Republicans continue to make the rich richer and the poor poorer

The Thinker by Rodin

It’s pretty hard to keep up with the inanities coming out of the mouth our “president”. As a Democrat he sure embarrasses me, but I often wonder why Republicans are not. If retiring Senator Bob Corker (R-TN) is correct, most Republicans in Congress are embarrassed by Trump, but can’t summon the political will to say so.

Trumps tweets and remarks get weirder and weirder. This is probably due to 50% ignorance and 50% cognitive decline. Still, it’s quite embarrassing. Yesterday, a day after his Secretary of Energy Rick Perry declared that Puerto Rico was a country, Trump told a convention of evangelicals that he has spoken with the “president” of the Virgin Islands. So two top administration officials including our “president” don’t understand that both Puerto Rico and the Virgin Islands are American territories. What’s next? Sending in the marines to take over these “countries”?

Yet on such capable shoulders we are entrusting our nation. The only thing seeming to restrain Trump from his worst impulses seems to be a few officials, principally Chief of Staff John Kelly, Defense Secretary Maddis and Secretary of State Tillerson. They are our firewall of sorts, although there is no guarantee they can restrain Trump. Reportedly they have a suicide pact: if one gets fired they all resign. In any event depending on one unflagging Chief of Staff to babysit Trump 24/7/365 doesn’t seem like a great plan. Trump might launch nuclear weapons against North Korea while Kelly is in the bathroom.

So what does all this have to do with the rich getting rich and the poor getting poorer? Nothing really. I am just venting. But in the boatload of stupid that has come out of Trump’s mouth and Twitter feed recently, there was this from his interview with Sean Hannity on Tuesday:

The country — we took it over and owed over 20 trillion. As you know the last eight years, they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion, right? And yet, we picked up 5.2 trillion just in the stock market.

Possibly picked up the whole thing in terms of the first nine months, in terms of value. So you could say, in one sense, we’re really increasing values. And maybe in a sense we’re reducing debt. But we’re very honored by it. And we’re very, very happy with what’s happening on Wall Street.

Aside from the numbers themselves that are off, there is the amazing conclusion from Trump, a graduate of Wharton. Remember, Trump recently bragged that he could beat Rex Tillerson in any IQ test. Trump apparently thinks that gains in the stock market cancel out federal debt. This is surprising in itself, but apparently it only works if he is in office. It doesn’t apply to the Obama administration, which saw the longest sustained growth of the stock market in history. There is no doubt that the stock market is doing very well since he took office, but it’s not doing appreciably better than it did under Obama. Those of us with lots of stocks are just seeing our pile of wealth get larger and larger.

I certainly see it in our portfolio. We take $1900 a month out of it to supplement our retirement. Just our investments (almost all of it in retirement accounts) amounted to $795K on February 1, and is now valued at $857K. Add in our house and other assets are we are millionaires, if a net worth of about $1.41M means that much these days. Gains in the stock market though create wealth only for those who own stocks. Guess what? Many of those who voted for Trump don’t have much if anything invested in the stock market. That’s due in part because there is little money left over to invest in stocks. According to one study, in 2013 the top 1% alone owned 38% of the stock market. The top 10% owned 81.4% of stocks. That leaves 19% for the rest of us. I may be technically a millionaire but rest assured my assets are part of that 19%. In reality I am not even close to being rich, at least not by the standards of the top 10%. I sure don’t plan to buy a Tesla or fly on a private jet to Monaco.

To make money in the stock market though you need to invest regularly over many decades and hold onto the assets. And that’s only possible if you have money left over to invest in the first place. It also means that you also need a relatively secure job, so that you are not raiding your nest egg in lean times. You also need it just to get through recessions and downturns with your investments able to wait out the hard times. If you don’t have all these factors in your favor you probably won’t be investing much in stocks and if you do it will be periodic retirement investments during relatively flush times.

So the surging stock market is really creating wealth principally for the rich who already have plenty of it, exacerbating income inequality. At best its effect for the rest of us is indirect, perhaps by keeping unemployment low thus maybe pushing up wages a bit, or by stimulating investment in the economy. Nothing about the stock market’s rise though fundamentally changes things for the middle class, poor and working class.

