How the middle class got screwed: College costs, globalization and our new Insecurity Economy

The social safety net is in tatters. No jobs are safe. Who is to blame — and what has the anxiety done to us all?
Marianne Cooper

Excerpted from "Cut Adrift: Families in Insecure Times"

It is clear that American families have been struggling in recent decades. Less obvious are the forces that are responsible for this reversal of fortune. However, a significant body of research now points to a confluence of economic and social trends that many scholars agree have played a crucial role in the rise of financial insecurity.

The Rise of the Service Economy

Since the 1970s, work in the United States has undergone a dramatic transformation—a regression from the New Deal quest for stability and from shared prosperity to insecurity security to a state in which work is precarious. In the words of sociologist Arne L. Kalleberg, work has become more “uncertain, unpredictable, and risky from the point of view of the worker.”

One reason for the rise of precarious work is the wholesale restructuring of the American economy from one based on manufacturing to one based on services. After World War II the manufacturing sector comprised 40 percent of the labor force; by 2005, that share had fallen to only 12 percent. The service sector now makes up about 80 percent of the jobs in the United States. Durable manufacturing jobs (autoworker, machinist, chemical engineer) offering higher wages and good benefits have been replaced by service sector jobs (store clerk, cashier, home health-care aide) that pay less, offer few or no benefits, and are more insecure.

Moreover, while the manufacturing sector tends to create good jobs at every employment level, the service sector tends to create a relatively small number of high-skill, high-paying jobs (in fields like finance, consulting, and medicine) along with a large number of low-skill, low-paid jobs (in retailing, child care, and hospitality). The result is that secure, semiskilled middle-income jobs like those that once fueled the rapid expansion of the American middle class are increasingly hard to find.

The Impact of Globalization

Beginning in the mid-to-late 1970s, U.S. firms began to face dramatically increased competition from around the world. To compete, American companies sought to lower labor costs, in part by outsourcing work to lower-wage countries. Technological advances aided this outsourcing process, as the growth in electronic tools for communication and information management meant that goods, services, and people could be coordinated and controlled from anywhere around the globe, enabling businesses to more easily move their operations to exploit cheap labor sources abroad.

Perhaps the most far-reaching effect of globalization has been a renegotiation of the unwritten social contract between American employers and employees. Managers now demand greater flexibility to quickly adapt and survive in an increasingly competitive global marketplace. In this context, the traditional employment relationship, in which work is steady and full-time, workers are rarely fired except for incompetence, working conditions are generally predictable and fair (often defined by union-negotiated contracts), and good employees can expect to climb a lifetime career ladder in the service of one employer, has come to seem unrealistic and onerous to business leaders. Today that traditional arrangement has largely disappeared, replaced by nonstandard, part-time, contract, and contingent work, generally offering reduced wages and scanty benefits. Mass layoffs are no longer an option of last resort but rather a key restructuring strategy used to increase short-term profits by reducing labor costs in both good times and bad.

The Decline of Unions

In this new environment, unions are struggling. Although manufacturing workers have a long history of labor organizing, service sector workers such as restaurant and retail employees do not, making it harder for service employee unions to grow. Moreover, globalization, technological changes, and the spread of flexible work arrangements have combined to enable employers to make an end run around unions by moving jobs to countries or parts of the United States where anti-union attitudes and laws predominate. As a consequence of these developments, union membership has steadily declined. In 1954, at the peak of union membership, 28 percent of employed workers were in unions. By 1983, only 20 percent of workers were union members. In 2012, union membership reached a historical low, with membership comprising only 11 percent of American workers. Among full-time workers, the median weekly earnings for union members is $943, while among nonunion workers the median weekly earnings is $742. The decline of unions has severely curtailed and diminished workers’ ability to collectively bargain to maintain high wages and good benefits, indirectly fueling a steady decline in the value of the minimum wage. Moreover, the decline of unions has eroded a broader moral commitment to fair pay, which even nonunion workers previously benefited from.

Together, the rise of the service economy, globalization, the decline of unions, and the erosion of the old work contract between employers and employees have created a precarious work environment for more and more Americans. Between the 1980s and 2004, more than 30 million full-time workers lost their jobs involuntarily. And during the Great Recession of 2008–2009, another 8.9 million jobs were lost. In the past few years, long-term unemployment has reached levels not seen since the government began monitoring rates of joblessness after World War II.

