The EITC, or Earned Income Tax Credit, has been known for over thirty years to be one of the more successful anti-poverty programs in the nation. The tax relief program is geared toward only workers earning income below a certain income threshold and is responsible for delivering much needed tax refunds to workers, who in turn use this money for medicine, rent, school supplies and food. Every year many people who are eligible for the tax credit in the U.S. and L.A. County fail to claim it, leaving behind billions in uncollected money. According to a 2008 research brief by the United Way of Greater Los Angeles, one in five taxpayers in L.A. County claimed the EITC in the 2006 tax year- that is, 750,000 taxpayers in L.A. County. These residents received a total of 1.5 billion dollars in refunds. Where does all this refund money go? What are the implications when eligible people don’t claim the refund and in essence, ‘leave it on the table’?

A new report by the New America Foundation examines the consequences. Money that is not claimed is never spent on local businesses, which in turn never create new jobs that could have been.  In addition, potential local tax revenue from this forgone economic activity is never generated. The report does an excellent job of highlighting how we are all in the proverbial “same boat.” Even if you are not low income, and not receiving the tax credit, your community still benefits by the infusion of cash coming into your business, your neighborhood and in your infrastructure via tax revenues generated.

Among some of the findings:

• L.A. County left over 370 million dollars in unclaimed refunds in year 2006. This meant a loss of over 440 million dollars to the economy in foregone sales.
• Over 2,700 jobs were not created due to this loss to the economy. This translates into over 123 million dollars in forgone wages.
• The EITC is particularly important in L.A. County because it has a higher level of poverty than the state and the nation- nearly 40% are considered low income. L.A. County has a lower median income compared to other large metro areas, and has a higher proportion of minorities (a constituency which claims the EITC in no small numbers).

If poverty prevention as well as alleviation is to be a public policy goal for our communities, then EITC expansion and funding for capacity and outreach is vital.  To learn about EITC outreach efforts in Los Angeles, visit http://www.greaterlaeitc.org/.

Winners and losers will, of course, be decided on the soccer pitch, but how would these countries fare if their success were based on how well they meet the needs of their residents? The Human Development Index (HDI) is a widely used measurement of the quality of life in countries around the world. Using the HDI as a proxy for how countries would perform the World Cup (i.e. the country with the higher HDI wins each game), matchups in the second round would include (see table at the bottom for the most recent HDI for each of the countries in the World Cup, except North Korea):

Switzerland vs. Brazil
Italy vs. Japan
Portugal vs. Spain
Netherlands vs. New Zealand
Greece vs. Uruguay
Australia vs. England
U.S. vs. Germany
France vs. South Korea

Following the same logic, the quarterfinals matches would be:

Japan vs. Switzerland
Greece vs. Australia
France vs. U.S.
Netherlands vs. Spain

Australia would beat Japan in one semifinal and Netherlands would squeak by France in the other.

In the final, Australia would win over the Netherlands, giving the Socceroos their first World Cup title.

While Australia has been improving in recent years, I think I speak for most fans of the beautiful game in concluding that it’s a good thing that the HDI doesn’t determine the results on the field. Brazil, certainly one of the favorites to raise the cup, is ranked 23rd in HDI among the countries in the World Cup. Ivory Coast, with one of the lowest HDI rankings in the world (163rd out of 182), is the top team in Africa and a leading candidate to stage some major upsets.

While human development levels may be somewhat predictable and unsurprising, sport can be thoroughly unpredictable. Global inequalities persist, but soccer is the great equalizer.

Human Development Index for World Cup 2010 Countries

Source: Human Development Report 2009

In this vein, TIME’s recent cover story describes “What’s Still Wrong with Wall Street.” Allan Sloan writes:

Welcome to Round 2 of Main Street vs. Wall Street. The divide is the worst I’ve seen in my 40 years of writing about finance. In a new TIME poll, 75% of the respondents say they believe Wall Street will revert to business as usual, 67% want the government to force pay cuts, and 59% want more government regulation.

Main and Wall are never going to love each other. And they probably shouldn’t, because their interests aren’t identical. But if we’re going to get through this mess as a society and regain our prosperity, Main Street and Wall Street need to understand each other. And they don’t.

(To see some interesting poll data, as well as a telling graph from Thomas Piketty and Emmanuel Saez’s research on income inequality, check out the PDF version of the article.)

Sloan concludes with four ideas for fixing the disconnect, the first two geared toward policy makers, the latter two directed to you and me.

1) Break up institutions that are too big to fail so that we can allow them to fail.
2) Tell the truth, and play it down the middle.
3) Put not your faith in the Fed or Uncle Sam.
4) And for heaven’s sake, don’t put your faith in Wall Street.

To reinforce these points, I might add that Nancy Gibbs’s article in the same issue on “The Case for Modesty, in an Age of Arrogance” should be required reading for all of us.

