SAJE Guide to Economics Education

A Peoples Curriculum for a Healthy and Fair Economy

Prepared for Casey Family Programs

January 9, 2009
CONTENTS

I. Introduction
Why Economics? 1
Credit Where Credit is Due 2
II. Values and Economics
Introduction 4
Values Script
The Economy is a Human Creation 4
The Myth of Scarcity 5
The Myth of the Level Playing Field 5
Competition 6
How Do Different People React to Competition 6
Fairness 7
III. Understanding Economic Inequality
Introduction
What is a Live Illustration? 9
Ten Chairs: Purpose and Setup 10
Ten Chairs Script
Introduction 11
Wealth 11
Some Key Points About Wealth 13
Inequality is Glocal (Local and Global) 13
The Primary U.S. Housing Subsidy is Not for Poor People 16
Wages and Work 17
Taxes 19
Personal Income Tax 19
Figure 1: Just Economics 20
Capital Gains Tax 22
Corporate Tax 22
Estate Tax 22
Taxes for Everyone Else 23
Supply Side and Demand Side Economics 23
Figure 2: Just Economics 24
Demand Side Economics 25
Supply Side Economics 25
Policy Solutions 26
Conclusion 26
IV. Forces Behind the New Inequality
Introduction 28
Reduced Public Sector 28
From War on Poverty to Criminalization of Poverty 28
Elimination of Union Jobs 29
Elimination of Social Safety Net 29
Big Cities Become Command Centers for Global Economies 29

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 Speculation in Urban Land 29
Fiscalization of Land Use 30
V. Strategies for Change and Hope
Policy, Negotiated Agreements, and Democratic Institutions 30
Stories From the Field 32
Cecilia's Story 33
Closing Thoughts 35

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I. Introduction

Why Economics?

At the present moment we are facing an economic crisis of international

proportions that has led to the loss of homes, jobs, credit and public resources
for thousands of people in Los Angeles.

These real world conditions have led more people to the understanding that
something is seriously wrong with the way that the economy is organized and
that economic policy is too important to our families, our communities, and the
world to be left to a handful of experts, policy wonks, billionaires, and
corporations.

In a real democracy, all of us should have something to say about the basic
values behind how jobs are distributed, the purpose of taxes, and the role that
the public sector should have in determining who should benefit from our
country’s economic resources.

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

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

The purpose of this curriculum is help educators, organizers, and facilitators

build a foundation for these discussions -- to help people connect their values
and experience with economic concepts and ideas so that they can gain the
clarity and confidence that is necessary to collectively produce solutions for
change.

1
Credit Where Credit is Due

Before we start, it is important to acknowledge that this curriculum is built on

the shoulders of many others. Here are a few who really stand out in my own
experience:

Just Economics was a women’s economics

collective organized by Ellen Teninty in the 1980s.
Just Economics designed and produced engaging
popular economics education for all kinds of
organizations around the country for about 10
years. I was a member, of the group, and another
member, Marlene Kim, came up with the original
idea for the Ten Chairs “live illustration” that is
included in this packet. Ten Chairs has been used so
much since then that many don’t know its roots -- a
true sign of success.1
Just Economics 1996

United for a Fair Economy was co-founded by Chuck Collins and Felice
Yeskel in 1995. United for a Fair Economy provides workshops, trains trainers,
and publishes popular economics education training guides and other
materials. They have a great website http://www.faireconomy.org with links to a
lot of resources, including their own animated powerpoint of the Ten Chairs
exercise.

United for a Fair Economy 2008

1
Five Just Economics members recently reassembled to create a new workshop about the
current financial crisis, its causes, and solutions. Available early 2009.

