Business: Income Inequality and Katrina

Washington Post business columnist Steven Pearlstein was online to discuss income inequality in the wake of Hurricane Katrina. In today's column , he writes that despite four years of economic growth, driven by impressive productivity gains, the average worker is no better off than he was in 1997.

A transcript follows.

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here .

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Laurel, Md.: Today's column raises essentially the same points George Will's did yesterday, but from the opposite side. Poverty among (predominantly black) Orleanites is a big problem systematically along with that of other large urban areas.

But as Will points out, most of us know the formula for avoiding poverty -- finish high school, don't marry until 20, don't have a baby until married. And statistics bear out that the poor of New Orleans overwhelmingly rejected it (78% of black children born in Louisiana are to unmarried parents).

As a resident of upper Prince Georges County, I'm surrounded by African-Americans who are in many cases the first generation in their families not to grow up in poverty. They followed the rules.

Many social activists continually beat the drum for more or more effective "affirmative action," claiming implicitly or explicitly what while it's done something (like helped my now-neighbors for whom race PER SE had been the limiting factor in their family history) white-dominated society has found other ways to keep the rest of blacks down.

Does there come a point at which we say "whites can't do much to prevent unwed parenthood and other pathologies among the black poor, and those black's won't rise until the improve their own behavior"?

washingtonpost.com: George F. Will: A Poverty of Thought (Sept. 13, 2005)

Steven Pearlstein: Well, you and Mr. Will (a fellow Trinity College graduate) have got right to the heart of the matter. I think we can pretty sell that there is a dynamic at work in which all sorts of factors conspire to create pockets of social, economic, political dysfunctionality that are very hard to climb out of. Why don't these folks behave themselves, stay in school, keep their pants on, get a job and everything will turn out okay. The fact is they don't--not out of ignorance about the possibility, not out of lack of desire to lead a middle class life, but because they are, like all of us, a product of their environment and upbringing that conspire against it. Some of the "solutions" we have come up with as a society have, indeed, helped people climb out of the cycle of poverty. But for other people, they haven't worked. I'm not willing to write those people off yet -- or even some of those solutions, which haven't always been executed in the best way. I think we're a rich enough country to keep on trying. But one thing I do know: nothing will get better if we don't keep talking about this problem in a way that doesn't put all the blame on the underclass.

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Bangor, Maine: David Broder's column closed with the comment "I think it's 1925...and we're headed for 1929." Do you agree with this observation, and if so, how should it affect our financial response to the Gulf Coast devastation?

washingtonpost.com: David S. Broder: A Price To Be Paid For Folly (Sept. 11, 2005)

Steven Pearlstein: No, I don't think so. That probably underestimates the adaptability of our economy and our political system. But as you might have read last week, I agree that Katrina is more of an economic hit and danger than the consensus forecast.

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washingtonpost.com: Steven Pearlstein: Katrina, an Economic Tipping Point (Sept. 9, 2005)

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Durham, NC: It doesn't seem the economic approach to reducing poverty is working and it doesn't seem the use of gov't programs to reduce poverty is working either (I work with one of these programs and we burn money on local politicians pet projects). So what do we do? Is there a move afoot anywhere in government to rethink the past 40 years of poverty programs and reorient them to the new world we live in?

Steven Pearlstein: There is some conservative rethinking going on, most of which involve very controverial initiatives that would met stiff resistance from entrenched interests and even the poor themselves (think of school vouchers or eliminating the minimum wage). But in truth, when push comes to shove, the Republicans would rather forget about poverty than take the time, money and political risk to do something about it. They really do believe that as long as the system is open to individual initiative and drive, anyone can make it to the middle class.

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Silver Spring, MD: You posit that the average worker is no better off now than in 1997? I don't think so. On average companies have much better benefits for their employees since 1997. Look, it's hard to blame income inequalities on any particular person other than the individuals themselves. I am not making half as much as some of my fellow graduates; however, I would submit that the difference in income is not a difference in quality of life or satisfaction. I think the key is living within your means and not spending like you make more than you actually do.

Steven Pearlstein: Income statistics are very difficult to deal with. I was referring to the Census Bureau's most widely used definition. But, as you point out, there are lots of other ways to measure income and well-being. Census has 17 alternative measures, I think it is, and some of those show things to be somewhat more equal, with average households doing steadily better over time. However, even within those, there is a trend toward more inequality.

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Danvers, MA: Income adjusted for inflation actually understates the problem. The reason is that everyone's income tracks GDP growth per capita, which is bigger than inflation. So, staying even with inflation is actually falling behind. Also, examining very long term data, it appears that there may be a weak link between growth and inequality, but not enough to mention. And growth doesn't describe well-being, which may diverge significantly, some saying that in the US it peaked in the early 70s with continual decline since then.

My question must be political, as all economics is, since it appears we live in a system that left to its own devices would happily drive wages to zero (as they were for many before 1865). What does the political situation look like which results in a reversal (substantial improvement) in the fortunes of the lower 80% (which would necessarily be taken as a loss to the top 20%) and how does it happen? The last set of precipitating events was pretty ugly.

