SALON

Great Recession

Tuesday, Aug 9, 2011 4:10 PM UTC

How America turned poverty into a crime

The poor aren't just struggling during the recession; they're being actively hounded by urban officials

By Elias Pirela, 6, right, holds his brother Ahmad Phillips, center, as he stands with his mother Latasha Phillips, 33, left, before leaving for the first day of school from his temporary home at the Community Partnership for Homeless in Miami, Monday, Aug. 23, 2010

I completed the manuscript for “Nickel and Dimed” in a time of seemingly boundless prosperity. Technology innovators and venture capitalists were acquiring sudden fortunes, buying up McMansions like the ones I had cleaned in Maine and much larger. Even secretaries in some hi-tech firms were striking it rich with their stock options. There was loose talk about a permanent conquest of the business cycle, and a sassy new spirit infecting American capitalism. In San Francisco, a billboard for an e-trading firm proclaimed, “Make love not war,” and then — down at the bottom — “Screw it, just make money.”

When “Nickel and Dimed” was published in May 2001, cracks were appearing in the dot-com bubble and the stock market had begun to falter, but the book still evidently came as a surprise, even a revelation, to many. Again and again, in that first year or two after publication, people came up to me and opened with the words, “I never thought…” or “I hadn’t realized…”

To my own amazement, “Nickel and Dimed” quickly ascended to the bestseller list and began winning awards. Criticisms, too, have accumulated over the years. But for the most part, the book has been far better received than I could have imagined it would be, with an impact extending well into the more comfortable classes. A Florida woman wrote to tell me that, before reading it, she’d always been annoyed at the poor for what she saw as their self-inflicted obesity. Now she understood that a healthy diet wasn’t always an option. And if I had a quarter for every person who’s told me he or she now tipped more generously, I would be able to start my own foundation.

Even more gratifying to me, the book has been widely read among low-wage workers. In the last few years, hundreds of people have written to tell me their stories: the mother of a newborn infant whose electricity had just been turned off, the woman who had just been given a diagnosis of cancer and has no health insurance, the newly homeless man who writes from a library computer.

At the time I wrote “Nickel and Dimed,” I wasn’t sure how many people it directly applied to — only that the official definition of poverty was way off the mark, since it defined an individual earning $7 an hour, as I did on average, as well out of poverty. But three months after the book was published, the Economic Policy Institute in Washington, D.C., issued a report entitled “Hardships in America: The Real Story of Working Families,” which found an astounding 29 percent of American families living in what could be more reasonably defined as poverty, meaning that they earned less than a barebones budget covering housing, child care, health care, food, transportation, and taxes — though not, it should be noted, any entertainment, meals out, cable TV, Internet service, vacations, or holiday gifts. 29 percent is a minority, but not a reassuringly small one, and other studies in the early 2000s came up with similar figures.

The big question, 10 years later, is whether things have improved or worsened for those in the bottom third of the income distribution, the people who clean hotel rooms, work in warehouses, wash dishes in restaurants, care for the very young and very old, and keep the shelves stocked in our stores. The short answer is that things have gotten much worse, especially since the economic downturn that began in 2008.

Post-Meltdown Poverty

When you read about the hardships I found people enduring while I was researching my book — the skipped meals, the lack of medical care, the occasional need to sleep in cars or vans — you should bear in mind that those occurred in the best of times. The economy was growing, and jobs, if poorly paid, were at least plentiful.

In 2000, I had been able to walk into a number of jobs pretty much off the street. Less than a decade later, many of these jobs had disappeared and there was stiff competition for those that remained. It would have been impossible to repeat my “Nickel and Dimed” “experiment,” had I had been so inclined, because I would probably never have found a job.

For the last couple of years, I have attempted to find out what was happening to the working poor in a declining economy — this time using conventional reporting techniques like interviewing. I started with my own extended family, which includes plenty of people without jobs or health insurance, and moved on to trying to track down a couple of the people I had met while working on “Nickel and Dimed”.

This wasn’t easy, because most of the addresses and phone numbers I had taken away with me had proved to be inoperative within a few months, probably due to moves and suspensions of telephone service. I had kept in touch with “Melissa” over the years, who was still working at Wal-Mart, where her wages had risen from $7 to $10 an hour, but in the meantime her husband had lost his job. “Caroline,” now in her 50s and partly disabled by diabetes and heart disease, had left her deadbeat husband and was subsisting on occasional cleaning and catering jobs. Neither seemed unduly afflicted by the recession, but only because they had already been living in what amounts to a permanent economic depression.

Media attention has focused, understandably enough, on the “nouveau poor” — formerly middle and even upper-middle class people who lost their jobs, their homes, and/or their investments in the financial crisis of 2008 and the economic downturn that followed it, but the brunt of the recession has been borne by the blue-collar working class, which had already been sliding downwards since de-industrialization began in the 1980s.

In 2008 and 2009, for example, blue-collar unemployment was increasing three times as fast as white-collar unemployment, and African American and Latino workers were three times as likely to be unemployed as white workers. Low-wage blue-collar workers, like the people I worked with in this book, were especially hard hit for the simple reason that they had so few assets and savings to fall back on as jobs disappeared.

How have the already-poor attempted to cope with their worsening economic situation? One obvious way is to cut back on health care. The New York Times reported in 2009 that one-third of Americans could no longer afford to comply with their prescriptions and that there had been a sizable drop in the use of medical care. Others, including members of my extended family, have given up their health insurance.

Food is another expenditure that has proved vulnerable to hard times, with the rural poor turning increasingly to “food auctions,” which offer items that may be past their sell-by dates. And for those who like their meat fresh, there’s the option of urban hunting. In Racine, Wisconsin, a 51-year-old laid-off mechanic told me he was supplementing his diet by “shooting squirrels and rabbits and eating them stewed, baked, and grilled.” In Detroit, where the wildlife population has mounted as the human population ebbs, a retired truck driver was doing a brisk business in raccoon carcasses, which he recommends marinating with vinegar and spices.