2
Right to the City is a national alliance that I co-
founded in January 2007 along with Gihan
Perera of the Miami Workers Center and Jon
Liss of Tenants and Workers United in
Alexandria. Right to the City applies a human
rights frame to urban problems, is grounded in
local organizations and struggles, and is
committed to coalescing them into national
impact. I created the "economic forces" exercise
that is included in this packet as a result of many discussions about the roots of
gentrification and displacement in our cities with Gihan and Jon. Like the Ten
Chairs exercise, this presentation has a life of its own and has been used,
improved, and altered by many. For more information about Right to the City,
go to www.righttothecity.org.

Strategic Actions for a Just Economy (SAJE) is an economic justice and

community development organization that is based in Los Angeles. I am its
founding Director who started the organization with about 50 other people in
1996. SAJE is dedicated to building economic power for working class people
in Los Angeles, to reduce the City’s economic inequality, and to establish a
right to the city for all. We believe that people who are most affected by
economic problems are the best people to collectively devise solutions, and we
recognize that this takes preparation. Like Just Economics, United for a Fair
Economy, and Right to the City, SAJE is a big advocate of popular education,
which we see as the education that is necessary for democracy to work. It is in
that spirit that these materials are offered. For SAJE's online version of the
economic forces exercise, see "What's Behind the Gentrification of Our Cities"
at www.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 called Just Economics. We

taught thousands of people -- community and organization leaders, social
service agencies, activists, philanthropists, all kinds of people -- economics and
economic policy analysis using popular education methods. Our signature
message was, and still remains for me, about how values are front and center to
understanding economics.

What follows is a version of the Values Script that I have been using most
recently. You will want to adjust the content to suit your audience, personal
style and the context of your presentation.

Values Script

The Economy is a Human Creation

We are going to talk a little about economics as a baseline for thinking about
community economic development just to set some ground rules, get some
basic points straight.

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

It is not. The economy is a human creation.

Interest rates don’t fall like rain. They are set. By people. Economic events
are the result of human decisions. And with that comes some basic human
stuff -- where those decision-makers are coming from. Their beliefs about
human 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 the
results will not work for us either.

This understanding compels us to dispel some cultural myths that skew our
conversations and are hidden assumptions behind a lot of economic
conversations. 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 do
with individual decisions and actions or whether it has something to do with
the way the system is structured.

The Myth of Scarcity

One description of economics is the system by which we distribute scarce
resources. This is based on the idea that there is simply not enough to go
around. Is that true? What do you think?

Over the past twenty years, billions of dollars have gone into real estate and
into 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 our
tax dollars were issued to the very banks who got us into the current crisis by
speculating 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 resources

and who is not.

The Myth of the Level Playing Field

Another favorite is the myth of the level playing field -- the notion that anyone
can realize the American Dream if they pull themselves up by their bootstraps
and apply themselves. (Forgive the clichés, but they are clichés because
everyone either believes them or at least goes about their business as if they
were 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 on
third base -- not because they hit a home run. And others -- well they even got
into 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 housing
is supposed to be bad for people. That subsidy to poor people is considered
undeserved, bad for them, and bad for the country. It takes away their
initiative 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.

Competition
Competition 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, and
excel. But hidden here are assumptions about human nature. As though if
there was not enough competition we would become lazy. If we are made to
compete, then we are more productive and improve quality. This is the logical
premise for cutting welfare programs. Helping people might breed laziness.

How Do Dif fere nt Peo ple Rea ct t o Co mp e titi o 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 “what’s the use,” and walk on
by.

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

I’m actually not against competition. But it seems clear to me that whenever
you have a system that creates winners and losers it is important to figure out
where competition makes sense. Great for football. Maybe even great for
science. But do we really think it is a good idea for children to compete for a
good education? Or for food? Don’t we all benefit if everyone has a good
education? And healthy nutrition?

Once we understand that we can make our own rules about competition and
that what is important is how we structure competition we can have a better
discussion about economic policy. This idea is central -- how we structure
competition matters.

2
In 2005, over $90 billion was lost to our tax roles because homeowners can deduct property taxes and
mortgage 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.