Risk Shifts to the Individual

Over the last several decades, both government policy and private sector labor relations have evolved to reduce the sharing of the economic risks involved in managing lives, caring for families, and safeguarding futures. Instead, individual Americans are increasingly being asked to plan for and guarantee their own educations, health care, and retirements. If today’s families want a safety net to catch them when they fall, they need to weave their own.

Underlying this shift in risk is neoliberal political ideology, often identified with leaders like Ronald Reagan and Margaret Thatcher, which holds that people will work harder and make better decisions if they must defend themselves against the vicissitudes of life. Neoliberal doctrine views dependence in a negative light (arguing that “coddling” by government undermines individual initiative) and actually celebrates risk and uncertainty as sources of self-reliance. In this new paradigm, the individual is encouraged to gain greater control over his or her life by making personal risk-management choices within the free market (and living with the consequences of any misjudgments). In this “ownership society,” individuals must learn to be secure with insecurity; the goal is to amass security on our own rather than look to government help or collective action as sources of support.

With the rise of neoliberalism, the ethic of sharing risk among workers, employers, and the federal government that emerged after the New Deal was replaced by an aggressively free-market approach that pushed deregulation and privatization in order to minimize the role of government in economic life. At the same time, responsibility for social welfare has steadily devolved from the federal government to states, localities, and even the private sector. The push toward privatizing social services reached a new level when President George W. Bush, through his establishment of the office of faith-based organizations, sought to formally create public-private partnerships in which welfare provision would increasingly be supplied not by the government but by religious organizations. The result of this devolution of social services has been the replacement of a relatively stable, consistent system of safety-net programs with a patchwork of state, local, and private programs, all of which scramble to find funding.

Though many Americans may be unfamiliar with the risk shift story, the results are widely known. From 1980 to 2004, the number of workers covered by a traditional defined-benefit retirement pension decreased from 60 percent to 11 percent. In contrast, the number of workers covered by a defined-contribution retirement benefit like a 401(k) plan, in which the worker is fully responsible for saving and managing his or her savings, grew from 17 percent in 1980 to 61 percent in 2004.

Traditional employer-provided health-care coverage began to erode as well. From 1979 to 2004, coverage dropped from 69 percent to 55.9 percent. In 2010, 49 million Americans were uninsured, an increase of close to 13 million people since 2000. For workers who continue to receive coverage, their share of the costs has increased drastically. A survey conducted by the Employee Benefit Research Institute found that to cover medical costs, 45 percent have decreased their contributions to other savings, 35 percent have had difficulty paying other bills, and 24 percent have had difficulty paying for basic necessities.

The Affordable Care Act, passed in 2010 and upheld by the Supreme Court in 2012, will greatly expand affordable health care. As a result of the legislation, it is estimated that by 2019, 29 million Americans will gain health insurance coverage. However, an equal number will still be uninsured. And the number of uninsured may rise depending on how many states opt out of expanding Medicaid eligibility. Currently twenty states will not participate in the Medicaid expansion. Analysis of states that won’t expand Medicaid has found that, as a result, about 5.3 million people will earn too much under their state’s Medicaid eligibility level to qualify but will earn too little to be eligible for tax credits that help offset the cost of insurance. Of the top ten least-insured metropolitan areas in the United States, seven are in states that will not expand Medicaid eligibility.

When it comes to aid for higher education, federal funding has grown, but that aid has mostly come in the form of loans rather than grants. Over the last decade, grants have made up between 22 and 28 percent of federal aid for education, while loans have made up between 61 and 70 percent. Moreover, even though there has been a 15 percent increase in the number of low-income students who receive a Pell Grant, the maximum award these students can receive now covers only about a third of the costs of a college education, as compared to around three-quarters in the 1970s.

The high price of a college degree is linked with a significant decline in the number of low- and moderate-income students who enroll in and graduate from college. Between 1992 and 2004, the percentage of low-income students enrolled in a four-year college decreased from 54 to 40 percent and the percentage of middle-income students decreased from 59 to 53 percent. For low-income children, the college completion rate has increased by only 4 percentage points between the generation born in the early 1960s and the generation born in the early 1980s. In contrast, among high-income children the college graduation rate increased 18 percentage points between generations. If education is the ladder by which less-advantaged Americans can hope to rise to the middle class and beyond, the rungs of that ladder are increasingly out of reach—yet another way in which the traditional system of shared social responsibility has been gradually dismantled over the past forty years.