Indeed, Republicans seem intent to make things worse. Just yesterday Trump ordered an end to Obamacare subsidies for the working class. This will have the effect of pricing almost all of them out of the health insurance market. This will make healthcare more expensive, increase the probability of bankruptcy due to medical debt and make their financial situation more precarious. In short, they are likely to be pushed down the ladder again. The major reason these classes saw any gains recently was from having affordable health care, which helped protect their assets.

Having tasted real health insurance, these voters are likely to be furious when they vote next November, particularly as the rich will keep getting richer. While the stock market may continue to surge until then, these changes will directly affect the financial stability of the middle and lower classes. It’s likely that when these voters realize they have been shafted once again that Republicans will pay a huge political price.

Ted Cruz is worried about a blowout if Republicans don’t deliver on tax cuts and repealing Obamacare. As he will discover next November these are the factors likely to cause the blowout.

Republicans are simply racists and classists

The Thinker by Rodin

Did you watch the last night’s Republican debate; you know the one where Donald Trump snippily decided he would not attend because he doesn’t like questions that Megyn Kelly might ask? You did? Good for you and apparently you are more into politics than I am. I was certain I’d learn nothing new and from the reviews I was right. So now voters wait warily for the results of the Iowa caucuses next Monday night. Let’s hope the Republicans get it right this time.

Some pundits are predicting the demise of the Republican Party after the next election. I’ll be lifting a glass of champagne if that happens to be the case. Abraham Lincoln wouldn’t recognize his own party anyhow. Republicans after all freed the slaves and today’s Republicans want to make them slaves again. I won’t be lifting my glass too high though because as bad as the Republican Party is, I do think whatever phoenix emerges from its ashes could actually be worse.

What got me thinking this way was reading the latest Washington Post OpEd by conservative Charles Krauthammer. After the obligatory sentences saying how Bernie Sanders couldn’t get elected because America doesn’t elect socialists (conveniently ignoring the fact that Franklin Delano Roosevelt won four terms on an effectively socialist platform, and by overwhelming majorities), Krauthammer looks at the factions within the G.O.P. In particular he notes that Donald Trump is not really conservative, certainly not in the sense that he wants to rollback social programs. In the same paper, Fareed Zakaria notes that Republicans have given lip service to getting rid of social programs and in many cases expanded them. In fact, he notes polls that economically conservative Republicans are going for Cruz over Trump by 15 percent, while Trump wins by 30 percent over Cruz from Republicans holding “progressive positions”, such as on health care, taxes, the minimum wage and the benefits of unions.

Well, this is a head scratcher, until you think about it a little while. One possibility is that Trump is expanding the Republican base, pulling in (principally white) people that don’t tend to vote Republican, or vote at all, because no one in the party represents them. However, there is no evidence that Republican Party registration is increasing significantly nationwide, as this recent Gallup poll attests. Zakaria does quote Michael Tessler of the Rand Corporation, who provided his statistics. Tessler says: “Trump performs best among Americans who express more resentment toward African Americans and immigrants and who tend to evaluate whites more favorably than minority groups.” This is a polite way of saying Trump does much better with the party’s racists. This is not surprising until you think about what this actually means.

What principally unites the Republican Party (to the extent it is united) is not fiscal conservatism. It’s not the importance of federalism (state control). It’s not God, an aggressive foreign policy and it’s certainly not Jesus. It’s not even guns. Their principle shared-value is that they think they are special and deserve a singular status over the rest of society, who they mostly look down on. In short, most of them are racists, even if they can’t even admit it to themselves. It’s more acceptable to be a classist, instead of a racist, which many will openly acknowledge. This basically means they don’t believe in egalitarianism and that some for whatever reasons (status, wealth, race, education, values) deserve to be privileged. Moreover because they are privileged, they should not feel (and apparently don’t feel) ashamed of this. It’s this energy that Trump is harnessing. When push comes to shove, this is what Republicans care about.

I believe it is part of Carl Rove’s master plan. He fed these primal fears to give the Republican Party oversize stature. They feel it slipping away, which is why Republican-led states enacted onerous voting restrictions. Their loss of their status, real or in many cases imaginary is their greatest motivation. Trump was savvy enough to cut through the bullshit and go for the jugular. This is why he is leading in the polls. (It does help to have so many competing candidates that the opposition is scattered.)