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

We can have health care companies competing for the highest quality, lowest
cost health care. Or we can have them compete for the greatest profit to
shareholders even if that ends up producing less access and bad working
conditions.

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

Fairness
Finally, most economic systems and policy include a theory of fairness.

Fairness is about justice. Our economic policies should be about what we

believe to be fair or just, and we tend to think that fairness can be an objective
standard. Let’s 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 isn’t only about numbers and facts. It is s a complex
discussion.

When we think about the rules that underly the economy, we make trade-offs
between how we want to balance risks, rewards, and responsibility. There are
also tradeoffs to be made between personal freedom and the public costs of
those freedoms. We will discuss these ideas more later.
However, the real question before us is that we rarely get to talk about these
issues, because, increasingly, decisions about the economy occur outside of the
public 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, let’s 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 the
unequal distribution of wealth in the U.S. today, how that is even more unequal
by race and class, and to show the dramatic increase in inequality that occurred
between the 1970s and today.

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

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

What is a Live Illustration?

People in Just Economics used the term live illustration to describe this kind of
exercise. As Just 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 Social
Policy, housed in the Graduate Theological Union in Berkeley, and we used the
minister’s rule, “People can listen no more than 20 minutes, even if you are talking
about how to get into Heaven.” We were guided by the idea that we wanted the
participants to gain the courage to become outspoken, not to be once again intimidated
by experts. We understood that participants will remember what they say more readily
than what they have heard, so they have to talk.

We use what we call “live illustrations,” which differ from traditional role-plays. We
developed ways to show statistics that were visual and used bodies from the audience so
they became active and memorable. If the topic is one with which the audience has a
lot of personal experience, we create an analytical framework and then interview the
audience 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 little
information, like the Savings and Loan scandal or structural adjustment programs, we
call players from the audience and adorn them with props and hats and walk through
the tale. That way they can follow the money trails and see where policy choices were
made.”

3
from Ellen Teninty and Just Economics, “Experiences with Popular Economics Education,
Teaching for Change: Popular Education and the Labor Movement, Center for Labor Research and
Education, 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 minutes

Participants
• 10 people

Materials
• 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
participants—not a rhetorical question.
• Bold indicates new terms being defined or a point to emphasize.

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Ten Chairs Script

Introduction
What I’d like to do is illustrate the status of the economy in the United States
right now. This illustration will help us understand some of the economic
pressures affecting working families today.

Wealth
First, I am going to illustrate the distribution of wealth in the United States. I
have here ten chairs, which will represent the total net private wealth in the
United States.

Now, I need ten people to come up and sit in these chairs. (Quickly take
volunteers 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 talking
about material things – not spiritual wealth. I am talking about the things
people own. Cars, Boats, Jewelry, Buildings, Machines, Cash, Bonds, Stocks,
etc.

I am not talking about income. I am not talking about your paycheck. I am

only what ends up in savings.

Now what do I mean by private wealth? The fact that this is private wealth
means that it is the wealth owned by individuals and corporations – not the
government. It doesn’t include the national parks. But it does include all of
the business assets in the United States.

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

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

So, if you have lots of assets, but you also have lots of debts, you don’t have
much net wealth. That’s most of us right?

The people sitting in the chairs represent the family population of the United
States (a family in this case is a household – a group of people who pool their
income 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 private
wealth 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 discussion
about “what is fair for pay?” by quickly asking the audience a few questions: What
kind of economy is this? Is it fair? Get a couple of answers and then cut the discussion
off by saying something like, “We can talk about this all day, but it doesn’t matter
because this isn’t 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 first
person on your right – the audience’s 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 these
chairs. Stretch out and enjoy!

Actually, this unequal distribution of wealth is even more dramatic, because in

2004, the top 1% wealthiest families in the United States own 34.3% of the
wealth – about three and a half chairs! That’s 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 our
folks are standing up – they have no chairs at all. (Take 2 of the displaced people
and stand them behind and to the right of the chairs on the audience’s far right)

The rest of you – just over 70% of the families in the U.S. – you have to share
these 3 chairs. (Indicate the 3 chairs on the audience’s far right.) I don’t know how
you are going to work this...sit on laps or sit on the floor with your arms on the
chairs or what. You work it out among yourselves. (This is funny – pause to let
them scramble).

