This response ignores the ugly truth of what brought about this crisis. It wasn't a sudden spike in irresponsibility on the part of middle-class Americans. It was an inevitable by-product of tricks and traps deliberately put in place to maximize profits for a few while creating conditions that would soon maximize misery for millions.
The housing bubble was no accident. Fueling the boom was the development of securitized mortgages. The Fed did its part, too, contributing extremely low-interest rates and lax oversight. Bush helped inflate the bubble by pushing to dismantle some of the barriers to homeownership--part of Bush's vision of "an ownership society." The road to hell continues to be paved with good intentions.
The longer this remains the dominant cosmology in the Obama administration--and the longer it takes to switch to a plan that reflects a cosmology on which the American people are the center of the universe and are deemed "too big to fail"--the greater the risk that the economic crisis will be more prolonged than necessary. And the greater is suffering. There is an enormous human cost to this dogma.
These are massive numbers. But when you remember that we spent $182 billion to bail out AIG ($12.9 billion of which went straight to Goldman Sachs), you realize that this amount alone would be more than enough to close the 2010 budget gap in every state of the Union. Toss in the $45 billion we gave to Bank of America and the $45 billion we gave to Citigroup, and we would be well on the way to ensuring that no state's vital services are cut through 2011.
But instead that money has gone to the banks without any fundamental reform to the system, without any strings attached or edicts about how much they have to lend to help the real economy recover--or, indeed, without even having to tell us what they did with our money.
The trend is even starker when you look at the financial sector's share of U.S. business profits. Between 1973 an 1985, the financial industry's share of domestic corporate profits topped out at 16%. In the 1990s, it spanned between 21% and 30%. Just before the financial crisis hit, it stood at 41%.
The expansion of the financial industry has come at a significant cost to the rest of us. And those who have paid the highest price are the members--and former members--of America's middle class.
It's no wonder that Wall Street breathed a deep sigh of relief when the Senate passed the Restoring American Financial Stability Act in May 2010. It was considered mission accomplished for financial reform. Unfortunately, it didn't do enough to rein in Wall Street. It didn't end too-big-to-fail banks, and it kept taxpayers on the hook for future bailouts.
In the three decades since the Reagan Revolution, Americans have been [told that] unregulated markets are the true path to a higher standard of living. Along the way, the social contract--especially the subsections protecting workers, poor people, and our air, water, and oceans--was fed into a shredder. Starting with the New Deal, we began constructing a social safety net to help the most vulnerable among us. But who needed a safety net when the laws of supply and demand were there to protect us, when the trickle-down theory would provide sustenance for us all?
The missing tenet in this new free-market fundamentalism was the recognition, central to capitalism, that businessmen have responsibilities above and beyond the bottom line.
In 2004 US multinational corporations paid roughly $16 billion in taxes on $700 billion in foreign active earnings--putting their tax rate at around 2.3%. Know many middle-class Americans getting off that easy at tax time?
In Dec. 2008, 83 of the 100 largest publicly traded companies in the country had subsidiaries in tax havens. Washington has been trying to address the issue for close to fifty years--JFK gave it a go in 1961. But time and again corporate lobbyists have managed to keep the loopholes open.
Enter the bankruptcy bill that banking lobbyists pushed through Congress in 2005. Instead of cracking down on predatory lending practices, closing loopholes that favor the wealthy, and strengthening the safety net for working people, single mothers, and elderly Americans struggling to recover from financial setback, the Senate put together a nasty little bill that:
Sadly, in that prison population are 150,000 children. Too many of America's schools have become preparatory facilities not for college but for jail. When the choice has come down to books versus bars, our political leaders have chosen to build bigger prisons rather than figure out how to send fewer kids to them. How is it that we are willing to spend so much more on kids AFTER they are found guilty of crimes than we are when they could really use the help?
In the end, the blame for the chronic inability to fix our educational system has to be laid at the feet of our leaders in Washington. Every candidate promises to transform our schools--and fail to do so.
"Education," said Pres. Obama during his May 2010 commencement address at Hampton University, "is what has always allowed us to meet the challenges of a changing world." But he made it clear that the bar for meeting those challenges has been raised, and that a high-school diploma--formerly, in the president's words, "a ticket into a solid middle-class life"--is no longer enough to compete in what he called the "knowledge economy."
"Jobs today often require at least a bachelor's degree," he said; "the unemployment rate for folks who've never gone to college is over twice as high as for folks with a college degree or more."
In a single-payer health-care plan, the federal government provides coverage for all. Patients don't go to a government doctor--they just have the government pay the bill. And that's how it would work with education. In a single-payer education plan, the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would be then free to enroll their child in the school of their choice.
