The War on the Middle Class

Gratifying as it is to listen to Joe Biden and President Obama strike back at Paul Ryan and Mitt Romney and their plans to destroy Medicare and give vast tax breaks to the rich, the Democrats have hardly been reliable allies for the vast majority of Americans.

As best-selling authors and Pulitzer Prize winning investigative reporters Donald Barlett and James Steele explain in their latest book, The Betrayal of the American Dream (PublicAffairs, 2012), Democrats and Republicans alike have aided and abetted corporations in rigging the tax code, hollowing out manufacturing, deregulating industry, making it legal for companies to renege on their pension obligations, sending jobs overseas, and bailing out the banks while letting corrupt Wall Street titans go free after they defrauded their customers and destroyed the economy and many people’s lives.

Before Paul Ryan came along, Presidents Clinton and Obama both flirted with entitlement reform.

All of these policies together have led us to the where we are today.

For the last four decades the economic elite in this country have been buying influence and pushing policies, Barlett and Steel write, “that have enriched themselves while cutting the ground out from underneath America’s greatest asset—its middle class.”

“What is happening to America’s middle class is not inevitable,” the authors charge. “It’s the direct result of government policy, and it can be changed by government action. Look no further than at what the governments of our trading partners do to protect their people and advance the interests of their country. We could do the same.”

Barlett and Steele cover a lot of ground in this relatively short, fast-paced book. Their straightforward, impassioned prose is filled with real-life stories of people who are losing their grip on the American Dream.

“Our kids are going to be fluffing dogs and doing toenails while the Chinese are making leading-edge devices,” observes Douglas Bartlett, whose father founded the first plant that made circuit boards in the United States, which shut down in 2009 after 57 years. During that time the U.S. went from dominating the industry to being shut out, thanks to our benighted trade policies.

Many of the stories are tragic.

Computer programmer Kevin Flanagan kills himself after being forced to train his low-paid guest-worker replacement after losing his once high-paying, high-status job.

Joy Whitehouse, who worked hard all her life, was plunged into poverty by her husband’s early death and, soon after his trucking company’s refusal to pay out the death benefit it owed. (The company, pushed into bankruptcy by a corporate takeover, was able to walk away from pension obligations thanks to legislation Congress passed that allows corporate CEOs to renege on such agreements with employees, while keeping full compensation for themselves.) Whitehouse—self-sufficient to the end—died while collecting cans, which she sold to recyclers to try to cover living expenses and medication for her cancer and chronic lung disease she could no longer afford.

The Betrayal of the American Dream forces us to look in the mirror and see how different our country has become from the nation it once was, and still imagines itself to be.

Want a visual image of America’s hollowed-out, liquidated infrastructure? Compare it to the new, super sleek airports in China and Japan. “Visitors landing at JFK before driving into New York City don’t have quite the same sense of awe,” Barlett and Steele write

Since the 1970s, public policies driven by America’s ruling class have “moved the nation ever further away from the broad programs that helped create the world’s largest middle class.

As American politicians and pundits, influenced by multinational corporations and their rightwing think tanks, continue to treat tariffs on subsidized imports and other minimal enforcement of fair trade laws anathema, China is busy “building a self-sufficient economy the old-fashioned way—by protecting and enhancing its domestic industries.”

The authors give example after example of how our trading partners have subsidized and nurtured industries—from shoe-making to solar technology—while the United States has let American businesses and the jobs they create fall victim to competition with low wages and artificially low prices, with no protection at all.

They also disprove the idea promoted by free trade fundamentalists like Tom Friedman that, while old-line manufacturing jobs may be fleeing new, high-tech jobs are taking their place. Research and development, too, are moving to office parks overseas.

Another brutal anecdote: Governor Arnold Schwarzenegger met with the steel workers who built the Bay Bridge to thank them for their great work “welding, painting, lifting, designing, shipping, all of those things in order to help us in California rebuild our Bay Bridge.”