The most common coping strategy, though, is simply to increase the number of paying people per square foot of dwelling space — by doubling up or renting to couch-surfers.

It’s hard to get firm numbers on overcrowding, because no one likes to acknowledge it to census-takers, journalists, or anyone else who might be remotely connected to the authorities.

In Los Angeles, housing expert Peter Dreier says that “people who’ve lost their jobs, or at least their second jobs, cope by doubling or tripling up in overcrowded apartments, or by paying 50 or 60 or even 70 percent of their incomes in rent.” According to a community organizer in Alexandria, Virginia, the standard apartment in a complex occupied largely by day laborers has two bedrooms, each containing an entire family of up to five people, plus an additional person laying claim to the couch.

No one could call suicide a “coping strategy,” but it is one way some people have responded to job loss and debt. There are no national statistics linking suicide to economic hard times, but the National Suicide Prevention Lifeline reported more than a four-fold increase in call volume between 2007 and 2009, and regions with particularly high unemployment, like Elkhart, Indiana, have seen troubling spikes in their suicide rates. Foreclosure is often the trigger for suicide — or, worse, murder-suicides that destroy entire families.

“Torture and Abuse of Needy Families”

We do of course have a collective way of ameliorating the hardships of individuals and families — a government safety net that is meant to save the poor from spiraling down all the way to destitution. But its response to the economic emergency of the last few years has been spotty at best. The food stamp program has responded to the crisis fairly well, to the point where it now reaches about 37 million people, up about 30 percent from pre-recession levels. But welfare — the traditional last resort for the down-and-out until it was “reformed” in 1996 — only expanded by about 6 percent in the first two years of the recession.

The difference between the two programs? There is a right to food stamps. You go to the office and, if you meet the statutory definition of need, they help you. For welfare, the street-level bureaucrats can, pretty much at their own discretion, just say no.

Take the case of Kristen and Joe Parente, Delaware residents who had always imagined that people turned to the government for help only if “they didn’t want to work.” Their troubles began well before the recession, when Joe, a fourth-generation pipe-fitter, sustained a back injury that left him unfit for even light lifting. He fell into a profound depression for several months, then rallied to ace a state-sponsored retraining course in computer repairs — only to find that those skills are no longer in demand. The obvious fallback was disability benefits, but — catch-22 — when Joe applied he was told he could not qualify without presenting a recent MRI scan. This would cost $800 to $900, which the Parentes do not have; nor has Joe, unlike the rest of the family, been able to qualify for Medicaid.

When they married as teenagers, the plan had been for Kristen to stay home with the children. But with Joe out of action and three children to support by the middle of this decade, Kristen went out and got waitressing jobs, ending up, in 2008, in a “pretty fancy place on the water.” Then the recession struck and she was laid off.

Kristen is bright, pretty, and to judge from her command of her own small kitchen, probably capable of holding down a dozen tables with precision and grace. In the past she’d always been able to land a new job within days; now there was nothing. Like 44 percent of laid-off people at the time, she failed to meet the fiendishly complex and sometimes arbitrary eligibility requirements for unemployment benefits. Their car started falling apart.

So the Parentes turned to what remains of welfare — TANF, or Temporary Assistance to Needy Families. TANF does not offer straightforward cash support like Aid to Families with Dependent Children, which it replaced in 1996. It’s an income supplementation program for working parents, and it was based on the sunny assumption that there would always be plenty of jobs for those enterprising enough to get them.

After Kristen applied, nothing happened for six weeks — no money, no phone calls returned. At school, the Parentes’ seven-year-old’s class was asked to write out what wish they would present to a genie, should a genie appear. Brianna’s wish was for her mother to find a job because there was nothing to eat in the house, an aspiration that her teacher deemed too disturbing to be posted on the wall with the other children’s requests.

When the Parentes finally got into “the system” and began receiving food stamps and some cash assistance, they discovered why some recipients have taken to calling TANF “Torture and Abuse of Needy Families.” From the start, the TANF experience was “humiliating,” Kristen says. The caseworkers “treat you like a bum. They act like every dollar you get is coming out of their own paychecks.”

The Parentes discovered that they were each expected to apply for 40 jobs a week, although their car was on its last legs and no money was offered for gas, tolls, or babysitting. In addition, Kristen had to drive 35 miles a day to attend “job readiness” classes offered by a private company called Arbor, which, she says, were “frankly a joke.”

Nationally, according to Kaaryn Gustafson of the University of Connecticut Law School, “applying for welfare is a lot like being booked by the police.” There may be a mug shot, fingerprinting, and lengthy interrogations as to one’s children’s true paternity. The ostensible goal is to prevent welfare fraud, but the psychological impact is to turn poverty itself into a kind of crime.

How the Safety Net Became a Dragnet

The most shocking thing I learned from my research on the fate of the working poor in the recession was the extent to which poverty has indeed been criminalized in America.

Perhaps the constant suspicions of drug use and theft that I encountered in low-wage workplaces should have alerted me to the fact that, when you leave the relative safety of the middle class, you might as well have given up your citizenship and taken residence in a hostile nation.

Most cities, for example, have ordinances designed to drive the destitute off the streets by outlawing such necessary activities of daily life as sitting, loitering, sleeping, or lying down. Urban officials boast that there is nothing discriminatory about such laws: “If you’re lying on a sidewalk, whether you’re homeless or a millionaire, you’re in violation of the ordinance,” a St. Petersburg, Florida, city attorney stated in June 2009, echoing Anatole France’s immortal observation that “the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges…”

In defiance of all reason and compassion, the criminalization of poverty has actually intensified as the weakened economy generates ever more poverty. So concludes a recent study from the National Law Center on Poverty and Homelessness, which finds that the number of ordinances against the publicly poor has been rising since 2006, along with the harassment of the poor for more “neutral” infractions like jaywalking, littering, or carrying an open container.

