The Problem of the Rich Man

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The Problem of the Rich Man F. Scott McCown,
Executive Director, mccown_at_cppp.org 900 Lydia
Street, Austin TX 78702 www.cppp.org
512.320.0222
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The Benedictine Sisters of St. Scholastica
MonasteryBoerne, Texas Founders of the Center
for Public Policy Priorities, 1985
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Mark 10 The Rich Man 17 And as he was setting
out on his journey, a man ran up and knelt before
him, and asked him, "Good Teacher, what must I do
to inherit eternal life?" 18 And Jesus said to
him, "Why do you call me good? No one is good but
God alone. 19 You know the commandments Do
not kill, Do not commit adultery, Do not steal,
Do not bear false witness, Do not defraud, Honor
your father and mother.'" 20 And he said to
him, "Teacher, all these I have observed from my
youth." 21 And Jesus looking upon him loved
him, and said to him, "You lack one thing go,
sell what you have, and give to the poor, and you
will have treasure in heaven and come, follow
me."
22 At that saying his countenance fell, and he
went away sorrowful for he had great
possessions. 23 And Jesus looked around and
said to his disciples, "How hard it will be for
those who have riches to enter the kingdom of
God!" 24 And the disciples were amazed at his
words. But Jesus said to them again, "Children,
how hard it is to enter the kingdom of God! 25
It is easier for a camel to go through the eye of
a needle than for a rich man to enter the kingdom
of God." 26 And they were exceedingly
astonished, and said to him, "Then who can be
saved?" 27 Jesus looked at them and said,
"With men it is impossible, but not with God for
all things are possible with God." 28 Peter
began to say to him, "Look, we have left
everything and followed you." 29 Jesus said,
"Truly, I say to you, there is no one who has
left house or brothers or sisters or mother or
father or children or lands, for my sake and for
the gospel, 30 who will not receive a
hundredfold now in this time, houses and brothers
and sisters and mothers and children and lands,
with persecutions, and in the age to come eternal
life. 31 But many that are first will be last,
and the last first."
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Acts 4 32 Now the whole group of those who
believed were of one heart and soul, and no one
claimed private ownership of any possessions, but
everything they owned was held in common. 33With
great power the apostles gave their testimony to
the resurrection of the Lord Jesus, and great
grace was upon them all. 34There was not a needy
person among them, for as many as owned lands or
houses sold them and brought the proceeds of what
was sold. 35They laid it at the apostles feet,
and it was distributed to each as any had need.
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Articles of ReligionAs established by the
Bishops, the Clergy, and the Laityof the
Protestant Episcopal Church in the United
Statesof America, in Convention, on the
twelfthday of September, in the Year of our
Lord, 1801.
XXXVIII. Of Christian Mens Goods, which are not
common. The Riches and Goods of Christians are
not common, as touching the right, title, and
possession of the same as certain Anabaptists do
falsely boast. Notwithstanding, every man ought,
of such things as he possesseth, liberally to
give alms to the poor, according to his ability.
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Who is poor?

• The Idea of Poverty - a condition of economic
  hardship
• Quantifying Poverty - technical meaning
• to define who is poor federal poverty level
• to measure how many people are officially poor
  poverty thresholds

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What is Poverty?

• The federal poverty level (FPL) - Individuals
  in families with income below the federal poverty
  level are considered poor
• Guidelines reflect the minimum amount of income
  that American households need to subsist
• Federal poverty guidelines are used to
  determine eligibility for many federal, state,
  and local programs
• Private organizations also use these guidelines
  to target their services to low-income families

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What is Poverty?
SOURCE  Federal Register, Vol. 71, No. 15,
January 24, 2006  
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How many people are poor in Texas?
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Texans along the continuum
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What causes poverty?

• The fundamental causes of poverty are structural
  and not individual.
• The poor work.
• Of the 558,000 families with children below
  poverty, 70 were headed by an adult working on
  average 43 weeks per year, and about 50 by an
  adult who work 50 or more weeks per year for at
  least 35 hours a week.
• Including the near poor, meaning those
  families with incomes below 200 of the poverty
  level, 89 of the families are headed by an adult
  who works.