Steven Pearlstein: It looks a bit like the Clinton administration, to give you a flip answer, coupled with a much more significant investment in education and child care and health care and social services for the poor, financed by slightly higher marginal tax rates on the upper 20 percent.

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New York, New York: I do not see eye to eye with you regarding your column this morning.

Fact: Over 60% percent of African Americans vote for liberals in national and local elections.

Fact: Most cities in the US with large African American populations also have liberal minority mayors and local governments

Fact: The African American political and social leadership in this country has never condemned one riots whether they be in LA, NY, Newark or New Orleans. Is not shooting guns at rescue workers in a time of crisis a form of terrorism.

Fact: Millions of new Americans come to this country every year and with less going for them and no government help. Arab Americans, Mexican Americans, Russian Americans, South Asian Americans, Caribbean Americans enter the middle class.

Question: Is it possible that American born African Americans are being used by Liberals and are treated like second class citizens? Is it possible that the welfare system and the feckless education offered to African Americans is accomplishing nothing other that to create a new slave class that is warehoused in Democratically controlled inner cities; only this time the slave master is the federal government which writes the checks and parasitic leaders like Al Sharpton and Jesse Jackson?

Steven Pearlstein: I doubt that is the case, other than the suggestion that we are creating a class of people who are effectively outside the rest of the society and economy.

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Manassas, VA: I'm not rich, never have been rich, and probably never be rich. I've never made over $40K a year anytime during my life, and I have a wife and two kids. I've hadn't had a vacation in years, my small house has no luxuries, we only have one car, no cable, we constantly cut coupons for groceries, yet we somehow manage.

During all these times, I've never blamed my situation on the terrifyingly popular "tax cuts for the rich". Sure, I was mad at the government's tremendous waste in form of unending bureaucracy and subsidies, but most of all I was mad at myself. It was my fault the times I was unemployed, and it's my fault that I don't make more than $40K a year.

But, guess what? I'm updating my working skills in order to be more competitive and be able to earn a better job.

I don't mind the "rich" getting tax cuts. What I mind is that a simple concept that made this nation great is eroding rapidly:

Personal responsibility.

Steven Pearlstein: I think you raise a good point. Tax cuts for the rich are NOT the cause of there being an unacceptably large underclass trapped in a poverty cycle. They are NOT the cause of stagnant wages for many households. They are NOT the cause of increasing poverty rates or the increase in the number of Americans without health insurance. But they do represent a significant source of funds that might be used effectively to ameliorate those problems.

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Washington, DC: If I read the statistics at the end of your column correctly (as an attorney, I admit this is a leap of faith), you have accounted for 9.9% of the chances for a child born into the poorest 10 percent of households. (1.3% chance of the top 10, 4.3% chance at the top 20, and about 4.3% in the bottom 20). I think that leaves a 91% chance that the child will be somewhere in the middle. To me that sounds like a pretty good chance that a child of one of the poorest people in the country will move up the economic ladder. Maybe not all of the way to the top, but certainly an improvement. Am I correct in my interpretation of the data and if so, aren't you being overly cynical about the ability to improve ones lot in life over time (I've seen this in my own family as my great-grandparents were generally poor farmers/immigrants and each successive generation has achieved new academic success and income improvements)?

Steven Pearlstein: I don't think you're correct. If you are black and very poor, the odds are 2-1 at least that your children will be very poor as well. If you are very rich, the chance of you becoming very poor is almost nill.

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Brooklyn, NY: Interesting column. The Post reports today that they will attempt to remove more prevailing wage regulations, apparently at Grover Norquist's behest. I can't see how paying reconstruction workers less and putting more into the already-bulging pockets of out-of-state bosses will help the Gulf Coast economy. More to the point, why should anyone listen to Grover Norquist, especially POTUS? Norquist has never been elected to public office by the voters nor confirmed in an appointed office by elected officials. I'm one voter who's really offended that he has such power and influence. Based on what? Money?

washingtonpost.com: Bush Takes Responsibility For Failures Of Response

Steven Pearlstein: Sometimes I think Grover Norquist exists only to give quotes to my colleagues in the press, which is the main source of his influence, whatever it happens to be. I suspect it isn't anywhere near as great as the news media suggests.

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Detroit: The income inequality among Americans that has been spotlighted by Hurricane Katrina should be no surprise. Recent studies have been published indicating that the discrepancy of wealth between the rich and poor in this country has been only increasing. Half of all members of Congress are millionaires and the wealth of members of the President's cabinet (as well as that of the vice president) is astounding. We have a president who campaigned in 2000 on a tax-cut program that benefited primarily the rich. The people who lead us have little in common with us in the way they lead their lives. Should it be any surprise that it was primarily the poor affected by the hurricane?

Barbara Bush's recent comment of "so many of the people in the arena here, you know, were underprivileged anyway, so this is working very well for them" only underscores the attitude of those who are well-off and in circles of power. It is hard to believe that over half a century ago, Roosevelt said "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." That attitude is long gone from those that govern us.