The report lists America’s ten “meanest” cities — the largest of which include Los Angeles, Atlanta, and Orlando — but new contestants are springing up every day. In Colorado, Grand Junction’s city council is considering a ban on begging; Tempe, Arizona, carried out a four-day crackdown on the indigent at the end of June. And how do you know when someone is indigent? As a Las Vegas statute puts it, “an indigent person is a person whom a reasonable ordinary person would believe to be entitled to apply for or receive” public assistance.

That could be me before the blow-drying and eyeliner, and it’s definitely Al Szekeley at any time of day. A grizzled 62-year-old, he inhabits a wheelchair and is often found on G Street in Washington, D.C. — the city that is ultimately responsible for the bullet he took in the spine in Phu Bai, Vietnam, in 1972.

He had been enjoying the luxury of an indoor bed until December 2008, when the police swept through the shelter in the middle of the night looking for men with outstanding warrants. It turned out that Szekeley, who is an ordained minister and does not drink, do drugs, or cuss in front of ladies, did indeed have one — for “criminal trespassing,” as sleeping on the streets is sometimes defined by the law. So he was dragged out of the shelter and put in jail.

“Can you imagine?” asked Eric Sheptock, the homeless advocate (himself a shelter resident) who introduced me to Szekeley. “They arrested a homeless man in a shelter for being homeless?”

The viciousness of the official animus toward the indigent can be breathtaking. A few years ago, a group called Food Not Bombs started handing out free vegan food to hungry people in public parks around the nation. A number of cities, led by Las Vegas, passed ordinances forbidding the sharing of food with the indigent in public places, leading to the arrests of several middle-aged white vegans.

One anti-sharing law was just overturned in Orlando, but the war on illicit generosity continues. Orlando is appealing the decision, and Middletown, Connecticut, is in the midst of a crackdown. More recently, Gainesville, Florida, began enforcing a rule limiting the number of meals that soup kitchens may serve to 130 people in one day, and Phoenix, Arizona, has been using zoning laws to stop a local church from serving breakfast to homeless people.

For the not-yet-homeless, there are two main paths to criminalization, and one is debt. Anyone can fall into debt, and although we pride ourselves on the abolition of debtors’ prison, in at least one state, Texas, people who can’t pay fines for things like expired inspection stickers may be made to “sit out their tickets” in jail.

More commonly, the path to prison begins when one of your creditors has a court summons issued for you, which you fail to honor for one reason or another, such as that your address has changed and you never received it. Okay, now you’re in “contempt of the court.”

Or suppose you miss a payment and your car insurance lapses, and then you’re stopped for something like a broken headlight (about $130 for the bulb alone). Now, depending on the state, you may have your car impounded and/or face a steep fine — again, exposing you to a possible court summons. “There’s just no end to it once the cycle starts,” says Robert Solomon of Yale Law School. “It just keeps accelerating.”

The second — and by far the most reliable — way to be criminalized by poverty is to have the wrong color skin. Indignation runs high when a celebrity professor succumbs to racial profiling, but whole communities are effectively “profiled” for the suspicious combination of being both dark-skinned and poor. Flick a cigarette and you’re “littering”; wear the wrong color T-shirt and you’re displaying gang allegiance. Just strolling around in a dodgy neighborhood can mark you as a potential suspect. And don’t get grumpy about it or you could be “resisting arrest.”

In what has become a familiar pattern, the government defunds services that might help the poor while ramping up law enforcement. Shut down public housing, then make it a crime to be homeless. Generate no public-sector jobs, then penalize people for falling into debt. The experience of the poor, and especially poor people of color, comes to resemble that of a rat in a cage scrambling to avoid erratically administered electric shocks. And if you should try to escape this nightmare reality into a brief, drug-induced high, it’s “gotcha” all over again, because that of course is illegal too.

One result is our staggering level of incarceration, the highest in the world. Today, exactly the same number of Americans — 2.3 million — reside in prison as in public housing. And what public housing remains has become ever more prison-like, with random police sweeps and, in a growing number of cities, proposed drug tests for residents. The safety net, or what remains of it, has been transformed into a dragnet.

It is not clear whether economic hard times will finally force us to break the mad cycle of poverty and punishment. With even the official level of poverty increasing — to over 14 percent in 2010 — some states are beginning to ease up on the criminalization of poverty, using alternative sentencing methods, shortening probation, and reducing the number of people locked up for technical violations like missing court appointments. But others, diabolically enough, are tightening the screws: not only increasing the number of “crimes,” but charging prisoners for their room and board, guaranteeing they’ll be released with potentially criminalizing levels of debt.

So what is the solution to the poverty of so many of America’s working people? Ten years ago, when “Nickel and Dimed” first came out, I often responded with the standard liberal wish list — a higher minimum wage, universal health care, affordable housing, good schools, reliable public transportation, and all the other things we, uniquely among the developed nations, have neglected to do.

Today, the answer seems both more modest and more challenging: if we want to reduce poverty, we have to stop doing the things that make people poor and keep them that way. Stop underpaying people for the jobs they do. Stop treating working people as potential criminals and let them have the right to organize for better wages and working conditions.

Stop the institutional harassment of those who turn to the government for help or find themselves destitute in the streets. Maybe, as so many Americans seem to believe today, we can’t afford the kinds of public programs that would genuinely alleviate poverty — though I would argue otherwise. But at least we should decide, as a bare minimum principle, to stop kicking people when they’re down.

Barbara Ehrenreich is the author of a number of books including “Nickel and Dimed: On (Not) Getting By in America” and “Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America.”

Barbara Ehrenreich is the author of a number of books including "Nickel and Dimed: On (Not) Getting By in America" and "Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America." More Barbara Ehrenreich.