After all, if you want power it’s not about making a logical case; it’s about making a resonating emotional case. Fear is a great motivator and Republicans excel at looking behind their backs. Trump succeeds by saying that those others not like us are the cause of our fear of loss of status and privilege. Throw out the “illegals” and things may not be well, but they sure will be better. He has ruled out major changes to Medicare and Social Security because he’s read the polls and knows his fans support programs like these. Tax cuts go disproportionately to the wealthy but welfare goes disproportionately not to the poor, but to the middle class.

Medicare and Social Security are just two ways to keep the middle pacified, but it’s only the beginning. There is the employer health insurance tax credit, which annually costs three times as much as food stamps. There is the home mortgage interest deduction, tuition tax credits and even energy efficiency credits that go only to those who can afford to take advantage of them. Power is secured through keeping the rabble happy. Trump knows there are plenty in the middle who understand their standard of living is wobbly. The last thing most of these people want is more uncertainty to their standard of living, but they are perfectly happy to add uncertainty to those who don’t think and act like them: the others. Me first!

The Romans quickly realized that the rabble wasn’t happy unless the lions ate a gladiator or two now and then. They made it convenient for citizens to enjoy this entertainment by allowing everyone in for free. Trump is metaphorically doing the same thing: he is harnessing the power that is already there. He plays the crowd the same way Itzhak Perlman plays the violin. He plays up the juicy expectation of red meat to come: walls along the border with Mexico and less of the other among us. He says: less of them means more for us and will make us (the privileged) great again. And so they dance and he knows that the rest of the party will come along in time. The Republican Party leadership seems to understand which way the wind is blowing. Chairman of the Republican National Committee, Reince Priebus recently said as much, and even elder statesmen like Bob Dole seem to be acknowledging they will fall in line too. Power is what counts; whatever message gives them that power is okay.

It’s just that because of Donald Trump it’s now out in the open. Even Republicans can’t deny it anymore because their leading candidate simply won’t. They are the party of people like them: white racists and classists. They just can’t hide from it anymore.

Money is freedom

The Thinker by Rodin

Americans celebrate freedom. Everyone is free, we proudly proclaim. But what exactly is freedom anyhow? Freedom amounts to being able to do what you want when you want to do it. Based on this criterion, it’s clear to me that some of us are freer that others, and those are people with more money. When you have a lot of money, you have the freedom to go backpacking in Tibet. You are probably not going to realize this particular freedom if you are a product of a single-family household and your mother lives in subsidized housing.

We sometimes celebrate the homeless as free people. Perhaps there is a certain freedom in being a vagabond. You can go where you want but chances are to get there you will have to walk. You had best not walk into certain planned communities, particularly in Sanford, Florida. A George Zimmerman type anxious to try out the Stand Your Ground law may kill you. The homeless are free, but you are likely to frequently go hungry. I understand that the dumpsters behind neighborhood Burger Kings offer al fresco free dining opportunities. Sleep will probably be uncomfortable as you will be outdoors and subject to the elements. You likely won’t be allowed to sleep just anywhere, not even places you would think you would be, like a public park. So be prepared to be rudely woken up at 3 AM and asked to shuffle along, or hauled to a nearby police station and booked for being a vagrant. There you can at least you can get free meals and a warm place to sleep.

For most of us, this freedom is very limiting, and something to be avoided not embraced. In fact, it is a faux freedom. Wild animals have this sort of freedom too, but no one envies them. However, with money freedom becomes tangible. Money can buy you freedom from constant hunger and provide a safe place to call home. With more money it can buy health care and likely keep you out of a whole lot of unnecessary misery. With even more money you can become educated, attract a quality mate and take regular vacations. With yet more money you can take exotic vacations, afford homes in the Hamptons and maybe run for political office.

So in reality freedom is not so much about being free, it is about the how much freedom you can afford to purchase. And that depends on how much money you or your parents have. Consequently, in a nation that values freedom we also value wealth, because the more wealth you have the more freedom you have.

