proto-image

istock photo

Assault on the Middle Class

Sunday, August 5th, 2012 

This is the first of three excerpts from the "Betrayal of the American Dream," being co-published by the Investigative Reporting Workshop and the Philadelphia Inquirer. The fourth installment will feature a Q&A with the authors on solutions.

Prologue

"The Betrayal of the American Dream" is the story of how a small number of people in power have deliberately put in place policies that have enriched themselves while cutting the ground out from underneath America’s greatest asset — its middle class.

Their actions, going back more than three decades, have relegated untold numbers of American men and women to the economic scrap heap — to lives of reduced earnings, chronic job insecurity and a retirement with fewer and fewer benefits. Millions have lost their jobs. Others have lost their homes. Nearly all face an uncertain future.

Astonishingly, this has been carried out in what is considered the world’s greatest democracy, where the will of the people is supposed to prevail. It no longer does. America is now ruled by the few — the wealthy and the powerful who have become this country’s ruling class.

This book tells how this has happened, who engineered the policies that are crippling the middle class, what the consequences will be if we fail to reverse course and what must be done to restore the promise of the American dream.

We have been reporting and writing about middle-class America for many years. In our 1992 book, "America: What Went Wrong?" we told the stories of people who were victims of an epidemic of corporate takeovers and buyouts in the 1980s. We warned that by squeezing the middle class, the nation was heading toward a two-class society dramatically imbalanced in favor of the wealthy.

At the time, the plight of middle-class Americans victimized by corporate excess was dismissed by economists as nothing more than the result of a dynamic market economy in which some people lose jobs while others move into new jobs — “creative destruction,” it was called. Soon, they said, the economy would create new opportunities and new jobs. We said, Don’t believe it.

What happened to the middle class in the 1980s and early 1990s wasn’t just a blip, but part of a disturbing pattern: a shift by Washington away from policies that had built the American middle class and enabled successive generations to do better than their parents, in favor of policies that catered to Wall Street, corporate chieftains and America’s wealthiest citizens. We wrote:

Popular wisdom has it that the worst has passed, that it was all an aberration called the 1980s. Popular wisdom is wrong. The declining fortunes of the middle class that began with the restructuring craze will continue through this decade and beyond.

Chapter 1: Assault on the Middle Class

Her name was Barbara Joy Whitehouse, but everyone called her Joy, and after you met her you knew why.

barbara_whitehouse

Photo published by the Salt Lake Tribune 2007

Barbara Joy Whitehouse

She was 69, and though hobbled by ill health, her eyes sparkled and she wore a smile. A wisp of a woman who had probably never weighed a hundred pounds, she radiated dignity and resolve.

Joy lived in a small home in a community called Majestic Meadows, a mobile-home park for seniors just outside Salt Lake City. In her backyard was a shed that was filled with used aluminum cans — soda cans, soup cans and vegetable cans — that she had collected from neighbors or found alongside roadways.

Twice a month she took them to a recycler who paid her as much as $30 for her harvest of castoffs. When your fixed income is $942 a month, as hers was, an extra $30 here and there makes a big difference. After paying rent, utilities and insurance, Joy was left with less than $40 a week to cover everything else. So the money from cans helped pay for groceries as well as her medical bills for the cancer and chronic lung disease she had battled for years.

“I eat a lot of soup,” she said.

As a young woman, Joy never dreamed that her later years would be spent this way. She and her husband had raised four children in Montana, where he earned a good living as a long-haul truck driver. But in 1986 he was killed on the job in a highway accident attributed to faulty maintenance on his truck. It happened during a period when his company was struggling to survive the cutthroat pricing that Congress legislated when it deregulated the trucking industry.

After her husband’s death, Joy knew that her future would be tough, but she was confident that she could make ends meet. After all, the company had promised her a death benefit of $598 every two weeks for the rest of her life — a commitment she had in writing, one that was a matter of law.

She received the benefit payments for four years. Then the check bounced. A corporate-takeover artist, later sent to prison for ripping off a pension fund and committing other financial improprieties, had stripped the business and forced it into U.S. bankruptcy court. There the pension obligation was erased by members of Congress who had passed laws allowing employers the right to walk away from agreements with their employees. In a country that once prided itself on creating a level playing field for everyone, those same members of Congress preserved the right of executives in those same companies to keep all their compensation, and even to raise it substantially.

