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 Response Page - Coggins Interview -      
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These comments are responses to the statements listed below,
which were generated in regard to the 
Jay Coggins  Interview of
07-11-2014.
 

Does income inequality retard economic growth, reduce competitiveness?

OVERVIEW

Economic inequality in Minnesota and the United States continues to grow, says Jay Coggins of the University of Minnesota. He co-authored a 2013 Growth and Justice report that makes the case that those at the very top of the income scale are pulling away in income growth, while middle-class income stagnates and poverty rates increase. Coggins argues that current levels of income inequality threaten overall economic growth, both nationally and in Minnesota.

 

Minnesota is richer in income than the national average and has less income inequality than the U.S. as a whole, according to Coggins. But that advantage is slipping. He notes that there are counties in Minnesota where inequality is as high as in Mississippi, which is among the most unequal states in the country. Minnesota's state and local taxes are more regressive than federal taxes, but less regressive than most other states' taxes.

 

Coggins argues that part of the job and skills mismatch problem that helps contribute to income inequality is due to inadequate financial support for the preK-12 school system. And he contends that the corporate world could help the middle 80 percent of people (by income) by once again paying for on-the-job training for its employees.

 

Coggins and his report co-authors conclude that increases in inequality are not inevitable. They recommend development of an "Economic Inequality Impact Assessment" to determine the economic inequality impact of new government policies, legislation or regulations before they go into effect. 

For the complete interview summary see:  Coggins interview

Response Summary: Average response ratings shown below are simply the mean of all readers’ zero-to-ten responses to the ideas proposed and should not be considered an accurate reflection of a scientifically structured poll.

To assist the Civic Caucus in planning upcoming interviews, readers rated these statements about the topic on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

1. Topic is of value. (7.8 average response) The interview summarized today provides valuable information or insight.

2. Further study warranted. (7.2 average response) It would be helpful to schedule additional interviews on this topic.

Readers rated the following points discussed during the meeting on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

3. Income gap restrains growth. (6.8 average response) Growing income differences between the richest and poorest individuals in the United States act as a restraint on economic growth.

4. MN advantages have lessened. (7.3 average response) While such differences are less in Minnesota, and the state's median income is above the national average, these advantages have diminished since 2000.

5. Consider effect on income inequality. (6.8 average response) Just as we weigh environmental impact, proposals for legislation and regulations in Minnesota should be analyzed to see whether they would lessen, accentuate, or be neutral relative to income inequality.

6. Limit CEO pay and increase estate tax. (5.1 average response) Proposals by economist Joseph Stiglitz to limit CEO pay and restore a meaningful estate tax should be enacted.

7. Strengthen opportunities for the poor. (6.5 average response) Improving access to education, strengthening social protection programs and removing barriers to unionization would help people at the low end.

8. Keep income gap out of policy-making. (3.9 average response) Instead of the measures outlined above, it's probably best to keep the question of income differences out of public policy changes and let the competitive economic system handle the problem on its own.

 

Response Distribution:

Strongly disagree

Moderately disagree

Neutral

Moderately agree

Strongly agree

Total Responses

1. Topic is of value.

9%

0%

13%

30%

48%

23

2. Further study warranted.

9%

4%

22%

22%

43%

23

3. Income gap restrains growth.

17%

0%

13%

39%

30%

23

4. MN advantages have lessened.

9%

0%

18%

41%

32%

22

5. Consider effect on income inequality.

17%

4%

9%

30%

39%

23

6. Limit CEO pay and increase estate tax.

30%

13%

9%

22%

26%

23

7. Strengthen opportunities for the poor.

14%

14%

5%

41%

27%

22

8. Keep income gap out of policy-making.

41%

14%

14%

9%

23%

22

Individual Responses:

Ray Ayotte  (7.5)  (2.5)  (7.5)  (7.5)  (7.5)  (5)  (7.5)  (7.5)

Jim Olson  (10)  (5)  (5)  (7.5)  (5)  (2.5)  (7.5)  (5)

2. Further study warranted. Much of the publications on this subject are less capable of definitive answers, including the matter of transfer payments.

3. Income gap restrains growth. The differences between the top 1% and the bottom group are interesting, but ignore the vast majority of capacity to spend.  Also other studies on the impact of a change in minimum wage laws indicate that about half of those households classified as in poverty do not have anyone in the household employed.

 5. Consider effect on income inequality. What is the cost-benefit score for such added research in the present stage of research and knowledge in this area?

