The American people have reason to be pessimistic about their future. Real wages have been declining. Median household fell to $50,303 last year, from $52,163 in 2007. 1 More people than ever are without health insurance. At 2009, the number was at 50.7 million. 2 Yet, health care spending grew to a record of 17.3% of the nation’s GDP. College tuition has been rising 2 1/2 times faster than inflation. Economists predict the cost of attending state colleges will soar to $120,000 by 2015. Currently over $40 billion in student loan debt has forced many former students into financial bondage or even bankruptcy. 3 That makes college more out of reach for poor and middle class families. A report from the National Low Income Housing Coalition shows that 71% of the renters spent more than half of their income in rents, and this will likely increase due to the greater demand in the aftermath of home foreclosures. That doesn’t factor in the 3.1 million shortage in affordable housing units. 4 U.S. home foreclosures have increased by 25% in August 2010 as compared to August 2009. 5 This situation evolves during the greatest recession since the Great Depression with an unemployment rate of 9.8%. 6 The real unemployment rate probably stands at 20% if you count out the underemployed and the discouraged workers. 7 There might be a 4% increase in the GDP, but as economist Paul Krugman noted, it is jobs not the GDP that matters to American people. 8 Economist Joseph Stiglitz calls for another round of government stimulus, or else the unemployment rate will remain at 10% well into the middle of the decade. 9.
Consumer Protection Agency chair, Elizabeth Warren, already talks about the coming collapse of the middle class, due to the rising costs of health care, education, housing and other basic necessities for middle class families. She also dissects the two-income trap middle class people are finding themselves in. 10 Former Labor Secretary, Robert Reich, was writing about the three coping mechanisms for middle class people, all of which have been exhausted in the great recession of 2008, when the housing and financial bubble collapsed. One was the fact that women were joining the workforce (that is what Warren described), the second was that both, men and women, were working longer than ever before (350 hours more per year than Europeans. The third mechanism was borrowing on the mortgage, using the house as a collateral to keep up the spending habits. 11 Huffington Post publisher, Arianna Huffington goes even as far as saying that we are moving toward a third world status. 12
Another aspect that also explains the misery of middle class Americans is the fact that over the past 30 years the wealth has concentrated on the top. As of 2007, the top 1% of households (upper class) were owning 34.6% of the nation’s wealth. The top 20% of households (including professional and managerial class) owned 85% of all wealth. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. The bottom 60% was making less, only 95 cents out of every dollar. The top 0.1% had more combined income than the poorest 120 million Americans. The ratio of CEO to factory worker rose from 40:1 in 1960 to 344:1 in 2007. That is coming after the capital gains taxes were significantly reduced. 13 The economic misery of middle class America (stagnating wages, rising costs for necessities) explains the financial industry’s drive to expand credit. It certainly increased their short-term profits to sell high risk mortgages to low-income people, but jeopardized the U.S. and global economy. As they were saved, the moral hazard was activated, and I doubt that the financial regulations will prove effective to prevent another financial meltdown. It could rather be expected that they risk another one, since the taxpayers will be there to save these financial institutions. 14 Calculating the effects of the recession (higher unemployment rate, less tax revenues, more stabilizer spending, less business activity, bank bailouts, stimulus package) the government is facing a federal budget deficit of $1.3 trillion in FY 2011, increasing the public debt to around $15.1 trillion.
This dire fiscal situation forces of making cutbacks in government expenses at a time, when people need it the most. We need more education spending, because that’s where our future is decided on. We need more transportation spending, because it will create jobs and improve our infrastructure. We also need welfare spending, which includes health care, retirement, and income supplements for low and medium income families to bolster the economy, and establish long-term stability. President Obama is already calling for a ‘robust debate’ on deficit reduction 15, having activated a deficit commission. This commission has published a report that calls for cuts (!) in marginal corporate and income taxes, while raising the retirement age, threatening Social Security and Medicare, and cutting crucial government investments in education and infrastructure. 16 This would load the costs of fiscal recovery onto middle class workers, who are already overburdened.