We are also aware that freedom is constrained by law. In many mostly Southern states, your right to vote can be constrained by requiring state issued IDs to be shown at polling places, which curiously affects the poor almost exclusively. Sometimes fewer polling machines show up in predominantly poor neighborhoods as well, making it harder to have your vote count, such as happened in areas around Cleveland in the 2000 election. The consequence of actions like these is to give those with money more leverage to influence laws than those with less money. The rich also have disproportionate resources to influence others politically. This is perfectly legal. In its Citizens United decision, the Supreme Court also asserted something wholly absent in the constitution: that corporations have the same rights as people and can give unlimited amounts to PACs. Unsurprisingly then, our government tends to disproportionately reflect the interests of those with money over those without.

Effectively money not only buys freedom, but also allows some measure of being able to take away freedoms from others. Lately the aspiration that all should have roughly the same amount of freedom has been classified as socialism, a strange assertion for a nation founded on the assumption that all men are equal. Make health care available to all regardless of their ability to pay, and poorer people will effectively have more freedom, but in the eyes of many it is an unearned freedom, thus it should not be allowed.

How does one earn more freedom? If freedom is wealth, it happens through acquiring wealth somehow, which can be hard to do without a good education and the right connections. Some time back I wrote about the rags to riches myth. Yet there was one famous president who arguably demonstrated that it was possible to ascend from rags to riches. He was our greatest president: Abraham Lincoln. He had no formal education and never went to law school, yet he became a lawyer and eventually president of the United States. How on earth do you get to become a lawyer with no formal education? At the time it meant convincing the Illinois Supreme Court, which had only recently become a state, that you were competent to practice law. Honest Abe did it somehow.

Rest assured that Lincoln’s tactic no longer works in Illinois or likely in any other state. If you want to practice law, you had best get a law degree and join the local bar association. That of course will require money, and it’s unlikely some benevolent nonprofit will be giving it to disadvantaged inner city youth. Anyhow, if you can acquire a law degree then maybe the Illinois Supreme Court will deign to let you argue before it. Since Abe’s time, Illinois has tightened its standards on who is allowed to acquire higher levels of freedom, and it is generally doled out only to those with the means. In effect, it has cut one pathway that enabled someone to go from rags to riches. There are virtually none left, but the Republican myth remains that there are all sorts of ways to achieve the impossible.

We have created all sorts of barriers to keep people from moving from one socioeconomic level to the next. If it happens at all, it requires superhuman effort. Few of us are supermen, so we are virtually doomed to fail and we will stay in our social class. This seems to be fine for those who are already have wealth. Indeed, they seem anxious to add additional barriers that have the effect of making it even harder to ascend up the socioeconomic ladder. This is done in the guise of welfare reform, reducing or eliminating subsidized housing, and strict time limits to food stamps and unemployment benefits. The effect is to give certain classes of people more freedom than others and through lowered estate taxes give them the ability to extend those freedoms to their children. It also helps ensure a permanent underclass of citizens and keeps a permanent upper class as well.

The lack of defined pathways to become upwardly mobile feeds resentment and fosters insular behavior, heightening class-consciousness and dividing us as a society. To understand the brouhaha in Wisconsin, one has to look not at the bottom of the income scale, but at its middle and the brazen power of those at the top to push the middle class further down the income scale by lowering their pensions, making them pay more for their health insurance and not allowing collective bargaining. In effect, through legislation the middle class’s freedom and wealth is being moved to those with more wealth. Ironically, this is classified as being part of a pro-freedom agenda. The reaction by a vulnerable but politically important middle class was entirely predictable. It was fed by cluelessness and a sense of superiority of those with wealth that they know better. Mostly it is due to a fundamental unwillingness by those in power to understand the connections that implicitly bind us.

Some of the wealthy understand this connection. They know that their wealth is predicated on keeping the other 99% hopeful for a more prosperous future. They understand that marginally higher taxes on their income are actually an investment in their prosperity. Moreover, the smartest ones understand that for society to be stable there must be viable economic ladders to move between all financial classes. Most of those ladders have disappeared, mostly between the lower and middle classes, but also between the middle and upper classes. These ladders do not appear magically, or they would exist now. Instead they must be constructed by civilized society. While capitalism helps provide the wealth that makes these ladders possible, they do not occur from largess, but are a result of government.