6. Limit CEO pay and increase estate tax. The 1986 income tax law placed a limit on CEO pay, except for incentive pay. This helped create the problem of "high" CEO pay.  It's too easy to evade these restrictions.

Anonymous   (10)  (7.5)  (7.5)  (7.5)  (10)  (7.5)  (10)  (2.5)

Chris Wright  (10)  (10)  (10)  (10)  (10)  (10)  (10)  (0)

2. Further study warranted. It would also be helpful if we talked about taking back the money power.  Debt is not money, money is money, but all money is created as debt through the fractional reserve private banking system.  As people take out loans the money supply increases.  When banks restrict credit the money supply decreases as loans are paid off.  If all loans were paid off, there wouldn't be any money. The awesome power to create money should not be allowed for private gain, but should be the exclusive right of a sovereign people.

3. Income gap restrains growth. When most of the money supply is in the hands of the rich few, it doesn't get spent into the economy and economic growth declines.  Likewise, when most of the money supply is in the hands of the many, money gets spent into the economy, economic growth increases. But try to get Republicans to understand that the rich are not job creators; demand, meaning money, creates jobs.

7. Strengthen opportunities for the poor. H.R. 2990, The NEED Act, introduced by Dennis Kucinich in 2011 would have forbidden private banks from creating money and would have had a monetary authority in the U.S. Treasury spend money into the economy on education, healthcare and infrastructure at the rate of 0% inflation. In addition, the act would have provided interest-free money to federal, state and local governments. All the barriers outlined above would be eliminated if we ended our debt money system, which creates money out of nothing as debt, but doesn't create the interest necessary to pay back the loan.

8. Keep income gap out of policy-making. I'm sure the bankers and corporate monopolies that hate economic competition would love that.

Michael Martens  (7.5)  (7.5)  (5)  (7.5)  (10)  (0)  (0)  (0)

3. Income gap restrains growth. I read that the technology of the Industrial Revolution was largely in place in the first 25 years. But it took 150 years for the middle class to benefit in the 1950s.  How does the Information Revolution compare to this? It would be helpful to compare how income inequity increased in the initial 25 years of the Industrial Revolution with how income inequity has increased during the Information Revolution. The Baby Boomers have been referred to as "Me Generation."  That certainly seems true of the financial top 10% not caring for the other 90%.

7. Strengthen opportunities for the poor. Improve access to education especially for adult learners so they can start new or change careers. Rather than increase spending on Anti-Poverty programs, the EIC( (Earned Income Credit for the working poor) should be expanded especially for single parents and families. People don't have to sign-up for any programs or meet special qualifications, etc. They just have to be working & poor. Keep it simple.

8. Keep income gap out of policy-making. A new income tax rate should be established for single earning over $250,000 and couples earning over $500,000 at 55%. Everyone with gross income over $150,000 should be required to pay income tax of at least 10% of gross income with only allowances for medical expenses or causality losses over 20% of gross income.

Dave Broden  (7.5)  (5)  (7.5)  (10)  (7.5)  (0)  (5)  (7.5)

1. Topic is of value. Good dialogue but nothing unique or new; reasonable status of Minnesota but not linked well.

2. Further study warranted. Interesting topic and certainly front and center now. However is this really the issue or the result of other issues?

3. Income gap restrains growth. This is likely valid but how the data is compiled and used can drive the outcome and more is needed to sort out the levels at the top and bottom, not just refer to richest and poorest. What is the distribution and impact? I agree the issue is real, but the economy is shifting. How do we deal with that?

4. MN advantages have lessened. A valid and important point that we need to better understand and build on.

5. Consider effect on income inequality. Some legislation, yes; other items, no. How we do this could evolve into government making market decisions and that is not the role of government. If the issue is education, then yes; if regarding economic development incentives, no.

6. Limit CEO pay and increase estate tax. This is a political question and not appropriate for the Civic Caucus to make a statement [about]. Such legislation will not solve the issues at all. We need to educate, train, and create jobs …that aid those [about whom] we are concerned. Legislating to penalize the [beneficiaries] may seem good and may be a signal, but it will not solve.

7. Strengthen opportunities for the poor. This question is also a bit political. "Barrier to Unionization" does not fit with education and social protection. The unionization topic should be a open discussion on its own by the organizations who are focused on this topic. The value and purpose of unions have changed as the economy has changed; [we] need to consider that as we move ahead.

8. Keep income gap out of policy-making. Income differences should be part of the public policy debate but actions must be a balance between [the] economic system and government actions. Many of the above statements were a bit biased for balanced discussion.

