The Betrayal of the American Dream
Page 22
Unless we do that, the story still playing out today across the United States will be repeated in some fashion in the years ahead when Wall Street cooks up its next great scheme. So far, more than 8 million homes are in some stage of foreclosure. Millions more are teetering on the edge. To hold down the number on the market, the government has authorized the bulldozing of empty houses.
As the housing market imploded and trillions of dollars in home equity vanished, millions of homeowners watched their most valuable asset disappear. In effect, that money was stolen by Wall Street with the touch of a keystroke. Two hedge fund managers alone made billions of dollars by betting the house of cards would collapse. So it wasn’t as if no one saw what was happening. The equity that went up in smoke was money the middle class and the working poor were counting on to pay medical bills, fund college tuition for their children, help aging parents, or support their own retirement. All gone.
Despite the literally tens of thousands of illegal acts committed throughout the years of the great swindle, not one corporate executive or Wall Street titan has been charged with a crime. Any reasonably curious prosecutor, who was so inclined, could start at the bottom and work his or her way up the food chain, beginning with all the statements attesting to the value of a mortgage applicant’s assets. It would have been rather easy since the paperwork was known laughingly across government, the banking industry, Wall Street, and the mortgage industry as “liar loans.” The people who arranged the mortgages were rewarded with oversized bonuses. So, too, their bosses. The phony loans then were packaged into securities sold by Wall Street, which started the process all over by attesting that they were of prime quality. The securities were peddled to investors who were suckered by Wall Street’s spiel. And on and on it went.
Law enforcement has been feeble; many prosecutors lack backbone, will, or imagination. This contributes to the pervasive attitude that for some the ordinary rules do not apply. Indeed, this is a pretty good definition of the ruling class: they can avoid the rules. Those who control the economy as well as the country implemented the doctrine of “too big to fail”: select corporations would not be subject to bankruptcy rules but would be bailed out by the taxpayers. The likes of Goldman Sachs and Morgan Stanley would have to be rescued—by the little people. The principle also has been established that government bailout money can be used to pay executive bonuses.
The “too big to fail” doctrine helped trigger the largest economic collapse since the Great Depression, yet inexplicably Congress left the principle intact. Given the right circumstances, another unsuspecting generation will be blindsided by another crash. There’s more. Congress bought into the idea that if select Wall Street firms and banks were too big to fail they also were too big to prosecute. Handing the moneyed a permanent “get out of jail free” card, Congress placed the ruling class as far above the laws of the land as they were above the laws of the market.
WILL THE MAJORITY RULE?
Most of the changes essential to restoring the American middle class require congressional support, but Congress has largely been on a thirty-year holiday from economic reality—at least as far as the middle class is concerned. Once in a while, however, even Congress has to come back to the people. Significant attempts to restore equity to the tax code by raising taxes on the wealthy will be met with cries of “class warfare,” and any effort to temper the power and tax exemptions of U.S. multinational corporations that would limit their ability to invest outside the United States and send jobs abroad is certain to be met by a ferocious lobbying assault in Washington. Corporations also will argue that the goods they import made by cheap labor will provide lower-priced consumer items for sale that are good for our economy. But what kind of a society will we have if low prices are the ultimate measure of its worth? A society built on the economic principle that the lowest price is all that matters will be quite different from a society built on the principle that everyone who wants to work should receive a living wage. By putting the emphasis on the lowest possible price, we have sacrificed other values that create a healthy, productive society.
For all this to change, the people will have to prevail. Middle-class Americans, still the largest group of voters, must put their own economic survival above partisan loyalties and ask four simple questions of any candidate who wishes to represent them:
1. Will you support tax reform that restores fairness to personal and corporate tax rates?
2. Will you support U.S. manufacturing and other sectors of the economy by working for a more balanced trade policy?
3. Will you support government investment in essential infrastructure that helps business and creates jobs?
4. Will you help keep the benefits of U.S. innovation within the United States and work to prevent those benefits from being outsourced?
The choices we make in the candidates we elect and the programs and policies we support will set the direction of the country.
Many Americans are determined to restore rule by the majority. Last year, after we published some of our preliminary findings about the economic state of the middle class, many citizens wrote to us to offer their views. One man called for a “nonviolent revolution by the middle class.” Another proposed a movement to turn everyone in Congress out of office. Still others, while acknowledging the gravity of the situation, also expressed hope, like this man from Illinois:
Our market power is now so diminished, and our indebtedness so exorbitant, that we may have few levers left. But it is never too late to reorient our thinking and to correct a sustained injustice to our citizens.
What’s at stake is not only the middle class, but the country itself. As the late U.S. Supreme Court justice Louis Brandeis once put it: “We can have concentrated wealth in the hands of a few or we can have democracy. But we cannot have both.”