4
If 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 big
houses and drive big cars and have a lot of possession, but they have no wealth
because they have so much debt.

Inequality is Glocal (Local and Global)

About two years ago, our hometown, Los Angeles, was awarded the dubious
distinction of being the most unequal city in the country. That means that the
distance between the richest people and the poorest people in L.A. is bigger than any
other 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 of
Mexico.

Most major cities are moving a similar direction.

Growing inequality is a national trend and the Gini Index, how economic inequality is
measured, 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. At
zero, everyone is equal. Complete inequality is measured at one. One person owns
everything. 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 one

policy discussion in Japan. And the Japanese Gini Index today is where our was in
1968.

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Let’s 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 (that’s 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 1990’s, about one 10th of these
top 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 it
comes from investments and businesses. Very wealthy people use their money
to make more money. They can also move their money around from country to
country pretty easily.

Now let’s talk about the middle 70% Walk over to the 7 people who are assembled
around 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 family’s net wealth in the U.S. is:
$140,7002. (That means that if you took all white families and lined them up
from 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 family’s 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 trillion
more than the bottom 90%. A worker making $10 an hour would have to work for over 10,000
years to earn what one of the 400 richest people in the U.S. earned in 2005." Source: John
Cavanaugh and Chuck Collins, "The New Inequality," The Nation, June 30, 2008.

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The median Latino family’s wealth is $18,600.

Unfortunately, the Federal Reserve Bank, which compiles these statistics,

doesn’t track wealth for Asian or Native American families, so I can’t give those
numbers to you.6

What kind of assets 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 55
years of age, homeownership is lower now than it has been in about two
decades.

Why do you think that is? What situation did people over 55 have that the rest
of us didn’t?

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

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

Plus, in the 50’s and 60’s we had programs to encourage homeownership for
young families like the GI bill. We also had Savings and Loans – financial
institutions that made home loans at low rates. You might not remember the
Savings and Loan scandal in the 1980s, because we are having a banking
scandal now. But it is enough to know that those conservative, community
oriented lending institutions are not a resource anymore.

Today the main housing program that this country offers its people is the home
mortgage income deduction – a tax break for folks who own homes. We spent
about $90 billion dollars on this deduction in 2005 – but more than half went to
people who earn over $100,000 a year. 20% went to the 2% of the population
who earns more than $200,000 a year.

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

15
 The Primary U.S. Housing Subsidy is Not for Poor People

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

According to a report by the Congressional Joint Committee on Taxation, this cost the
federal 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 the
11.8 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 don’t earn
enough income to claim deductions.

Tenants, of course, don’t 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 do
increasingly offer a savings program rather than a guaranteed check after
retirement. Only 18% of the bottom fifth lowest paid workers in the US have a
pension plan (indicate the folks standing up) compared with 73% of the top fifth
highest paid workers (indicate the person with the 7 chairs). African American
workers are less likely than whites to have a pension plan, and Latino workers
less likely than African Americans. Women are less likely than men to have a
pension plan.

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

So let’s talk about the people who are standing up.

16
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 aren’t able to save.

In fact, most of the people over there trying to hold on to a chair are in pretty
much 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 pay
check. It gives you a tremendous feeling of insecurity. Most people in the
United 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: Melvin
Oliver and Thomas M. Shapiro, Black Wealth, White Wealth, 1995) That was
about 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 distribution
of wealth, but we are going to talk briefly about income and taxes – not the distribution
of income, just what has happened to the incomes/tax bills of the segments of society
shown 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 earn
interest and dividends, they speculate, they buy and sell assets to make what are
called 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 this
year, the stock market was doing pretty well and the high interest rates of the
late 80’s and early 90’s 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 top
10% of the nationa's wealthiest families. 42% of the benefits went to the top 1%
ALONE.