Feeling insecure

With instability and uncertainty figuring prominently in people’s lives, it is important to ask if these social and economic trends are reflected in the way Americans feel. Do Americans feel more insecure? Have they become more worried? This question turns out to be a difficult one to answer.

The first obstacle to figuring out the answer is that we lack rich, long-term survey data that would enable us to tease out an in-depth answer. As a recent Rockefeller Foundation report noted, efforts to assess and measure people’s sense of security are rare. And the surveys we do have focus almost exclusively on job loss, which is just one risk among many that needs to be explored.

A second obstacle to measuring perceptions of security and insecurity across the decades is whether or not, over time, people continue to judge and evaluate their situations by the same criteria. In other words, can we assume that year in and year out people use the same yardstick to measure whether or not they are having a good or bad year? If assessments and meanings change over time and surveys don’t capture these subjective changes, then it’s not clear what our assessments are really measuring.

Analysis by Richard Curtin, the director of the Survey of Consumers at the University of Michigan, addresses the subjective nature of evaluation in his analysis of changes in the standards by which consumers have judged the economy over the last fifty years. For example, during the 1960s people had high expectations and were very confident about the government’s ability to control the economy and keep things on track. Such optimism about rising affluence ran into a brick wall during the economic shocks of the 1970s and early 1980s. Initially, dissatisfaction ensued as people continued to hold on to the economic aspirations from the past. By the mid-1980s, however, after repeated economic setbacks, consumers lowered their expectations about achievable growth rates and became more tolerant of high inflation and high unemployment. By the early 1990s, fears about job security grew as Americans became skeptical about the government’s ability to use economic policy to prevent downturns.

At this point expectations were so diminished that it took one of the longest economic expansions in U.S. history to reset high levels of optimism. Fueled by the dot-com boom, aspirations soared. In 2000, consumer confidence hit a new peak. With expectations high, consumers in the early 2000s cited high unemployment as an issue even though it was only around 6 percent, half as much as it had been in the early 1980s. The optimism of the late 1990s soon gave way to pessimism because of the successive recessions of 2001 and late 2007. In fact, between January 2007 and mid-2008, the Index of Consumer Sentiment fell by 42 percent, the greatest percentage decline compared to any other recession.

By mapping out historical shifts in consumers’ assessments of the economy, Curtin illustrates how “the same level of economic performance, say in terms of the inflation or unemployment rate, can be evaluated quite differently depending on what was thought to be the expected standard.” Moreover, changes in standards of evaluation usually occur very slowly and therefore can be difficult to detect. And since different groups of Americans have fared differently as a result of macroeconomic changes, it stands to reason that some Americans may have altered their standards and expectations sooner than others, and some may have altered their aspirations more significantly, and perhaps more permanently. In all likelihood, for example, those employed in the waning manufacturing sector, like autoworkers, had to let go of their expectations for a secure economic life long before and to a much larger degree than have college-educated Americans employed in the expanding service sector.

With this in mind, when sociologists Katherine Newman and Elisabeth Jacobs looked at survey data from the late 1970s to just before the Great Recession that examined people’s economic perceptions, they found something interesting. Their analysis revealed that, despite a few peaks and valleys, overall trends during this period suggest that Americans came to see themselves as more secure and in better financial shape, with about the same likelihood of losing their job. As we might expect, their analysis found that those with the lowest incomes and least education expressed the most vulnerability to employment insecurity and financial hardship, while those with higher incomes and more education expressed lower levels of concern.

