But instead that money has gone to the banks without any fundamental reform of the system, without any strings attached or edicts about how much they have to lend to help the real economy recover—or, indeed, without even having to tell us what they did with our money.
All across the country, the fiscal ax is falling. The devastation is in the details:
California is eliminating CalWORKS, a financial assistance program for families in need, a cut that will affect 1.4 million people, two-thirds of whom are children.15 This plan would also cut state subsidies for child care, affecting 142,000 children.
Minnesota has eliminated a program that provides health care to 21,500 low-income employed adults with no children.16
Rhode Island has cut health insurance for 1,000 low-income families.
Maine has cut education grants and funding for homeless shelters.
Utah has cut Medicaid for physical and occupational therapies, as well as for speech and hearing services.
Michigan, Nevada, California, and Utah have eliminated coverage of dental and vision services for those receiving Medicaid.
Alabama has canceled services that allow 1,100 seniors to stay in their own homes instead of being sent to nursing facilities.
Georgia has cut $112 million from an initiative designed to reduce the gap in funding between wealthy and poor school districts.
Arizona has cut cash assistance grants for 38,500 low-income families.
Virginia has decreased payments for people with mental retardation, mental health issues, and problems with substance abuse.
Illinois has cut funding for child welfare and youth services programs.
Connecticut has cut programs that help prevent child abuse and provide legal services for foster children.
Massachusetts is making cuts in Head Start, universal pre-K programs, and services to prepare special-needs children for school.
Keep in mind, all these services are being cut at a time when more and more people are finding themselves in need of them. It’s a perfect storm of middle-class suffering.
And yet the human consequences of the financial collapse are largely missing from our national debate. I’m referring especially to the people who had steady jobs; people with college degrees; people who were paying their bills, saving for retirement, doing the right thing—and who have, in many instances, lost everything. The daily miseries being visited upon them are unfolding across the country.
So why is there no sense of urgency coming out of Washington?
Perhaps the reason can be found in the stunning results of a study conducted by Northeastern University’s Center for Labor Market Studies that broke down the unemployment rate by household income.17 Unemployment for those making $150,000 a year, the study found, was only 3 percent in the last quarter of 2009. The rate for those in the middle income range was 9 percent—not far off the national average. The rate for those in the bottom 10 percent of income was a staggering 31 percent.
These numbers, according to the Wall Street Journal’s Robert Frank, “raise questions about the theory behind what is informally known as ‘trickle down’ economics, since full employment at the top doesn’t seem to be translating into more jobs below.”18
In fact, these numbers do more than raise questions—they also supply the answers.
Does anyone believe that the sense of urgency coming out of Washington wouldn’t be wildly different if the unemployment rate for the top 10 percent of income earners was 31 percent? If one-third of television news producers, pundits, bankers, and lobbyists were unemployed, would the measures proposed by the White House and Congress still be as anemic? Of course not—the sense of national emergency would be so great you’d hear air-raid sirens howling.
Instead we get policy Band-Aids—timid moves that will do little to abate a crisis that threatens to change the very fabric of our society. For much of our history, America was known for its promise of upward mobility. That promise has been called into question over the past three decades, and an extended run of high unemployment could be its death knell.
“These are the kinds of jobless rates that push families already struggling on meager incomes into destitution,” wrote New York Times columnist Bob Herbert.19 “And such gruesome gaps in the condition of groups at the top and bottom of the economic ladder are unmistakable signs of impending societal instability. This is dangerous stuff.”
The lack of urgency we are seeing in Washington—and the lack of focus on real people—is stunning considering that the consequences of our failed financial system are everywhere you look. Putting flesh and blood on the cold, hard statistics means putting the spotlight on the people whose lives were turned upside down as a result of our out-of-control financial system.
Ron Bednar and Mary McCurnin of Rancho Cordova, California, are a loving couple that got divorced last year, not because their relationship wasn’t working but because it was the only way to make ends meet. Due to unemployment and a bankruptcy caused by a prolonged illness, they found themselves with only $300 in the bank. By getting divorced, McCurnin was able to collect Social Security widow’s benefits from her first husband, who died in 1989. “We literally live from week to week,” she says.
Kimberly Rios of North East, Maryland, sold her wedding ring on Craigslist so she could pay her utility bills. “This is no joke, please be a serious buyer,” her ad read. “It is too cold for us to be without electric and heat so if you have been looking consider my deal.” After selling her ring, she locked herself in her bathroom, pretending to take a shower, so she could cry without upsetting her family. “I just felt like it was the last piece of what little I had left,” she says. “I came out smiling as usual and tried to get my husband and daughter excited that this was a good thing.”
Faye Harris was laid off from her accounting job at Emory University Hospital in Atlanta last year. She had been diagnosed with cancer and was fighting it successfully. But as soon as the time off she was guaranteed by the Family and Medical Leave Act expired, she received a letter of termination and her health insurance was canceled. “Do I just lie down and die? Am I not worthy anymore?” she asked herself. “I’ve worked all my life. Put myself through school, raised four children, played by the rules, saved money, and this one illness has just wiped me out.”