17
They do pretty well from their jobs too. The top 20% highest income workers
are the only workers in the US economy whose wages have done UP in the last
20 years. In 2004, CEO’s, the executives of large corporations, earned 431
times more than the average factory worker. That explains a lot about
inequality. In 1960 people in those same jobs made only 40 times more than
your average worker. Since 1980, average corporate CEO pay went up about
743% (from an average of $1.4 million in 1980 to an average of $11.8 million in
2004).7 At the same time, the average hourly wage for workers during the same
period, pretty much stayed the same. At the same time, worker productivity
increased tremendously -- up by about 70% during the same period.

How about the rest of these people? What kind of jobs do the folks standing
up 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 a

temporary job.

What does it mean to have a contingent job? What is your life like? Can’t plan,
can’t save, can’t work out child care, can’t 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 are
living in poverty. That is over a quarter of all the workers n the country. Early
reports indicated that 33% of women workers earn a poverty level wage –For
African 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 for
whites 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 median
income is just over $34,000, and for African Americans families the median
income is about the same.

7
Measured in 2003 dollars.

18
However, the single biggest factor in how much income you can make is still
whether you were born a boy or a girl. In 2003, the median hourly wage for
women was $12.49. The median hourly wage for men was $15.26.8

Taxes
So...What about taxes? Did the tax bill for the top 10% wealthiest families go
up or down?

It went down.

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

Personal Income Tax

The personal income tax system in the US is what is called a graduated income
tax – it’s like a layered cake.

We have 6 income layers, and each one gets taxed at a different rate.9 Here is an
example 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 Income
Insecurity", 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:

He ads of Ho use hol ds Tax

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

19
Figure 1 Just Economics

20
So, at the first layer, from 0 up to a certain dollar amount, depending on how
many people in your family and so forth, you pay no taxes.10 After you reach
the limit of the first layer you start paying 10 percent on each dollar that you
earn. 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 each
additional dollar, and so on up to 35%, which is the top rate for the highest
income 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 it
by your income, you would get your “effective tax rate” – sort of like the average
of what you pay on all the layers that apply to you. That is how your estimated
taxes are calculated for payroll deduction.)

Let’s 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 is
the tax rate that applies to each dollar you earn OVER $295,550 – not the entire
earnings.

In the 1950’s (when I was a little child) the top tax rate was 91%. That means
that after $400,000 (at that time, worth a lot more today) people paid pretty
much every dollar they earned back to the government. When Ronald Reagan
came into office in 1980, the top rate was 70%. By the end of his first year in
office, it was just 50%. Tax “reform” in 1986 brought it down to 28%. It went
up 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% Reagan
1993 39.6% Clinton
2008 35% George W Bush

People said that the “Clinton tax increase” was the “largest tax increase in
history”. But they usually don’t mention the “largest tax decrease in history”
under Reagan. Our income tax is not high. The 86 countries in the world with
an 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 -- where
working 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.

21
So one of the reasons that there is less money for social programs today than
there was in earlier decades is because we stopped collecting money from
people who have a lot of it.

Capital Gains Tax

The other tax that got cut was the Capital Gains Tax. (Tax on money earned on
money) The capital gains tax rate in the past has been as high as 45%. In the
80’s 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 the
money earned from investments.

Keep in mind that 90% of the capital gains taxes collected are paid by the top
10% 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 to
the profit made when selling a house – but it is important to note that these
taxes only apply if you don’t invest the profit in a new house within two years.
Since most of us who own homes buy another when we move, then we don’t
pay capital gains taxes.)

Corporate Tax
Additionally, the wealthy got a big break on corporate taxes. Taxes on
corporations 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 1960
corporations are contributing 23% of the total federal revenue – almost a
quarter of the all the taxes collected – by 2004 corporations were only
contributing 10% of all taxes collected.11 Many corporations got huge tax
refunds in early 80’s. Today, corporations contribute about 9% of all taxes
collected.

