Who Stole the American Dream?

by Hedrick Smith

  “The H-1B visa program is riddled with loopholes and is in need of serious reform,” Senator Grassley declared. “Senator Durbin and I have been highlighting fraud and abuse within the H-1B program for years…. It’s time we get the program back to its original intent where employers use H-1B visas only to shore up employment in areas where there is a lack of qualified American workers.”

  Rand: No High-Tech Skills Gap

  Grassley threw the spotlight on the central question: Is there, in fact, a genuine shortage of qualified American professionals, as industry spokesmen claim?

  During the feverish dot.com boom in the late 1990s, as the H-1B program was gaining momentum, Norman Matloff, a professor of computer science with the University of California at Davis, debunked “the myth of a desperate software labor shortage.” Matloff provided figures to Congress showing ample pools of well-educated American job applicants at Microsoft, Intel, and other high-tech companies.

  High-tech industry claims were even more sharply challenged during the long, slow “jobless recovery” after the dot.bom bust and the 2000–2002 recession. In 2004, Rand, the California research giant, did a detailed study and rejected high-tech industry claims of a “skills gap.” Rand asserted that there was no gap—no evidence of a shortage of highly qualified people in science, technology, engineering, and mathematics (STEM). “We find neither an inadequate supply of STEM workers to supply the nation’s current needs, nor indications of shortages in the foreseeable future,” Rand stated.

  Another study in 2009 by Rutgers University, the Urban Institute, and Georgetown University found that the STEM pipeline from American universities to high-tech industry was working well. In fact, this study charged that the high-tech industry’s off-shoring strategies were causing some of the personnel problems that industry was complaining about. By giving good jobs to foreigners, the study asserted, U.S. high-tech companies made themselves look less attractive to the most promising American students.

  American universities, the Rutgers study asserted, “graduate many more STEM students than are hired each year…. The problem may not be that there are too few STEM qualified college graduates, but rather that STEM firms are unable to attract them.” Some of the best math and science students were choosing other careers, Rutgers reported, because they offered higher pay, better prospects for advancement, and more job security, and the other careers were “less susceptible to offshoring.”

  Faced with strong evidence that the skills shortage had been exaggerated by industry, Congress dropped the quota on H-1B visas to sixty-five thousand a year in 2004 but created a special category of twenty thousand more visas for foreign students studying in American universities and transitioning to the U.S. high-tech sector. Despite the change in law, the numbers of foreign workers on either H-1B, B-1, or L-1 visas remained high.

  To try to curb the importing of foreign workers, Senator Charles Schumer proposed in August 2010 to more than double the H-1B visa fees to $3,750 a head. The New York Democrat lauded companies such as Oracle, Cisco, and Apple for using the H-1B visa program as intended and then sharply attacked firms that violate the spirit of the law by operating “a glorified international temp agency for tech workers.” Schumer claimed that he was not trying “to target Indian companies,” but to penalize firms whose business model was built around importing H-1B workers—a description that mostly fit Indian companies and a few American firms that copied the Indian business model.

  As Congress passed Schumer’s legislation, the Indian IT industry, treating Schumer’s bill as a salvo at them, protested that the United States was violating international trade practices. Jeya Kumar, CEO of a top Indian IT company, said that raising the visa fee would “erode cost arbitrage” and force changes in the operations of “Indian offshore providers.”

  “Exactly,” Schumer shot back. “That is what we want.”

  But the higher visa fees have had only modest impact, and the fundamental reform pushed by Senators Chuck Grassley and Dick Durbin to overhaul the H-1B program, clamp down on low pay and other abuses, and improve protections for American workers has been tied up in congressional deadlock. Their bill, strongly opposed by the high-tech industry, has been bottled up for more than three years.

  One potentially helpful step, taken by Congress in late 2011, was to eliminate the annual limits on green cards for foreigners who want to work and live permanently in the United States and become tax-paying U.S. citizens, not foreign nationals taking both American wages and taxes abroad. Over time, this step could ease some of high-tech America’s demand for H-1B visas. But much broader reforms are needed to stop foreign “body shops” from undercutting the jobs of American middle-class professionals and to recoup one million jobs already lost to foreigners.