Tuesday, May 8, 2012 6:28 PM UTC

David Brooks, “structuralist”

The New York Times moderate says the welfare state is unsustainable, and buys himself a new $4 million home

By

David Brooks is everything that’s wrong with elite opinion in America. The president reads him and takes him seriously. That is why the opinions of venal faux “reasonable” clowns like Brooks matter. Brooks today sums up the new argument for not actually doing anything to alleviate worldwide unnecessary hardship: The problem is “structural,” not “cyclical”!

Long Op-Ed short, Brooks says “cyclicalists” (unnamed) think we should deficit-spend our way to prosperity, because, according to Brooks, they believe that “the level of government spending is the main factor in determining how fast an economy grows.” (No one actually believes this.) But according to Brooks, all of our problems are “structural,” which is to say that the reason we have mass unemployment and debt and growing wealth disparity is because of “technological change” and crappy schools. And “special-interest deals” in the tax code.

The point of the Brooks argument is simply to make continued non-action to address actual short-term pressing problems sound serious and wise. He’s not even making a partisan argument, you see. Oh, people on “the left” have been having their silly little debate, but all the serious people — “some on the left but mostly in the center and on the right” — have accepted the sad truth, like Brooks. And Brooks is soberly explaining the situation. He is not at all responding to Paul Krugman, his fellow New York Times columnist, who has lately taken to fiercely rebutting arguments put forth by various unnamed “centrists” and “moderates” in his columns.

This is Brooks’ conclusion:

But you can only mask structural problems for so long. The whole thing has gone kablooey. The current model, in which we try to compensate for structural economic weakness with tax cuts and an unsustainable welfare state, simply cannot last. The old model is broken. The jig is up.

It’s so sad, but everyone will now just have to accept that social democracy is an impossibility. We have learned that “the old economic and welfare state model is unsustainable,” so shut up about your unemployment benefits running out and there being no jobs still. (Silly me, here I was thinking the recent massive international financial crisis actually exposed post-industrial capitalism as the “unsustainable” thing.)

Ezra Klein has the rather polite, policy-based response to Brooks’ argument: Essentially that even if Brooks is right about America’s structural problems needing to be addressed, we should still also give poor people money and indebted people relief and spend money on infrastructure improvements to prevent these structural problems from becoming even worse.

Dean Baker has the response in which it is pointed out that Brooks is full of predictable, repetitive shit. The “we have no jobs because of technology and also there are plenty of jobs but unemployed people have the wrong skills” line is as old as the Great Depression and there is no actual evidence for it. It’s just what people who want to sound serious while dismissing efforts to spend money on economic stimulus say.

Hey, let’s check out some recent real estate news at the Washington Post’s Reliable Source blog, for fun. Looks like a Mr. David Brooks just bought himself a $3.95 million home in Cleveland Park!

The New York Times op-ed columnist and wife Sarah are trading up — from their longtime home near Bethesda’s Burning Tree Club to a century-old (exquisitely renovated) five bedroom, four-and-a-half bath house in Cleveland Park. It includes a two-car garage, iron and stone fence, generous-sized porch and balcony, and what appear to be vast spaces for entertaining. The timing seems to have been right: After only a few days on the market, their old place (which also boasts five bedrooms) is under contract for $1.6 million.

Whoops, sorry about your welfare state collapsing, 12 million out of work Americans, but it was just too “unsustainable” to keep you employed — you should all consider developing new skills and trying to find more “productive” work, like writing bullshit columns for the New York Times, maybe.

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Alex Pareene

Alex Pareene writes about politics for Salon and is the author of "The Rude Guide to Mitt." Email him at apareene@salon.com and follow him on Twitter @pareene More Alex Pareene.

Tuesday, May 8, 2012 11:55 AM UTC

Chomsky: “Jobs aren’t coming back”

Wealth is concentrated with the 1 percent because America no longer makes things: Financiers just manipulate money

By (Credit: iStockphoto/buzbuzzer)
This article originally appeared on TomDispatch.com.

The Occupy movement has been an extremely exciting development. Unprecedented, in fact. There’s never been anything like it that I can think of.  If the bonds and associations it has established can be sustained through a long, dark period ahead — because victory won’t come quickly — it could prove a significant moment in American history.

The fact that the Occupy movement is unprecedented is quite appropriate. After all, it’s an unprecedented era and has been so since the 1970s, which marked a major turning point in American history. For centuries, since the country began, it had been a developing society, and not always in very pretty ways. That’s another story, but the general progress was toward wealth, industrialization, development and hope. There was a pretty constant expectation that it was going to go on like this. That was true even in very dark times.

I’m just old enough to remember the Great Depression. After the first few years, by the mid-1930s — although the situation was objectively much harsher than it is today — nevertheless, the spirit was quite different. There was a sense that “we’re gonna get out of it,” even among unemployed people, including a lot of my relatives, a sense that “it will get better.”

There was militant labor union organizing going on, especially from the CIO (Congress of Industrial Organizations). It was getting to the point of sit-down strikes, which are frightening to the business world — you could see it in the business press at the time — because a sit-down strike is just a step before taking over the factory and running it yourself. The idea of worker takeovers is something which is, incidentally, very much on the agenda today, and we should keep it in mind. Also New Deal legislation was beginning to come in as a result of popular pressure. Despite the hard times, there was a sense that, somehow, “we’re gonna get out of it.”

It’s quite different now. For many people in the United States, there’s a pervasive sense of hopelessness, sometimes despair. I think it’s quite new in American history. And it has an objective basis.

On the Working Class

In the 1930s, unemployed working people could anticipate that their jobs would come back. If you’re a worker in manufacturing today — the current level of unemployment there is approximately like the Depression — and current tendencies persist, those jobs aren’t going to come back.