In truth, upward mobility is what truly drives growth and by extension wealth and freedom. It is in the best interest of the rich to empower the poor and the middle class so their talents can be maximized for the benefit of society. For when that happens, rather than wealth trickling down from the moneyed, it trickles up. All are enriched, all share the benefits of greater connection, and all share in a greater freedom. It is a formula that worked well for America until it was abruptly changed with the election of Ronald Reagan. To become great as a country again we must rebuild these economic ladders. The decline of our country will be marked by the day when we deliberately destroyed these ladders of hope and opportunity.

The end of the middle class

The Thinker by Rodin

My thanks to commenter George who, five years after it was published, left the first comment to my 2003 post, The Dual Income Trap. George is one of millions of average Americans who has meticulously played by the rules and done all the prudent things. By doing so, he now finds his family preciously hanging on to its middle class existence. In a way, George is lucky. Millions of others are not so lucky. They have lost their houses and in many cases, their jobs too and are now scrambling. I hope that most have some place of refuge for hard times, perhaps just a spare bedroom in Mom and Dad’s house. Others have downsized their lives and are living in apartments, which hopefully are more affordable. It was clear that their house was not.

The pain Americans are going through can be understood not just in unemployment statistics but also by other shocking statistics. For example, one in ten Americans are receiving food stamps. Autoworkers are feeling in a particularly precarious position. It is not just the members of the United Auto Workers that are wondering how long they will be employed. Demand for cars, including foreign cars, is way down, despite gas prices at $1.60 a gallon. If you are a UAW worker, you have the sinking feeling that you are about to kiss a living wage goodbye forever. Yesterday President Bush approved $17.5 billion in emergency loans to GM and Chrysler. He did so not because he has any sympathy for the UAW and its workforce (whom you can tell he detests) but to ensure they do not collapse until after he leaves office. That way he cannot be blamed for their demise.

This economic crisis should pretty much kill off the middle class as many of us knew it. I define “middle class” as being able to own your own and maintain a single family home, have a car or two, raise a couple kids and live in a generally safe neighborhood. In reality, this life was going anyhow. George mentions that his family income is around $100,000 a year. The real price of admittance to the middle class these days is about $100,000 a year in family income. There are exceptions of course because there are parts of the country where the cost of living is remarkably low. Particularly if you live along one of the east or west coasts, if you do not have $100,000 in family income you can pretty much rule out a standard of living similar to the one (presumably) your family had growing up.

As for those with a family income in the $40,000 to $80,000 range, these people have now largely been priced out of the middle class. Unsurprisingly, they are the ones who have been predominantly getting the shaft during this severe recession. Our nation’s autoworkers have epitomized the collapsing middle class. However, their situation is hardly unique and is emblematic of a very broad problem.

There is little in the way of silver linings here. One lesson these people have learned is that they can no longer charge the difference between their desired standard of living and the standard of living they can afford. Now, assuming they are not in bankruptcy, many find that their credit limits have been reduced and their monthly payments have increased. Some sort of credit correction was probably due anyhow, but this is a hell of a time to go through it. Much of the economic shock we are now enduring is due to the collapse of credit. No wonder we are spending less. No one is willing to lend us the money to live beyond our means anymore. Frugality has become necessary. This means fewer dollars circulate, which translates into a large economic downturn.

Many of the formerly middle class are moving swiftly into what can charitably be called the lower middle class. I prefer to be more realistic and call them the working poor. You are in this class if you find that one or more of the breadwinners are working two or more jobs just to survive. Granted, finding any job in these times is going to be challenging. Good luck even finding a job paying starvation wages at your local Wal-Mart. Most likely, any health insurance, if you had it, has vanished. You may have been living paycheck to paycheck before this economic crisis. Now you are in survival mode, desperately trying to keep a roof over your head and your aging cars usable until the economy turns around.

Even when the economy does turn around, do not expect that your financial situation will markedly improve. Perhaps with the collapse of housing prices you will be able to afford a single-family house again. The dual income trap though will not be going away and is likely to only be exacerbated.

