Third World America: How Our Politicians Are Abandoning the Ordinary Citizen. Arianna Huffington
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Despite the fact that many banks, car companies, and so on would be defunct without government intervention, the free-market fundamentalists continue to live in denial, trying to convince the world that if only left alone, free markets would right themselves.
Free-market fundamentalism didn’t fail because our leaders didn’t execute it well enough. In fact, during his time in office (until the economic house of cards finally collapsed at the end of his presidency), President George W. Bush and his team did a bang-up job executing a defective theory. The problem isn’t just the bathwater; the baby itself is rotten.
William Seidman, the longtime GOP economic adviser who oversaw the savings and loan bailout in 1991, cuts to the chase: “[The Bush] administration made107 decisions that allowed the free market to operate as a barroom brawl instead of a prize fight. To make the market work well, you have to have a lot of rules.” Even Alan Greenspan108, whose owl-eyed visage could adorn a Mount Rushmore of free-market capitalists, finally saw the light, telling a House committee in October 2008 that he “made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”
Many, including Bush 43, lay the blame on a few rotten apples: “Wall Street got drunk109,” he said. Maybe so, but who made the Bush years a nonstop happy hour and kept serving up the drinks?
Of course, Republican leaders were not the only ones drinking the free-market Kool-Aid. It was also chugged by New Demo crats such as Bill Clinton. He came into office knowing it was the economy, stupid, then proceeded to oversee a presidency focused on the soaring Dow Jones industrial average, even as the number of Americans living in poverty stubbornly refused to dip below thirty-two million110, and the number of Americans unable to make ends meet without the aid of a soup kitchen or food bank hit twenty-six million111—with more homeless children112 than at any time since the Great Depression. Yet the Clinton White House’s messaging was like a twenty-four-hour Boom Channel: All Prosperity, All The Time.
In those go-go years, even being downsized could, in the eyes of the free-market evangelists, be turned to your advantage. In early 1996, after forty thousand AT&T workers113 were pink-slipped, future Mad Money host (and Jon Stewart whipping boy) Jim Cramer, then still a hedge-fund manager, wrote a piece that landed on the cover of the New Republic. Head-lined “Let Them Eat Stocks,” the article found a silver lining in the dark cloud of the massive layoff, proposing that the fired workers be given stock options. “Let them participate in the stock appreciation that their firings caused,” Cramer gushed. Cue Eric Idle’s “Always Look on the Bright Side of Life.”
Four years later, Bush v. Gore ushered in the CEO president and his CEO VP. They promptly threw open the White House doors to their corporate cronies from Enron and Halliburton114 and declared open season on the interests of the average American. The Enronization of our economy was under way.
THE RICH GET RICHER
The Reagan years ushered in the era of the widening income gap. The rich grew considerably richer while the real income of everyone else, from the poor to the middle class, either slid back or, at best, leveled off.
In their paper on long-term change in the U.S. wage structure, economists Claudia Goldin and Lawrence Katz of Harvard and the National Bureau of Economic Research reported, “From 1980 to around 1987115, wage in equality increased in a rapid and monotonic [i.e. steady] fashion. Those at the top grew most rapidly, those in the middle less rapidly, and the bottom the least of all. . . . [These] wage structure changes have been associated with a ‘polarization’ of the labor market with employment shifting into high-and low-wage jobs at the expense of middle-wage positions.”
By the late 1980s, due to changes in technology, outsourcing, and the loss of manufacturing jobs, the middle class was sputtering. Even as productivity rose, the wages of the average worker remained flat.
In 1995, the midway point116 between the Reagan Revolution and today, John Cassidy penned an article in the New Yorker entitled “Who Killed the Middle Class?” Cassidy had his readers imagine a lineup composed of every American, arranged from poorest to richest. The individual exactly in the middle—the median—was arguably the most middle-class person in the nation. That man or woman, in September 1979, was earning (in constant, inflation-adjusted dollars) $25,896 a year. In September 1995, that same man or woman was earning $24,700 a year—a 5 percent cut in salary over the intervening decade and a half.
In contrast, the nation’s top 5 percent117 saw their pay rise 29 percent over the same period, up to $177,518. And the top 1 percent did best of all. In fact, between 1977 and 1989 the richest Americans’ average income rose from $323,942 to $576,553—a whopping 78 percent increase in real terms.
The trend continued into the first decade of the twenty-first century. According to a report compiled by Elizabeth Warren118, the average middle-class income between 2000 and 2007 fell $1,175, while expenses rose $4,655. Over the same period, the top 1 percent119—which had pocketed 45 percent of the nation’s income growth under Clinton—captured 65 percent of all income growth under Bush.
And according to a report released in May 2010120 by the Brookings Institution, between 1999 and 2008 the median house hold income fell $2,241 to $52,029, while the share of house holds earning middle-class incomes dropped from 30 to 28.2 percent.
So it’s clear: Well before the economic crisis hit in the fall of 2008, the once-envied American middle class was already being driven to its knees. Indeed, in a 2008 Pew survey121, 56 percent of middle-class Americans said they had either fallen back or merely managed to tread water over the previous five years. It was, according to Pew122, “the most downbeat short-term assessment of personal progress in nearly half a century of polling. Fewer Americans now than at any time in the past half century believe they’re moving forward in life.”
And that was just as the Great Recession was beginning to ravage the economy. Since then, life for the middle class has gone from bad to worse. In a revised take on the original Misery Index123—the measure developed by the late economist Arthur Okun that combined the unemployment rate with the consumer price index to condense the state of the economy into one neat, digestible number—the Huffington Post created the Real Misery Index. Incorporating a more extensive host of metrics, including the most accurate unemployment figures; inflation rates for essentials such as food, gas, and medical costs; and data on credit card delinquencies, housing prices, home loan defaults, and food stamp participation, the Real Misery Index is a much more accurate estimate of economic hardship. In April 2010, as the unemployment rate remained stubbornly high and the number of Americans on food stamps grew to forty million, the Real Misery Index, which charts data from 1984 to