Steven Pearlstein: I love that Roosevelt quote, which is featured at the Roosevelt memorial here, I believe. I wonder what would happen if somebody ran for president on that theme?

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Scarsdale, NY: Get over yourself. Why would I put my money toward "helping" someone too stupid to evacuate and too dumb to save? If I won't do it, why should the government with MY tax dollars? I am a much better credit risk for my money. I deserve the benefits of my risk taking, by eliminating the tax on capital gains once and for all. Some people simply don't deserve a break--they've squandered more than enough. That's what Bar was talking about in the Astrodome, and she and her son are "right on."

Steven Pearlstein: Ah, the view from Scarsdale!

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Hey Comrade Pearlstein!: Steven, now I know why you write for the Post. Your latest column reeks of Communist or at best, Socialist sympathies. One of the tenets of Capitalism is a requirement for economic winners and losers, thereby creating incentive for work. I find it interesting that, by virtue of your jabs at his background, you conveniently pin the blame for economic disparity on the President. We had incredible economic growth during Clinton's tenure and New Orleans was just as poor. Look, it sounds to me like you want to model us after the French. Something tells me that things would be better off than if we were to hand over the keys to the unions and operate at exponentially larger deficits (as a percent of GDP) just for the sake of feeling good about ourselves for taking care of the old and poor. Hey, let's give ourselves 6 weeks of vacation while we're at it and join France as it fades into irrelevance. I know you are a columnist and therefore able to postulate without care for objectivity, but come on. Make sure you return your passport and renounce your citizenship before shipping off with Alec Baldwin and his troupe of malcontents.

R. Riviere

Steven Pearlstein: Funny. But if you had read my stuff from France a few months back, I doubt you would have said that.

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Burlington, VT: Hi Steven,

Did not VP candidate John Edwards acknowledge the "Two Americas" (the haves and have nots) only to be resoundly mocked by the Republicans for positing such poppy-cock?

Steven Pearlstein: I'm not surprised that John Edwards was mocked by Republicans. What is surprising is that John Kerry didn't use Edwards more in the campaign and more fully embrace that message.

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Prague, CR: It took the threat of a socialist uprising to persuade the rich and powerful to accept FDR's reforms; Communist propaganda and its effect on the world opinion we used to compete for played a role in ending lynchings and passing civil rights legislation. (I can even remember when the US worker's wages were useful in the propaganda wars.) What do you think - any chance that poverty and the existence of a permanent underclass will become an issue of national security?

Steven Pearlstein: Not likely.

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washingtonpost.com: Steven Pearlstein: Two Economies, Two Mind-Sets: Germany Gets It, France Doesn't (June 24, 2005)

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Washington, D.C.: I assume your income statistics come from the Census Bureau's "Income, Poverty, and Health Insurance Coverage in the United States: 2004". That same publication shows a generally upward trend in median income since 1967 with periods of stagnation similar to the one we are currently experiencing. Is there something different about the current period relative to the earlier periods of stagnation in early 1980s and early 1990s?

That same publication shows the share of income earned by the top quintile is basically the same as it was in 2001, has growth in the income disparity leveled off?

Many who bemoan the distribution of income and middle class wage trends look approvingly at the European welfare state. You've written disapprovingly of European labor market policies, is there a set of policies that stimulates a more equal distribution of income without leading to European-style stagnation?

Steven Pearlstein: I'm not sure I agree with your analysis of the Census Bureau report. Look at table A-3 on page 40. Almost all the change in income shares comes at the top.

But your question is a crucial one. I was one of those people who used to think there was a high-growth, equality-enhancing solution. I'm not so sure any longer. In the kind of market economy we now have, I think tradeoffs are required. At this point, I'd take a bit less growth for a bit more equality. I wouldn't go as far as the Europeans go in that, particularly in their labor and product market rules designed to enforce equality. But I would enhance the tax-benefit structure.

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Richmond, VA: Regarding any rebuilding effort in Louisiana and Mississippi, doesn't allowing contractors like Kellogg, Brown & Root to pay less than the area wage rate just exacerbate the problem? And wouldn't these situations be helped if we had a national health insurance program and an increase in the national minimum wage rate to something close to livable?

washingtonpost.com: Audit Teams to Monitor Relief Money (Sept. 14, 2005)

Steven Pearlstein: I don't think this little tempest in a teapot over Davis Bacon has much to do with the problems of the underclass. Sorry. But it sure would help if we had some form of national health care and a minimum wage that was something close to livable.

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washingtonpost.com: An archive of Steven Pearlstein's past columns is online here .

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Alexandria, Virginia: Isn't it possible that income stagnation in the lower percentiles is due to the high level of low-skill immigration, which started in the 70's?

Steven Pearlstein: That is a factor, along with trade and outsourcing. But in the case of immigration, over time there are growth-enhancing aspects to it that offset partially its drag on wages.

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Arlington, VA: And please tell me the bigot from Scarsdale was being sarcastic...

Steven Pearlstein: Having been at the receiving end of a lot of email over the years, I can probably say with some certainty that he/she wasn't.