  EIGHTEEN MONTHS BEFORE PUBLIC ANGER boiled over at congressional gridlock on the deficit in August 2011, Senator Evan Bayh of Indiana gave public voice to what angers so many Americans today about Congress—it operates like a dysfunctional family.

  “The people’s business is not being done,” Bayh declared in February 2010. Congress suffers from multiple pathologies, he said, and he ticked them off: “strident partisanship, unyielding ideology, a corrosive system of campaign financing, gerrymandering of House districts, endless filibusters, holds on executive appointees in the Senate, dwindling social interaction between senators of opposing parties and a caucus system that promotes party unity at the expense of bipartisan consensus.”

  It is a list worth rereading. It spells out, item by item, what ails the machinery of our democracy and stands in the way of fixing the nation’s most pressing problems.

  The surprise was not in what Bayh said, but who said it and what he was doing about it. Evan Bayh was no stranger to the Washington power game. He grew up in politics. His father, Birch Bayh, held the same Senate seat from Indiana from 1968 to 1980. Evan Bayh entered politics young and rose fast: governor at thirty-four for two terms, then senator for two terms. In 2008, at fifty-four, he was prominent enough to make the short list of potential running mates for Barack Obama.

  By 2010, he was a moderate, centrist Democrat with a shot at the presidency if he stayed in the political game. But Evan Bayh was so sickened by the partisan gridlock and inertia on Capitol Hill that he announced he was quitting the Senate—giving up his political career in Washington.

  CHAPTER 18

  THE MISSING MIDDLE

  HOW GRIDLOCK ADDS TO THE WEALTH GAP

  Over the past thirty years, the parties have deserted the center … in favor of the wings…. First, at the level of individual members of Congress, moderates are vanishing. Second, the two parties have pulled apart.

  —NOLAN MCCARTY, KEITH T. POOLE, AND HOWARD ROSENTHAL,

  Polarized America

  It’s the incredible shrinking middle.

  —FORMER SENATOR JOHN BREAUX,

  Louisiana Democrat

  There are still times when you get Democrats and Republicans talking to one another. But in public settings, no. They are teams and they are at war. You don’t fraternize with the enemy.

  —TOM MANN,

  Brookings Institution

  WHAT MADE EVAN BAYH’S INDICTMENT of political Washington so striking was his description of personally witnessing the Senate decline.

  At one time, he recalled, the Senate had functioned well as a legislative body because a bipartisan atmosphere made compromises possible. People found ways around roadblocks. But in recent years, Bayh said, the Senate was so marked by partisan acrimony that it was frequently paralyzed by the refusal to compromise or by a small group of senators who threatened to filibuster and talk a bill to death. “Just one or two determined senators can stop the Senate from functioning,” Bayh said.

  As a boy whose father was a senator—Birch Bayh, a progressive Democrat from Indiana—young Evan Bayh remembered a different political climate in the 1960s and 1970s. He saw his father enjoying friendships with senators of sharply different views—Republicans
and conservative southern Democrats. Their social mingling and personal ties, Bayh said, had lubricated the process of government. Personal chemistry often created a way out of political deadlocks.

  “Members of Congress from both parties, along with their families, would routinely visit our home for dinner or the holidays,” Bayh recalled. “This type of social interaction hardly ever happens today and we are the poorer for it. It is much harder to demonize someone when you know his family or have visited his home. Today, members routinely campaign against each other, raise donations against each other and force votes on trivial amendments written solely to provide fodder for the next negative attack ad. It’s difficult to work with members actively plotting your demise.”

  By contrast, he recalled an episode in 1968, when his father was seeking reelection. “Everett Dirksen, the Republican leader, approached him on the Senate floor, put his arm around my dad’s shoulder, and asked what he could do to help,” Bayh recalled. “This is unimaginable today.”

