as we do, let us continue to recognize and support the key role oforganizing and popular education to build informed constituencies for long-term, transformational change.

We have nothing to lose and a genuine, democratic, and more fair economy togain.

Documents

SAJE Guide to Economics Education