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Boston, MA: I half expected Barbara Bush to ask for someone to break out into a song- "jump down, turn around, and pick a bale of cotton, jump down, turn around and pick a bale of hay".....

Steven Pearlstein: Funny.

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Mt. Lebanon, PA: When did the annual increase in median family income - adjusted for inflation - go negative?

This, of course, ignores the fact that who contributes to "the family income" is different now than in the 1960s and before and skews the data taking into account many people now working at more than one job - something that may have not been the case when I was growing up in the '50s. But I didn't want to confuse the situation with asides in your answer.

I guess the question really is, on an individual basis, are we better off now (in real dollars) than we were when I was inducted during Vietnam?

Seems to me my Mom's generation (post WWII) made the most money in the last century and will probably beat all the ones in this century! On a person to person basis.

Thanks much. HLB

Steven Pearlstein: You are right, there are all sorts of ways to measure well-being. Family versus household. Median versus mean. Income that includes the value of government benefits and taxes paid. And then there's the adjustment for household size, or the measure of consumer spending per person, etc, etc. etc. I spent years reading and writing about this stuff and I can tell you it's a swamp.

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Alexandria, VA: I thought your column was excellent, and gave great information everyone should read.

A lot of conservatives (including columnists in this paper), are saying that much of the socio-economic problem in Louisiana is because the women don't finish high school, get married and have children in a stable relationship. If they did this, they would have decent jobs, cars to escape hurricanes, etc. What is your read on this?

Steven Pearlstein: My read is that any useful analysis has to ask why these young people behave the way they do and make the choices that they make.

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Washington, DC: After all that we've seen and come to understand about those that were unable to evacuate from Katrina, is this going to make any difference in how the general populous looks at poverty? Or is this going to be seen by white America as a racial issue?

Steven Pearlstein: Well, to a degree it is an issue of race. But as you can tell from this discussion, a debate about poverty is not going to be without some fairly harsh sentiments about the people who are poor. These are very tough issues.

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MD: The average worker is no better off? Define the average worker.

In 1997 I was making $23,000 as a car rental agent (with an advanced degree) to make ends meet while trying to get into a financial career. I've worked hard, saved money, and moved up the ladder. Now I'm making over $100,000 a year as a consultant, just moved into my second home (purchased on my own, as was the first one). I've gone from having nothing in savings to over $250,000 in retirement accounts and investments. Not to mention over 30% equity in a $450,000 home. And guess what - I'm an average worker. Albeit one who keeps her nose to the grindstone and saves her pennies.

Some people will never improve their situations - sometimes the elements are out of their control, but often time they aren't. The biggest problem, in my humble opinion, are the people who won't take responsibility for the job choices, life choices, and spending choices, they make.

Steven Pearlstein: Well, actually its the median worker -- meaning the worker at exactly the middle of the income ladder. The average is higher because the rich are so much richer it skews the calculation.

Obviously, you've done well. Congratulations. And now your children, should you have them, will also have a much better chance of doing well, as well. But I'm guessing you didn't grow up in public housing project in Prince George's County.

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Clifton, VA: If you're poor you have the power to do something about it in this country. Have a friend who after is divorce 30 years ago was broke and just about homeless. He had been working menial low paying jobs and was just above the poverty level. He took the initiative to make his life better. To make a long story short he now owns 8 Mcd's franchises including one at National Airport.

He was able to break the cycle of poverty and despair from his upbringing etc. He is African American BTW. My advice get up off the coach and do something about it. Is an illegal immigrant can do it so can you! Gov't is more of a hindrance than a help.

Steven Pearlstein: That's a very widely held view in this country, which effectively defines the Republican (governing party) approach to poverty. I'm not sure, however, that it is sufficient.

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Washington, DC: You put a lot of blame on the Republican party in your column, and I agree that it is rightly placed. I wonder, however, what you think of the Democratic party. Don't you think that they fall into many of the same categories, when it comes to dealing with poverty (or ignoring it as the case me be) on a societal level? Taxes alone can't do the job. And if neither major party is will to make change, what chance do we have as a country of improving?

washingtonpost.com: Today's Column: Boats Rose in New Orleans, but Not for the Poor

Steven Pearlstein: The Dems have their own blindspots on poverty, to be sure, and cling to programs that demonstrably don't have very good payoffs. But if we could have a sustained and grown-up conversation about this issue, I'm sure we could come up with some real improvements.

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Washington, DC: You write "It is unclear whether we as a society find that morally unacceptable. If we do, we will have to accept slower economic growth and more aggressive redistribution of income through government tax and benefit and regulatory systems."

We have just spent the last 40 some years redistributing income, in order to benefit the poor. How is more of the same policies, which destroy incentive and self esteem, going to work now, when for the people in the 9th Ward in New Orleans, it obviously has failed miserably?

Steven Pearlstein: I don't think it destroys incentives and self-esteem to provide day care services for the working poor. I doubt it destroys incentives and self-esteem to send poor kids to good schools where all the other kids aren't poor. And I'm sure it doesn't destroy incentives and self-esteem to provide adequate health care to poor kids or raise the minimum wage a bit or make sure there are affordable housing units in middle and upper income neighborhoods.