Well, according to the 2009 Greater Los Angeles Homeless Count – released today – it hasn’t. The 2009 figure – 48,053 persons homeless in Los Angeles County every night – represents a 38% decline from the 2007 count. This is actually part of a trend over the past four years, as shown in the following chart:

When the 2007 numbers came out lower than 2005, a common justification was that the count became more precise as the methodology improved, implying that the earlier count wasn’t as accurate. Having been briefed on this year’s methodology, I agree that the 2009 count is the most reliable we’ve had yet. But, it still begs the question of whether we’re really seeing declines. As one news article characterizes it, “whether the drop was real or the by-product of fuzzy math in previous years, is hard to say.”

Leaders in Los Angeles are trying to frame the results in the positive, claiming that the decline is the result of increased public and private efforts to house the homeless. As Michael Arnold, Executive Director of LAHSA, stated in reaction to the numbers, “We know, we can sense, we can feel that there’s a change out there. These numbers provide us with some documentation, that things are really happening in Los Angeles.”

As I’ve written about before, there has been real, quiet progress in addressing homelessness in Los Angeles. That work is to be applauded. At the same time, we shouldn’t forget that we still have tens of thousands of people in Los Angeles who will sleep on the streets today. We still have plenty of work to do.

A new report from the LA-based Economic Roundtable attempts to meet those needs by providing a wealth of the most recent data on how the current recession is affecting everything from employment, income, housing, poverty and health in Los Angeles and the state. Using historical data on recessions and employment projections from respected forecasters, the report produces estimates for how residents will fare over the coming years. If you are interested in where we’ve been and could be going, check out Ebbing Tides in the Golden State: Impacts of the 2008 Recession on California and Los Angeles County.

In general, the report sees conditions continuing to worsen over the next year but then starting to improve steadily by 2011 or 2012. It even provides estimates of how much poverty and homelessness will increase or decrease. Are these accurate? Of course there is no way to know. As the Nobel Prize laureate physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” At the very least, Ebbing Tides in the Golden State provides an important overall understanding of how deep the recession is affecting us.

We hear nearly everyday about the growing number of foreclosures in our country, particularly in boom-and-bust markets like Los Angeles. This chart provides a historical picture that shows what a unique moment we are in.

In the last LA housing bust during the early 1990s, foreclosures doubled from under 15,000 in 1992 to over 33,000 in 1996 and 1997.   As the economy boomed, the number of foreclosures declined steadily to under 1,000 by 2005.  That eight-year decline was reversed in three quick years, with 2008 skyrocketing to nearly 40,000 foreclosures.

The early part of this decade looks like a nice, slow coast downhill.  Too bad we didn’t put on the brakes; maybe we could’ve avoided this current steep uphill climb.

The UCLA Institute for Democracy, Education, and Access (IDEA) has been tracking the state of California’s middle and high schools for years, pointing to the overall appalling outcomes for students and “opportunity gap” between the primarily higher-income white schools and primarily lower-income African American and Latino schools.

IDEA’s latest California Educational Opportunity Report highlights the latest trends.

• California ranks near the bottom of states in terms of education in many categories: 48th in 4th grade reading level, 47th in 8th reading level, 46th for 4th grade mathematics, and 45th for 8th grade math level.
• For those students who started 9th grade in California in 2003, just 65% graduated four years later, just 25% graduated ready for college, and just 14% were in a Cal Sate University or University of California campus a year after graduation. The outcomes for African Americans and Latinos are even worse.
• California ranks among the bottom three states in numbers of students for every school counselor, in student-teacher ratios, and average high school class size.

Besides just the normal misery index of data, the report provides insights from focus groups with parents of public school students throughout the state. One mother shared:

“Years ago when I was in elementary school, California was one of the leading states in education. Now it’s at the bottom. I look at the opportunities that are there now versus what used to be and it’s just sad, it’s not there anymore.”

Just as sad is the fact that while these opportunities aren’t there for most people, they are for a select few. Another mother in one of the focus groups confessed:

“I agree with everybody as far as the gloom, but…I got lucky [with my children’s school]…It makes a big difference where the school is.”

It shouldn’t matter where the school is, or if you are rich or poor, white, African American, Latino, or Asian. These problems and trends, of course, aren’t unique to California: schools across our nation are failing our students.

As a parent of two children in a public elementary school – in Los Angeles Unified School District, the second largest district in the nation with a myriad of problems – I obviously care about the state of our education. But, I contend that even those who have kids in private schools or don’t have kids in school at all should be very concerned as well.

If this current economic crisis has taught us anything, it has shown how fragile our economic system is, a system that depends on innovation to compete in a global marketplace, but in an ethical, sustainable way. A big wave of highly-skilled baby boomers will be retiring over the next couple decades, and we need to replace them with a prepared workforce that can help our economy not implode like it has over the last few months. Businesses need skilled employees, we all need doctors, teachers and other public servants. Where are we going to find these workers? They’re in our schools today, so we better invest in them to increase equal opportunity to raise the level for all our students.

Postscript: In today’s LA Times, Michael Hiltzik contends that cuts to the university systems in California are undermining the state’s economic future.

