The Betrayal of the American Dream (28 page)

What can be done?

The most obvious solution is to enforce existing trade laws by taking action against governments that unfairly subsidize their own industries and undermine the jobs of U.S. workers. This could be accomplished in some cases only by imposing tariffs—perhaps even high tariffs. The very mention of tariffs infuriates free-traders and the ruling class. But the U.S. economy is in a battle for its survival. Our competitors will not safeguard our interests over their own. Nor will corporations whose wealth is held substantially outside U.S. jurisdiction. We have to take responsibility. But unless we are willing to enforce the law, other countries will continue to ignore U.S. pleas to open their markets to our products.

For years American manufacturing has suffered at the hands of economists from leading business schools who have downplayed its importance in the economy. This needs to change. The head of a Silicon Valley technology firm, Henry Nothhaft, argues that domestic manufacturing is essential not only because of the jobs and security it provides to workers, but also because it is crucial to innovation.

“R&D de-coupled from manufacturing eventually results in the loss of incremental innovation which occurs on the factory floor,” Nothhaft has written. Because of corporate America’s obsession with downsizing and short-term profits, he says, “we have gutted our ability to build the most advanced high-tech products of tomorrow.” Similarly, Nothhaft says, “for every manufacturing job lost, ripple effects of job destruction and income erosion spread like a plague throughout the economy.”

Relatively new companies like Google are often cited as classic examples of the entrepreneurial American venture that comes along in every era that injects life into the economy. But not every company can be, or should be, a Google. Our economy still runs on products that have been around for decades and are essential to the nation’s well-being—its consumers and workers. As Ralph Gomory, the onetime head of research at IBM, told a congressionally-appointed study committee in 2011: “To prosper a country needs to make a range of good products and services, and then keep after them year after year, constantly learning and improving their capabilities to stay with or ahead of the competition.” Those companies need congressional support quite as much as, if not more than, the multinational corporations. If they are to grow, they must find and develop markets abroad as well as domestically.

Though the nation has done little to alter the free-trade policies that have destroyed so many jobs, hopes began to rise recently that the long slide in manufacturing employment as a result of those policies might be over. For the first time in many years, factories were consistently adding jobs; 400,000 were added in 2010–2011. In his State of the Union address in 2012, President Obama singled out manufacturing for special mention: “We have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it.”

It may be just another one of those economic mirages that have spurred false hopes over the years. But it would be a defining moment in rebuilding the middle class if the slide in manufacturing jobs were to be significantly reversed. At the very least, what we must do is halt the growth in the trade deficit—to stop the bleeding that has resulted from the carnage in lost plant jobs in recent decades, to ensure that the manufacturing sector that’s left is stabilized and bolstered by a change in our trade policies. That alone would be a major victory.

INVEST IN AMERICA

There is only one player capable of offsetting the decline in private investment in this country that has resulted from U.S. corporations sending jobs and plants offshore and investing in other countries: the federal government.

Washington has the power to make an investment that would dramatically benefit the middle class as well as all other citizens. Instead, Washington is paralyzed. Intimidated by the deficit hawks who are funded by the ruling class, they decry any action that requires more federal spending. Contrary to what you hear and read in much of the media, in our view the nation should not be worried about federal spending right now. The federal deficit is an important, long-term problem, but unless we restore prosperity by creating more good-paying jobs, worries over the deficit will be moot.

One way for the government to create jobs would be to make a massive investment in infrastructure—not a make-work program, but a broad-based investment phased in over many years. This would boost the economy by creating millions of jobs in construction, manufacturing, and other industries. This would be a wise investment even if the economy was in fine shape and unemployment was low, because the country’s basic infrastructure is falling apart from years of neglect.

The American Society of Civil Engineers (ASCE) issues a periodic report on the state of the nation’s bridges, highways, dams, rails, waterways, ports, water systems, and tunnels—all the components of our nation’s infrastructure. Nearly all of these facilities are in such bad shape that they get no better than a D grade from the ASCE. “Delayed maintenance and chronic underfunding are contributors to the low grades in nearly every category,” the ASCE concluded in its 2009 report. Just fixing current structural problems and upgrading those facilities would cost $2.2 trillion, the ASCE estimated. The deterioration is accelerating at such a pace that the ranking of the United States on infrastructure plunged from first in 2006 to sixteenth in 2011, according to the World Economic Forum.

Like so many other aspects of the economy described in this book, infrastructure investment is another casualty of the political dominance of the ruling class, whose private planes and gated residences lead them to think that infrastructure is less than essential to them. From 1950 to 1979, during a period when the United States funded broad-based public programs, its investment in transportation, water management, and electricity transmission grew at an average rate of 4 percent each year—about the same as the growth of the economy during that time. But from 1980 to 2007, when U.S. investment in infrastructure was scaled back to 2.3 percent, economic growth also fell, to an average annual rate of 2.9 percent, according to a 2009 study by the Political Economy Research Institute (PERI). “Faster public investment growth produces faster overall growth,” concluded PERI.

In contrast, China and Japan, the chief competitors of the United States in Asia, are investing heavily in infrastructure—railroads, highways, Internet networks, ports, airports, and all the basic services that promote commerce and create jobs. Visitors to those nations are often stunned by the sophistication of the new technology that the Chinese and Japanese are pouring into their basic infrastructure. Visitors arriving at JFK before driving to New York City don’t have quite the same sense of awe.