The change took place in the 1970s. There are a lot of reasons for it. One of the underlying factors, discussed mainly by economic historian Robert Brenner, was the falling rate of profit in manufacturing. There were other factors. It led to major changes in the economy — a reversal of several hundred years of progress towards industrialization and development that turned into a process of de-industrialization and de-development. Of course, manufacturing production continued overseas very profitably, but it’s no good for the work force.

Along with that came a significant shift of the economy from productive enterprise — producing things people need or could use — to financial manipulation. The financialization of the economy really took off at that time.

On Banks

Before the 1970s, banks were banks. They did what banks were supposed to do in a state capitalist economy: they took unused funds from your bank account, for example, and transferred them to some potentially useful purpose like helping a family buy a home or send a kid to college. That changed dramatically in the 1970s. Until then, there had been no financial crises since the Great Depression. The 1950s and 1960s had been a period of enormous growth, the highest in American history, maybe in economic history.

And it was egalitarian.  The lowest quintile did about as well as the highest quintile. Lots of people moved into reasonable lifestyles — what’s called the “middle class” here, the “working class” in other countries — but it was real.  And the 1960s accelerated it. The activism of those years, after a pretty dismal decade, really civilized the country in lots of ways that are permanent.

When the 1970s came along, there were sudden and sharp changes: De-industrialization, the off-shoring of production, and the shift to financial institutions, which grew enormously. I should say that, in the 1950s and 1960s, there was also the development of what several decades later became the high-tech economy: Computers, the Internet, the IT Revolution developed substantially in the state sector.

The developments that took place during the 1970s set off a vicious cycle. It led to the concentration of wealth increasingly in the hands of the financial sector. This doesn’t benefit the economy — it probably harms it and society — but it did lead to a tremendous concentration of wealth.

On Politics and Money

Concentration of wealth yields concentration of political power. And concentration of political power gives rise to legislation that increases and accelerates the cycle. The legislation, essentially bipartisan, drives new fiscal policies and tax changes, as well as the rules of corporate governance and deregulation. Alongside this began a sharp rise in the costs of elections, which drove the political parties even deeper into the pockets of the corporate sector.

The parties dissolved in many ways. It used to be that if a person in Congress hoped for a position such as a committee chair, he or she got it mainly through seniority and service. Within a couple of years, they started having to put money into the party coffers in order to get ahead, a topic studied mainly by Tom Ferguson. That just drove the whole system even deeper into the pockets of the corporate sector (increasingly the financial sector).

This cycle resulted in a tremendous concentration of wealth, mainly in the top tenth of one percent of the population. Meanwhile, it opened a period of stagnation or even decline for the majority of the population. People got by, but by artificial means such as longer working hours, high rates of borrowing and debt, and reliance on asset inflation like the recent housing bubble. Pretty soon those working hours were much higher in the United States than in other industrial countries like Japan and various places in Europe. So there was a period of stagnation and decline for the majority alongside a period of sharp concentration of wealth. The political system began to dissolve.

There has always been a gap between public policy and public will, but it just grew astronomically. You can see it right now, in fact. Take a look at the big topic in Washington that everyone concentrates on: The deficit. For the public, correctly, the deficit is not regarded as much of an issue. And it isn’t really much of an issue. The issue is joblessness. There’s a deficit commission but no joblessness commission. As far as the deficit is concerned, the public has opinions. Take a look at the polls. The public overwhelmingly supports higher taxes on the wealthy, which have declined sharply in this period of stagnation and decline, and the preservation of limited social benefits.

The outcome of the deficit commission is probably going to be the opposite. The Occupy movements could provide a mass base for trying to avert what amounts to a dagger pointed at the heart of the country.

Plutonomy and the Precariat

For the general population, the 99% in the imagery of the Occupy movement, it’s been pretty harsh — and it could get worse. This could be a period of irreversible decline. For the 1 percent and even less — the .1 percent — it’s just fine. They are richer than ever, more powerful than ever, controlling the political system, disregarding the public. And if it can continue, as far as they’re concerned, sure, why not?

Take, for example, Citigroup. For decades, Citigroup has been one of the most corrupt of the major investment banking corporations, repeatedly bailed out by the taxpayer, starting in the early Reagan years and now once again. I won’t run through the corruption, but it’s pretty astonishing.

In 2005, Citigroup came out with a brochure for investors called “Plutonomy: Buying Luxury, Explaining Global Imbalances.” It urged investors to put money into a “plutonomy index.” The brochure says, “The World is dividing into two blocs — the Plutonomy and the rest.”

Plutonomy refers to the rich, those who buy luxury goods and so on, and that’s where the action is. They claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them adrift. We don’t really care about them. We don’t really need them. They have to be around to provide a powerful state, which will protect us and bail us out when we get into trouble, but other than that they essentially have no function. These days they’re sometimes called the “precariat” — people who live a precarious existence at the periphery of society. Only it’s not the periphery anymore. It’s becoming a very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing.

So, for example, Fed Chairman Alan Greenspan, at the time when he was still “Saint Alan” — hailed by the economics profession as one of the greatest economists of all time (this was before the crash for which he was substantially responsible) — was testifying to Congress in the Clinton years, and he explained the wonders of the great economy that he was supervising. He said a lot of its success was based substantially on what he called “growing worker insecurity.” If working people are insecure, if they’re part of the precariat, living precarious existences, they’re not going to make demands, they’re not going to try to get better wages, they won’t get improved benefits. We can kick ’em out, if we don’t need ’em. And that’s what’s called a “healthy” economy, technically speaking. And he was highly praised for this, greatly admired.

So the world is now indeed splitting into a plutonomy and a precariat — in the imagery of the Occupy movement, the 1 percent and the 99 percent. Not literal numbers, but the right picture. Now, the plutonomy is where the action is and it could continue like this.