The only initiative that makes sense in order to restore fiscal sanity is by improving the economy via public expenditures; strengthening the social safety nets (Medicare and Social Security), which makes Americans more secure and more confident- universal Medicare would have the added effect of reducing overall health care costs, and making it more affordable); reducing defense spending, largely by pulling out foreign U.S. military bases and ending the wars in Iraq and Afghanistan; and pay for all programs by raising taxes on the wealthiest Americans. Given their lucky fortunes, which they have largely stolen from the general public, it is high time for them to reimburse the American people for their plight and misery over the past years. 17
We know that the American Dream is absolutely endangered. But we are seeing political change for the worse. The newly sworn-in Republican House majority already pledged to make significant spending cuts. 18 The new health reform law is threatened to be repealed 19, despite the real benefits to American people. 20 The Republicans are going as far as to abolish the donut hole provision that would have made prescription drugs more affordable for seniors. They want to attack the health care law piece by piece, also betting for court challenges. It’s clear that big pharma and big insurance are behind this scheme, despite the fact that the Obama administration had been making a lot of concessions to these corporations. The most notable benefit of the health care law involves the individual mandate and the public subsidies for people, who can’t afford (private) health insurance. The public option or Medicare expansion provision was dropped altogether, leaving the American people at the mercy of the private insurance companies, who have received no obligation to restrain premiums. There was a provision to commit 80% of premium dollars to patient treatment, but there will be ways to get around it.
What concerns me most is not merely the corporate greed that the Republicans are so eager to implement, and the Democrats are so willing to contribute to, but why the people would elect the party into power that has proposed nothing to help out ordinary Americans. It is the dislike of the incumbents that brings people to elect the other party, or to stay home altogether. There seems to be an understanding that a majority of the people just don’t care about the political process, since it will make no difference in their material outcomes. The political activist and linguist, Noam Chomsky, talks about the sameness of politicians of both parties, the inability of the political system to bring up substantial econonomic issues that matter to American people, and the resulting indifference to the political process. 21 One has the assumption that the same goes with the Tea Party movement, that expresses the right sentiments of the people (which is rising economic insecurity), but the wrong political solutions (being against everything that the government does). The right corporate and media propaganda will energize the anxious and threatened lower middle class, the people, who have worked longer than ever before with decreasing material security, and the people, who are asking themselves what they have done wrong. They have done nothing wrong, but in their fury they are supporting a sentiment that may well get out of hand, and turn rectionary and violent. Look at the rants against illegal immigrants, the welfare recipients, and the Wall Street speculators.
If we are to avoid such social catastrophe, leadership needs to be taken to improve the situation of the American people, give them a greater source of economic security and make the fruits of productivity increases and economic growth more widely shared.
1 Leonhardt, David. “A Decade With No Income Gains.” New York Times. 10 Sept. 2009. Web. 06 Jan. 2011. http://economix.blogs.nytimes.com/2009/09/10/a-decade-with-no-income-gain/.
2 Bihari, Michael. “50 Million Americans Without Health Coverage.” Health Insurance at About.com. 21 Sept. 2010. Web. 07 Jan. 2011. http://healthinsurance.about.com/b/2010/09/21/50-million-americans-without-health-coverage.htm.
3 Wadsworth, Gordon H. “Sky Rocketing College Costs.” InflationData.com. 15 Oct. 2010. Web. 7 Jan. 2011. http://www.inflationdata.com/inflation/Inflation_Articles/Education_Inflation.asp.
4 “Introduction- Out Of Reach 2010.” National Low Income Housing Coalition. June 2010. Web. 7 Jan. 2011. http://www.nlihc.org/oor/oor2010/introduction.pdf.
5 Andrew H. “U.S Recession: U.S Homes Foreclosures in August 2010 HIGHEST EVER since RECESSION.” Gather. 16 Sept. 2010. Web. 7 Jan. 2011. http://www.gather.com/viewArticle.action?articleId=281474978522994.
6 “United States Unemployment Rate.” TradingEconomics. 5 Dec. 2010. Web. 07 Jan. 2011. http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD.