If we don't hold our health hostage to the value of our property, why do we do this with our children's education? The annual educational cost per child--equalized for urban and suburban school districts across each state--would come from current education funding sources.
With 535 members of the Senate and the House, that means lobbyists in the halls of power outnumber our elected representatives almost 26 to 1. If we divide $3.5 billion evenly among the 535, it means each member of the legislative branch was at the receiving and of $6.5 million worth of special interest arm-twisting over the course of the year.
And that's just the money corporate America is spending on lobbying. Millions more are given directly to politicians and the political parties. From 1974 to 2008 the average amount it took to run for reelection to the House went from $56,000 to more than $1.3 million.
This has to start with a complete reboot of the way we finance our elections. The most effective means of restoring the integrity of our government is through the full public financing of political campaigns. It's the mother of all reforms--the one reform that makes all other reforms possible. After all, he who pays the piper calls the tune. If someone's going to own the politicians, it might as well be the American people. Think of it: No hard money, no PAC money, no endless dialing for dollars. No more lobbyists sitting in House and Senate offices literally writing tailor-made loopholes into laws. Just candidates and elected officials beholden to no one but voters.
You want Third World thinking? How about North Korea joining the nuclear club while its people starve? Since the fall of the Roman Empire, one of the hallmarks of nations in decline has been increased military spending at the expense of other essential priorities. Think of the Soviets trying to match America, nuclear warhead to nuclear warhead.
Civilizations almost always die from suicide, not by murder. That is, our future is dependent on the choices we make and the things we decide to value.
Today, while America's economy sputters--with more than 26 million people unemployed and underemployed and record numbers of homes being lost to foreclosure--the "guns versus butter" argument isn't even part of the national debate.
So why is there no sense of urgency coming out of Washington? Perhaps the reason can be found in the stunning results of a study that broke down the unemployment rate by household income. Unemployment for those making $150,000 a year, the study found, was only 3% in the last quarter of 2009. The rate for those in the middle income range was 9%--not far off the national average. The rate for those in the bottom 10% on income was a staggering 31%.
Does anyone believe that the sense of urgency coming out of Washington wouldn't be wildly different of the unemployment rate for the top 10% of income earners was 31%? Of course not--the sense of national emergency would be so great you'd hear air-raid sirens howling. Instead we get policy Band-Aids.
So what, exactly, does it mean--"Third World America"? For me, it's a warning: a shimmering foreshadowing of a possible future. It is the flip side of the American Dream--an American nightmare of our own making.
I use it to sum up the ugly facts we'd rather not know, to connect the uncomfortable dots we'd rather not connect, and to articulate one of our deepest fears as a people--that we are slipping as a nation.
In 2009, the American Society of Civil Engineering (ASCE) released its comprehensive infrastructure report card; the overall grade was an appalling D. The report noted a downward trend since 2005. It' the kind of report card you would have expected on the eve of the collapse of the Roman Empire.
But despite the desperate state of affairs, America remains in denial. According to the ASCE, we would need to invest $2.2 trillion over the next 5 years just to bring our existing infrastructure up to a passable level (let alone a level appropriate for the 21st century). But we've only budgeted $975 billion for that period. America's antiquated infrastructure is desperately in need of an extreme makeover
At the moment, the only high-speed train in the US is Amtrak's Acela, which travels the Washington-NYC-Boston line. And I use the term "high-speed" very loosely. While in theory the trains have a peak speed of 150 mph, the average Acela speed is just 71 mph, while its trains frequently stuck behind slower-moving ones on the heavily traveled tracks.
Meanwhile, countries such as Japan, France, and Italy all have reliable train services that surpass 200 mph. Same with China. For example, the 600-mile ride between Wuhan and Guangzhou is completed in 3 hours by bullet trains reaching 217 miles per hour.
The stimulus bill included $8 billion for high-speed rail projects in thirty states. While this new investment is a start, it's only a drop in the bucket.
To help close the widening gap between us and the rest of the digitally connected world, the Obama administration has proposed a national broadband plan, with the goal of increasing broadband access from around 63% currently to 90% by 2020. The plan would also ensure that every high school graduate is digitally literate. This sounds great. But 2020? That hardly has the sense of urgency you'd expect from a country that is quickly falling behind.
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The above quotations are from Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream, by Arianna Huffington. Click here for other excerpts from Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream, by Arianna Huffington. Click here for other excerpts by Arianna Huffington. Click here for a profile of Arianna Huffington.
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