The middle class has been destroyed. It was not an accident because to kill it you had to move money from the middle class to either the poor or the rich. It went to the rich because, unsurprisingly, they have power. Starting in earnest with the election of Ronald Reagan, the rich pulled every lever to make sure they paid less in taxes and you effectively paid more. Government costs what government costs, after all. Whether by increasing taxes for those of modest incomes or through deficit spending, the effect either way is to push the burden on the rest of us less capitalized. If your taxes were cut too but deficit spending made up the difference, it meant that wealth was moving overseas. The effect was to move our collective wealth elsewhere and since most of it was vested in the middle class, the middle class lost wealth. That is one reason why unsecured credit card debt kept climbing. Think of it: when President Carter was in office, we were the world’s largest creditor nation. We owned much of the world. Now we are the largest debtor nation. We are owned by much of the world.

How to change the situation? I wish I could be as optimistic as our new president, but I think he is on the right track. We have to transform our country so that it is the engine of a new 21st century economy. We have to offer products and services that this new resource-constrained world will need. Being the leaders in manufacturing clean technologies will be key, because these will be new technologies will be in high demand, hence profitable, hence wealth builders. If we can do this then perhaps the broken middle class will reemerge.

Our middle class needs to reemerge because our nation cannot be wealthy if its wealth is vested mainly in its aristocracy. Ordinary people power an economy. Until ordinary people have money to power it again, the economy is likely to remain poor. Unfortunately, this transformation process, if it can be done at all, will take decades. We have no choice but to start now. Let us hope our competitors are less adept at creating this new economy than we may be.

The Fading American Middle Class

The Thinker by Rodin

The Washington Post has been running a series of articles on the fading American middle class. These articles are enlightening. However they are not all surprising. The reality is the American middle class is an endangered species. America is quickly dividing into a society of haves and have nots. This trend probably does not bode well for the United States. If it continues it may actually hasten the sort of liberalism anathema to many so enamored with our current corporate-ocracy.

Is “corporate-ocracy” too strong a word? I don’t think so. I would argue strongly that a government by and for the corporation has supplanted our republican government. There are exceptions. But the safeguards put in place during more liberal times that restrained corporations so they act in the public’s interest have frayed to the point where they are becoming hard to see. If anyone doubts that special interests are firmly in control of our government they need only watch the recent 60 Minutes interview with outgoing South Carolina Senator Fritz Hollings. He laid it all out: money buys influence and as a result the public interest gets short shrift.

“Communications, defense, you got them all – farms, agriculture people and everything else like that … They get their piece of the pie. That’s our problem. Today, you can’t find the real interests of the country.”

It would be tempting to blame the decline of the middle class entirely on American corporations. And certainly they share a lot of the blame. For the last thirty years corporate America has worked hard to marginalize labor unions. They are now at the point where they hardly exist anymore. Even when they exist unions are increasingly impotent. Corporations have options now they didn’t have before, such as the ability to quickly outsource jobs to countries where pesky labor laws don’t exist. And Congress has aided and abetted this process. It has made it easier for a company with pension plans to change them so that workers receive less in the way of pensions. The better companies throw newer workers into 401-K plans instead of defined benefit plans. Some of them convert all their workers to 401-K plans. Others have used legal shenanigans to raid pension funds to prop up their share prices. And if the corporate pension fund goes bankrupt, it’s not a problem for shareholders. The costs are foisted on the taxpayer, that is the Pension Benefit Guarantee Corporation. Increasingly, if companies offer health insurance benefits at all then workers are asked to pay larger shares of premiums and higher deductibles.

The result is that marginal cost of living raises are more than eaten up by increased costs for health insurance. This cascades into a decline of the standard of living for middle class people. Increasingly these costs have the effect of dumping people out of the middle class. A labor force that is increasingly disposable exacerbates the situation. Careers long thought secure are now often easily outsourced. Workers that used to be able to get benefits are often now employed as temporary employees or as contractors, if their work is not outsourced to some foreign country.

It is hard for many of us, particularly younger workers, to grasp the magnitude of the change that has occurred over the last 30-40 years. Consider this: in the 1960s a single breadwinner could support the middle class lifestyle for a family. For example a bus driver could afford to buy his own house and car, keep the wife at home and send the kids to college. He usually didn’t need a second job. What’s the situation today? To live a middle class lifestyle a family requires at least two wage earners. The bus driver is likely living in an apartment somewhere, and is probably working another job. His wife is pulling a couple jobs too. It’s increasingly unlikely his family has health insurance. They are precariously holding on to their middle class existence. One lost job or one huge medical bill and their lifestyle is blown away.