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Anchorage Alaska: New Orleans and its business cheerleaders seem determined to force through the rebuilding of the city and environs with massive amounts of Federal money with little prior planning and respect for the events of the last 18 days. In other words, get it back to where it was NOW!

How does it help the New Orleans area underclass to return to the old city, the old ways of thinking, the old businesses, and the old money shoveling?

I'm an engineer. I have a helluva lot more respect for looking forward and designing to what you got, instead of what you want. And that includes the course they teach at university in engineering school. RETHINK 101.

Right now, I'm buying Mother Nature war bonds. She seldom disappoints on returns.

Thanks.

Steven Pearlstein: Amen, brother.

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Southern Maryland: How much money have you sent to the welfare recipients in New Orleans over the years, the ones who were raping, pillaging and plundering? A lot of the people I saw in the news reports appeared to be on welfare and will likely remain on welfare all their lives. My heart goes out to the sick and elderly, those nursing home patients who died in their beds, the old man who died in his wheelchair on the sidewalk.

However, the young and healthy can be doing more for themselves than producing offspring, sucking up welfare benefits, and using a disaster as an opportunity to loot stores.

I left home at 19 with a public school education, $100 in my pocket for a month's rent and living expenses until my first payday, and nothing else. I worked for the Government, now own my own home, and worked my way through night school for an AA degree. I have a good job and a healthy 401K. I have never been on welfare, drugs, or alcohol, and I have never produced illegitimate children. If I can make it, anybody can. There is no excuse for sermons about poverty and inequality. BTW -- I had to pay for my college education by working two jobs and going to school a night. Not a dime from parents or Uncle Sam. Some folks got theirs for free through affirmative action and they still can't speak in complete sentences.

Steven Pearlstein: No doubt about it -- this is a great country where you can go from rags to riches if you've got what it takes. But not everyone has what it takes, for reasons that are not all their fault. So do you want to write them off, or do you want to see if there are some reasonable things to do for them that might improve their lives and cut their numbers in half without so distorting the economic system that it winds up hurting everyone else? Let me know.

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Wayne, PA: I frequently see statistics like you state today "the top 20 percent of households" and I don't know what that figure means. I fear many of us just shrug that figure off thinking it surely doesn't apply to me because I'm trying to figure out how to pay my mortgage, car payment, and increased health costs! Wouldn't it be helpful to put dollar figures around these percentages as a sober reminder how big the divide is. Thanks for a provocative article.

Steven Pearlstein: These are statisticians terms. The upper 20 percent includes households with pretax income (exclusive of capital gains and some government benefits) of about 88,000 or more. Its all in the Census Bureau report, again at Table A-3.

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Sykesville, MD: We are a big, rich (overall) country. And in all honesty the widening gap between rich and poor is frightening to me. When disparities become too great, huge, violent social upheaval is NOT unknown.

We tell welfare mothers to get back to work, but tell non-welfare (and predominantly white women) to stay home and raise their children--our way. And only our way (the Republican way) is the way that works and that's the only way it's ever been. Mom stays home with kids. Bull. Look at the raw data.

Well, I'm here to point out that it's not the only way. I'm a fourth-generation Polish American. ALL the mothers worked outside the home, you had older family who helped raise the kids, you didn't socially isolate families and tell them they have to do it all for themselves (teach, doctor, socialize, etc.). It's an impossible standard and it's making people crazy.

Another quick point, if I may, why do NUNS receive Social Security, but stay-at-home parents (mothers, mostly) do NOT? THAT is absurd. Homemaking is worth 40K/year to a family and should be recognized.

Steven Pearlstein: All good points. Thanks.

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MD: How much more do we want the top earners to pay in taxes? A small minority of top earners pay a huge chunk of the total tax bill. What is the liberal bias that keeps wanting to add to that. Top wage earners already pay their share, and the shares of many, many others.

Steven Pearlstein: People at the top pay less in taxes than they used to. I don't think we have to go back to the 39 percent marginal rate and apply it to both to earned and unearned income. But I think we can head a bit back in that direction. My own preference would be return to the ideal of treating all income the same (wages, capital gains, dividends, etc) and getting a lower rate -- say 35 percent. When you add state taxes, that gets you to 45 percent in many states. When marginal rates get higher than 50 percent, that's when you start seeing all sorts of distortions in behavior.

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Washington, DC: The writer from Laurel has probably always been surrounded by people encouraging him to succeed and had role models in his life to show him what success looks like. I promise you that most of the poor people in New Orleans had neither. I cannot tell you how many times in my struggle to transcend the poverty I was born into, I heard the phrase, "You think you're better than me?" Even from family members. It was disheartening but I persisted even at the cost of estrangement from some people. It is much, much harder than he thinks to chart and maintain a different course for yourself.

Steven Pearlstein: Thanks for that.

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Bethesda, MD: Given the huge disparity between good school districts and poor ones, particularly when funding depends on the local economy, is anyone REALLY surprised that there are pockets of "lost" people?

Some people are starting SO FAR behind the starting line that it takes them years to FIND IT, let alone "catch up" to anyone else.