Ricky Macoy of Quinlan, Texas, is a fifty-two-year-old electrician who found himself among the long-term unemployed. With little work since late 2008, he began pawning his possessions, including his tools, and holding yard sales to get enough money to feed his family. “The thing that hurt the most was we had to hock my son’s PlayStation 3, his Wii, his electric guitar,” Macoy says. “We lived a good life. Middle-income America, man. I’m used to construction, the booms and the busts … [but] I was not expecting to be laid off this long.”
Heather Tanner of Pacifica, California, put herself through law school, working during the day and attending classes at night—dreaming of one day being able to move her family out of their apartment and buy a house. In August, she was laid off from her $100,000-a-year job as an attorney—and then struggled to find a new position. “I applied for jobs at Target, Macy’s, as a camp counselor,” she says. “I’ve been on many interviews, but the comments I get at nonlegal jobs are, ‘Why do you need this kind of job?’ I mean, I have a family to support.” She and her husband cashed in their 401(k)s and used their savings to pay off bills. “The kids don’t understand,” she says, explaining that the thing that hurt the most was having to disappoint her children when it came to things such as birthday visits to Disneyland the family could no longer afford. “I’d love to make their dreams come true, but right now we just have to focus on getting by.”
There are, sadly, millions of these stories. Stories crying out to be told. Stories that, if told often enough, will bring the human element to the fore of the debate—and grab the public’s imagination.
In the last chapter of Michael Herr’s Dispatches, he speaks of conventional journalism�
��s inability to “reveal” the Vietnam War: “The press got all the facts (more or less).…20 But it never found a way to report meaningfully about death, which of course was really what it was all about.” And Tom Wolfe, in “The Birth of ‘The New Journalism’: Eyewitness Report,” discusses conventional journalism’s inability to capture the turbulence of the 1960s: “You can’t imagine what a positive word ‘understatement’ was among both journalists and literati.…21 The trouble was that by the early 1960s understatement had become an absolute pall.” Well, it’s happening again—we are failing to capture the turbulence of our times with narratives that allow the public, and force our leaders, to connect with the pain and suffering that should be fueling the fight to change direction while there’s still time.
WORKING-CLASS SUFFERING MEETS REALITY TV
Before becoming prime minister of England, Benjamin Disraeli wanted to issue a wake-up call about the horrible state of the British working class. So, in 1845, he wrote a novel, Sybil, which warned of the danger of England disintegrating into “two nations between whom there is no sympathy … as if they were inhabitants of different planets.”22 The book became a sensation, and the outrage it provoked propelled fundamental social reforms.
In the nineteenth century, one of the most effective ways to convey the quiet desperation of the working class to a wide audience was via a realistic novel. In 2010, it’s through reality TV.
Now, I realize that most of what we are served up under that rubric is actually the farthest thing from reality. The exploits of Snooki, Jake the Bachelor, and all those Real Housewives hardly reflect life as most of America knows it and lives it.
The real America is hurting—not jetting off to an exotic location for “fantasy suite” canoodling. But no matter how sobering the statistics we are getting on a regular basis (and I’ll offer up some bracing ones in a moment), the hardships and suffering tens of millions of Americans are experiencing are almost entirely absent from our popular culture. This is a shame, because drama and narrative have the ability to move people’s perceptions in a way that raw numbers never can.
Enter Undercover Boss, the CBS reality show in which corporate CEOs don disguises and spend a few days experiencing what it’s like to be a low-level worker at their companies. It’s the kind of popular entertainment that can start out as one thing—a fun, high-concept reality show—but morph into something that affects the zeitgeist by shining a spotlight on just how out of touch America’s corporate chiefs are. And their cluelessness is not just about the jobs their workers do—it’s about the lives their workers lead.
Ever since Roseanne went off the air, the stories of working-class Americans have been all but invisible on network TV. But now, week in and week out, millions can see what downsizing and Wall Street’s demands for ever-greater productivity and earnings margins did to the lives of so many Americans, even before the economic crisis.
The chasm between America’s classes has reached Grand Canyon–esque proportions. Forty years ago, top executives at S&P 500 companies made an average of thirty times what their workers did—now they make three hundred times what their workers make.23 That’s the kind of statistic a show like Undercover Boss can bring to life. Here are a few others:
Between 2007 and 2008, more than 800,000 additional American households found themselves trying to make do on under $25,000 a year, bringing the total to nearly 29 million.24
In 2005, households in the bottom 20 percent had an average income of $10,655, while the top 20 percent made $159,583—a disparity of 1,500 percent, the highest gap ever recorded.25
In 2007, the top 10 percent pocketed almost half of all the money earned in America—the highest percentage recorded since 1917 (including, as Business Insider editor Henry Blodget noted, in 1928, the peak of the stock market bubble in the “roaring 1920s”).26
Between 2000 and 2008, the poverty rate in the suburbs of the largest metro areas in the United States grew by 25 percent—making the suburbs home to the country’s biggest and most rapidly expanding segment of the poor.27
Making matters even worse is the fact that while the classes are moving farther apart—with the middle class in real danger of disappearing entirely—mobility across the classes has declined. The American Dream is defined by the promise of economic and social mobility—but the American Reality proves just how elusive that dream has become. Indeed, Canada, Germany, Denmark, Norway, Finland, Sweden, and even the often-reviled France have greater upward mobility than we do.