It was a typical political photo op. Except, Steele and Barlett write, “the setting wasn’t Pittsburgh, Chicago, or Los Angeles. Schwarzenegger was standing in a steel plant thirty minutes outside Shanghai.”

The Bay Bridge project exemplifies how “some politicians have abandoned even the pretense that they want to create jobs in America.”

A consortium of U.S. steel producers lost out in a bidding war with China. Schwarzenegger justified going with the Chinese firm because it saved $400 million. But that didn’t count the lost jobs, their impact on the economy, or the extra costs in sending 200 engineers and contractors to China to provide technical advice and make sure the project met specs.

Boeing, too, is saving money in the short term by offering a lot of help to subsidized Chinese industry as it takes over the making of planes once manufactured by high-paid workers in the United States. A state-run Chinese company is now using the once-top-secret Boeing plans for building aircraft, and has already begun building competitor aircraft itself.

“What need will China have to import much of anything from us once it has created all the basic industries?” Barlett and Steele observe.

Meanwhile, factories like Rubbermaid, that held together whole communities with great, middle class jobs, have finally caved into pressure from corporations like Walmart that force low prices and low wages.

“What kind of a society will we have if low prices are the ultimate measure of its worth?” Barlett and Steele ask.

A chapter on the subprime mortgage disaster ends with a contrast to how young, middle class homeowners faired under the GI Bill, when the federal government did not permit the kinds of tricks and traps Wall Street used to defraud working people right out of their homes.

The Betrayal of the American Dream shows the destructive impact of all of the interlocking policies promoted by the new ruling class, as the authors dub the very rich and their handmaidens in Washington.

What’s good for American global corporations, they write, is no longer good for America.

“A pretty good definition of the ruling class: they can avoid the rules,” Barlett and Steele write, noting that not one Wall Street titan has been charged with a crime in the subprime mortgage meltdown, while many have used taxpayers’ bailout money to pay themselves bonuses.

Even if unemployment gets better, the policies that are killing the dream of widespread prosperity will continue to shrink the middle class.

What to do?

The authors suggest a short list of “bare minimum” steps.

The simplest is revising the tax code. In 1955, the rich paid an income tax rate of 51.2 percent. By 2007 that rate was 16.6 percent (not counting proliferating loopholes).

No wonder the current wealth gap is greater than at any time since the Gilded Age.

One big solution to the much-hyped debt crisis is to tax the very rich, so those who earn $388,000 a year, for example, are not in the same tax bracket as those who make $50 million, Barlett and Steele modestly suggest.

While Paul Ryan and his allies talk about “simplifying” the tax code, what they really mean is that they want to lower the top tax rate to 25 percent, the authors point out.

Ryan would also eliminate federal income taxes on dividends, interest, and capital gains—a huge windfall for the very wealthy.

Instead, Barlett and Steele suggest real simplicity: a one-page 1040 tax form with no deductions and as many as a dozen truly progressive tax brackets, topping out at 50 percent for those making more than $10 million a year.

Corporate taxes could be reformed to stop punishing businesses that operate within the United States and stop allowing U.S. multinationals to suppress wages, hide profits overseas, and sell products made with cheap foreign labor back in the United States without paying a penalty.

Since corporations bought the current tax code, the problem with fixing it is political, not technical.

The same goes for the federal budget and the deficit.

“Budget deficit and debt issues are nothing more than a vehicle to continue tearing down the safety net,” the authors write. Fair taxes on the rich and corporations can reduce the debt without entitlement cuts.

Other solutions include investing in infrastructure, recognizing the importance of maintaining U.S. manufacturing not just to sustain good jobs but as a cradle of innovation, and, of course, prosecuting Wall Street criminals.

Barlett and Steele conclude, tantalizingly with a final prescription: a call to organize the middle class to take back our democracy. How do we do it? A new topic for a new book from this great reporting team.

If you liked this article by Ruth Conniff, the political editor of The Progressive, check out her story "Fireworks at the Second Tammy/Tommy Debate."

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