And let's talk health care. If you can't find it or use it, you shouldn't be surprised that there are many people who never get to the starting line, ever. Let alone "get ahead".

It's very sad to hear people blaming "them" all the time.

How a person treats their "inferiors" is a MUCH better measure of a person than how they treat their peers or "superiors".

Steven Pearlstein: The problem with too many people who look like they've hit a home run in life is that they forget they started out on third base.

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Clarendon, VA: Although the statistics on economic mobility (or immobility) may been seen as a problem, aren't they better than in most other industrialized economies ? At least the U.S. does not have the aristocratic stratification that is often a barrier to educational/economic achievement that our Western counterparts often have?

Steven Pearlstein: Actually, they aren't better than all, and not a whole lot better than many others. Maybe they were in the past. But no longer.

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Takoma Park, MD: I can remember one family in particular that refused to sign their two kids up for the reduced-price breakfast and lunch program because they were always hearing about how people who used the program were "free-loaders" and "layabouts".

That was in Takoma Park in the 70's and 80's.

Two hungry children, every day. It's damned hard to learn when you are near tears when you smell food.

Provide the net, but don't castigate those who avail themselves of it.

Steven Pearlstein: I'm going to end with this comment, and then publish all the other comments that we didn't have time to get to. Thanks, folks. Its been a very very good chat.See you next week.

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Washington, DC: Your entire premise is wrong, but in the right direction.

Actual earned-income valuation has not been hung-up since 1997 - it has DECLINED. This is true even for white collar workers other than at the CEO level - student loan costs have increased by 40% and housing costs in major East Coast areas have increased by over 70% since 1997. Income has gross-increased, not trued-up, by roughly 16.7%. The percentage of the population covered by -any- form of health insurance has declined since 1997. The percentage of the population covered by disability income insurance is now below 10%.

We are no longer a first-world country. We just aren't. Northern and Western Europe are laughing at us, as they well should.

Steven Pearlstein: 1.

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Utrecht, Netherlands: "Europeans Need to Learn the Virtue of Risk"

For several years now there has been a steady stream of jeremiads about the supposedly sclerotic European economies coming from - mostly - American commentators. Although your articles on this subject seem to me to be far better researched and written without the screeching bitterness one so often detects in other American commentators, I am always struck by the absence of the "bigger picture" when European economic policies are discussed.

It is true, of course, that the welfare state as it existed for most of the Cold War has run its course - just as all economic models grow and fall over time. To advocate, however, the replacement of this model with what is generally referred to as the Anglo-Saxon economic model is not necessarily the best solution for Europe.

What should never be forgotten is why this welfare state model came to dominance in Europe in the first place. Most modern American commentators blame it on a perceived preference for 'socialism' among the European peoples. However, this model came about precisely to counter the Soviet socialism as it was being established in the East of the continent after World War II.

Moreover, European - and American - policy makers at the time realised that one of the reasons for the outbreak of yet another war on this continent was the economic crisis of the late 1920s and 1930s which provided an easy fishing ground for Nazism and Communism, leading to social unrest, collapse of democratic control, dictatorship in Germany, and World War and the Holocaust as the most depressing result.

Therefore, both the experience of crisis and World War, and the potential lure of Soviet socialism in the East after the war, led successive European governments to adopt the welfare state. It was meant to prevent the rise of another type of fascism whilst keeping Soviet dominance out of Western Europe.

These were very profound reasons for establishing the welfare state; it did not come about out of some innate desire for 'socialism' as many modern commentators contend.

Now that the dangers of both fascism and communism are no longer urgent or even apparent, it is indeed time to shed the welfare state as far as possible. Yet, Europeans have enough historical sense and knowledge to know that his continent can always slide out of control again, however unlikely that is at this moment in time.

Therefore, Europeans should carefully listen to outside criticism of their welfare states. Besides, there are plenty of Europeans who are aware of the changing economic relations in the world and the need to adapt to that. On the other hand, Europeans should never lose sight of their own particular and peculiar geo-political situation. Policies that would aggravate that situation - mass redundancies in several sectors, mass influx of workers from Eastern Europe, to name but a few - would not serve this continent well. Because in terms of geo-political calamities Europeans know all to well "the value of risk". And it isn't a positive one.

Steven Pearlstein: 2.

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Silver Spring, MD: Another reason for continuing poverty is the diminished opportunity to have a social community WITH MONEY.

Look, why do people REALLY want their kids to go to an Ivy League school? The education isn't necessarily any better (trust me, I know this first-hand), it's the ACCESS to WEALTHY CONNECTIONS.

People who are rich, sometimes the upper middle class, fail to recognize the part that luck plays. They tend to believe that everything happens in their favour due to merit--never luck.

Your natal family is LUCK, folks. If you are born into a wealthy family, you have a much better chance of not falling too far economically. You will have more opportunities for a good education, good health care, a dentist, nourishing food and decent clothes.

I grew up poor, let me tell you it is HARD to concentrate on learning when you are HUNGRY. EVERY DAY.

Steven Pearlstein: 3.