7 Gallardo, Roberto. “U2: The Real Unemployment Rate.” Daily Yonder. 06 Dec. 2010. Web. 07 Jan. 2011. http://www.dailyyonder.com/u2-real-unemployment-rate/2010/12/03/3065.
8 Krugman, Paul. “Deep Hole Economics.” New York Times. 2 Jan. 2011. Web. 7 Jan. 2011. http://www.nytimes.com/2011/01/03/opinion/03krugman.html?_r=2.
9 Blodget, Henry. “We Need a Second Stimulus Now Says Nobel Laureate Stiglitz or Americans Will Be Unemployed for Years.” Yahoo! Finance. 17 Feb. 2010. Web. 07 Jan. 2011. http://finance.yahoo.com/tech-ticker/we-need-a-second-stimulus-now-says-nobel-laureate-stiglitz-or-americans-will-be-unemployed-for-years-424832.html?tickers=^dji,^gspc,tbt,dia,spy,tlt,man.
10 Warren, Elizabeth. “The Coming Collapse of the Middle Class.” YouTube. UCtelevision, 31 Jan. 2008. Web. 07 Jan. 2011. http://www.youtube.com/watch?v=akVL7QY0S8A.
11 Reich, Robert. “It’s the Economy, Stupid — But Not Just the Slowdown.” Robert Reich’s Blog. 4 Dec. 2007. Web. 07 Jan. 2011. http://robertreich.blogspot.com/2007/12/its-economy-stupid-but-not-just.html.
Also depicted in Reich’s book Reich, Robert B. Aftershock: the next Economy and America’s Future. New York: Alfred A. Knopf, 2010. Print.
12 Huffington, Arianna S. Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream. New York: Crown, 2010. Print.
13 Domhoff, G. William. “Who Rules America: Wealth, Income, and Power.” UC Santa Cruz – Sociology. Dec. 2010. Web. 07 Jan. 2011. http://sociology.ucsc.edu/whorulesamerica/power/wealth.html.
14 Read an interview with the economist Nouriel Roubini. He is commenting on the prospect of another bubble and financial meltdown.
“I fear that we have not learned those lessons and that part of the policy response is now creating a new global asset bubble that will cause a bigger financial crisis in the next few years. For one thing, there is a lot of talk about better regulation an supervision of the financial system but the financial industry is back to business as usual – rebuilding leverage, engaging in prop trading and other risk behavior, compensating bankers and traders with indecent bonuses – and is lobbying against better regulation and supervision. Governments are talking about reforms but almost no one has implemented them.
In the meanwhile interest rates remain close to zero in most advanced economies and they are also very low in many overheating emerging markets. Also dollar funded carry trades are feeding asset bubbles globally. Thus, part of the sharp rise in risky asset prices since March 2009 is driven by a wall of liquidity chasing assets that are becoming overpriced: US and global equities, credit, oil and commodity prices, emerging markets asset prices. And if this bubble eventually gets out of hand the eventual bust could lead to another and bigger global financial crisis in the next two or three years.”
“Ian Bremmer and Nouriel Roubini: Author One-to-One.” Amazon.com. Web. 07 Jan. 2011. http://www.amazon.com/Crisis-Economics-Course-Future-Finance/dp/1594202508.
Roubini, Nouriel, and Stephen Mihm. Crisis Economics: a Crash Course in the Future of Finance. New York, NY: Penguin, 2010. Print.
15 Wolf, Richard. “Obama: ‘Robust Debate’ over Budget, Deficit in 2011.” USA Today. 23 Dec. 2010. Web. 07 Jan. 2011. http://content.usatoday.com/communities/theoval/post/2010/12/obama-robust-debate-over-budget-deficit-in-2011/1.
16 Grim, Ryan, and Dan Froomkin. “Deficit Commission Slashes Taxes For Wealthy, Corporations, While Raising Retirement Age And Cutting Spending.” The Huffington Post. 1 Dec. 2010. Web. 07 Jan. 2011. http://www.huffingtonpost.com/2010/12/01/deficit-commission-tax-cuts-for-rich-higher-retirement-age-_n_790308.html.