APPENDIX
Richest Pay Less
Effective Federal Tax Rate for Top 400 Families, 1955–2007
Sources: Top 400, 1955 and 1961: Janet McCubbin/Fritz Scheuren, Individual Income Tax Shares and Average Tax Rates, IRS, 1988 and 1989; 1995–2007: IRS, Statistics of Income, “The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992–2007.” Research by Monica Arpino, Michael Lawson, Investigative Reporting Workshop
Graphic by Alissa Scheller, Investigative Reporting Workshop
The Real Deficit
U.S. global trade policies have wiped out millions of jobs and created a staggering trade deficit —the world’s largest. Our main trading partners all run trade surpluses.
Source: World Trade Organization Research by Monica Arpino, Michael Lawson, Investigative Reporting Workshop Graphic by Alissa Scheller, Investigative Reporting Workshop
Corporations’ Declining Share of the Tax Bill
Source: The President’s Budget for Fiscal Year 2012 Research by Monica Arpino, Michael Lawson, Investigative Reporting Workshop Graphic by Lisa Snider, Investigative Reporting Workshop
The Loss of Manufacturing Jobs
Manufacturing, once a path to the middle class for American families, made up only 9 percent of the workforce in 2011, an all-time low.
Source: Bureau of Labor Statistics Research by Monica Arpino, Michael Lawson, Investigative Reporting Workshop Graphic by Alissa Scheller, Investigative Reporting Workshop
ACKNOWLEDGMENTS
We owe a deep debt of gratitude to all the men and women we interviewed who gave so willingly of their time. They welcomed us into their lives, invited us to sit with them around their kitchen tables, allowed us to visit them at their places of work, or talked to us for hours by phone to tell us their stories. They are the heart of this book, and their resilience and fortitude have reaffirmed our faith in the American people. To each one, we extend our heartfelt thanks.
This book would not have come to pass in its present form without the support, encouragement, and research assistance provided by the Investigative Reporting Workshop at the American University
School of Communication in Washington, D.C. The Workshop is the creation of Charles Lewis, the preeminent figure in the ever-evolving world of nonprofit investigative journalism. We have known Chuck for many years, dating back to his days as founder and director of the Center for Public Integrity in Washington, and admire his courage, principles, and achievements. When we first discussed the idea of revisiting the story of what is happening to the American middle class, Chuck not only encouraged us to do so but suggested that we collaborate with the Workshop which could assist with research and provide a platform for our findings as well as for the work of others on the subject. Under Chuck’s direction, the Workshop launched a multimedia research and reporting project called “What Went Wrong.” It quickly became a research hub for information about the middle class and its website served as an invaluable vehicle for us and other writers to post the stories about working Americans. This fruitful collaboration with the researchers, writers, and producers at the Workshop produced a rich volume of journalism—more than forty multimedia stories alone in 2011—including work by us that ultimately became an important part of this book.
Many others at the Workshop deserve our thanks. Kat Aaron, the project manager for “What Went Wrong,” helped to direct the research and brought her own deep knowledge, compassion, and expertise to the subjects we researched. Her professionalism, commitment, and exceptional contributions to the entire venture are deeply appreciated. Lynne Perri, the Workshop’s managing editor, is as able, expert, and delightful a manager of a newsroom as you are likely to find—a wonderfully incisive editor and steadying influence. We would also like to thank senior editor Margaret Ebrahim for her excellent preliminary work in chiseling out from the vast themes we all followed a coherent story line that we hope will be the basis of a documentary based on this work. Senior editor Wendell Cochran, a longtime friend and fellow investigative reporter, provided ideas that were helpful in shaping the project. Thanks are also due to Barbara Schecter, the Workshop’s able development director. We had the benefit of working with the Workshop’s talented young staff, including Monica Arpino, Lydia Beyoud, Russ Choma, Jacob Fenton, Alissa Scheller, and Michael Lawson. Michael’s sensitive interviews greatly enriched this story by providing a deeper understanding of the challenges that many Americans face today.
Also at American University, we want to express our thanks to Larry Kirkman, dean of the School of Communication, whose support and encouragement for this venture from the start is deeply appreciated.
Our remarkable collaboration with the Workshop would not have been possible were it not for the generous support of the Nathan Cummings Foundation, the Deer Creek Foundation, the Otto Haas Charitable Trust, the Public Welfare Foundation and the Wyncote Foundation.
Additional research for the project was provided by Allison Steele, whom we would like to thank for her thoughtful and incisive reporting.
At PublicAffairs, we have been fortunate to work with an extremely talented group of professionals who have given us all the encouragement and assistance any authors could ever expect: Peter Osnos, founder and editor-at-large, who enthusiastically supported this book from day one and offered wise counsel at every stage; publisher Susan Weinberg, whose support and encouragement were unstinting; and editor Clive Priddle for his outstanding editing, his intellectual curiosity, and his ability to draw out of us information we didn’t even realize we had. We also want to thank three others at PublicAffairs who are emblematic of this deeply talented publishing house—Lisa Kaufman, Melissa Raymond, and Jaime Leifer.
We would also like to thank editors at the Philadelphia Inquirer, which copublished six articles we wrote for the Investigative Reporting Workshop: Stan Wischnowski and Rose Ciotta, who initiated the idea of copublishing with the Workshop, and Kevin Ferris, who shepherded the stories into print.