If it does, the historic reversal that began in the 1970s could become irreversible. That’s where we’re heading. And the Occupy movement is the first real, major, popular reaction that could avert this. But it’s going to be necessary to face the fact that it’s a long, hard struggle. You don’t win victories tomorrow. You have to form the structures that will be sustained, that will go on through hard times and can win major victories. And there are a lot of things that can be done.

Toward Worker Takeover

I mentioned before that, in the 1930s, one of the most effective actions was the sit-down strike. And the reason is simple: That’s just a step before the takeover of an industry.

Through the 1970s, as the decline was setting in, there were some important events that took place. In 1977, U.S. Steel decided to close one of its major facilities in Youngstown, Ohio. Instead of just walking away, the workforce and the community decided to get together and buy it from the company, hand it over to the work force, and turn it into a worker-run, worker-managed facility. They didn’t win. But with enough popular support, they could have won.  It’s a topic that Gar Alperovitz and Staughton Lynd, the lawyer for the workers and community, have discussed in detail.

It was a partial victory because, even though they lost, it set off other efforts. And now, throughout Ohio, and in other places, there’s a scattering of hundreds, maybe thousands, of sometimes not-so-small worker/community-owned industries that could become worker-managed. And that’s the basis for a real revolution. That’s how it takes place.

In one of the suburbs of Boston, about a year ago, something similar happened. A multinational decided to close down a profitable, functioning facility carrying out some high-tech manufacturing. Evidently, it just wasn’t profitable enough for them. The workforce and the union offered to buy it, take it over, and run it themselves. The multinational decided to close it down instead, probably for reasons of class-consciousness. I don’t think they want things like this to happen. If there had been enough popular support, if there had been something like the Occupy movement that could have gotten involved, they might have succeeded.

And there are other things going on like that. In fact, some of them are major. Not long ago, President Barack Obama took over the auto industry, which was basically owned by the public. And there were a number of things that could have been done. One was what was done: reconstitute it so that it could be handed back to the ownership, or very similar ownership, and continue on its traditional path.

The other possibility was to hand it over to the workforce — which owned it anyway — turn it into a worker-owned, worker-managed major industrial system that’s a big part of the economy, and have it produce things that people need. And there’s a lot that we need.

We all know or should know that the United States is extremely backward globally in high-speed transportation, and it’s very serious. It not only affects people’s lives, but the economy.  In that regard, here’s a personal story. I happened to be giving talks in France a couple of months ago and had to take a train from Avignon in southern France to Charles De Gaulle Airport in Paris, the same distance as from Washington, D.C., to Boston. It took two hours.  I don’t know if you’ve ever taken the train from Washington to Boston, but it’s operating at about the same speed it was 60 years ago when my wife and I first took it. It’s a scandal.

It could be done here as it’s been done in Europe. They had the capacity to do it, the skilled work force. It would have taken a little popular support, but it could have made a major change in the economy.

Just to make it more surreal, while this option was being avoided, the Obama administration was sending its transportation secretary to Spain to get contracts for developing high-speed rail for the United States, which could have been done right in the Rust Belt, which is being closed down. There are no economic reasons why this can’t happen. These are class reasons, and reflect the lack of popular political mobilization. Things like this continue.

Climate Change and Nuclear Weapons

I’ve kept to domestic issues, but there are two dangerous developments in the international arena, which are a kind of shadow that hangs over everything we’ve discussed. There are, for the first time in human history, real threats to the decent survival of the species.

One has been hanging around since 1945. It’s kind of a miracle that we’ve escaped it. That’s the threat of nuclear war and nuclear weapons. Though it isn’t being much discussed, that threat is, in fact, being escalated by the policies of this administration and its allies. And something has to be done about that or we’re in real trouble.

The other, of course, is environmental catastrophe. Practically every country in the world is taking at least halting steps towards trying to do something about it. The United States is also taking steps, mainly to accelerate the threat.  It is the only major country that is not only not doing something constructive to protect the environment, it’s not even climbing on the train. In some ways, it’s pulling it backwards.

And this is connected to a huge propaganda system, proudly and openly declared by the business world, to try to convince people that climate change is just a liberal hoax. “Why pay attention to these scientists?”

We’re really regressing back to the dark ages. It’s not a joke.  And if that’s happening in the most powerful, richest country in history, then this catastrophe isn’t going to be averted — and in a generation or two, everything else we’re talking about won’t matter. Something has to be done about it very soon in a dedicated, sustained way.

It’s not going to be easy to proceed. There are going to be barriers, difficulties, hardships, failures.  It’s inevitable. But unless the spirit of the last year, here and elsewhere in the country and around the globe, continues to grow and becomes a major force in the social and political world, the chances for a decent future are not very high.

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Noam Chomsky is Institute Professor (retired) at MIT. He is the author of many books and articles on international affairs and social-political issues, and a long-time participant in activist movements. More Noam Chomsky.

Monday, May 7, 2012 7:23 PM UTC

No one went to jail, so why is Wall Street so mad?

Not prosecuting any of the parties responsible for the recession has just served to embolden them

By (Credit: Reuters/Joshua Roberts)

In Newsweek, Peter Boyer and Peter Schweizer explore the question of President Obama’s Justice Department’s failure to press any major criminal charges against Wall Street. We learn, distressingly, that “finance-fraud prosecutions by the Department of Justice are at 20-year lows.” Ex-Countrywide whistle-blower Eileen Foster, to name one prominent critic of the Justice Department’s inaction, is still urging the Justice Department to do something about her former colleagues, but to no avail. What’s holding them back?