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John Wesley, Journal 1753 I visited as many more
of the poor as I could. I found some in their
cells underground others in their garrets
half-starved with both cold and hunger, added to
weakness and pain. But I found not one of them
unemployed, who was able to crawl about the room.
So wickedly, devilishly false is that common
objection, They are poor, only because they are
idle. If you saw these things with your own
eyes, could you lay out money in ornaments or
superfluities?
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What help do the poor get?
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What help do the poor get?
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John Wesley, On Visiting the Sick One great
reason why the rich, in general, have so little
sympathy for the poor, is because, they so seldom
visit them. Hence it is, that, according to the
common observation, one part of the world does
not know what the other suffers. Many of them do
not know, because they do not care to know they
keep out of the way of knowing it and then plead
their voluntary ignorance as an excuse for their
hardness of heart. Indeed, Sir, said a person
of large substance, I do not know anybody in the
world that is in want. How did this come to
pass? Why, he took good care to keep out of
their way and if he fell upon any of them
unawares he passed over on the other side.
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Whats Wrong With the Poverty Measure?

• Conventional Thinking About Poverty No Longer
  Works
• Established in the 1960s based on assumption that
  cost of food accounted for one-third of household
  spending
• Significant shifts in household expenses since
  then
• No measurement of other household costs
• Varying rates of inflation for specific
  expenditures
• Taxes and benefits not included
• No provision for geographic variation
• No accounting for change in standard of living

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From Poverty to Family Economic Security

• Toward an Alternative Poverty Measure
• Whats acceptable? - Poverty defined as safe and
  decent standard of living, not a measure of
  deprivation
• Poverty as a measure of costs, not income
• In 2001, CPPP published Making It What it Really
  Takes to Live in Texas, featuring the Family
  Security Index and the Family Security
  Portfolio

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What is the Family Security Index?
As Americans, we generally believe that economic
opportunity is available to anyone willing to
work hard. But when families with two parents
working three jobs still cannot meet basic needs,
something additional is required. We must make
good on our common belief that hard work brings
prosperityor at least sustenance. We must put
together the portfolio of wages, employee
benefits, nonprofit and faith-based services that
will create family economic security. Let us
exclude no one from the land of opportunity.
--From Making It What It Really Takes to Live
in Texas
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What is the Family Security Index?

• A market-basket approach to determine how much
  income working families require to meet their
  basic needs
• Provides a realistic, yet conservative, estimate
  of the income needed to support working families
  in Texas
• Uses most current available data to estimate the
  specific costs faced by families of various size
  and composition
• Documents variation in costs across different
  regions of the state

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Criteria

• Geographically specific
• 27 metropolitan statistical areas (MSAs) in
  Texas
• Variety of family types
• Two-parent, single-parent, children of different
  ages, and adult households without children
• Most conservative, yet realistic estimates the
  austerity check

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The Austerity Check

• Does not include the cost of video rentals,
  movies, cable television, eating out, other
  entertainment, or long distance telephone.
• Omits expenditures for birthday and holiday
  gifts.
• Does not include any expenses for credit card
  debt, or for saving to cover education,
  retirement, or family emergencies.
• Does not include cushion for emergency or
  unanticipated expenses (e.g., car repair)

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Family Security Index Budget Items

• Housing
• Cost of rent and utilities with exception of
  phone
• Food
• Monthly cost of food prepared at home
• Child Care
• Monthly cost of child care specific to age of
  child(ren)
• Medical
• Costs of total health care premium plus monthly
  out-of-pocket
• Transportation
• Gas, registration fees, taxes, routine
  maintenance, and loan payments
• Other Necessities
• Local phone, clothing, personal care,
  housekeeping, and reading supplies
• Payroll and Federal Income Tax
• EITC, Child Tax Credit, and Dependent Tax Credit

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The Austerity Check

• Families often remain on Section 8 waiting lists
  for several years before receiving housing
  assistance
• The Thrifty Food Plan assumes that families never
  purchase fast food or restaurant meals
• 5.5 million Texans, one-quarter of the
  population, were uninsured in 2003. Only 52
  percent of Texans receive health insurance
  through their employers (9 percent below national
  average).
• In all but one state, the yearly cost of full
  time child care exceeds annual public college
  tuition