Estate Tax
This is really the only tax on wealth. It is only levied on dead rich people (as a
kind of inheritance tax). It used to tax people who died with over $675,000 in
net wealth. Now, under the George W Bush tax cuts – it will be eliminated
entirely 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 Everyon e Els e
So what happened to taxes for middle and low income people before George W
Bush?

They went up.

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

What taxes went up?

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

Government services also got more expensive – bus fares, some places now
charge 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 that
71% of the more than 1.6 trillion dollars of cuts go to the highest earning 20% of
families.

Only 29% of the benefits go to the bottom 80% of families. The richest 1% will
get 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 Economics

Before 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 that
drive our economy. There was one set of values that moved economic growth
for everyone between 1947 and 1979. During this period, when the economy
was doing well, it was doing well for everyone, for workers and corporations
alike.

23
There was another set of values and ideas that dominated the period between
1979 and the present. This is when economic benefits were pushed upward
towards the richest people and corporations in our country.

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

Figure 2 Just Economics

24
Demand Side Economics
The basic idea behind demand side economics is that the engine of the
economy is the consumer. If all consumers can afford to buy the things that
others produce, pay rent, buy homes, etc., then the economy grows. Following
from this logic, demand side economists advocate for taxing very wealthy
people and corporations to pay their share of public needs; then use that
money for public investment in things like education, roads, etc. -- to meet our
expensive collective needs. This model also sees that higher wages for working
people benefit everyone -- because then consumers can drive economic activity
with their purchasing power.

Supply Side Economics

Proponents of supply side economics hold that the engine of the economy is
the 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 private
sector to provide for our needs through unfettered markets. To accomplish
this, 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.

25
Policy Solutions
You can use the image of the Ten Chairs to think about economic policy and
specific 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 that
will build new wealth in low-income communities – a local credit union might
help folks take their little bit of savings and invest in each other to grow their
community. You could help people start small businesses.

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

3) Use tax policy to redistribute some of the chairs that the top 10% have
accumulated. This can occur if we raise taxes on the top and use the money to
help 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 are
reinvested 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, or
retirement, encouraging the growth of unions, etc.

Conclusion
Even before the current economic crisis, the average American family was
under a great deal of economic stress. The Ten Chairs exercise shows us that
the starting point for the crisis was enormous and growing economic inequality
that was produced by policy decisions. People had already been working
longer hours for less pay, they have less job security, they have huge debts, and
they are paying higher taxes. Even when the economy was supposed to be
doing great, most people are not.

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

Who was being blamed? Immigrants, welfare moms, the homeless. We

blamed the Japanese for competing with our car industry. And of course even
though many immigrants are white, the word immigrant means Latino to many
people. And many people think of welfare moms as African Americans, even
though the majority are white.

So a lot of who we blame, without economic education, results in reproducing

predjudices and beliefs and scapegoating rather than facts.

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

One advantage of the current economic crisis, painful as it is, is how it has
exposed 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 public
accountability. These problems, at least in this moment, are easier to see and
touch 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 Ten
Chairs 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 people
closer together and produce more equality, or move people apart, and create
the 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 economically
unequal city in the nation? How do these policies play out in our local
economies? What other factors influence the outcomes -- technology, markets,
etc.?

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

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

Reduced Public Sector

In the 1970s we still had a fairly robust public sector that benefited our cities
and communities. Since then there has been about an 85% reduction of
federal urban programs.

From War on Poverty to Criminalization of Poverty

40 years ago the administration declared war on poverty. Today, our cities have
declared a war on the poor and are constantly seeking ways to criminalize
poverty.

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 50
block area.

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Elimination of Union Jobs
In 1960, unions represented almost one third of American workers. Today,
they represent just over 10%. Core industries were the backbone of unionized
sectors. 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 jobs
are gone, and with them, the wages and benefits.