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Adams Morgan, DC: I really enjoyed your column this morning and it is my sincere hope that as a result of this crisis the pendulum may start to swing the other way, away from what was laughably referred to by the president as "compassionate conservatism." Americans will hopefully take this Rorschach moment to truly think about how we all might do things better if given the chance, and since much New Orleans will have to be physically rebuilt, we'll have the unique opportunity to create from the ground up a true 21st century city.

I'm not surprised at the disdain expressed by some that blame the poor for creating their own situations. But I believe that because our capitalist society is set up to be so competitive, that the middle class, seeking to ensure the success of their own children, are shortsighted and don't see that helping the poor to rise out of the underclass would help all Americans and put us at parity with other industrialized nations (reduced crime being a prime example). In my opinion, it's the middle class, the largest voting block, that doesn't want to share their wealth. Can't we at least agree that everyone, especially the poor, deserves to have at minimum good schools and access to health care?

Steven Pearlstein: 4.

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Burke, VA: Several posters have brought up the issue of personal responsibility. These discussions, however, tend to overlook the circumstances of children, who are not in a position to make decisions. Disadvantaged children don't choose their families, homes, neighborhoods or school systems. Clearly, there are going to be adults who are irresponsible. The question is, "can we shape policies that would give children a fairer shake?"

Steven Pearlstein: 5.

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Silver Spring, MD: You know even the poor are PEOPLE, they are not economic units, like cattle.

Sure, some are totally irresponsible screw-ups (I bet you know some rich people who are too, but they have money, so we call them "eccentric"), but until you have had to max out YOUR credit cards on medical care because the crummy insurance offered is ABYSMAL and you get hit by an uninsured driver...well, you get the picture.

"A Modest Proposal" anyone?

Steven Pearlstein: 6.

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WDC: Please explain the difference on why immigrants who come to this country with nothing often escape the same fate as those in our poorer areas? You said earlier that we won't solve the problem but putting all the blame on the lower class. However, we wont' solve the problem until everyone accepts personal responsibility either.

Steven Pearlstein: 7.

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Chicago, IL: Hope I'm not too late, but it seems the question boils down to one I heard a colleague express: What do we do about the people who aren't good at capitalism?

Steven Pearlstein: 8.

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PG: I'd say the average worker is worse off. Benefits have been eroded in two areas:

1. Workers must now pay more for health insurance. More are uninsured as they cannot afford the cost.

2. Workers' pensions are less secure. Companies have switched from defined-benefit to defined-contribution plans. Some companies go to court to dump their pension obligations.

Steven Pearlstein: 9.

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Another person in Durham, NC: Steven--

I thought your column today had one thing over Mr. Will: you didn't blame the poor for their status. I applaud that. Durham, NC is a majority black city in the south. We have a black middle class here that's grown and prospered through much of the 20th century. However, there seems to be an entrenched underclass with those negative behaviors and outcomes.

It's true this group has been absent of effective role models for decades. Do people like Mr. Will tend to not notice that? Also, wouldn't it be more productive to talk about poor people without taking their dignity away? Believe me, yelling at them about their errors in judgment doesn't work.

Do you see the influx of cheap, organized, motivated Mexican labor taking the jobs that this underclass used to count on? It seems they used to have more options drifting from one low-paying job to another, now those are gone.

Steven Pearlstein: 10.

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Annandale, Virginia: Wouldn't those who advocate more/higher taxes to pay for additional services to the poor/needy have a stronger case if there was a track record of such programs actually working? Yes, Head Start and Pell grants are important, but I think part of the concern many people have is that there's just not much evidence of the federal government's success in breaking the economic stratification cycle. One could argue that hiring quotas and affirmative action, which incur no direct government cost, are more effective that taxes that pay for AFDC and food stamps.

Steven Pearlstein: 11.

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Washington, D.C.: I was anticipating a thought-provoking and balanced discussion on poverty and class, yet I am now disgusted by the vilifying of Barbara Bush and the submitter from Scarsdale.

Steven Pearlstein: 12.

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Doylestown, PA: I wonder if Scarsdale would refuse (taxpayer-funded) firefighters and police coming to his/her aid if s/he were "too stupid to evacuate" his/her burning house?

Steven Pearlstein: 13.

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Washington, DC: Steve, it seems to me that when the wife of a former president and the mother of the current president, a person who has traveled the world over and is highly educated, can say what Mrs. Bush said -- without shame and without widespread censure -- we see what we are up against. Nonprofit organizations that serve the chronic poor have to start having Accountable Conversations about the financial investments we need to make turn this ship around. We've had a 25-year tax policy conversation that frames nonprofits as the great sucking sound of tax dollars. The Nonprofit Sector -- which is where this conversation must emerge from, clearly lacks leadership. This is the real problem don't you think?

Steven Pearlstein: 14.

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Hyattsville, MD: So, if only 20% are benefiting, then why do about 50% vote Republican? Are they just totally uninformed, or motivated by other issues...or I guess, another question is since you go back to 1997, is this a partisan issue at all?

Steven Pearlstein: 16.

