Lumps of coal all around

It may be the holiday season, but the public mood is grumpy.

Californians are dispirited, especially about the state’s direction and their own pocketbooks as the inequality gap between haves and have-nots steadily widens.

Consider the views of people surveyed by the Public Policy Institute of California and reported last week:

— Two-thirds of voters believe the state is headed in the wrong direction. That’s up 11 percentage points from February.

— Despite signs of slow economic recovery in California, two-thirds of voters think the state is headed for bad times next year. Three times as many say they are worse off as say they’re better off than a year ago.

— Nearly half, 48%, of California adults count themselves among the have-nots; only 39% believe they’re haves . That’s a stunning switch from 2002, when just 32% thought they were have-nots and 60% felt they were haves.

“People are feeling pretty low about where they stand,” says Mark Baldassare, the policy institute’s president and pollster. “They’re not getting the kind of pay raises they’re used to….

“People who used to feel good about themselves now think they’re not doing that well — that the 1% is taking all the income gains.”

Californians aren’t being paranoid. There are good reasons for their sour dispositions.

The institute recently published a study on income distribution in California. “Not only has the income gap between lower- and upper-income families widened,” researchers wrote, “but the percentage of middle-income families has also continued to shrink.”

They reported that only 48% of California families can be considered middle-income, roughly seven points lower than the national average.

Another outfit, the California Budget Project, recently published a report called “A Generation of Widening Inequality” that detailed the yawning gap between rich and poor. The left-leaning group used government data.

Among the findings:

— More than one-third of California’s income gain between 1987 and 2009 went to the top 1%. Nearly three-fourths went to the top 10%.

— When adjusted for inflation, income fell 15% during that 22-year period for people in the middle fifth of earnings. It jumped 50% for the top 1%.

— In 2009, the last year for which numbers are available, the top 1% had an average income 33 times the middle fifth, a gap twice as large as a generation ago.

— Typical compensation for CEOs of large corporations, adjusted for inflation, skyrocketed from $1.8 million in the 1980s to $9.2 million in the first half of the 2000 decade.

— California has the seventh-widest gap between rich and poor in the nation (New York has the widest). The U.S. has the largest inequality gap of all the wealthy industrialized nations.

“America will have a hard time functioning if the inequality continues,” Gov. Jerry Brown told reporters last week in announcing nearly $1 billion in new state budget cuts.

“But reversing it [in] the face of globalization and technological innovation is difficult. And trying to do it through the tax code alone will not work.”

Later, I asked Brown to elaborate on why he believes it will be tough for the nation to function with mounting income inequality. “The idea of equality is the bedrock of democracy,” he said simply.

A diminishing middle class and a widening gulf between rich and poor threaten both democracy and capitalism.

Democracy requires at least the aura and potential of equality to foster civic participation and respect for institutions, something amiss today — government and Wall Street being particularly disrespected.

“When people feel they’re have-nots, I wonder what that does to the fabric of society,” Baldassare says.

Back in the Great Depression, it came close to creating a socialist revolution, many believe, before FDR offered economic stimulus and hope.

A stable middle-class is needed to sustain capitalism and the rich.

“Most companies sell to the mass market,” notes Steve Levy, director of the Center for the Continuing Study of the California Economy. “They can’t make it from just the top 1% or 10%, which is why demand is suffering and there’s no rush to build more appliances or homes.

“The concentration of wealth puts a crimp in demand.”

So what can be done in California to help revive the middle class and narrow the gap?

Start with educating students to better fit 21st century jobs and returning middle-class affordability to state universities. “Economic opportunity in the new economy is inextricably linked to education,” noted the policy institute’s report.

Make California business-friendly again by streamlining regulations and curtailing abuse of environmental protections by NIMBYs, labor unions and private sector competitors. Close wasteful corporate tax loopholes and substitute tax incentives that create jobs.

As Brown said, the inequality gap cannot be narrowed through the tax code alone — by imposing another millionaires’ tax. But he’s proposing to tax the rich anyway because that’s what the have-nots and unhappy haves are likely to vote for. Sock it to the top 1%.

The governor needs more tax revenue to balance the books without cutting deeper into government services, including education.

“The only tax that is overwhelmingly popular is the tax on wealthier people,” the governor observed.

But to make it “a more balanced program,” he also included in his proposed ballot initiative a half-cent sales tax increase.

“The electorate is frustrated, discontent, not too impressed by government at any level, which was true 30 years ago,” Brown said. “But I think it’s gotten worse.”

He’s right. The public is chanting bah, humbug.

george.skelton@latimes.com