Well, a lot of things. For one, criminal cases for finance-related wrongdoing are hard and complicated to prosecute. The Justice Department is stocked with a lot of people with experience defending financial institutions — including Attorney General Eric Holder, a former partner at Covington & Burling, which represents many of the worst of the mega-banks. Plus, curiously, a lot of Goldman executives and other Wall Street types keep donating lots of money to Obama! (Though less money than they gave him in 2008.) The simple answer is that Holder, and Obama, seem to think that while Wall Street did a lot of stupid, venal things that ruined everyone’s lives, those things were largely … legal. Obama said as much to Rolling Stone: “In some cases, really irresponsible practices that hurt a lot of people might not have been technically against the law.” He might be not entirely wrong! Lots of horrible finance industry practices were and are perfectly legal. But we’ll never quite know whether the line was crossed until we … actually investigate.

So it’s all the odder that Wall Street is so damn mad at Obama, right?

In the only slightly oversimplified narrative of the financial crisis and subsequent recession as you and I and most non-billionaires understand it, Wall Street blew up the world economy, then got bailed out to the tune of billions of dollars, and then resumed being hugely profitable and irresponsible as everyone else suffered through foreclosures, massive debt and mass unemployment. In this narrative, the government, led at various points by members of both parties, did everything in its power to maintain the status quo on Wall Street, while offering primarily temporary relief and various ineffectual half-measures to everyone else. Eventually the Democrats passed some form of “financial regulation” that largely has not yet gone into effect and that will not do much to stem or reverse the financialization of our economy. (The SEC is way, way behind on implenting Dodd-Frank and seems in no great hurry to finish.) The president eventually began noting the existence of mass outrage toward the financial sector, but he did little to actually address that outrage beyond proposing a new tax bracket for millionaires.

So, based on all that, it is very hard to see what Wall Street is so mad about! But as I explained earlier today, most of these rich financial industry titans are also dumb, spoiled children. If anything, the president’s failure to treat the chicanery and fraud that led to the crisis as crimes worth prosecuting had the same effect that his failure to prosecute the architects of Bush’s torture regime had: It emboldened the wrongdoers, who are now convinced that they never did wrong. In this environment, the public’s real and justified outrage at Wall Street is wholly inexplicable to finance types, who blame it on the media and Obama’s occasional rhetorical populism. (He is making people hate bankers by pointing out that people hate bankers!)

Now, in lieu of subpoenas and indictments, we have mild criticism — Obama’s occasional off-message mentions of “fat cat bankers” or whatever — and those mild criticisms set off hysterical waves of paranoia and self-righteous fury. Because no one was hauled off in chains, the people who wreaked so much havoc think it’s actually been established that they did not do wrong.

So Obama has now not succeeded in cowing or placating Wall Street.

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Alex Pareene

Alex Pareene writes about politics for Salon and is the author of "The Rude Guide to Mitt." Email him at apareene@salon.com and follow him on Twitter @pareene More Alex Pareene.

Thursday, May 3, 2012 12:00 AM UTC

My own private recession

At 28, I moved in with Mom. It's the classic hard-luck tale of my generation -- but the only person at fault is me

By (Credit: Piotr Marcinski via Shutterstock)

Following the hottest new trend of last two years, I moved in with my mother at age 28. Despite everything, she still showed me off to the ladies at bridge night, just like when I was a kid. “This economy,” the ladies said, shaking their heads at the shame of it. Yes, lucky me, the recession. I could hide among its victims, and no one suspected what I knew.

This was all my fault.

Great timing for my high school reunion. That one question to sum up my first 10 years of adulthood: “So, what have you been up to?”

“Oh, just living with Mom,” I said, throwing an ironic thumbs up. I shrugged. “You know, with this economy…” Not even a full sentence, it worked as an excuse without technically being a lie. They all nodded with sympathy as if something had happened to me, and not because of me.

They’d heard I’d been in the Peace Corps and surely they pictured me suffering, knee-deep in river mud, hand-scrubbing a tattered poncho. Surely they didn’t picture me lounging on a Brazilian beach, or drinking red wine in Buenos Aires. Surely they didn’t picture my fellow volunteers and me heading to the capital at least once a month, watching dubbed American cable and feeding each other crème brûlée we got delivered to our hotel rooms, almost as a joke on poverty. Surely they didn’t suspect that I’d bought myself an air conditioner when my host mom offered to sell me hers and a horse just because it would probably be my only chance in life to have one, even if being a single woman going out in fields by herself started rumors that I was a hussy. They assumed I suffered in poverty, because suffering was supposed to be part of the fun.

But, out of sight of our host families, we gave in to the temptation to grab at the luxury within reach to break up the sweat, grisly meals and discomfort, both social and physical, that made up so much of our lives there. All you had to do was think in dollars, take out a 20 here and there from that one ATM that accessed American banks, and over two years you could deflate your savings on so many small comforts of the First World.

Even though it was my job to teach the locals about sustainability, I was leading my own unsustainable life, outspending my earnings 2-to-1, living on the edge of my credit limit and willfully ignoring the ticking of borrowed time. This is what leads to recession, on any scale.

At my high school reunion, I let the assumed victimhood ride, but at home, Mom knew better.

“You have three months,” she said. My stimulus package: 90 days of free rent, free food, unlimited pool and pool floatie raft access, as well as full-time use of her Jeep Cherokee while she drove her husband’s work truck with the 7-foot blind spot.

I slipped into the refuge of her life, but at night, lying under her seashell comforter, I felt the absence of everything I’d let myself lose. She knocked on her own guest bedroom door and came in, smiling, delighted to have her daughter on the same continent. She sat on the edge of the bed, stroking my hair. “Everything will be OK,” she said, seeing my red eyes. Her voice smoothed the hot shame, even though I had no reason to believe what she said.

The story was always that she and Dad had balanced each other out in every way, except that they were both bad with money. This was my breeding. I had lived paycheck to paycheck since I started scooping ice cream for a living at 14. In middle school, I was the one asking if anyone had 50 cents. In high school, I was the one losing the clothes I’d borrowed from friends. In college, I was the one lying in a clinic, selling my plasma for $20 of beer money.

