Arianna Huffington's "Third World America"

Arianna Huffington is a gem. She runs a wonderful blog, the Huffington Post, and now she's written an excellent book, a book for the 99% of Americans who are not inside the deal that has been looting government for the benefit of corporations and the ultra-rich.

This book lays out the argument for why America is fast descending to "third world" status as the riches of the country are being looted by bought and sold politicians working for corporations and the ultra-rich. If you want to know the facts and walk through the arguments, this book is your bible. It is all here.

Nothing better illustrates the ways in which we have begun to travel down this perilous road than the sorry state of America's middle class. So long as our middle class is thriving, it would be impossible for America to become a Third World nation. But the facts show a different trajectory. It's no longer an exaggeration to say that middle-class Americans are an endangered species.

"The middle class has been under assault for a long time," President Obama said in early 2010 while announcing a series of modest proposals to bolster what he called "the class that made the twentieth century the American cen tury."

During the 2008 campaign, Barack Obama's guiding principle was that he "would not forget the middle class." Indeed, David Plouffe, Obama's campaign manager, told me after the election, "We held that North Star in our sights at all times. We made many mistakes along the way, but we always remembered that we were running because, as Barack put it, the dreams so many generations had fought for were slipping away." Well, you'd need a pretty powerful telescope to see that North Star these days.

And she lays out the data that quantifies the bad news:

Just how bad things have gotten was succinctly -- and bracingly -- summed up by Elizabeth Warren, Chair of the Congressional Oversight Panel charged with monitoring the Troubled Asset Relief Program (TARP): "One in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped out more than $5 trillion from pensions and savings."

The Bush and Obama administrations bailed out America's big banks because it suddenly became imaginable that the financial system might collapse. When we take a hard look at what's happening to America's middle class, it's disappearance suddenly becomes not only imaginable but, unless drastic action is taken, inevitable.

And...

According to a report by the Center on Budget and Policy Priorities, at least twenty-nine states have made cuts to public health programs, twenty-four states have cut programs for the elderly and disabled, twenty-nine states have cut aid to K-12 education, and thirty-nine states have cut assistance to public colleges and universities.

America's states faced a cumulative budget gap of $166 billion for fiscal 2010. Total shortfalls through fiscal 2011 are estimated at $380 billion -- and could be even higher depending on what happens to unemployment.

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 along would be more than enough to close the 2010 budget gap in every state in the Union. Toss in the $45 billion we gave to now-making-a-profit Bank of America and the $45 billion we gave to now-making-a-profit Citigroup, and we would be well on the way to ensuring that no state's vital services are cut through 2011.

The problem with the current social system in the US -- the laws, the business environment, and social services -- is that it is stacked against the middle and working classes:

Unemployment for those making $150,000 a year, the study found, was only 3 percent in the last quarter of 2009. The rate for those in the middle income range was 9 percent -- not far off the national average. The rate for those in the bottom 10 percent of income was a staggering 31 percent.

These numbers, according to the Wall Street Journal's Robert Frank, "raise questions about the theory behind what is informally known as 'trickle down' economics, since full employment at the top doesn't seem to be translating into more jobs below.

Now to define "middle class". The US is a successful society when the great majority see itself as "middle class". Here's what Arianna Huffington writes:

According to the Pew Research Center, more than half of American adults (53 percent) define themselves as middle class. But behind this assertion, Pew discovered a host of caveats: "Four-in-ten (41%) adults with $100,000 or more in annual household income say they are middle class" -- as do 46 percent of those with incomes below $40,000. At the same time, a third of those with incomes between $40,000 and $100,000 don't believe they are middle class.

For purposes of its research, Pew defined the middle class as those adults "who live in a household where the annual income falls within 75% and 150% of the median" gross income for a family of three in 2006 (the latest year data was available). In dollars and cents, that meant an income of between $45,000 and $90,000 made you middle class.

But in the end, in a very American way, it all comes down to self-definition: If you consider yourself middle class, you are middle class

What she doesn't add, but should, is that the more people who perceive themselves as middle class, the healthier the society will be. Much of the bitter politics since the "Reagan revolution" has been caused by a "me first" ethic and a feeling that economic success is the yardstick by which to measure everything. But it isn't. Many socially valuable careers pay very low wages. By not valuing those who choose these careers you are undermining the health of the society. The "Lifestyles of the Rich and Famous" and the "trickle down economics" of the last 30 years are a sign of illness, not of an incipient era of glorious wealth.

The past 30 years have been tragic. Here are some statistics from the book:

In 1995, the midway point between the Regan Revolution and today, John Cassidy penned an article in the New Yorker entitled "Who Killed the Middle Class?" Cassidy had his readers imagine a lineup composed of every American arranged from poorest to richest. The individual exactly in the middle -- the median -- was arguably the most middle-class person in the nation. That man or woman, in September 1979, was earning (on constant, inflation-adjusted dollars) $25,896 a year. In September 1995, that same man or woman was earning $24,700 a year -- a 5 percent cut in salary over the intervening decade and a half.

In contrast, the nations top 5 percent saw their pay rise 29 percent over the same period, up to $177,518. And the top 1 percent did the best of all. In fact between 1977 and 1989 the richest Americans' average income rose from $323,942 to $576,553 -- a whopping 78 percent increase in real terms.

