Tackling America's income divide

WASHINGTON -- Are we truly on a swing back to centrist and pragmatic politics? Like a first robin of spring, the House's fast vote to raise the minimum wage to $7.25 in a phased two-year process, up from the $5.15 figure at which the Republican-controlled Congress left it frozen for the past decade, is a good omen.

But action around the nation seems even more dramatic. Voters in six states in November not only raised minimum wages, but agreed to index them to inflation. The six (Arizona, Colorado, Missouri, Montana, Nevada and Ohio) joined four others (Oregon, Florida, Washington and Vermont) that had already fixed their rates above the federal level and included the annual cost-of-living adjustment.

Other state actions underscore a rising tide of concern about their citizens' economic security. Arkansas, Wyoming and Idaho are looking at eliminating sales taxes on groceries, a major burden to poor families. California Gov. Arnold Schwarzenegger is now backing universal health insurance, while governors from New York to Arizona consider ways to cover thousands of low-income, uninsured families.

Yet as welcome as these developments seem, the harsh reality is that they're a very modest start at tackling the massive and growing inequalities plaguing our society. We have today 37 million people living in poverty, about the population of California.

Meanwhile, more than half of all income in America goes to the top 20 percent of earners. In 1978, the average corporate CEO earned 35 times more than the average worker; today he (and yes, occasionally she) earns 262 times as much. The ratio of average CEO pay to minimum-wage worker pay is 821:1.

Concurrently, affordable housing and health care alike are out of reach for tens of millions of us. Seven in 10 American households now use credit to cover basic living expenses.

I've long been attracted to former Minnesota Rep. Martin Sabo's proposal to deny corporations tax deductions on any executive compensation exceeding 25 times the pay of a firm's lowest-paid workers.

And not just to "get" the multimillion-dollar-a-year earners. A recent Hamilton Project paper by former Treasury Secretary Robert Rubin and others argued convincingly that the nation's overall economic growth will be endangered unless average middle-class Americans have enough financial stability -- to get back on their feet after expected shocks, for example, or to be emboldened to take the risks that lead to greater productivity (getting college degrees, or perhaps starting a business).

Arguably it was that kind of security in the years after World War II -- combined with the GI Bill, and its wondrous ticket to higher education for millions of Americans -- that expanded opportunities so rapidly, making America an economic global powerhouse.

Today, it's heartening to see the states starting to grasp the necessity to reduce income disparities and to give their citizens enhanced security. But it won't be easy: States can't run deficits. Medicaid and other health expenditures threaten their budgets, and their higher-education costs have escalated beyond the reach of many of their middle classes -- not to mention poor families in need of a breakthrough.

Nor are states' hands clean in promoting equality through fiscal policies: Many of their tax systems are regressive, hitting low-income people the hardest.

Former Sen. John Edwards is the presidential candidate for 2008 who has grasped America's income divide most convincingly. He ran his 2004 campaign for vice president on the theme of "Two Americas," reflecting his own deep moral concerns but using a phrase opponents could denigrate as divisive "us-versus-them" language.

But there's a future-oriented, unifying edge to Edwards' new campaign, as he places priority on lifting low-income Americans out of poverty, on universal health care, and on vastly expanded U.S. efforts and investments to reduce oil dependency and protect against global warming.

Could that mean some new taxes, some delay in federal deficit reduction? Edwards isn't ruling out either. The Iraq Study Group suggests that eventual Iraq war costs could reach $2 trillion. But can we spend and invest in our shared future at home? If Edwards and the other Democrats could get that debate rolling, we might really have a new politics in America.

Neal Peirce's column appears alternate Mondays on editorial pages of The Times. His e-mail address is nrp@citistates.com