RETHINK TRAINING

The nation’s federal training program for workers who lose their jobs to imports or offshoring is sorely in need of reform. Interviews with laid-off workers showed a pattern of frustration with the Trade Adjustment Assistance (TAA) offices in many states. Although workers were appreciative that the program existed, many reported that their caseworkers were overwhelmed with work, rarely if ever returned their calls, and sometimes weren’t sure if they could even be of help. Others told of TAA caseworkers who were so overworked that they refused to give their last names, presumably to make sure they weren’t contacted outside of work hours. Other workers who had been laid off complained that TAA was out of touch with reality.

Terri Steger was a systems analyst for AT&T and one of its contractors for thirty-five years in Milwaukee before her IT job and the jobs of her coworkers were shipped to India in 2009. She soon found herself in an orientation class sponsored by the local TAA office in Milwaukee to help her and others who had lost their jobs decide on their next career. Steger said that one of the federal officials suggested to the group that they consider information technology.

“We raised our hands and said, ‘Wait a minute, you might want to rethink that, because we’re all in information technology and our jobs are in India right now,’” she said.

An even greater shortcoming in U.S. training programs is the lack of well-funded, well-publicized, and highly respected apprenticeship programs. Such programs would give high school graduates who are unable to go to college, or whose skill sets are in other areas, a way to obtain training that would make them valuable to employers and enable them to earn a good living. The U.S. emphasis on college at the expense of apprenticeship programs has long been a complaint of many American industrialists, sociologists, and other experts. In other countries, notably Germany and Switzerland, apprenticeship programs are considered a fundamental part of secondary education and have been a major factor in the manufacturing success of those countries.

UPHOLD THE LAW

It sounds almost old-fashioned: to protect the middle class and all other Americans from the charlatans of Wall Street who served up the great housing meltdown, let’s start enforcing the law. The triumph of the ruling class is so complete that there’s no longer serious prosecution for violations of fraud and other statutes, which, if enforced, might discourage financial bandits in the future. If people end up in prison for committing a misdemeanor, surely they could go there for destroying the lives of working people.

Unless we do that, the story still playing out today across the United States will be repeated in some fashion in the years ahead when Wall Street cooks up its next great scheme. So far, more than 8 million homes are in some stage of foreclosure. Millions more are teetering on the edge. To hold down the number on the market, the government has authorized the bulldozing of empty houses.

As the housing market imploded and trillions of dollars in home equity vanished, millions of homeowners watched their most valuable asset disappear. In effect, that money was stolen by Wall Street with the touch of a keystroke. Two hedge fund managers alone made billions of dollars by betting the house of cards would collapse. So it wasn’t as if no one saw what was happening. The equity that went up in smoke was money the middle class and the working poor were counting on to pay medical bills, fund college tuition for their children, help aging parents, or support their own retirement. All gone.

Despite the literally tens of thousands of illegal acts committed throughout the years of the great swindle, not one corporate executive or Wall Street titan has been charged with a crime. Any reasonably curious prosecutor, who was so inclined, could start at the bottom and work his or her way up the food chain, beginning with all the statements attesting to the value of a mortgage applicant’s assets. It would have been rather easy since the paperwork was known laughingly across government, the banking industry, Wall Street, and the mortgage industry as “liar loans.” The people who arranged the mortgages were rewarded with oversized bonuses. So, too, their bosses. The phony loans then were packaged into securities sold by Wall Street, which started the process all over by attesting that they were of prime quality. The securities were peddled to investors who were suckered by Wall Street’s spiel. And on and on it went.

Law enforcement has been feeble; many prosecutors lack backbone, will, or imagination. This contributes to the pervasive attitude that for some the ordinary rules do not apply. Indeed, this is a pretty good definition of the ruling class: they can avoid the rules. Those who control the economy as well as the country implemented the doctrine of “too big to fail”: select corporations would not be subject to bankruptcy rules but would be bailed out by the taxpayers. The likes of Goldman Sachs and Morgan Stanley would have to be rescued—by the little people. The principle also has been established that government bailout money can be used to pay executive bonuses.

The “too big to fail” doctrine helped trigger the largest economic collapse since the Great Depression, yet inexplicably Congress left the principle intact. Given the right circumstances, another unsuspecting generation will be blindsided by another crash. There’s more. Congress bought into the idea that if select Wall Street firms and banks were too big to fail they also were too big to prosecute. Handing the moneyed a permanent “get out of jail free” card, Congress placed the ruling class as far above the laws of the land as they were above the laws of the market.

WILL THE MAJORITY RULE?

Most of the changes essential to restoring the American middle class require congressional support, but Congress has largely been on a thirty-year holiday from economic reality—at least as far as the middle class is concerned. Once in a while, however, even Congress has to come back to the people. Significant attempts to restore equity to the tax code by raising taxes on the wealthy will be met with cries of “class warfare,” and any effort to temper the power and tax exemptions of U.S. multinational corporations that would limit their ability to invest outside the United States and send jobs abroad is certain to be met by a ferocious lobbying assault in Washington. Corporations also will argue that the goods they import made by cheap labor will provide lower-priced consumer items for sale that are good for our economy. But what kind of a society will we have if low prices are the ultimate measure of its worth? A society built on the economic principle that the lowest price is all that matters will be quite different from a society built on the principle that everyone who wants to work should receive a living wage. By putting the emphasis on the lowest possible price, we have sacrificed other values that create a healthy, productive society.

For all this to change, the people will have to prevail. Middle-class Americans, still the largest group of voters, must put their own economic survival above partisan loyalties and ask four simple questions of any candidate who wishes to represent them:

1. Will you support tax reform that restores fairness to personal and corporate tax rates?