The Erosion of America's Middle Class : The Begining of the End of Great Empire

[Shahed Baig]

The Erosion of America's Middle Class

"While America's super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

Finley calls them "the new poor." "That is a different category of people that I think we're seeing," he says. "They are people who never in their wildest imaginations thought they would be homeless." They're people who had enough money -- a lot of money, in some cases -- until recently.

"The image of what is a poor person in today's day and age doesn't fly. When I was growing up a poor person, and we grew up fairly poor, you drove a 10-year-old car that probably had some dents in it. You know, there was one car for the family and you lived out of the food bank," says Finley. "In the past, you got yourself out of poverty and were on your way up."

"It was the American way, a path taken by millions. "Today the image is you're getting newer late model cars that at one point cost somebody 40, 50 grand, and they're at wits end, now they're living out of the food banks. And for many of them it takes a lot to swallow their pride," says Finley.

"Today the American way is often headed in the opposite direction: downward.

"Two weeks ago, Microsoft founder Bill Gates and 40 other billionaires pledged to donate at least half of their fortunes to philanthropy, either while still alive or after death. Is America a country so blessed with affluence that it can afford to give away billions, just like that?

"Gates' move could also be interpreted as a PR campaign, in a country where the super-rich sense that although they are profiting from the crisis, as was to be expected, the number of people adversely affected has grown enormously. They also sense that there is growing resentment in American society against those at the top.

"For people in the lower income brackets, the recovery already seems to be falling apart. Experts fear that the US economy could remain weak for many years to come. And despite the many government assistance programs, the small amount of hope they engender has yet to be felt by the general public. On the contrary, for many people things are still headed dramatically downward.

"In a recent cover story titled "So long, middle class," the New York Post presented its readers with "25 statistics that prove that the middle class is being systematically wiped out of existence in America." Last week, the leading online columnist Arianna Huffington issued the almost apocalyptic warning that "America is in danger of becoming a Third World country."

More than a year after the official end of the recession, the overall unemployment rate remains consistently above 9.5 percent. But this is just the official figure. When adjusted to include the people who have already given up looking for work or are barely surviving on the few hundred dollars they earn with a part-time job and are using up their savings, the real unemployment figure jumps to more than 17 percent.

In its current annual report, the US Department of Agriculture notes that "food insecurity" is on the rise, and that 50 million Americans couldn't afford to buy enough food to stay healthy at some point last year. One in eight American adults and one in four children now survive on government food stamps. These are unbelievable numbers for the world's richest nation.

Even more unsettling is the fact that America, which has always been characterized by its unshakable belief in the American Dream, and in the conviction that anyone, even those at the very bottom, can rise to the top, is beginning to lose its famous optimism. According to recent figures, a significant minority of US citizens now believe that their children will be worse off than they are.

Many Americans are beginning to realize that for them, the American Dream has been more of a nightmare of late. They face a bitter reality of fewer and fewer jobs, decades of stagnating wages and dramatic increases in inequality. Only in recent months, as the economy has grown but jobs have not returned, as profits have returned but poverty figures have risen by the week, the country seems to have recognized that it is struggling with a deep-seated, structural crisis that has been building for years. As the Washington Post writes, the financial crisis was merely the final turning -- for the worse."

*** "Dad...I guess I should be back in LA working..." said Maria, after we reviewed her finances.

She earns her living as a model and actress. But it is not a great living. Her chosen career is like that of a professional athlete. A few of them make big money. Most struggle to make ends meet.

Maria does okay.

She has learned from her father not to borrow money. So when she bought a car - a spiffy Mini Cooper convertible - she wanted to pay cash. She went to cash out some of her stocks, but a broker talked her into leaving the stocks in the portfolio and taking a cash advance against it.

This was great for the broker. He earned a fee from the loan. But it only made sense for Maria if her stocks rose more than the loan charges. Not a good bet in this market. Besides, if she wanted to borrow money she would be better off borrowing from dear old dad.

"I probably should have stayed in LA...because I need the money. It's expensive to come over here. I mean, there's the airfare...but also the money I don't make."

"Don't worry about it," said Dad. "Most people are far too busy in general...and too busy earning a living to make any real money. They get caught up in it. Their incomes go up. So they increase their expenses. The more they earn, the more they have to earn. And it just goes on and on...with no time to really think...and no chance to do anything that takes a long time. Most people can't take a year off from work. Many can't take a week off. They can't afford it.

"But it's probably a good idea to take some time off. I've become very suspicious of busy-ness. You know, all those fellows who earned their MBAs or their Ph.Ds. in finance and business? They went to Wall Street and worked liked devils. Dashing to Cleveland to do a deal...rushing to London for a meeting...a cellphone in one hand...a Blackberry in the other...working until 1AM...feverishly churning paper.

"What good was it? Wall Street is supposed to allocating capital efficiently so that the free market economy can make progress. What they were really doing was creating a kind of Bubble Finance - trying to make as many deals as possible in order to earn fees. And all the deals involved adding debt to the system.

"And they were so busy doing it that they didn't bother to notice what was really going on. You should read some of the transcripts of testimony by the people running big Wall Street firms. Or just talk to some of the people doing the deals. They were going at it like demons. But they never stopped to reflect on what they were really doing or what good it was doing. So, when the crisis came, they didn't know what was hitting them. The dumbbells discovered that not only did they monger a lot of debt, the also bought it...and held it in their own vaults. Of course, Lehman didn't survive. The others only made it through by leaning on the taxpayers.

"The whole thing was comical and absurd..." "Dad, are you getting off-topic here?" Maria interrupted.

"No, no...this is my point. Here were the best educated, smartest, highest-earning people in the country. And they couldn't see that they were on the edge of bankruptcy. Why not? Because they were too busy earning money!

"The average fellow does that too. He works so hard...and he spends so much money...that he can't see that he's always right on the edge of going bust. He has no margin. No cushion. He doesn't take the time to think through what he is doing and why.

"I work hard most of the year. From 8 in the morning to 8 at night, more or less. I've done that for the last 40 years. But when August comes around, I try to downshift. Instead of racing down the highway...I want to take a little back road and meander a bit...see where it leads.

"I might even stop for a picnic...or sit in a chair and read a book I wouldn't ordinarily read...or think about what I'm doing...about who I am and what I really want...about what is important and how to get it... "

"Dad, you are a big BS-er. You know perfectly well you never slow down. You come here and you work all day, just like at home. And you get mad when someone interrupts you. You're just painting shutters and fixing doors, rather than working in the office.

"Yeah...but I can think while I'm painting..."