Obviously, it isn’t doing well, as evidenced by the latest job figures. Several years ago, I created the Quality of Life Index to track socio-economic conditions in Los Angeles, and I was struck at the relatively low unemployment figures (around 5%). How could this be in an area with such high levels of poverty? The problem then wasn’t finding work; it was finding work that paid a decent wage. Well, that’s changed today, and unfortunately not for the better. As this chart shows, unemployment is up overall in the U.S., but it is rising even faster in LA, now approaching 11%, double what it was just 14 months ago.

Unemployment in the U.S. and L.A. County January 2000 - January 2009

With all this bad news, those who can are saving more. As Justin Fox explored recently in an interesting essay in Time Magazine, this thriftiness can be damaging in the short term, though it is still important in the long term (if we’ve learned anything from this crisis, that is). I’ll try to do my part in helping out retailers when I can, while at the same time heeding wise words from Fox’s column:

Don’t spend more than you make. Don’t buy things you don’t need. Save for a rainy day. Saving stimulates investment. Careful stewardship of resources brings prosperity. Frugality is its own reward.

* In Denver, nearly 30% of the homeless are newly homeless.

* Massachusetts reports that number of families living in shelters has risen by 33% in the past year.

* The Iowa City school district (where I attended, by the way) is reporting a sharp increase in the number of homeless students living in the district. There were 354 homeless students in the 2007-2008 school year, up from 279 in 2006-2007, and from 234 the year before that.

NLCHP is also tracking the implications of the recently passed American Recovery and Reinvestment Act for the poor. As outlined below – and at http://www.nlchp.org/news.cfm?id=83 – there are some significant resources in the bill to help the most vulnerable as part of the recovery. The key now, as with the stimulus bill over all, will be spending those resources wisely and being able to show that they led to economic recovery.

Homeless Prevention
* $1.5 billion to the HUD Emergency Shelter Grant Program
* $100 million to the FEMA Emergency Food and Shelter Grant Program

Food Assistance
* Food stamp benefits will increase by approximately 13%. This increase will phase out over time.
* $100 million for formula grants to states for elderly nutrition services, including Meals on Wheels
* $150 million for the Emergency Food Assistance Program to purchase commodities for food banks

Education
* $70 million for the Education for Homeless Children and Youth Program

Disability Payments
* Supplemental Security Income (SSI) beneficiaries and veterans receiving disability benefits or pensions from the VA will receive a one-time payment of $250.

Unemployment Benefits
* Increases unemployment benefits by $25 per week
* Continues the extended unemployment benefits program until December 2009 (the program was due to expire in March 2009). The extended unemployment benefits program provides up to 33 weeks of extended benefits.

Earned Income Credit and Child Tax Credit
* Provides additional tax credit to families with three or more children and decreases the marriage penalty for the tax credit
* Decreases the annual income required to claim the Child Tax Credit from $8,000 to $3,000

Assistance to Persons Fleeing Domestic Violence
* $50 million to the transitional housing program authorized by the Violence Against Women Act to assist individuals and families fleeing from domestic violence

A recent commentary on Spotlight on Poverty and Opportunity (which, by the way, is a great resource for a wide range of resources and opinions on addressing poverty) by Rebecca Blank and Robert Kerr called “Poor Measurement” succinctly summarizes some of the limitations and current efforts to improve how we measure poverty. (A longer explanation of their argument is in “Improving the Measurement of Poverty,” a Brookings publication). As the authors point out, the official methodology in the U.S. does not adequately account for how employment and households have changed since the 1960s when it was first developed, nor does it account for regional differences in the cost of living (i.e. the income needed to be out of poverty is the same in Beverly Hills as in rural Alabama).

The good news is that there is a clear blueprint for creating a more accurate methodology for measuring poverty, recommended by an expert panel by the National Academy of Sciences (NAS). The bad news is that this panel made its recommendations in 1995 (no, that is not a typo) and still there has been no official change made by the federal government. Researchers and policy makers looking for more precise numbers on poverty have devised alternative methods for estimating poverty (e.g. using a ratio such as 200% of the federal poverty line). New York City has even moved forward on doing its own calculations, based on the NAS recommendations. Federal legislation has been introduced in Congress to implement the NAS recommendations, and Blank and Kerr suggest the Obama administration could make the change administratively without legislation.

So, what’s the hang up? Certainly part of the problem is that such an alternative measurement would certainly increase the number of people defined as living in poverty. I remember a “West Wing” episode several years ago in which the administration was considering revising the poverty methodology to give a more accurate picture of how many and who was living in poverty. But in the end they decided against it because the political advisers said that President Bartlet (played by the great Martin Sheen) would be known as the leader on whose watch the numbers of people living in poverty increased substantially overnight.

Well, poverty is certainly going to swell over the next couple years no matter what, so perhaps this is the perfect time politically to change how we measure poverty. Besides, with a clearer understanding of who is poor, hopefully we can be smarter about how best to help them get out, and stay out, of poverty.