At the Wylie Agency, which has represented us for many years, we want to thank Jeffrey Posternak for his suggestions and his commitment to this book, as well as for his many courtesies and help through the years.
We are greatly thankful to Maxwell King, our former editor at the Philadelphia Inquirer, who was instrumental in helping to shape our 1991 series “America: What Went Wrong?” and who also urged us to write this book. Max gave a thoughtful, thorough reading of the first draft of this work and made his usual excellent suggestions, all the while offering his encouragement as we threaded our way through the thickets of trade and tax policy.
We would like to thank Martin Lobel, a Washington tax lawyer who for more than forty years has guided us through the labyrinth of the U.S. tax system, always with great patience and good humor.
And to Eileen Reynolds, who always asks the right questions.
Last, a special word of thanks to Nancy Steele, a superb editor who made important contributions to each stage of this project.
One final word: This book is another chapter in the continuation of a story we have been reporting and writing about for many years in newspapers, magazines, and books. Some of the individuals in this book have appeared in our previous work, but we have updated their stories to place them in the context of recent economic events. Staying in contact with some of them over the years has deepened our perspective about the plight of the middle class, which we have tried to convey in this book.
As always, whatever errors there may be, and we hope there are few, are solely our own.
A NOTE ON SOURCES
This book is based on interviews and public records and data from a wide variety of federal, state, and local agencies.
With few exceptions, the statistics used in this book were drawn from government and corporate sources. They include the U.S. Internal Revenue Service, the Bureau of Labor Statistics, the Federal Reserve Board, the Annual Budget of the U.S. Government, the Economic Report of the President, corporate filings with the U.S. Securities and Exchange Commission, the Congressional Budget Office, the Organization for Economic Cooperation and Development, the U.S. Department of Commerce, the U.S. State Department, the International Trade Administration, the Social Security Administration, and the U.S. Census Bureau.
Other sources of information at the national level included the U.S. International Trade Commission, the Employment and Training Administration of the U.S. Department of Labor, the Bureau of Economic Analysis, the United States Trade Representative, the Foreign Agents Registration Unit Public Office of the U.S. Department of Justice, the Center on Budget and Policy Priorities, the U.S. Department of Treasury, the Senate Records Office, the House Clerk’s Office, the Government Accountability Office, the Employee Benefit Research Institute, the Pension Benefit Guaranty Corporation, the Interstate Commerce Commission, the Federal Trade Commission, the U.S. Department of Agriculture, the Inspector General’s Office, Public Papers of the Presidents, the Congressional Record, and congressional hearings related to trade, taxes, and other economic issues spanning more than half a century.
We also collected information from many associations, nonprofit organizations, court jurisdictions, and local government agencies, including the Association for Manufacturing Technology, Footwear Industries of America, the Aerospace Industries Association, the Institute for Policy Studies, Good Jobs First, the Coalition for American Solar Manufacturing, the Offshoring Research Network, the American Manufacturing Trade Action Coalition, the National Consumer Law Center, the Center for Responsible Lending, the Community Reinvestment Association of North Carolina, the California Reinvestment Coalition, the Lee County (Florida) Circuit Court, the U.S. Bankruptcy Court for the Northern District of Texas, the Circuit Court of Van Buren County, Arkansas, and the Concord (California) Police Department.
As always, the libraries in many communities were vital in allowing us to access older records that haven’t been digitized, including the Free Library of Philadelphia, the American University Library, the Wayne County Public Library of Wooster, Ohio, and the Bob and Wauneta Burkley Library and Resource Center of DeWitt, Nebraska.
We benefited f
rom the work of others who have also studied the impact of economic measures affecting the middle class. We want to single out the 2010 report, “Shifting Responsibility—How 50 Years of Tax Cuts Benefited the Wealthiest Americans,” by Chuck Collins, Allison Goldberg, and Sam Pizzigati. Published by Wealth for Common Good, a network of business leaders, high-income individuals, and others working to make the tax system fairer, “Shifting Responsibility” is a straightforward view of how tax policy has been hijacked by the rich.
While we used primary materials for the most part, some books and publications were invaluable. One of the most important books was Manufacturing a Better Future for America by Richard McCormack, Clyde Prestowitz, David Bourne, John Russo, Sherry Lee Linkon, Ron Hira, Irene Petrick, Peter Navarro, James Jacobs, and Michael Webber, published in 2009 by the Alliance for American Manufacturing. This is a compelling account of the systematic gutting of American manufacturing by American policymakers.
INDEX
A
Abramoff, Jack
Accenture
AdAge
Afghanistan
Aguiar, Jacob
Aguiar, John
Aguiar, Meghan
Aguiar, Syrena
Airline Deregulation Act
airline industry. See deregulation
Albaugh, Jim
Alcatel Data Networks
Alfred P. Sloan Foundation
Allen, Marc
America: What Went Wrong?