17 There’s really a position behind promoting equal opportunity and re-interpreting the term “self-reliance” that is so often overstated and misrepresented in the American public debate.
Allan Nairn on equal opportunity and reparations for Haiti: “You know, in this country and in a lot of the rich world, when we talk about issues of equality, there’s always a standard debate goes on, a very sterile debate, between equality of opportunity and equality of result. The right says, “Oh, we can only have—we shouldn’t have equality of result: everybody ends up at the same place. We should only have equality of opportunity: people start from the same place, and then you have a fair race.” I tell you, the poor of the world would be thrilled to settle for just equality of opportunity. Forget equality of result. If you really had a regime of equality of opportunity, that would mean all children start from the same place. They all start with nutritious food, with clean water, with free schooling, with a safe home, etc., and then, let the chips fall where they may, run the race. But that is so far from what we have now in the world. It’s obvious. It’s obvious to everyone. In order to achieve that equality of opportunity and in order to be evenhanded in applying the principle of what to do about the theft and the inheritance accumulated by our forefathers, you would need massive reparations, a massive flow of money from the rich world to places like Haiti, to places like Afghanistan. And that’s just through applying consensus principles that everyone accepts.”
“Nairn, Allan. “Allan Nairn: As U.S. Loses Its Global Economic Edge, Its “One Clear Comparative Advantage Is in Killing, and It’s Using It”” Democracy Now. 29 Dec. 2010. Web. 07 Jan. 2011. http://www.democracynow.org/2010/12/29/allan_nairn_as_us_loses_its.
Sam Harris on self-reliance: “To make matters more difficult, Americans have made a religious fetish of something called “self-reliance.” Most seem to think that while a person may not be responsible for the opportunities he gets in life, each is entirely responsible for what he makes of these opportunities. This is, without question, a false view of the human condition. Consider the biography of any “self-made” American, from Benjamin Franklin on down, and you will find that his success was entirely dependent on background conditions that he did not make, and of which he was a mere beneficiary. There is not a person on earth who chose his genome, or the country of his birth, or the political and economic conditions that prevailed at moments crucial to his progress. Consequently, no one is responsible for his intelligence, range of talents, or ability to do productive work. If you have struggled to make the most of what Nature gave you, you must still admit that Nature also gave you the ability and inclination to struggle. How much credit do I deserve for not having Down syndrome or any other disorder that would make my current work impossible? None whatsoever. And yet devotees of self-reliance rail against those who would receive entitlements of various sorts — health care, education, etc. — while feeling unselfconsciously entitled to their relative good fortune. Yes, we must encourage people to work to the best of their abilities and discourage free riders wherever we can — but it seems only decent at this moment to admit how much luck is required to succeed at anything in this life. Those who have been especially lucky — the smart, well-connected, and rich — should count their blessings, and then share some of these blessings with the rest of society.”
Harris, Sam. “Is the Ruination of America Possible?” AlterNet. 5 Jan. 2011. Web. 07 Jan. 2011. http://www.alternet.org/story/149396/is_the_ruination_of_america_possible?page=2.
18 Calmes, Jackie. “G.O.P. Sets Up Huge Target for Budget Ax.” New York Times. 3 Jan. 2011. Web. 7 Jan. 2011. http://www.nytimes.com/2011/01/04/us/politics/04fiscal.html?_r=1.
19 Montopoli, Brian. “House to Vote to Repeal Health Care Reform on Jan. 12th – Political Hotsheet – CBS News.” CBS News. 3 Jan. 2011. Web. 07 Jan. 2011. http://www.cbsnews.com/8301-503544_162-20027095-503544.html.
20 Sebelius, Kathleen. “Don’t Repeal Health Care Law.” The Chicago Tribune. 05 Jan. 2011. Web. 07 Jan. 2011. http://articles.chicagotribune.com/2011-01-05/news/ct-oped-0105-sebelius-20110105_1_health-care-law-premium-insurers-health-coverage.
21 Chomsky, Noam. “Noam Chomsky – The Political System in the USA.” YouTube. 2 Sept. 2006. Web. 07 Jan. 2011. http://www.youtube.com/watch?v=mk8pxyAWTBk.