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Monthly Expenses
FSI 2001
Housing 858
Food 418
Child Care 569
Medical 727
Transportation 391
Other Necessities 321
Monthly Expenses 3,284
(For a family of two adults and two children in
the Austin-San Marcos MSA)
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Federal Taxes
FSI 2001
Payroll Tax 251
Income Tax 298
Earned Income Tax Credit
Child Tax Credit (83)
Child Dependent Care Credit (80)
Taxes and Tax Credits 386
(For a family of two adults and two children in
the Austin-San Marcos MSA)
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What It Really Takes to Live in Austin
FSI 2001
Necessary Monthly Income 3,670
Necessary Annual Income 44,044
Household Hourly Wage
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Poverty Threshold 17,463
Percent Poverty Threshold 252
(For a family of two adults and two children in
the Austin-San Marcos MSA)
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What It Really Takes To Live in Texas
FSI 2001
El Paso 35,131
Laredo 35,530
San Antonio 37,300
Brownsville 37,558
Lubbock 38,288
Houston 40,669
Dallas 43,461
Austin 44,044
(For a family of two adults and two children)
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The Family Security Portfolio

• Community-specific and comprehensive approach to
  help families meet basic needs and build economic
  security
• Comprehensive set of services and programs to
  ensure the well-being of all working families in
  Texas, anchored by both private and public
  commitments
• Improved wages and benefits a key component of
  the Family Security Portfolio
• Family-based coordination of services from state
  and local government, non-profit service
  providers, faith-based organizations

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Whats Wrong with Income Inequality?

• All Americans should benefit from the nations
  economic growth.
• Widening gaps
• weaken our social fabric
• increase disparities in political influence.
• Studies have linked higher levels of inequality
  to poorer health and higher death rates.

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Aggregate Income Comparisons
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Average Income in Texas (2000 dollars)
Average income is post-tax, and includes the
value of the EITC, realized capital gains or
losses, and the cash value of food stamps,
subsidized school lunch, and housing subsidies.
Source Economic Policy Institute/Center on
Budget and Policy Priorities analysis of data
from the U.S. Census Bureaus Current Population
Survey
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Change in Average Income in Texas
Source Economic Policy Institute/Center on
Budget and Policy Priorities analysis of data
from the U.S. Census Bureaus Current Population
Survey
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Households with the Lowest Income Pay the Highest
Percentage in State and Local Taxes
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(No Transcript)
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The Widening Gap

• Over the past two decades, the benefits of
  economic growth have disproportionately favored
  the wealthiest 20 of Texas families.
• Very high income families have benefited most
  the incomes of the richest 5 of families grew
  more than five times as fast as the incomes of
  the poorest 20.
• In the early 1980s, the incomes of the richest
  fifth of families were 6.2 times those of the
  poorest families. By the early 2000s, this ratio
  was more than eight to one.

Source Economic Policy Institute/Center on
Budget and Policy Priorities analysis of data
from the U.S. Census Bureaus Current Population
Survey
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How Does Texas Stack Up?

• Income inequality between the top 20 of families
  and the average middle-income family is greater
  in Texas than in any other state.
• Texas is the second worst among states with
  respect to inequality between the best-off and
  poorest families.
• Average income in the top fifth is 8.1 times
  greater than the average income in the bottom
  fifth compared to
• the U.S. average of 7.3
• and a ratio of 5.2 in the state with the least
  income inequality.

Source Economic Policy Institute/Center on
Budget and Policy Priorities analysis of data
from the U.S. Census Bureaus Current Population
Survey
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Deuteronomy 811-20

• 11 Take care that you do not forget the LORD
  your God, by failing to keep his commandments,
  his ordinances, and his statutes, which I am
  commanding you today. 12When you have eaten your
  fill and have built fine houses and live in them,
  13and when your herds and flocks have multiplied,
  and your silver and gold is multiplied, and all
  that you have is multiplied, 14then do not exalt
  yourself, forgetting the LORD your God, who
  brought you out of the land of Egypt, out of the
  house of slavery, 15who led you through the great
  and terrible wilderness, an arid waste-land with
  poisonous snakes and scorpions. He made water
  flow for you from flint rock, 16and fed you in
  the wilderness with manna that your ancestors did
  not know, to humble you and to test you, and in
  the end to do you good. 17Do not say to yourself,
  My power and the might of my own hand have
  gained me this wealth. 18But remember the LORD
  your God, for it is he who gives you power to get
  wealth, so that he may confirm his covenant that
  he swore to your ancestors, as he is doing today.
  19If you do forget the LORD your God and follow
  other gods to serve and worship them, I solemnly
  warn you today that you shall surely perish.
  20Like the nations that the LORD is destroying
  before you, so shall you perish, because you
  would not obey the voice of the LORD your God.