Dave Durenberger  (10)  (10)  (10)  (7.5)  (7.5)  (2.5)  (7.5)  (0)

8. Keep income gap out of policy-making. If possible, an intellectual forum which can cut thru the "on the one hand and on the other" of opinion economics and apply results to pre-agreed areas of public policy should be considered.

Peter Toensing  (10)  (10)  (7.5)  (10)  (10)  (7.5)  (7.5)  (0)

David Dillon  (0)  (0)  (0)  (5)  (0)  (0)  (0)  (10)

Phil Kinnunen  (7.5)  (10)  (0)  (0)  (0)  (0)  (7.5)  (10)

1. Topic is of value. It just scratched the surface of the issue.

3. Income gap restrains growth. In reality the two are not connected, but only a popular talking point among people who think they have a right to dictate how much money someone else should make.

5. Consider effect on income inequality. In the interest of equality, all income levels should be taxed at the same rate; then we would be on the road to equality.

6. Limit CEO pay and increase estate tax. There surely are adjustments that could be made in the way that CEO pay is set, a very closed circuit of corporate boards; however, estate taxes are fundamentally wrong in that taxes have already been paid on that money by the person that earned it in the first place.  Again, in the interest of equality and fairness, how would it be fair and equal to have to pay taxes on this estate again?

7. Strengthen opportunities for the poor. One of the problems with our society is the creation of too many safety nets in the form of "social protection programs".  Programs need to be in place for those that truly need help and have no where else to turn, however, there is a growing percentage that are becoming more and more dependent upon government help that only has to do with their unwillingness to work, nothing to do with income inequality.

8. Keep income gap out of policy-making. This has been proven time and again over the years, the list of failed government attempts to "fix things" keeps growing, i.e., social security, Medicare, boarder security, military sexual assault reforms and the list goes on.  Let capitalism work without excessive government interference; there might be hard times, but eventually corrections are made when the crows come home to roost.

Scott Halstead  (10)  (10)  (10)  (10)  (10)  (5)  (7.5)  (0)

6. Limit CEO pay and increase estate tax. CEO pay is a national issue.  If our income and estate tax rates are excessive, businesses will relocate to other states, as will wealthy individuals.

8. Keep income gap out of policy-making. The nation [has] to deal with this issue.

Dennis L. Johnson  (7.5)  (10)  (5)  (7.5)  (10)  (0)  (2.5)  (10)

1. Topic is of value. Did Coggins ever look at how the highest, say, 10% use their income? Do they invest to create more jobs and wealth for the middle class? Do they spend their income on personal goods, which also creates jobs? Or do they lock it up in a vault? This study is incomplete until these aspects are looked at also.

2. Further study warranted. Does the study indicate the tremendous amount of income in the form of transfer payments of all kinds (welfare, Social Security, food stamps, tuition aid, aid to dependent children, aid to the disabled, and other forms), which bring nearly 50% of the population to depend on government?

3. Income gap restrains growth. Incompleteness of the study makes this question impossible to answer.

4. MN advantages have lessened. Perhaps because the highest income levels reside in other states?

5. Consider effect on income inequality. The study is far too incomplete to draw such conclusions.

6. Limit CEO pay and increase estate tax. Excessive interference with the free market.

7. Strengthen opportunities for the poor. Access to education is generally more than adequate. Too many do not take advantage of these opportunities; first come up with a solution for that. Social protections programs are more than adequate, consuming a great percent of the national budget with very few checks and limitations on gaming the systems. Unionization is obsolete; people are now hired for their skills, not as human mule laborers.

8. Keep income gap out of policy-making. Couldn't agree more. Our rate of growth and opportunity was highest when controls were fewest. The economy is now stagnant due to excessive controls and interference by governments at all levels.

Bright Dornblaser  (10)  (10)  (10)  (10)  (10)  (10)  (10)  (0)

Don Anderson  (5)  (5)  (10)  (7.5)  (7.5)  (7.5)  (10)  (5)

Bob Willow  (10)  (10)  (10)  (10)  (10)  (10)  (10)  (0)

John Milton  (10)  (10)  (10)  (0)  (10)  (10)  (10)  (0)

I suggest that everyone read Thomas Piketty’s book on inequality.

Wayne Jennings  (10)  (10)  (9)  (9)  (8)  (10)  (9)  (1)

Joe Nathan  (8)  (5)  (8)  (na)  (5)  (6)  (na)  (na)

The Minnesota legislature made funding all day kindergarten for every district a far higher priority than funding high quality early childhood education for students from low income and limited English Speaking families.  Every youngster, no matter how affluent the family, now has access to all day kindergarten.  Less than 20% of students from low-income Minnesota families have access to strong early childhood education programs.