The Washington Post talks about the $17 an hour job as typical middle class wages. I laughed when I saw this number. Exactly who can afford a middle class existence on $17 an hour? It can’t be done in my neighborhood, that’s for sure, unless the spouse is also earning $17 an hour. And those kind of wages likely mean they are living in an apartment, or perhaps a modest town home, not some single family house with a two car garage.

And what sorts of jobs are paying this kind of money? I can think of some. Clerks perhaps, mechanics and plumbers. Many of these jobs are also the most vulnerable to outsourcing. What does one do when they lose that $17 an hour job that has been outsourced or made obsolete? It’s possible but unlikely that they will find another job at this wage rate. Instead, as the Post documents, they are working two jobs somewhere to maintain the same income level. But if they had benefits before it’s unlikely they have much in the way of benefits now.

Working two jobs instead of one they live an increasingly precarious and exhausting life. The smartest ones may have anticipated their obsolescence and went back to school. But as many computer programmers found out in the last few years there is no guarantee that the money invested in a new career will ever pay off. In our modern world the uncertainty of maintaining any job is much higher.

And so the middle class slowly disappears. Manufacturing moves overseas. Machines handle more farm jobs. Computer repair people find they aren’t needed because machines can be replaced for less money than it takes to fix them. The winners are those who are born into money or can simultaneously be savvy, intelligent, multitask and have connections. To sustain the middle class lifestyle it is no longer sufficient to have a trade. You must continually reinvent yourself. You must be a shrewd businessman. You must do your market research. You must find a particular niche. You must network ruthlessly. In short this new Darwinism requires a combination of skills never needed before. Not all can cope with the complexity and demands of such changes. So they fall through the cracks. They spend their days as cashiers at Wal-Marts and their nights at a second job, and their weekends at a third job.

And who is benefiting? Perhaps by shopping at Wal-Mart in their few off hours they are saving a few bucks. Clearly stockholders are benefiting. Their share prices are increasing. But where is this wealth really coming from? In effect we have decided that in America that we will transfer wealth by screwing the hard working earnest American laborer tighter and tighter. The money will largely go to those who had wealth to begin with, making them increasingly wealthy. And that’s how the middle class disappears, slowly, until one day it is gone entirely. By that time it will seem natural and we’ll all smile and say we are happy because we believe in the Republican Party, and the Republicans are good.

How long can this go on? I would hope not much longer, or the character of the country that I grew up in will be changed irretrievably. I often feel like our future will look a lot like Brazil’s. It seems that the stranglehold by the corporation on our democracy is virtually complete. But perhaps the corporation has pressed its advantage too far. Perhaps like Howard Beale the American worker will no longer play the patsy and demand a government of, by and for the people again.

But this seems naive. Apparently we are a nation of sheep. We’ve bought into the whole corporate bullshit and we’ve wrapped it around God and the American flag. We can’t tell them apart anymore. Why are the people who are getting screwed the worst pushing for their own obsolescence and poverty?

There is a solution to this madness. It’s called electing people who represent your interests, and not the special interests. It remains to be seen if Karl Rove can keep sufficient numbers of Americans ignorant of what we are in effect doing to ourselves.

The Dual Income Trap

The Thinker by Rodin

I like it when the little light bulb above my head goes off. It doesn’t happen as often these days, but it did the other day when I read this interview in Salon with Elizabeth Warren. She is professor at the Harvard Law School. Together with her daughter Amelia Warren Tyagi they wrote a recently published book “The Two-Income Trap: Why Middle Class Mothers and Fathers are Going Broke.”

It’s a great interview and I’ll probably have go out and buy the book now. The book puts its finger on a nagging question: why more of us are going broke in America. The results were not what I expected. The McMansions popping up around my neighborhood do not mean that we are living better; in fact the study shows that people are living pretty much the same lifestyle our parents did. Yes, we have more toys like DVD players and computers, but we are not spending more on similar things than our parents did.