Elimination of the Social Safety Net

Thirty years ago the United States had a social infrastructure that could help
people out in hard times. Today, much of that social infrastructure has been
moved to the private sector or stripped away completely.

Big Cities Become Command Centers for Global Economics

Yesterday's urban economies had local and regional roots. Today the
economies of most major cities respond to global demands, and act as
command center for global economies or respond to command centers.
This skews who developers build for, who cities court (creatives) and creates
cities of high paid professionals who are served by low-wage service sectors,
where most job growth resides. This kind of economics makes big cities like
Los Angeles logical places for sustained and high levels of inequality.

Speculation in Urban Land

Thirty years ago much of the nation's investment and speculative capital went
into stocks. A few years ago, when the high tech bubble burst and the stock
market 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 our
cities as more and more are renters, rents remain high, and wages remain
stagnant. Now that real estate bubble has burst, and with it, the entire
international financing house of cards.

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The Fiscalization of Land Use
With less public money, cities are trying to cash in on the real estate boom by
using real estate development to raise funds and replace taxes. Convention
centers, stadiums, tourist hotels, and huge auto malls produce sales, tickets and
bed 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 much
revenue it can produce rather than what communities really need--like housing,
community-serving-retail, parks, and good jobs. The address of a sister
organization in San Diego is located on Mile of Cars Drive. That gives you a
clue as to what city hall was thinking when they created an auto mall to bring in
sales 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 on
the facts, I would suggest that our community economic development goal has
to be to increase people’s control over economic resources.

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

sphere.

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 get
us out. It can help restructure competition, it can bring back infrastructure, it
can reduce inequality. But it took thirty or forty years to run this country, at
least my city, into the ground. Its going to take a while to bring it back. How
do 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 most
economic resources today. Community benefits agreements, community
reinvestment agreements, collective bargaining agreements with employers and
landlords are asserting people’s desire for accountability and justice and

30
demonstrating that this can be done. It can be policy. Nobody has gone out of
business.
Another is to build our own public spheres in local economies. To create
democratic economic institutions that prefigure the country we can be.
Community development credit unions, community land trusts, cooperative
housing are examples.

I don’t believe that any of these strategies are possible without organizing. We
need 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 the
product of movements and action, and then when we get to the issue on the
table, we need the wonks, the lawyers, and the experts. And it certainly helps
to have them accompany and inform us as we move forward. We cannot create
a bargaining table for a community benefits or collective bargaining agreement
unless we have organized the power to make us interesting and necessary to
talk to. We can’t build democratic economic institutions unless we organize
and educate people into decision-making bodies, economic units that can make
economic decisions together. To effect change I don’t think that every
organization has to use all these strategies (although SAJE does) but these
strategies need to be aligned for change to occur.

Here is a little snapshot of what I’m 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 didn’t work. We held a people’s
hearing with over 500 people and had our electeds come. That didn’t work.
We pooled our resources, built a set of demands, researched where those had
been implemented successfully, wrote our own white paper, and still could not
impact the plan. Finally we joined a law suit. Our settlement agreement builds
from 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 our
community would meet our needs rather than displace us. We ultimately
negotiated the “Staples Agreement” that turned the $2 billion, 4 million square
foot L.A. Live Project into living wage jobs, local hiring, and affordable
housing. The negotiation took several months. But the project got delayed and
didn’t break ground for about seven years. Good thing our Coalition had

31
decided from day one that they were in this for the long haul. Last month we
placed 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 shared
a vision we built on that to create a proactive organization, to create our own
public sphere extended our circle to include development partners and formed
the Figueroa Corridor Community Land Trust.

All of these efforts are aligned. They include people and organizations who
have aligned with each other to build power and change the nature of
economic relations in place. That alignment is community economic
development.

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

You don’t have to do that yourself. You don’t have to do all these things. You
just have to, as the Rock says, know your role in the alignment and take your
place. And accompany others.