Here are the numbers:
Almost one hundred million Americans are in families that make less in real income than their parents did at the same age.28
The percentage of Americans born to parents in the bottom fifth of income who will climb to the top fifth as adults is now only 7 percent.29
If you were born to wealthy parents but didn’t go to college, you’re more likely to be wealthy than if you did go to college but had poor parents.30
In other words, as the middle class is squeezed and more and more people are being pushed down, it’s becoming harder than ever to move up. In a study of economic mobility, Isabel Sawhill of the Brookings Institution and John E. Morton of the Pew Charitable Trusts wrote, “The inherent promise of America is undermined if economic status is—or is seen as—merely a game of chance, with some having the good fortune to live in the best of times and some the bad luck to live in the worst of times.31 That is not the America heralded in lore and experienced in reality by millions of our predecessors.”
And yet it’s certainly the reality being experienced now, and, at least in part, the reality being shown on Undercover Boss. Now, I’m not suggesting that the show is going to foment a working-class rebellion or directly lead to a raft of social reforms. But it might lead to a conversation we, as a nation, desperately need to have—especially in Washington.
Maybe if our elected representatives went undercover for a little while and experienced the reality of millions of American families that are measurably worse off because of Washington’s actions and inactions, we might get some real change.
MIDDLE-CLASS JOBS AND “THAT GIANT SUCKING SOUND”
Since the recession began in late 2007, we’ve lost more than 8.4 million jobs.32 Over 2 million of those were manufacturing jobs, the kind of jobs that have traditionally delivered American families into the middle class—and kept them there.33 We lost 1.2 million manufacturing jobs in 2009 alone.34 And while job numbers go up and down, the loss of these blue-collar jobs has been going on for decades.
In 1950, manufacturing accounted for more than 30 percent of nonfarm employment.35 As of last year, it’s down to 10 percent. Indeed, one-third of all our manufacturing jobs have disappeared since 2000.36 This devastating downward trend has contributed greatly to the erosion of the middle class.
There have been a number of recessions over the past few decades, and our economy has rebounded after each one. But each time it has bounced back in a way that made it harder for those in the middle class to stay there—and even harder for those aspiring to become middle class to get there.
The way that the useful section of our economy is being replaced by the useless section of our economy is rarely talked about in Washington. But the numbers don’t lie: The share of our economy devoted to making things of value is shrinking, while the share devoted to valuing made-up things (credit-swap derivatives, anyone?) is expanding. It’s the financialization of our economy.
According to Thomas Philippon, professor at New York University’s Stern School of Business, the financial industry made up 2.5 percent of America’s GDP in 1947.37 By 1970, it had grown to 4 percent. By 2006, just before the meltdown, it was 8.3 percent.
The trend is even starker when you look at the financial sector’s share of U.S. business profits. As MIT professor Simon Johnson recounted in the Atlantic, between 1973 and 1985, the financial industry’s share of domestic corporate profits topped out at 16 percent.38 In the 1990s, it spanned between 21 percent
and 30 percent. Just before the financial crisis hit, it stood at 41 percent.
That’s right—over 40 percent of the profits of the entire U.S. corporate sector went to the financial industry.39 James Kwak, coauthor of the Baseline Scenario, a leading blog on economics and public policy, explains why this is a problem: “Remember that financial services are an intermediate product—that is, we don’t eat them, or live in them, or put them on in the morning.40 They are supposed to enable a more efficient allocation of capital, so that the nonfinancial economy is more productive. But what we saw since the 1980s was the unmooring of the financial sector from the rest of the economy.”
In other words—it’s supposed to serve our economy, not become our economy.
The expansion of the financial industry has come at a significant cost to the rest of us. And those who have paid the highest price are the members—and former members—of America’s middle class. According to New York Times41 columnist Paul Krugman, “A growing body of analysis suggests that an oversized financial industry is hurting the broader economy. Shrinking that oversized industry won’t make Wall Street happy, but what’s bad for Wall Street would be good for America.”
It’s no wonder that Wall Street breathed a deep sigh of relief when the Senate passed the Restoring American Financial Stability Act in May 2010. It was considered mission accomplished for financial reform.
Unfortunately, it was more of a Bush 43 mission accomplished than an Apollo 13 mission accomplished. That’s because the bill passed by the Senate, like Bush’s ship-deck ceremony, was more notable for what it left undone.
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