What has changed is that to live the lifestyle our parents lived it takes two incomes, not one. And because it takes two incomes, the loss of any one income is devastating and can lead rather rapidly to bankruptcy. Consequences range from homelessness to moving your husband, wife and children into the basement of your parent’s house, if you are that lucky.

I see it around me in this economic malaise, but in reality this is a 30 year phenomenon. A neighbor’s husband down the street lost his job about a year back and is still unemployed. They’ve burned through his 401-K and most of their other assets. He was another victim of the high tech implosion. Her income, which is pretty decent working as she does for Fannie Mae, is insufficient to maintain their fairly modest lifestyle.

They live in the same sort of house I had growing up: just another colonial in a decent neighborhood. But in the past if one parent became unemployed the other could probably get some work to help make ends meet. In a depressed economy finding two or three jobs to make ends meet is difficult. If they can be found they are unlikely to pay the bills.

Why? Because lots of bills have gone through the roof. As the authors document, things cost more — a lot more, in real terms, than they used to. Two big examples: mortgage payments and health insurance. It used to be that you did not need health insurance; if necessary you could pay for medical costs out of pocket. That’s not an option anymore. The mortgage payment phenomenon is more interesting. The problem seems to be that we are drawn to zip codes with good schools and will pay inflated prices for housing so that our children will benefit from good education. It’s quite possible to find more affordable housing elsewhere, it’s just that most of us have a fear of living in these neighborhoods. But, paradoxically, if we had the courage to live in these neighborhoods rather than “follow the crowd” there would be sufficient critical mass to likely improve the local schools to our liking.

A few of their observations I figured out a long time ago and implemented in my life but still could not quite articulate them. One was that kids are huge financial risk factors. In short kids not only increase the risk that you will go broke but are huge income drains on the family. Sensing this was one of the reasons I was comfortable with stopping at one child. My wife and I had talked about having a second child but thinking of how much money it would take to raise a second child and send him or her to college was one reason I wanted to stop at one: adding another child would be too risky to our family unit. Of course I was also aware that life would be a lot more manageable with one child. But on some level I understood that even though I came from a family of ten I would be lucky to maintain the same lifestyle my parents had, which was pretty Spartan, with two children.

The interview though made me realize why it’s almost impossible to elect a politician these days who will raise your taxes. It’s not that taxes are evil, as many Republicans assert, it is because families have no more money to throw at taxes. Their money is already committed and they are at enough risk with two incomes trying to navigate their family through life to pay more taxes. It’s not a matter of philosophy, it’s a matter of economic necessity. Metaphorically, parents are on their front porch with a loaded shotgun warily looking up and down the street. They know it won’t take much for their American Dream to vanish, and they are vigilant in an almost reflexive way.

The consequences of “me first” on society at large are very real. If my income were cut in half I probably would be neglecting a lot of basic maintenance. The house and yard would look pretty shabby. The same is true of our society. As our costs of living escalate, and with little ability or will to maintain the infrastructure, things suffer. That’s why our roads and schools are so crowded. Citizens are saying “Sorry, me first!”

You have seen this happen most recently in California in the election of Arnold Schwarzenegger. Schwarzenegger said he would repeal the tripling of car taxes. This is money that people can put in their pockets. Naturally it’s hard not to vote for someone like that. The consequence is to exacerbate California’s budget problems but citizens are saying “Too bad: me and my family first.” It’s not that Californians explicitly want their state to go to hell; it’s that they are living too close to the margin and are consequently too scared to pull together.

I’m not sure how this will play out but most likely we will continue to see a decline in our prosperity. Right now we don’t really see it because dual income families are providing the illusion that it is under control. But increasingly cracks are beginning to show and soon we may have a bellwether event. It may be that with the costs of health insurance becoming out of reach even for middle class Americans we will demand national health insurance. It may be that the engines that sustain our growth, like cheap land, will gradually disappear and there will be no real way to get out of this economic box.

Ultimately this “me first” approach is not sustainable. We are in this together. It’s all well and good to promote growth as President Bush is doing, but this is not going to solve these systemic problems. To some extent the Wal-mart-izing of American may be the last step. We are making it as cheap as possible to buy the stuff we need, but eventually all the cost savings from that supply chain will be realized. And then what?

The malaise that so many people are feeling is very palpable. The solution out of it is not.