To support herself, Joy sold the couple’s Montana home and moved to the Salt Lake City area, where she had family and friends. With her savings running out, she applied early for her husband’s Social Security at a reduced rate. She needed every penny. For health reasons, she couldn’t work. In addition to lung disease that kept her tethered to an oxygen tank part of the time, she’d been further weakened by battles with uterine and breast cancer.  

Her children and other relatives offered to help with expenses, but Joy, fiercely independent, refused. Friends and neighbors pitched in to fill her shed with aluminum.

“You put your pride in your pocket, and you learn to help yourself,” she said. “I save cans.”

Joy’s story may sound like an isolated case of bad luck, but in one respect she vividly demonstrates what many other middle-class Americans experience these days. Thanks to Washington, Wall Street and the ruling class, our economic security has been taken away. The good-paying jobs that underpinned a way of life have been replaced by part-time or minimum-wage jobs, if there are jobs at all.

As steady work disappears, more and more people work under contracts, wages go down, and, of course, some have no work at all. Benefits that middle-class Americans paid for through reduced wages, benefits that promised to make their lives more secure, have been canceled.

And the worst is yet to come, as the privileged and their associates in Congress prepare to initiate slash-and-burn policies, beginning in 2013, to balance the budget — largely on the backs of the working middle class. That’s when people will learn that they are expected to work until at least the age of 70, assuming that they can find employers willing to hire them at that age and that they are healthy enough to handle full-time employment. At the same time that the government is requiring people to work until they are 70 before retirement benefits are available to them, for most working people, 50 is all too often the new 65 when it comes to employment opportunities for anyone who wants to do anything other than become a greeter at Walmart.

The ills of today’s economy are explained away by the privileged as nothing more than ongoing fallout from the recent recession. All will be better, they insist, when the economy recovers. They said the same thing 20 years ago when they attributed the economic failings of the early 1990s to a recession. The recession was not why the middle class was declining then. Nor is it now. The causes are deeper. The joblessness, foreclosures and implosion of retirement savings that came into sharp focus after this last recession are no more transitory today than they were in 1992. The attack on the middle class goes back long before that.

For decades, Washington and Wall Street have been systematically rewriting the rules of the American economy to benefit the few at the expense of the many — putting in place policies that have steadily dismantled the foundation of America’s middle class.

The financial deregulation that enriched Wall Street and triggered the Great Recession was just the latest in a long series of moves by the economic elite to consolidate their control of the American economy. They have:

• Created a tax system that is heavily weighted against the middle class  

• Deregulated sectors of the economy, and in so doing, killed jobs or lowered wages for employees across entire industries, such as airlines and trucking

• Ignited in the financial sector a wildly speculative run-up in mortgage-backed securities of little value that imploded in the 2008–2009 recession

• Encouraged corporations to transfer jobs abroad and eliminate jobs in this country to bolster the value of stock, increase dividends and boost executive compensation

• Enabled companies to eliminate positions and replace permanent employees with contract workers at lower pay and with no benefits

• Allowed multinational corporations to shelter profits overseas and avoid paying taxes on earnings that could be used to help stimulate jobs at home

• Forced 11 million people with mortgages that exceed the value of their homes to make monthly payments to the banks that caused the housing collapse — a debt they will never be able to pay off

• Refused to support the growth of new industries that could generate jobs for the future

The future looks bleak for all but the richest Americans if these policies don’t change.

Indeed, it’s grimmer than Washington is saying. A majority of the new jobs being created are at the bottom of the wage scale.