With support from Growth and Justice, African American Leadership Forum, Migizi Communications, Organizing Apprenticeship Project, Minnesota Association of Alternative Programs, Minnesota Business Partnership, Minnesota Chamber of Commerce and the Center for School Change, there was an attempt to change Minnesota's Post Secondary Enrollment Options law in 2014, removing the "Gag Rule".  This rule prevented colleges and universities from telling students they could save money by participating in Post Secondary Enrollment Options. However several statewide school "leadership" organizations (Superintendents, Secondary Principals and School Boards) fought vigorously against this - though school districts constantly tell students they can save money by participating in AP, IB and College in the Schools Programs.

Ultimately the Minnesota House and Senate conference committee and the full House and Senate agreed with the broad coalition and eliminated the "gag" rule.  But the "leadership" organizations continued resisting.  Senator Baak sided with these groups and demanded that there be change, so now colleges and universities are only allowed to tell students attending high schools enrolling 700 or more students, grades 10-12, that they can save money via PSEO.

Let's be clear: the secondary principals, school boards and superintendents are fine with exercising free speech about saving money via courses offered in high schools, but strongly resisted allowing that same freedom for colleges

Moreover, the University of Minnesota, where this professor works, has steadily restricted PSEO.  At one time it was open to students regardless of grade point average to take at least one course.  Now the University of Minnesota restricts it to a small percentage of those who apply and does not allow students with a low GPA, who might do well in one or two courses, to participate, despite the fact that some of the most successful PSEO students 20 years ago were such students

So money can help make a difference...but so can more openness to free speech and making research-based efforts (like high quality early childhood education for children from low income families) a higher priority.

Chuck Lutz  (9)  (8)  (9)  (10)  (8)  (10)  (9)  (0)

Tom Spitznagle  (5)  (7)  (7)  (5)  (3)  (4)  (2)  (5)

1) Based on the statistics presented by various sources over the years, there does not appear to be any shortage of public school funding, at least not in Minnesota.  If there are concerns about the effectiveness of public schools then there are plenty of other aspects about the current public school system, focusing instead on how effectively the current funding is employed, that should be examined.  2) The significant loss of well-paying manufacturing jobs to other countries, once a significant path to the middle class, especially for those without a college degree, would seem to be a major factor in growing income/wealth inequality.  Free trade laws, championed by both major parties, have been responsible for this unfortunate situation.  3) Liberal social policies at the Federal level (over a period of decades) intended to eliminate barriers to home ownership by virtually eliminating normal banking practices that require meeting certain financial qualifications for home loans backfired totally – the resulting recent financial collapse caused a significant loss of wealth and income by the middle class – ironically the group that these ill-conceived policies were supposed to expand in size.  4) Ever expanding social safety net programs seem to be inadvertently locking too many into low-income situations.  Those that avoid this trap and instead continue working and educating themselves will leave those dependent on government welfare programs in the dust, thereby adding to the wealth/income gap.  5) Demographic effects of the large baby boom generation leaving the workforce will further exacerbate the income/wealth gap. 6) Although the compensation of many executives is entirely too generous, fixing this situation legislatively probably won’t have much of an impact on the income/wealth gap.

Terry Stone  (5)  (5)  (0)  (5)  (0)  (0)  (2)  (10)

Of course the rich keep getting richer. They keep doing what they do; work hard and put capital at risk to create both wealth and jobs. The poor keep living longer, gaining weight (Kim & Leigh, 2010) and enjoying a high standard of living while receiving increased public subsidy for food, transportation, education, healthcare, infra-structure and public safety

Mr. Coggins seems insufficiently unmoved to mention that starvation has been completely eliminated as a cause of death in the United States. The deadly serious matter of starvation has been replaced with the dubious term food insecurity in the progressive lexicon.

Coggins states that, “Economies with less income inequality grow faster; as income disparity grows, the overall economic performance (measured by growth in GDP) is degraded.” No causal relationship between income inequality and growth rate is supported.

Coggins evokes Joseph Stiglitz: “Stiglitz wants to help those not at the top, especially poor people, by ……… removing barriers to unionization”. The United States has an entire body of law dedicated to labor— and giving organized labor extraordinary freedom and power. Currently, in Minnesota, the biggest single increase in union dues in a century is taking place. A liberal House, Senate and governor handed the unions this gift of revenue by stretching the definition of employee beyond all reason and allowing an organizational vote on child care workers. These child care workers thought they were self-employed. Surely Stiglitz wasn’t suggesting that unions in the 21st Century United States lack public support.