Yet, despite their lower levels of concern overall, Americans with higher earnings, bachelor’s degrees, and managerial jobs have nonetheless exhibited the biggest increase in worry. Over the last thirty years, the proportions of college graduates and managers who said that they are likely to lose their jobs next year and the proportions who said they did worse financially this year than last year have gone up. The rise in concern about job security and financial stability among this group reflects new realities. During this period, the rate of job loss for the most educated went up faster than the rate of job loss for less-educated Americans. And when these workers lost their jobs and found new ones, the new jobs often didn’t pay as much. By 2001, workers with a bachelor’s degree experienced about a 23 percent drop in their earnings after losing a job. Such trends stand at odds with a long-standing belief among Americans with college degrees that their skills and credentials will translate into a solid footing. If discontent emerges when there is a gap between expectations and outcomes, then it would make sense for concern to increase more among the group that still thought it was well positioned to maintain a good, secure life. When this kind of an expectation smacks into job loss and downward mobility, people will start to worry.

For Americans with less education and lower earnings, it is very possible that worry as measured by feelings about job insecurity and financial hardship did not increase as much over a sustained period because they altered their expectations sooner and more permanently than did better-off Americans. As Newman and Jacobs point out, when those at the bottom lose a job, there is not as far to fall. For such families, their economic situation doesn’t change much from year to year; it’s always bad. Alternatively, other families may have taken on debt in order to hold on to their standards for security. The lack of a consistent and steep increase in worry among less well-off Americans thus does not necessarily signal that they feel more secure than they used to feel. To be sure, it could actually mean that they have gotten used to having less or gotten used to the high levels of debt required for them to hold on to traditional conceptions of security amid declining fortunes. What is also likely going on is that people’s frame of reference for what security even means has undergone a transformation. Finally, it could also be the case that our standard measures for these issues (concern about job security and whether or not we are worse off this year than last) don’t allow us to accurately assess people’s feelings.

We do not have the kind of comprehensive longitudinal survey data that would enable us to detect subjective changes in Americans’ views about what constitutes security and insecurity and whether such definitions shape trends in worry and concern over time. But other measures point to increases in insecure feelings among Americans. For example, even before the Great Recession started, about half of those surveyed worried somewhat about their economic security, with one-quarter “very” or “fairly” worried. By 2009, just over half of those surveyed were now “very” or “fairly” worried. A Pew Research survey done in 2011 found that only 56 percent of those polled felt that they were better off financially than their own parents were when they were the same age, which is the lowest percentage since the question was first asked in 1981, when 69 percent said they felt better off. In 2012, the General Social Survey (GSS) found that less than 55 percent of Americans agreed that “people like me and my family have a good chance of improving our standard of living,” the lowest reported level since 1987. That same year, the GSS also found that a record number of Americans (8.4 percent) identified themselves as “lower class,” which is the highest percentage reported in the forty years that the GSS has asked this question.

And we may be seeing changes in the definition of the American dream. The American dream has long been equated with moving up the class ladder and owning a home, but recent surveys have noted shifts away from such notions. When Joel Benenson, chief pollster for President Obama, examined voters’ thoughts about economic security and the American dream in 2011, he found something new. His polling discovered that middle-class Americans were more concerned about keeping what they have than they were with getting more. Another 2011 survey found the same thing. When asked which is more important to them, 85 percent of those surveyed said “financial stability” and only 13 percent said “moving up the income ladder.” In 2007, a survey found that owning a home defined the American dream for 35 percent of those surveyed. By 2013, the top two definitions of the American dream were “retiring with financial security” (28 percent) and “being debt free” (23 percent). Only 18 percent of those surveyed defined the American dream as owning a home.

As the economy experienced wide-reaching transformations, meanings and feelings have likely changed along with it. A National Journal article noted how even the definition of being middle class has undergone adjustment, especially in light of the rise of contract workers or “permatemps,” those who may make a good wage but receive no benefits and can expect no job security. Capturing this adjustment, the article asks, “If they make a decent income, are permatemps middle class? Not by the standards of the past. But by the diminished redefinition, maybe they are: earning a middle-class living—for the moment.”

Amid these shifting economic tides and morphing definitions, many have lost their way. While old beliefs such as that hard work will lead to security and prosperity have fallen by the wayside, it’s unclear to many Americans what new truths lay in their stead. As President Obama’s pollster Joel Benenson discovered, this lack of direction causes a great deal of unease. “One of the big sources of concern for the people we talked with,” Benenson said, “was that they didn’t recognize any new rules in this environment. All of the rules they had learned about how you succeed, how you get ahead—those rules no longer apply, and they didn’t feel there was a set of new rules.” These kinds of examinations suggest that in the age of insecurity, Americans are not just trying to weather an economic storm, but they are also feeling their way through the dark.