  Today, ideological purists dictate “all or nothing” tactics, Bayh said. They see “compromise [as] a sign of betrayal.” Gridlock reigns. Little gets done.

  The Last Straw

  For Bayh, the last straw—the action that finally provoked him to quit—was the Senate’s rejection in January 2010 of a proposal for a bipartisan task force to bring the Congress a blueprint for an up or down vote on how to get the deficit under control. A Senate majority actually voted in favor of the commission, 53–46, but the vote failed because, under Senate rules, passage required sixty votes—a filibuster-proof supermajority.

  The margin of victory, the seven missing votes, had evaporated at the eleventh hour, Bayh noted, “for short-term political reasons.” The commission had been born as a bipartisan idea, with fourteen Republican and eleven Democratic co-sponsors, Bayh among them. President Obama had initially reacted coolly, but when he belatedly endorsed the bill, seven previously enthusiastic Republicans switched sides—six of the GOP co-sponsors plus Senate minority leader Mitch McConnell. Previously, McConnell had ardently endorsed the plan. It was, McConnell said, “the best way to address” the budget crisis. “It deserves support from both sides of the aisle,” McConnell had declared, chiding President Obama for hesitating to back it.

  But when the president endorsed the bill three days before the vote, McConnell switched sides. Outsiders were astonished. “It’s impossible to avoid the conclusion that the only thing that changed … is the political usefulness of the proposal to McConnell’s partisan goals,” wrote Fred Hiatt, editorial page editor of The Washington Post. “He was happy to claim fiscal responsibility while beating up Obama for fiscal recklessness. But when Obama endorsed the idea … and when the commission actually, against all odds, had the wisp of a chance of winning the needed 60 Senate votes—McConnell bailed.”

  Health Care Bills, Then and Now: The Vanishing Middle

  The past few years have seen a siege of partisan conflict. But it would be hard to find a more vivid contrast between the politics of then and now, between the mid-1960s and today, between the bipartisan politics of middle-class power and the partisan ferocity of the New Power Game, than the votes on major health care legislation in 2010 under President Obama and in 1965 on President Johnson’s proposal for Medicare.

  The debate in each case was furious. While liberals and moderates urged a broad new government insurance program as a safety net for the needy, conservative opponents ran angry newspaper ads with dire warnings that the new health program would lead to rationed care and a dangerous tide of “socialized medicine.” Business groups charged that patients would lose “the freedom to choose their own doctor” and that Washington bureaucrats would intrude on “the privacy of the examination room.” The hyper-rhetoric was the same in 1965 as in 2010.

  In 1965, with Congress considering the first significant expansion of the government’s social safety net since Franklin Roosevelt’s New Deal of the 1930s, it was the strong centrist vote, the pivotal middle ground in Congress, that carried the day.

  When the votes were tallied, 65 Republicans joined 248 Democrats to give Medicare a huge 313–115 majority in the House. In the Senate, 13 Republicans joined 57 Democrats for a 70–24 majority. Yes votes were cast by some of the most prestigious Republican moderates in Congress—Senators Jacob Javits of New York, Clifford Case of New Jersey, Hugh Scott of Pennsylvania, Leverett Saltonstall of Massachusetts, Margaret Chase Smith of Maine, George Aiken of Vermont, Everett Dirksen of Illinois, John Sherman Cooper of Kentucky, and Thomas Kuchel of California.

  In 2010, the vote on Obama’s health care plan—to extend health insurance to thirty-two million financially strapped Americans and to prevent insurance companies from barring coverage for average Americans with preexisting medical conditions or charging them steep fees—was sharply partisan. There was no middle ground. No moderates offered a compromise bill, as Republicans had done in 1965. GOP opposition was monolithic in 2010. Even the few Republican moderates toed the party line, though the Obama bill was a less ambitious expansion of government-backed health care than the health reform proposed by Republican Richard Nixon in 1974.

  Facing a wall of Republican opposition, the Obama White House had to make concessions to pro-business conservative Democrats and independents to piece together enough votes for passage. Senator Joe Lieberman of Connecticut extracted a White House promise to kill “the public option,” a government insurance program that was anathema to the private insurance industry. In the end, a watered-down health care bill barely scraped through.