And there are still not enough. We are in the fourth year of unemployment hovering above 8 percent. In April 2012, it was 8.2 percent, or 12.7 million men and women out of work. The last time we were in this situation was during the Great Depression. In 1982–1983, unemployment was above 9 percent for those two years, before dropping back into the 7 percent range. But the unemployment number the news media parrots is a Washington spin figure. The real number of people without work is north of 22 million. Think of it as the entire population of New York City and the surrounding suburbs, all looking for a job.   Begin with the basic unemployment figure of 12.7 million. Add to that the people who were working part time because they could not find full-time jobs, or who were forced into working less: 7.7 million. Now unemployment is 20.4 million. Finally, toss in another 2.4 million people officially identified as “marginally attached to the labor force” — those who had looked for a job in the past year but not in the month before the federal survey, partly because they were discouraged.

Grand total: 22.8 million in need of a job — or nearly double the official unemployment total.

Low-income households see little growth over the years

While household incomes at the top increased by more than half since 1967, wages on the lower end of the scale barely budged. Low-income households in 2010 brought in only 17 percent more than low-income households in 1967.

Source: Investigative Reporting Workshop research based on U.S. Census Bureau data
Graphic by Madeline Beard, Investigative Reporting Workshop

These figures will take on new meaning in 2013, when Congress begins to mindlessly — and needlessly — wield a meat axe to government spending. Not that spending should be allowed to continue unchecked. There are many areas where it should be reduced. But the spending that should be curbed won’t be. Rather, lawmakers will pretend, as they have for several years, that spending must be slashed to bring down the deficit. Even Social Security will be on the chopping block. So, too, health care. What they really mean is the ruling class is getting ready to squeeze working people even more.

What will this mean for middle class Americans and retirees like Joy Whitehouse?

For Joy it won’t matter. Barely able to afford minimal medical care and enough food to stay alive, she continued to maintain her independence as best she could — collecting empty cans by the side of the road until her strength gave out and she died.

For the rest of us, think of it as the end of a broad-based middle class in America.

Donald L. Barlett and James B. Steele have been working with the Investigative Reporting Workshop for the last two years to publish new stories about ongoing economic hardships on working Americans. These stories, coupled with new material and additional research, are now part of a new book, "The Betrayal of the American Dream," available Aug. 1 nationwide.

Barlett and Steele are contributing editors at Vanity Fair magazine. They have worked together for four decades, first at The Inquirer (1971-1997), where they won two Pulitzer Prizes and scores of other national journalism awards, then at Time magazine (1997-2006), where they earned two National Magazine Awards, and since 2006 at Vanity Fair. They also have written seven books, including the New York Times No. 1 best-seller "America: What Went Wrong?" — an expanded version of the original 1991 Philadelphia Inquirer series of the same name. Both live in Philadelphia. You can email the writers at info@barlettandsteele.com.

What Went Wrong

Donald Barlett and James Steele are revisiting America: What Went Wrong, their landmark 1991 newspaper series, in a new project with the Investigative Reporting Workshop. Over the next year, the project team will examine how four decades of public policy has shaped America's ongoing economic crisis.

Issues

Back Story

The authors talk about What Went Wrong

Donald Barlett and James Steele talk about the project, and why they decided to revisit a book they wrote two decades ago, in a series of video clips produced by the Workshop.

Nation's Story

Who pays the taxes?

Who pays the taxes?

We feature charts, maps, photos and other visualizations that reflect the state of the economy as part of our What Went Wrong project. This column chart shows the growing disparity between what individuals and corporations pay in taxes. In the 1950s, the difference was 22 percent. Recent figures show the difference is 62 percent.

Rags to rags: Economic mobility hard to come by

New Pew Center on States report confirms that moving up the American economic ladder is difficult, even though most people have more income than their parents.

Homelessness takes it toll on Florida's youngest

Florida, as a center of the housing boom, still struggles to recover from the Great Recession. Financial stresses and widespread foreclosures have placed families in precarious situations, resulting in a spike in child homelessness. Susannah Nesmith reports in the Broward Bulldog.

Older workers face challenges in Silicon Valley

An advanced degree and experience in the tech sector should be a ticket to a job in today's economy. But older workers in the heart of the new economy, Silicon Valley, are finding their resume is not the issue. Aaron Glantz reports in The Bay Citizen.

 Subscribe to the RSS Feed

Read an Excerpt

The Betrayal of the American Dream on Google Books

The Betrayal of the American Dream on Google Books

Check out the first chapter of Barlett and Steele's 2012 book here.