Coggins seems to share the progressive compulsive concern for what others are earning. Changes in corporate governance have led to sharp increases in CEO-to-worker compensation ratios since 1990, reaching a peak of 411.3-to-one in 2000. "It used to be unseemly to take this much money from the company," Coggins said.

The amount received by a private sector CEO is of legitimate interest only to the equity investors of the corporation hiring that CEO. It’s far more troubling when a publicly subsidized corporation like Minnesota Public Radio has a CEO taking home $600,000.

Here is another troubling paragraph: “Part of the job and skills mismatch problem stems from not enough financial resources going into the preK-to-12 school system. I don't think we're doing enough to financially support our schools." Apparently, Jay Coggins chooses to ignore research that, within normal ranges, there is no relationship between money spent and academic outcomes. There is perhaps better support for an inverse relationship between money and graduation rates. Here in Minnesota, it is no secret that the poorest performing school district spends an additional $10,000 per student over the state average.

Coggins revisits the educational spending fallacy here under recommendations for state governments: “Increase funding to schools. "I really regret that we're not spending more on schools," he said. "There are not enough resources. The dollars per pupil are down and the demands placed on schools are up."

More and more school funding has become a shibboleth of progressives. (A special thanks to Mr. Coggins for not calling his spending ideas investments in this interview.) The education industry is the only component of U.S. society that has not allowed an order-of-magnitude-level improvement in efficiency due to the introduction of the computer. Educational facilities at all levels have bulked-up the front office even as academic quality plummets. Education in the U.S. has been inexcusably slow to maximize the benefits of distance learning. On-line courses at MnSCU actually cost more than attending class. Minnesota’s education system is based upon an old model where knowledge was rare and students would pay to sit in a room where there was a source of knowledge. Today, knowledge is everywhere including the smart phones students need to turn off upon entering the classroom. This creates a strange world in which students live in a world of unlimited knowledge, but step out of it and into a classroom where knowledge is restricted to a single idea at a time that is shared at a rate sustained by the lowest common denominator. Our 2,000-year-old idea of four walls and a teacher is hopelessly out of date. The idea that we should throw more money at it is misdirected.

The entire ideas of building a strong educational system to serve our state’s business needs must be re-examined. The traditional model has been a good one, but times have changed. We get a solid return on educational spending only when the graduates stay in Minnesota. This is increasingly unlikely. About 40 million people move annually in the US. Nearly 3/4 of the US population moves an average of once every 5 years. The higher the education, the more likely a graduate is to move (Pew Research). In spite of a recent lull due to the recession, the U.S. is the most mobile nation on the planet.

Although the idea will bring tears to a progressive’s eyes, higher education may be best left to states that do it efficiently. It may be most cost effective to send our students elsewhere for higher education and import the skills we need from other states.

Finally, this statement shows Mr. Coggins’ enthusiasm for throwing money at early learning: “Part of the job and skills mismatch problem stems from not enough financial resources going into the preK-to-12 school system.” Proponents of massive costly early learning initiatives ignore a good deal of research that shows such programs are a waste of taxpayer money. A 2010 study by the Department of Health and Human Services concluded that though there were modest benefits to participating kids, they soon evaporated. "The benefits of access to Head Start at age 4 are largely absent by first grade for the program population as a whole," it admitted. "For 3-year-olds, there are few sustained benefits." Studies showing a robust return on investment for early learning programs covered small, controlled studies where a truly stunning amount of money was spent per pupil. Head Start began with President Johnson’s War on Poverty as part of the Office of Economic Opportunity (OEO). While the other programs of the OEO are mostly long gone, Head Start seems to hang on simply because it seems so intuitive that spending money on early learning should work. If it did actually work, it would be one of the few government social programs that did.

Larry Schluter  (10)  (9)  (9)  (8)  (8)  (9)  (9)  (3)

Very good discussion that need to be done as well on the national level. 

Roger A Wacek  (0)  (0)  (0)  (5)  (0)  (0)  (0)  (10)

    

The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Interview Group  includes persons of varying political persuasions,
reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

  John S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill Frenzel, Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Ted Kolderie, Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman


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The Civic Caucus, 01-01-2008
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Dan Loritz, chair, 612-791-1919   ~   Paul A. Gilje, coordinator, 952-890-5220.

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