The fate of America’s middle class hangs in the balance
27th February 2012 · 0 Comments
By Barrington M. Salmon
(Special to the NNPA from the Washington Informer) –
During his State of the Union address to the joint houses of Congress in January, President Barack Obama placed himself squarely on the side of the middle class that has been decimated since the economic meltdown of 2008 and a lingering recession. He argued that the economic inequities must be redressed and called on the wealthiest Americans to pay their fair share.
Census data released in 2010 illustrates the depth of the problem. Poverty has exploded, and a record 46.2 million people are counted in that category. But when the near-poor and new poor are added, the number of Americans who live in poverty approaches 150 million. Blacks, Hispanics, children and seniors have been hit particularly hard.
Poverty increased among all ethnic groups, except Asians, and the poverty rate for Blacks stands at 27.4 percent and for Hispanics it’s 26.6 percent. The poverty rate for whites currently stands at 8.5 percent.
“Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else – like education and medical research; a strong military and care for our veterans? Because if you’re serious about paying down our debt, we can’t do both,” Obama said.
The Republicans’ response was to deride Obama’s message and accuse him of fomenting class warfare.
“It is shameful for the president to use the State of the Union to divide us,” said Mitt Romney, one of a handful of Republicans battling for the GOP presidential nomination. His remarks echoed similar comments made on the stump in Florida by former House Speaker Newt Gingrich.
But the real shame, said TV host and commentator Tavis Smiley is the millions of innocent Americans who played by the rules but who now have been left to fend for themselves in the wake of the economic meltdown and as a direct result of the greed and recklessness of corporations, banks and insurance companies who gambled with taxpayers’ money and lost.
That gamble has translated into the dominant reality is homelessness, record unemployment, hunger, a scarcity of opportunities and the emergence of the new poor – consisting primarily of those who were once a part of the middle class.
“We are facing a critical time in our history that we cannot sidestep,” said Smiley in a recent interview. “The time is now to get serious about eradicating poverty before poverty eradicates us. How is it possible to sleep at night when poverty in America is forcing our children to surrender their life chances before they know their life choices?”
The one percent and the rest of us
In the wake of the 2008 economic meltdown, the length and breadth of the disparities between America’s rich and poor has come into stark contrast. It is estimated that the top one percent of this nation’s wealthy controls 40 percent of America’s wealth, income and resources.
Life for middle-class and low-income Americans is characterized by chronic high unemployment affecting about 15 million people; a housing collapse triggering unprecedented numbers of foreclosures; lack of access to health care; and a host of other social and economic ills that has turned the American Dream into a veritable nightmare.
At the same time, corporations, insurance companies and banks—many whose greed and reckless actions triggered the meltdown—are awash in billions of dollars. The general public is deeply angry about the instances of crony capitalism and corporate greed and many opposed the 2008 bailout. It is this discontent, which led to the emergence of the Occupy Movement whose members have railed against the social inequities, the vast disparities between the rich and poor and corporate gluttony writ large.
Ordinary Americans are deeply angered that they have been forced to pay the cost and bear the burden of the fallout from Wall Street’s failed gamble. The recklessness and greed of banking institutions, insurance companies and speculators brought America’s economic system to near-collapse. And now, as large corporations have stockpiled about $3 trillion in cash and sent American jobs overseas, the middle class and poor are contending with chronic unemployment, a housing meltdown, lack of access to quality healthcare and a slew of other issues.
Roderick Harrison, Ph.D, a Senior Fellow at the Joint Center for Political and Economic Studies in Northwest, said the widening gap between rich and poor has been decades in the making.
“I think that the problem that has generated this inequality is the argument that we had wage stagnation for the past 40 years,” he said. “Households maintained their standard of living by the increase of female participation in the labor force. At the same time, people piled up debt to maintain their standard of living and when they couldn’t finance debt, they experienced all these economic difficulties.”
Harrison, a demographer and sociologist, also explained that there is insufficient consumer demand to put people back to work and so the kind of inequalities America is now experiencing emerged.
“Increased productivity (such as installing machinery) and other gains in productivity used to be split between workers and machinery,” he said. “Any improvement in wages came from the increase in productivity. We have dug ourselves a hole that will not be easily addressed. The average banker makes 335 times what the bank teller makes. That’s three to five times what it used to be. If more of that money is in tellers’ hands that would be money spent for food, to buy a home or car—people would spend.”
Recklessness, greed and sowing the seeds of inequity
In a recent interview with Bill Moyers on Moyers & Company, former Citibank Chairman and CEO John Reed discussed his concerns about big banks’ power and influence and the lack of regulations that now governs their activities on Wall Street.
In the introduction to interview, Bill Moyers the men talked at length about the “seminal moment when Wall Street and Washington stacked the deck against the rest of us,” as Moyers explained.
“Remember, this is the political equivalent of a crime story, a mystery. How is it that our economy stopped working for the broad majority of Americans?” he asked. “How did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? In other words, how did politics create a winner-take-all economy?”
Moyers said none of this happened by accident and describes it as “an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head: giving to the rich and taking from everybody else. It’s all on the record.”
The “richest of the rich” was Citigroup, which at one time was the world’s largest financial institution. After the 2008 meltdown, the bank cut more than 50,000 jobs, and taxpayers shelled out more than $45 billion to save it. Last year, CEO Vikram Pandit pocketed about $2 million dollars in salary, almost $4 million dollars in deferred stock – stock options that may be worth as much as $6.5 million, and a $16 million retention bonus, said Moyers.
“There’s no clearer example of the collusion between government and finance than the deal that created Citigroup in the first place. At a standing-room only press conference in April 1998, Sandy Weill, head of the investment bank and insurance company Travelers Group, and John Reed, the longtime CEO of the commercial bank Citicorp, announced a gigantic, $140 billion merger.”
Just one problem, Moyers said. The merger flew in the face of established law. The Glass-Steagall Act was “a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. President Bill Clinton cleared the way by eliminating the 70-year-old law, thus ushering in the near-total collapse of the economy that was to follow.
An uncertain future
Former Senator Byron Dorgan, (D-ND), was a vocal critic against dismantling Glass-Steagall in 1999. His warnings presaged the economic meltdown nine years later.
“This set back the country significantly,” he explained. It was like a bunch of hogs at a slop pail trying to see who could eat the most. They wanted the rules to be gone. All this happened under our noses – regulators and members of Congress. There are really good people who didn’t stop to check, who didn’t think through the consequences.”
“This was not an accident; it is a matter of public policy. It is weighted in favor of the wealthy that have enormous clout on public policy. (And) financial institutions are still gambling today.”
Harrison said America is gripped by a “full-scale crisis.”
“It’s tough. About the only good news was that the growth of the gross domestic product was higher than expected. This could jump-start the economy,” he said. “There is strong evidence in the financial crisis of the credit default swaps and the role they played. The system is more complex that anyone really knows. A lot of people only know well where they work or pieces of the whole system.”
“I think we’ve created an economic system, vast, complex machinery. You have to hear something clanking along to know something’s wrong.”
This article was originally published in the February 27, 2012 print edition of The Louisiana Weekly newspaper