This trend continued into the first decade of the twenty-first century. According to a report compiled by Elizabeth Warren, the average middle-class income between 2006 and 2007 fell $1,175, while expenses rose $4,655. Over the same period, the top 1 percent -- which had pocketed 45 percent of the nation's income growth under Clinton -- captured 65 percent of all income growth under Bush.

Huffington is not happy with Obama's follow through on his election promises:

When it came to the foreclosure crisis, Obama's audacity to win morphed into a timidity to govern. Bolder action earlier by the administration and our paralyzed, polarized Congress would have kept millions of families in their homes and cleared the decks more quickly for an economic revival on Main Street. But that, of course, would have meant giving the public the same sort of breaks the gluttonous bankers got.

In Chapter 4 she looks at "Who Killed the American Dream?":

How did we get to a place where our infrastructure is well past its sell-by date, our schools are failing, our middle class is on life suport, and the American Dream is turning into a mirage?

Who took control of our national GPS and set as our ultimate destination the coordinates of a Third World future? Casting about for answers, the knee-jerk response is to point a finger and hurl an enraged j'accuse! at Washington. And, in this case, the knee-jerk response is right. But for all the wrong reasons.

Listen to the punditocracy and they'll tell you -- loudly and often -- that our politics is "broken" and "paralyzed." That government no longer works because of bipartisan bickering and polarization. That the parties have moved so far to their respective extreme on the left and the right that collaboration and consensus are no longer possible.

And while the GOP's decision to respond to the election of President Obama by transforming itself into the Party of No certainly gives that slice of conventional wisdom the surface patina of insight, dig a little deeper and you'll discover the much uglier truth: Over the past thirty years, the two parties have actually become much more alike -- both deeply in the pocket of the big-business masters who fill their campaign coffers.

American politics is indeed "broken" -- but not because our leaders are at one another's throats. It's broken because the founding democratic principle of "one man, one vote" has been replaced by the arithmetic of special interest politics. Thousands of lobbyists plus billions of dollars equal access and influence out of the reach of ordinary Americans.

And she backs up this claim with some statistics about voter perceptions:

Since 1964, the American National Election Studies at the University of Michigan has regularly asked voters whether they think the U.S. government is run "for the benefit of all" or "by a few big interests." In the mid-1960s, only 29 percent thought "big interests" ran the nation. By the mid-1990s, that number had climbed to 76 percent. And in 2008, 80 percent of Americans surveyed told the Program on International Policy Attitudes that they believed government was controlled by "a few big interests looking out for themselves."

And some facts by lobbying and money:

According to Simon Johnson and James Kwak in their book 13 Bankers, from 1998 to 2008 "the financial sector spent $1.7 billion on campaign contributions and $3.4 billion on lobbying expenses." And the money was, of course, targeted to where it would have the most effect: the campaign coffers of such Senate Banking Committee powerhouses as Phil Gramm, Alfonse D'Amato, Chris Dodd, and Chuck Schumer. Notice that the bankers' money rained down on both sides of the aisle.

And it isn't just the financial industry:

The mining and oil-drilling stories are remarkably similar to what happened in the financial industry over the past decade. A disaster occurs. Politicians are "outraged" and demand reform. Laws are passed. And then, when the next disaster occurs that the new laws were supposed to protect against, we find out about the loophoes in the last set of "reforms."

And if the above is not bad enough, it is worse because it isn't simply corruption -- the buying and selling of politicians -- there has been a wholesale ideological takeover of Washington that blinds the government to the real problems:

So the deck is stacked. The fix is in. The cards are marked. And our economy is as rigged as a carnival ring-toss game.

But it's even worse than that. Corporate Americca's takeover of our democracy runs deeper than the simple quid pro quo of a don ar swaying a politician. It has captured our leaders' hearts and minds. It's one thing for moneyed interests to be able to buy influence. It's another for that industry's agenda to become conventional wisdom across party lines.

"Politics is like sales," write Simon Johnson and James Kwak in 13 Bankers. "If you are trying to close a large deal with a major corporation, it helps to have friends on the inside, it helps to have buyers who see their fortunes aligned with yours, and it can even help to dangle the prospect of a high-paying job before the key decision-maker. But it is even better if the buyers really, independently want what you are selling. It is best of all if they believe that buying what you are selling is a symbol of their own judgment and sophistication -- that buying your product marks them as part of the informed elite."

That is what happened with the Vulcan mind meld between Wall Street and Washington, and it's what laid the groundwork for the financial crisis -- and the bailout with no strings attached that followed. Our leaders have completely bought what corporate America has been selling. It's become part of their DNA. This includes the key members of President Obama's economic team. They are operating on the basis of an outdated cosmology that places banks at the center of the economic universe.

Arianna Huffington has written a book well worth reading. It covers all the issues. It has the facts that people need to know to understand the situation. She even offers her solutions to save America from a Third World status. (I would like to think they could save the country, but honestly I don't think she has identified a workable solution.) There are grim times ahead for America. I hope the best for the people of that country, but I'm not very optimistic. I think they've been sold down the river by their leaders and it is next to impossible to galvanize them to save themselves before it is too late. The soporific effect of ideology from the right is lulling people into thinking "no government" is the answer. Sadly, that is the exact opposite of what is needed now to rehabilitate all that has been wrecked by the Reagan "revolution". But... that's just my opinion. Hopefully I'm wrong.