 Hi, I'm Rachel Black. I'm with the asset-building program at the New America Foundation and joining me today is Indeed Dettagopta He's a policy advisor at the Center on Budget and Policy Priorities We've just concluded an event called Poverty and Equality Mobility Oh My where we're asking the question how are families really doing since the Great Recession? Indeed joined us to discuss the impact of income inequality both historic trends as well as the impact of the Great Recession and why this matters when we're talking about how families are doing So Indeed, thanks so much for joining us Why does income inequality matter and how are families doing? Well, thank you Rachel for having me Income inequality measures matters for a whole range of reasons Including the fact that there's some evidence that our policy makers are most responsive at times to people with the highest incomes And as income inequality grows people with the highest incomes might live farther and farther apart from the rest of us And thus have divergent interests and priorities in the rest of us It also matters because we see that it might even be driving changes in life expectancy That are different for those with low earnings compared to those with higher earnings where just three or four decades ago There was very little difference in life expectancy throughout the income distribution among seniors But now we see that seniors have a much much longer life expectancy If they're in the top half of the earnings distribution then if they're in the bottom half of the earnings distribution And another concern is that As economic growth has become more and more unequal over time. It's become harder and harder to reduce poverty Great and Is this all a product of the Great Recession where it was everything fairly well equally divided before then How does where we are now compared to where we've been? That's a great question We have had times in American history where economic growth was more evenly distributed from 1947 to 1973 Whether you were in the bottom middle or top of the income distribution You saw your incomes double But since 1973 or so We've seen a complete loss of this shared prosperity where only the top has continued to see significant income growth Well middle income families have seen much less growth and those at the bottom have fared the worst during this recession Those at the bottom continued to fare badly And in fact they fare the worst again But these trends are much longer than indicated by just looking at this recession And in fact a lot of the drivers of these trends Have nothing to do with the recession will likely continue for years to come unless we take steps to address it And during your presentation you mentioned our current tax policy as one of those drivers Can you tell us a little bit more about that? Right? Absolutely. That's a great question Our tax system right now includes over a trillion dollars each year in subsidies In other words spending through the tax code and some of these might make sense But some of these Really need to be scrutinized for example We subsidize capital gains and dividend income and these income sources are highly concentrated at the very top of the income distribution So our tax system in some ways spends a lot of money to help people Who already have high incomes have even higher incomes and it spends much less to help people with low incomes Move up the income ladder or even to just improve their economic security I think with deficit reduction forthcoming in some way or another in a major way in the coming months and years It's really important to look at what our tax system is doing to either lean against or exacerbate Income inequality and it was really discouraging to find in the recent congressional budget office report on income inequality That our tax and transfer system actually has been doing less in recent years to reduce income inequality than it did in 1979 Well india it's just interesting that you mentioned that because I think that there's sort of a broad conception that Low-income people actually disproportionately benefit from our tax and transfer system. Uh, can you tell us how that Is or is not an accurate perception Yeah, absolutely I think the american public might be more aware of some of the transfers to low-income people and they may not even realize That we have significant transfers to middle and higher income people In what one political scientist called the submerged state We actually have significant spending that's hidden through the tax code If you ask a wide range of americans if they're receiving benefits from the federal government, for example I think you'd get a large share of homeowners who don't even appreciate that the federal government is subsidizing their home ownership Through the mortgage interest deduction So I think it's important to raise the profile of some of these subsidies While some of them might make sense or need some modification Some of them I think like preferences for certain income sources for people with the highest incomes Probably will not withstand scrutiny and need to be looked at for addressing our long-term deficit problem in the in addition to Your background in dealing with issues of income inequality You also have extensive experience working on our nation's tax writing committee ways and means where you were also part of forming policy to Help our social safety net programs better serve low-income families, which have been critical Especially as more and more families have turned to them Due to the recession We touched a little bit during the program on census's new supplemental poverty measure as Providing a more modernized glimpse at what a family needs to get by Both in terms of their expenses and sources of income Can you talk a little bit about how the social safety net has responded during the recession and how that's reflected in the new supplemental measure? That's a great question rachel If you look at a measure like the census bureau's recently released supplemental poverty measure You can actually see the power of the social safety net and pushing back Against the economic forces during this most recent recession from which we're still slowly recovering In fact, if you factor in the tax and transfer system The poverty rate is half what it would be without the system So programs like the earned income tax credit snap benefits and social security Are helping to contribute to cut poverty by nearly 50 percent Some of the effect of the social safety net comes from temporary measures that were enacted directly in response to this recession We should be concerned though because some of these Temporary measures are likely to expire without congressional action in the coming weeks The poverty rate in 2011 would thus be significantly higher Unless policy makers take steps now to extend things like unemployment insurance, which Previously only lifted about a few hundred thousand to a million and a half people out of poverty in a given year But due to significant extensions and expansions combined with the growth in long-term unemployment Have lifted over three million people out of poverty in each of the last two years Well, indy you mentioned unemployment insurance and depending expiration of some of the expansions of some of the social safety net programs that Clearly demonstrated through the supplemental poverty measure as providing critical assistance to families over the last couple of years unemployment is projected to continue to be with us for quite some time and we know that historically Poverty and unemployment tend to track each other In the absence of some of these supports That as you said were temporary What should we be expecting to see? moving forward over the next couple years If we don't extend provisions like the unemployment insurance extension that expires at the end of this year Or even the payroll tax cut Which while it's distributed widely to all american wage earners Nevertheless does a lot to reduce poverty, but also expires at the end of this year We'd actually have serious economic trouble first of all because we'd be pulling out A lot of money from the economy that right now is helping to boost aggregate economic demand Some private forecasters and analysts and experts and observers of the market are actually concerned that Withdrawing these two major provisions of support would threaten a second recession And what we've seen is while poverty doesn't always fall when the economy grows It certainly rises a lot when the economy turns down So without these two supports the economy itself is endangered again, and it's very likely that we'll see poverty rising Just as the unemployment rate will rise likely to double digits once more It's really helpful to hear you make A fact-based case for the extension of these programs. I think those of us who work in this field Be a light policy should best serve the interests particularly of those who are the most vulnerable But in fact what you're saying is there's also An economic growth argument and a pragmatic lens that we can take to the expansion of these programs and given the current political environment and Particularly the emphasis on deficit reduction That's a really valuable argument to be making so Thank you for offering that if people want more information on income inequality or The social safety net. Where can they go to find that? If people want more information on tax budget issues income inequality the social safety net and poverty They can go to the center on budget and policy priorities website www.cbpp.org or even check out our blog off the charts www.offthechartsblog.org I have checked out of the off the charts blog and I highly recommend it You could also check out the asset buildings blog the latter by going to assets.newamerica.net. Thank you so much