The Betrayal of the American Dream (2 page)

There are no Blue Book membership rosters of the new ruling class, no secret handshakes, no regularly scheduled meetings. Wealth alone does not get you a seat at the table; nor does your family tree, your academic credentials, or your job title, whether in a corporation, the government, or a think tank. What counts is your ability to advance the cause of the group. The membership is bipartisan. There are seats for Republicans and Democrats, as well as for institutions, including representatives of the mainstream media. In the most devastating financial collapse since the Great Depression, when the news media accounts were studded with doomsday scenarios, the ruling class made conscious decisions to rescue certain businesses while they shoved others off the cliff. In the process, both Democratic and Republican administrations ditched the notion that all Americans should be treated equally, that the playing field should be level for everyone. This quaint concept has no standing in a plutocracy. Lacking a civic or moral compass, it’s a peer group without a purpose beyond its own perpetuation with no mission except to wall in the money within its ranks.

In contrast, we define the “middle class” strictly by income. Most Americans, even those who are affluent, think of themselves as middle-class. But economically they are not. We have defined the heart of the middle class as those wage-earners who reported overall incomes between $35,000 and $85,000 on their tax returns in 2009. Median household income that year was $50,599, meaning that half of all Americans earned more than that and half earned less. That figure has since fallen below $50,000 as the United States went through its first full decade of declining incomes when adjusted for inflation. Only the poor and the middle went down. The rich tracked sharply higher.

All told, there were 34 million individuals and families in the $35,000 to $85,000 range who reported wage and salary income on their 2009 tax returns. They accounted for 30 percent of the more than 116 million returns filed by working Americans. By far the largest group with job income, 58 million individuals and families, fell below our middle-class definition. The remaining 24 million tax return filers fell in the upper-middle, affluent, and rich classes. While the merely affluent 20 percent in the upper middle maintained their wealth, those at the very top of the income scale—the one percent—dramatically increased their wealth. An extended middle class would include people with incomes up to $115,000. While that may seem large to people living in many towns across the country, it would not be nearly so impressive for a family in an expensive city such as New York. At the same time, at the other end of the scale, a new definition of poor puts one in two Americans in that category. Census Bureau and academic statisticians are still refining the definitions that will make up the new American poor.

Men and women of every age and profession within the middle class have been affected by the policies championed by the ruling class, but the ones who may pay the highest price are the young—those in their twenties and thirties. For the next generation, the outlook is even bleaker. Many doors that were once open to high school graduates have slammed shut. Factory jobs that offered a way to maintain a comfortable lifestyle have disappeared at record rates, and nothing has come along to take their place. The reason the Apple example is so chilling is that Apple and companies like it were supposed to be the forward-looking option for a better-educated U.S. middle class. As we show, especially with regard to outsourcing, the promise that education is a gateway to solid middle-class well-being has also been retracted for many Americans.

Growing numbers of college graduates are hurting, unable to find jobs in this economy that match the skills for which they were trained. They had been assured that a college degree would be their ticket to a secure future. Now many of those with freshly minted degrees are working at jobs that require only a high school diploma, expecting to be in hock for much of their productive lives, or living in shared housing with parents or friends because they don’t earn enough to pay their own way.

Veterans of the wars in Iraq and Afghanistan are especially disheartened by the lack of options. Volunteers at a veterans’ service center in Cape Coral, Florida, recall a young Army veteran who served in Iraq and received a Bronze Star. After his discharge, he returned to the States, enrolled in college, and earned a bachelor’s degree. He was then ready to enter the job market, but he told advisers at the veterans’ center that “there was nothing out there.” He believed that his only alternative was to reenlist, an option that will be less available as Defense cuts start to bite and staffing levels are reduced in all the armed services.

Many more areas of public policy affect the middle class but are beyond the scope of this book. For example, we do not discuss health care here in detail because of pending litigation and turmoil in Congress over threats to repeal President Barack Obama’s health care law. But in our view, the most fundamental problem in health care won’t be addressed anytime soon. The U.S. health care system is based on the misguided notion that the private market is the best way to provide care and coverage to Americans. We focused on it in our 2004 book
Critical Condition: How Health Care in America Became Big Business—and Bad Medicine.
In that work, we documented the failure of the market system to deliver quality health care to everyone at an affordable price. The market system didn’t work then. It doesn’t work now. It never will. Yet ideologues are committed to foisting it off on an unsuspecting public, and key lawmakers and jurists are prepared to do their bidding, even though when compared with other developed countries, the United States has fewer hospital beds per capita, fewer doctors per capita, and fewer nurses per capita. But the bottom line is this: U.S. citizens die younger than people in more than two dozen other countries, many decidedly less developed, largely as a result of inferior health care. What the existing American system does very nicely, however, is enrich a very few people and favored corporations.

The private market experiment has failed, but even Obama’s health care bill still leaves most of the power in the health industry in the hands of private insurers. It is a mark of how effectively the ruling class’s propaganda machine has become in framing the debate in America that this relatively benign piece of legislation would be portrayed as a triumph of “socialism.”