Stories From The Field

I’m now going to take about 10 minutes to pull all these pieces together in a
story. To offer you some stories about how this all plays out, values,
economics, history, and strategy in a community, and what happens when a
bunch of these local efforts align with each other. How this plays out in my life
and 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 part
of L.A. that is large by organizer standards, but tiny with respect to the global
nature of its problems. My turf is South Central Los Angeles, or more
specifically, the neighborhoods that are South of downtown and surround the
staples center and the University of Southern California.

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

32
Change has been rapid -- property values have quadrupled in this period. And
to our enormous frustration, the change has produced a new common sense.

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

But now, adjacent to a 7,000 seat live theater, a stadium, and loft dwellings, the
pervasive common sense by the guy on the street is that these buildings have
got to go. They don’t belong. They don’t fit in.

Part of common sense is produced by what you can see with your eyes and part
of common sense is the consciousness with which you see it. Consciousness
includes patterns, imprints, ideas, and biases that belong to culture to
experience to ideas. If you cannot see or know the injuries that moved that
building 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 the
economy you need to witness and know and believe that human decisions were
made in the face of or in the service of injustice. This is important. Because
once you know this, once you know that it wasn’t the “market” that it wasn’t a
“natural cycle” that it wasn’t inevitable, then you can believe in change. You
can witness and know and believe that other human decisions can make it
right, take it back, and produce justice.

So this is my job. I’m in the business making the invisible, the history, the
possibility 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 social
work or health promotion or community economic development. But know
this. We all have steady work, as do many, many others who are not in this
room. And we should all be proud of that. And to the extent that we bring
others along with us, we will be successful, like Cecilia Nunez.

Cecilia's Story
Cecilia Nunez was born in the Figueroa Corridor. She’s about my age. When
she was a child she lived across the street from where SAJE is located now in a
sweet little duplex which no longer exists. When she walked to school, she
watched the houses in her neighborhood, nice houses she thought, get torn
down and replaced by brick and concrete warehouses and factories that housed
low-wage jobs.

The school district threatened to take her neighborhood by eminent domain to

build a new school. Cecilia couldn’t see the racial expulsive zoning that

33
replaced residential land uses with industrial ones, as was common in working
class communities of color around the country. But she knew it was wrong.

With quiet determination she stayed in her neighborhood. She became a legal
secretary, proud of her professional status, and managed to transcend redlining
and gender discrimination and bought a house -- although she did have to pay
interest rates of 16% or 17%.

She was there when the MTA bought a several mile strip of land as a right of
way, traversing people’s back yards as a geographic wound, accumulating
garbage, debris, and trouble when it lost its purpose, but not its owner.

She was there when the redevelopment agency, to accommodate USC’s

expansion, 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 corner
of Figueroa and Jefferson, promising 2,000 jobs to the community only to be
kept as a university parking lot for 13 years and then the site of the USC Galen
sports arena.

The whole time she watched, she talked to neighbors, determined to take her
neighborhood 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 Planning
Commissioner. She and her neighbors got the MTA to landscape and fence the
right 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 the
land, the plans, the ideas of who and what the city is for. She is at the edge of
history.

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 cities
back, such as the Right to the City Alliance that SAEJ helped start -- as we
stand here together barely balanced at the pinnacle of bad policy, where public
sector, public sphere, public money has been stripped so bare that it seems as
though very little is left but private property rights, we have fantastic hope.

34
We have in neighborhoods across L.A., in cities across the country, in counties
across the world place-based organizing demanding a right to the city, to an
accountable economy, and to a genuine democracy.

Closing Thoughts

I just want to end with a few offerings, to basically turn the lessons I’ve learned
through these experiences and stories towards you. Please accept them in the
humble 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 of
billions of dollars poured into the huge financial institutions that are still
standing have not turned our economy around.

So choose long-term goals, seek authentic and deep collaboration with

others, 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 of
organizing 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 to
gain.

35