Windfalls came at times: a tax return or a student loan check. After swearing I’d hold tight to the money this time, I never failed to let it slip through my fingers. Mom had bailed me out so many times that we put her name on my bank account so she could make deposits more quickly. Over the years, I sunk into debt with greater and greater abandon until I now found myself wearing my mom’s shoes to a temp job processing insurance forms.

Mom and I crossed paths in the kitchen while getting ready in the mornings, just like when I was in high school. “Honey, do you want a fruit cup?” she asked, packing me a lunch just this once. As I left, she handed me an insulated turquoise lunch box.

At work that day, I scraped my fruit cup with a plastic spoon and said to the other temps, one of whom was living in a homeless shelter, “You know, right now you just gotta do what you gotta do.”

I couldn’t even begin to make a plan. Plans required hope. After so many failures, failure became an all caps noun that I wore across my forehead at my second job as a bad waitress, pouring coffee for my former high school classmates out to organic brunches with their husbands and babies.

I could barely scrounge up the gas money to visit my best friends in their adult lives. They listened to my speech about digging myself out of the hole, doing the right thing this time and said, “That’s good.” When we went out to dinner, I let them pick up the check, making clear once again who was who.

Though already on hardship forbearance for my student loans, I thought the best move would be to apply to grad school. Acceptance would mean those magical student loan checks, a years-long break from paying back my undergrad loans, and, best of all, another smokescreen. You can be poor because you’re in the Peace Corps, you can be poor because of the recession, you can be poor because you’re a grad student, and no one will know that you’re poor because you’re too immature to stop yourself from getting a frappuccino when you have $7 in the bank. I’d worry about paying the debt back later, of course, once I had the great job a fine arts degree would land me.

So, instead of using my paychecks to pay back my mom, I spent them, more than $1,000, on the GRE testing costs and fees to apply for schools that would require more loans to attend. I mailed in the checks and did the approximate math, figuring they’d be OK. I let days pass without facing my bank balance. The longer I procrastinated, the more scared I became of what awaited me behind my user name and password. I held out another day. Then my debit card got declined at the gas station. I used my credit card, which I was pretty sure had at least $12 left to use. Then I went home and had to confront my computer.

Red. NSF. NSF. -$34. -$34. Balance: -$97. By the time I weighed the entire situation, I was hot all over again, panicked as if trapped somewhere, though I was only trapped inside myself.

There was only one place to turn, but the thought of asking my mom for money one more time almost made me nauseous. I had already stretched her generosity so far, who knew when it was going to snap?

When she asked how my day was, I told her what was going on, and she didn’t even make me ask.

“How about $100?” she said, just like I hoped she would.

“How about two?” I said, just to be safe.

She scrunched her brow and stared a second, as if she didn’t recognize the person in front of her.  “Don’t be a taker,” she said.

I had no facial expression in my repertoire to respond to my own mother, looking at me like that, so I just looked down.

Weeks later, I got an acceptance letter to grad school, an invitation to spend $40,000 a year living in one of the world’s most expensive cities, educating myself in the arts, paid for with interest by my future self, guaranteed to be bolstered by emergency loans from my future mom and dinners out from my future friends picking up the tab for their broke grad student buddy. The person I hated myself for being would have accepted. But by that time, I knew what a better person would do, and I knew I wanted to be a better person.

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Paulette Perhach is a writer living in Seattle, working a 9 to 5, putting 15% into her 401(k), and paying off her debts with hopes of saving for grad school. Last month, a year and a half after returning from the Peace Corps, she made her last installment to pay back her mother. More Paulette Perhach.

Tuesday, May 1, 2012 7:45 PM UTC

America’s new working poor

In this economy, having a job is no longer a guarantee against poverty

By (Credit: AP/Eric Risberg)

Last Friday, the U.S. Government announced that 7.2 percent of Americans in the labor force earn so little that they are living in poverty. Reuters noted that the percentage of the working poor is the highest in at least two decades. The rate was 7 percent in 2009, 5 percent in 1999, and 5.5 percent in 1987.

In “The Rich and the Rest of Us,” we warn against letting positive stock market and job recovery reports blind us to the truth. The fact is it’s harder than ever for Americans to find work. And, for the working poor, simply having a job isn’t enough. With inflation and the cost of living steadily rising and good-wage jobs declining, it’s no wonder more and more hard-working Americans find themselves in poverty or one paycheck away from impoverishment.

The U.S. Census placed overall poverty numbers in the United States in 2010 at 15.1 percent of the population or 46.2 million. The working poor comprise 10.5 million of that number. According to government criteria, a single individual making an annual income of $10,830 and a family of four living off $22,400 per year qualify as “poor.” It’s a stunning reality that more than 10 million Americans with jobs meet the poverty criteria.

Revised Census figures put the number of Americans living in poverty at almost 50 million. When we were writing our book late last year, nearly 14 million Americans were unemployed, and millions more were under-employed. Keep in mind, those numbers did not include those who simply gave up trying to find a job.

“The Rich and the Rest of Us” presents “12 poverty-changing ideas” for nationwide consideration. Our philosophy is rooted in the principle of “fundamental fairness.” It calls for an economic system that allows poor and working people to live above the poverty line with jobs that have real living-wage salaries.

A new system of fundamental fairness will lead to a tax system that addresses the needs of the working–class people, and not just the mega rich. The rate of inflation has outpaced the rate of wage increases. There must be an equitable system to prevent further expansion of the “working poor” and give people the opportunity to climb out of poverty with dignity.

We know this will not be an easy endeavor. But in a country where millions of families– with both parents working — are still being considered “poor,” fundamental fairness isn’t just a desired outcome, it’s a national priority.

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Tavis Smiley and Cornel West co-host Smiley & West from Public Radio International (PRI). Their latest book is "The Rich and the Rest of Us: A Poverty Manifesto." More Tavis Smiley and Cornel West.

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