  Significantly, the final vote did not bring closure. With today’s sharp ideological schisms, no issue is ever settled. Every issue is forever in dispute. When the new Congress convened in January 2011, House Republicans set out to repeal, defund, and cripple not only the new health program, but other new Obama initiatives, such as the bill establishing the Consumer Financial Protection Bureau. That did not happen in the era of powerful centrist politics. Laws were enacted and Congress moved on.

  Bipartisanship Has Helped Both Parties

  Government worked better when bipartisan collaboration was the norm. Republican presidents benefited as well as Democrats—Dwight Eisenhower in the 1950s and Richard Nixon in the 1970s.

  As a Republican from Kansas dealing with a Democrat-controlled Congress, Eisenhower regularly shared drinks of bourbon and branch water at the White House with Lyndon Johnson, then the Senate Democratic majority leader, and with House Speaker Sam Rayburn. Ike’s openness was reciprocated. Once, when the archconservative Senate Republican leader William Knowland of California left his front-row seat and refused to floor-manage the passage of an Eisenhower foreign policy bill, Johnson took over and passed Eisenhower’s legislation—cross-party collaboration that is unimaginable today.

  Although Nixon won the presidency in 1968 by running as a conservative and forging a new Republican electoral base in the South, he governed more from the political center. His historic anticommunism, pursuit of the Vietnam War, and strong law-and-order stance at home won favor with conservatives. But his governmental activism won favor with liberals. He took strong government action in the economy, imposing wage and price controls, taking America off the gold standard, and shocking balance-the-budget conservatives with the surprising admission “I am now a Keynesian,” meaning that he supported deficit spending to stimulate the economy. On Capitol Hill, Nixon’s environmental, consumer, and regulatory legislation won strong bipartisan support, as did his modest expansion of Social Security, his tax increases on the wealthy, and his novel idea of guaranteed income for the poor.

  When Johnson was in the worst jams of his political life, he often turned to Republicans for help—and got it. Right after John F. Kennedy was assassinated in Dallas on November 22, 1963, Johnson made one of his first phone calls, as the newly sworn-in president, to Eisenhower, asking for help and advice. Ike promised to meet him in Washington the next day and delivered an eight-page memo that Johnson use
d as a blueprint in his early months.

  On the most contentious legislation, such as the Civil Rights Act of 1964, Johnson reached across the aisle to the Senate Republican leader, Everett Dirksen of Illinois, for help in breaking a determined filibuster by southern Democrats. With that kind of bipartisan cooperation, Johnson and Kennedy compiled the most productive legislative records during the half century from the end of World War II to the year 2000, according to an in-depth study of the work of each session of Congress.

  “The Pull to the Center”

  Perhaps the most compelling demonstration of bipartisanship came during the battles over the civil rights legislation in the mid-1960s. Without major Republican support, President Johnson could not have enacted those historic laws.

  The pivotal figure was Senate Republican leader Everett Dirksen. From his long years in the Senate, Johnson understood the political risk of his taking on the entrenched southern Democratic barons of the Senate, especially his old mentor Senator Richard Russell of Georgia, on civil rights. Johnson saw Dirksen and the Republicans as the key. He needed to harness them to a bipartisan coalition.

  As a business-friendly midwest conservative, Dirksen initially opposed a new law and regulations requiring desegregation of hotels, restaurants, and public accommodations. But patiently, methodically, Johnson worked on Dirksen. Bill Moyers, then LBJ’s press secretary, recalled seeing Johnson grab a New York Times article reporting that in 1964 racial segregation was still increasing in the South. He scribbled, “Shame, Shame, Shame,” on it and sent it to Dirksen. As longtime friends, they would sit together at the White House for a quiet drink in Johnson’s small private room just off the Oval Office, where the president would josh and cajole Dirksen. He worked on Dirksen’s pride in America, arguing that the time had come to grant Negroes their rights and that Dirksen, as a patriot, should support that goal.