There is a reason why Washington has turned its back on average Americans. We are no longer the democracy we once were. We have become a plutocracy in which the few enact programs that promote their narrow interest at the expense of the many. Ironically, it was Wall Street that disclosed the emergence of the American plutocracy. As early as 2005, a global strategist at Citigroup, Ajay Kapur, and his colleagues coined the word “plutonomy.” They used it in an internal report to describe any country with massive income and wealth inequality. Among those countries qualifying for the title: the United States. At the time, the top 1 percent of U.S. households controlled more than $16 trillion in wealth—more than all the wealth controlled by the bottom 90 percent of the households. In their view, there really was no “average consumer,” just “the rich” and everyone else. Their thesis: “capitalists benefit disproportionately from globalization and the productivity boom, at the relative expense of labor,” a conviction later confirmed by America’s biggest crash since the Great Depression. The very rich recovered quite nicely. Most everyone else is still in the hole. Some in the middle and at the bottom, like the millions who lost their jobs, their homes, and their retirement savings, will never recover.

Today, it’s not just Wall Street that discounts the significance of the great American middle class. In 2011,
AdAge,
the trade publication for the advertising industry, declared the era of mass affluence over in America, adding: “Simply put, a small plutocracy of wealthy elites drives a larger and larger share of total consumer spending and has outsize purchasing influence—particularly in categories such as technology, financial services, travel, automotive, apparel, and personal care.” From now on, if you don’t make $200,000, you don’t count, according to the advertising industry.

Barring wholesale changes in public policy, the coming years will be grim for millions of American men and women. To be sure, there will be ups and downs in the economy, enabling the mainstream news media and cable television to proclaim from time to time that all is well, just as they did in the early 1990s. But the dismal fact is that for tens of millions of middle-class Americans, as well as for the working poor who hope to achieve that status, the American dream is over. As for the mantra heard ever since the 1950s—that children can expect to enjoy a better life than their parents—only the delusional believe it today.

This is a sea change in American life without modern parallel. Where once we were told, over and over, that anyone could move up the economic ladder, now that movement is, with some exceptions, down. If existing policies remain in place, all that will be left will be the upper end of what once was a thriving, broad-based middle class. Everyone else will be toiling on a treadmill. “Retirement” will join “pension” as an archaic term in the dictionary. And if those who write the economic rules continue to have their way, those terms will be joined by some others too. Having dismantled the economic support network that underpinned the world’s largest middle class, the members of the ruling class have set their sights on another goal that, if achieved, would put the middle class in an even deeper hole: they are promoting “austerity” in government budgets and policies—cuts in programs such as Social Security and Medicare—for everyone but themselves.

Only once before in American history, the nineteenth-century era of the robber barons, has the financial aristocracy so dominated policy and finance. Only once before has there been such an astonishing concentration of wealth and power in an American oligarchy. This time it will be much harder to pull the country back from the brink.

What is happening to America’s middle class is not inevitable. 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.

But the United States has taken a totally different route.

“Running the country like a business means everyone is expendable,” says Christine Wright-Isak, a former advertising executive who teaches marketing at Florida Gulf Coast University. “Is that the kind of country we want?”

In the forty years that we have been researching and writing about issues that affect all of us, we have never been so concerned for the future of our country. The forces that are dismantling the American middle class are relentless.

America must stop sacrificing its greatest asset. Because, without a middle class, there isn’t really an America.

CHAPTER 1

ASSAULT ON THE MIDDLE CLASS

H
er name was Barbara Joy Whitehouse, but everyone called her Joy, and after you met her you knew why.

She was sixty-nine, and though hobbled by ill health, her eyes sparkled and she wore a smile. A wisp of a woman who had probably never weighed a hundred pounds, she radiated dignity and resolve.

Joy lived in a small home in a community called Majestic Meadows, a mobile home park for seniors just outside Salt Lake City. In her backyard was a shed that was filled with used aluminum cans—soda cans, soup cans, and vegetable cans—that she had collected from neighbors or found alongside roadways.

Twice a month she took them to a recycler who paid her as much as $30 for her harvest of castoffs. When your fixed income is $942 a month, as hers was, an extra $30 here and there makes a big difference. After paying rent, utilities, and insurance, Joy was left with less than $40 a week to cover everything else. So the money from cans helped pay for groceries as well as her medical bills for the cancer and chronic lung disease she had battled for years.

“I eat a lot of soup,” she said.

As a young woman, Joy never dreamed that her later years would be spent this way. She and her husband had raised four children in Montana, where he earned a good living as a long-haul truck driver. But in 1986 he was killed on the job in a highway accident attributed to faulty maintenance on his truck. It happened during a period when his company was struggling to survive the cutthroat pricing that Congress legislated when it deregulated the trucking industry. After her husband’s death, Joy knew that her future would be tough, but she was confident that she could make ends meet. After all, the company had promised her a death benefit of $598 every two weeks for the rest of her life—a commitment she had in writing, one that was a matter of law.

She received the benefit payments for four years. Then the check bounced. A corporate-takeover artist, later sent to prison for ripping off a pension fund and committing other financial improprieties, had stripped the business and forced it into U.S. bankruptcy court. There the pension obligation was erased by members of Congress who had passed laws allowing employers the right to walk away from agreements with their employees. In a country that once prided itself on creating a level playing field for everyone, those same members of Congress preserved the right of executives in those same companies to keep all their compensation, and even to raise it substantially.

To support herself, Joy sold the couple’s Montana home and moved to the Salt Lake City area, where she had family and friends. With her savings running out, she applied early for her husband’s Social Security at a reduced rate. She needed every penny. For health reasons, she couldn’t work. In addition to lung disease that kept her tethered to an oxygen tank part of the time, she’d been further weakened by battles with uterine and breast cancer.

Her children and other relatives offered to help with expenses, but Joy, fiercely independent, refused. Friends and neighbors pitched in to fill her shed with aluminum.