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Washington, DC: You put a lot of blame on the Republican party in your column, and I agree that it is rightly placed. I wonder, however, what you think of the Democratic party. Don't you think that they fall into many of the same categories, when it comes to dealing with poverty (or ignoring it as the case me be) on a societal level? Taxes alone can't do the job. And if neither major party is will to make change, what chance do we have as a country of improving?

Steven Pearlstein: 17.

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DC: I think some of your readers forget how recently some of the more obvious limits against African Americans are.

I'm just 40, and in my lifetime, I can remember driving to DC from Baltimore just so my mother could try on a hat in a department store (Lansburgh's)because black women could not where we lived.

We relied on horse cart driven vegetable salesman for fresh produce because reliable grocery stores were in far neighborhoods.

My mom, a postal worker, was about as middle class as you could get as an African American, unless your were a doctor, lawyer or entrepreneur. And we lived in a segregated - legally, then by default- neighborhood well into my teens.

So it is only reasonable that the many blacks who got left behind when their better income, role model neighbors moved out, would take on the habits and roles of those they still saw around them. Blacks born during the times of the riots are only in their mid 30s. We're just a generation removed from legal segregation, and those blacks who have overcome poverty now account for the fastest growth in wealth in the last five years. What exactly does this nation expect?

Steven Pearlstein: 18.

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Hialeah, Florida: I do not think is a matter of race, I rather think is a matter of political and economic system.

I wonder if should we have a federal government that could exercise a bigger role in addressing capital inversions to our underdeveloped regions. Or maybe state and local government having s bigger share of the revenues they got through its enterprises and general taxes?

Iraida

Steven Pearlstein: 20.

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Washington, DC: I just don't know where to start. It's comments like the questions you've answered that show this country has a long way to go in understand what the legacy of slavery and discrimination has done to African Americans. The people in NO lived in segregated areas. As Condi Rice said the are still "vestiges of the Old South." African Americans have double the unemployment of white (it's worse for teenagers), we pay higher interest rates for cars and mortgages (even when controlling for income, credit history, etc.), schools in our neighborhoods use outdated textbooks, do not have the internet access, etc. When whites complain about affirmative action, I don't think they realize that white women have been the biggest beneficiaries of such programs. And affirmative action goes both ways -legacy programs at colleges (how W. got into Yale), jobs going to unqualified candidates (Heck of a job Brownie), most corporate boards in America. this is not an easy problem to fix, and blaming the victims isn't the answer. Nor is refusing to admit that discrimination STILL exists in the US (albeit more subtle) and the majority population just doesn't want to face it. I came up when there were affirmative action programs that lead to the creation of a Black middle class. I benefited, as did Condi, Colin, and Clarence. There has been success. This is a complicated issue which can't be solves in sound bites.

Steven Pearlstein: 21.

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Reality: "Formula for avoiding poverty -- finish high school, don't marry until 20, don't have a baby until married. "

Hello! I hope the poster from Laurel and others know that you can finish high school, marry after 20 and have kids than and STILL be poor.

Steven Pearlstein: 22.

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Mt. Lebanon, PA: I'm a consulting engineer in private practice. The tax rate on my first dollar is the same as on my last. 16.5%.

The highest marginal tax rate is, what? 28%?

That's a pretty small margin from my rate to Bill Gates. And I know he's living like Louis XIV compared to my Jean Val Jean existence - except Jean had silver candlesticks (though stolen)!

Any black businessman or immigrant self-employed hustler pays the same rate I do. I'm betting we don't do that well in the New Bush Economy.

So, ask me if the rich are overtaxed.

Steven Pearlstein: 25.

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Washington, D.C.: There is all this talk of immigrants who risk life and limb to get here to work in jobs that no one else would do. If true, doesn't this suggest there is a lot of opportunity to at least start climbing the economic ladder?

Steven Pearlstein: 26.

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San Luis Obispo, CA: Laurel and Manassas sound like the Republican members of my family across the dinner table. They have a point: Just what can the government do to help instill a sense of personal responsibility in people whose own actions help keep themselves in poverty? I think a start is for Republicans to recognize that sex education classes that teach birth control and responsible sex are important. Uneducated women who have 9 kids from different fathers who don't pay child support are bound to find themselves (and their kids) stuck in poverty.

Steven Pearlstein: 27.

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Arlington, VA: The right-wing echo chamber must be hard at work this morning. You seem to be getting a lot of, "I'm not a racist but..." questions.

My question is this: what about access to family planning and health care? States with the least access to both have the highest rates of poverty, especially child poverty. Texas's "Pro-life" governor just threw 64,000 children off the health care rolls to balance the state's budget. So now not only are these kids poor, they have no access to doctors. That would kind of crimp their chances in life.

But according to some of your earlier posters I suppose it's all their fault...

Steven Pearlstein: 29.

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Washington, DC: The first poster's point about how to escape poverty (school, marriage, etc) misses your point this morning: with the current administration's policy of reducing spending on lower income groups through tax cuts for the wealthy, reduced social spending, etc., there is less money available to help the underclass escape poverty.

Steven Pearlstein: 30.

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