In the throes of the Great Depression, Americans decided that there had to be a better way to organize government and society, one that would allow individuals and families to enjoy greater stability and security. This philosophical shift from “rugged individualism” to “united we stand, divided we fall” paved the way for the New Deal, the Great Society, and the forging of an unwritten but pervasive social contract between employers and employees that rested on mutual loyalties and protections. The government invested in its citizens, employers invested in their employees, and individuals worked hard to make the most of those investments. As a result, in the decades immediately following World War II, prosperity reigned, inequality decreased, and a large and thriving middle class was born.

Beginning in the 1970s, this system began to unravel. Large-scale changes from globalization and the rise of the service economy to a philosophical shift toward free-market ideology and a celebration of risk changed the landscape of security in America. Against this backdrop, the government curtailed its investments in and protections of its citizens, and employers rewrote the social contract to increase their own flexibility and demand greater risk bearing by workers. Individuals continued to work hard, but instead of getting ahead, more Americans struggled harder and harder just to get by.

Insecurity now defines our world. The secure society has become the “risk society.” The belief that we are all in this together has been replaced with the assumption that we are each on our own. Cut adrift, Americans are struggling to forge security in an insecure age.

Recognizing the Class War

FinCap Wins Anyway
by JAMES ROTHENBERG


Stories don’t have to be true. They just have to hold our interest. The American story has held our interest for a long time, and it’s even partially true. The early settlers found it tough going, but that was in comparison to an English way of life. They found plenty of people here who were born here. Well, not quite people. Savages. The distinction accounts for all subsequent actions of the one toward the other.

The founders drew up a beautiful set of laws, but that was also to keep in place property arrangements commensurate with position. Liberty was deemed to be the province of all, with the country run by the people who own it.

The westward push was adventurous and heroic, but it also pushed southward some weaker, brown skinned people. The yellow skinned built the railroads and the black skinned built the economy, but the landowners built the legal structure. In this “nation of laws”, nothing has the lasting strength of the legal structure.

There’s a lot of wonderful things about America, the many freedoms, the informality, the modernity, and the special way we associate (sometimes) with the underdog. And it’s not a society where a peddler or clerk can’t chat up a bank president. But the story of America as a classless society is only partially true.

Missing are rigid, caste-like separations. Lines are more subtle and smeared out by a lifetime of ingesting bureaucratic illusion, played out like national theme music, and a relatively good living standard. And even where we openly speak of the “great middle class” it contains a touch of lording it over third world and autocratic countries that have a great “poor class”.

Over the ages class distinctions have been put in place by easily recognized fiat. In America they are infused by corporate law. You can’t step into an airport without hearing over and over again, “Federal law prohibits…dadadadadadadada” , but federal law does not prohibit corporate law, and it is this that helps create the orbital compulsion whereby the lightweights cannot escape from the pull of the heavyweight. Put in relativistic language (for accuracy and with the gain of an apt psychological overtone) the lightweights simply follow the easiest path in distorted space.

Differences in Americans’ status along class lines are internalized, and therefore partially discounted, but there are indications people are beginning to keep closer score, as evidenced by the Occupy movement. Its second stage engines haven’t fired yet. More is going to be needed because a vital Left presence is the only bulwark against nascent fascism, very hospitable to capitalism. It certainly isn’t going to come from our two monopoly political parties. The class disparity between rich and poor is manifest in the way government policy is slanted.

For instance:

Before becoming president, Barack Obama had a lot to say in favor of single-payer healthcare, actually a very bad name. It’s confusing to people and possibly purposely so. How many people actually care about how many entities pay for their healthcare so long as it is paid for by someone other than them? The better name is national healthcare, the model already existing in Medicare.

Perhaps because the very idea of socialism has been crapped on for so long in this country, even proponents of single-payer choose their words carefully, avoiding terms like “socialized” and “nationalized”. That’s why we hear the euphemism, “universal healthcare”.

State propagandists coined the expression “godless communism”, as if this was a property of communism. If it is, the implication is that we have a system of “godly capitalism”. Gets pretty silly. Except that all our state managers take a virtual oath to that god.

Obama actually had a very good chance to move to national healthcare. He had described, and passionately, our present health system as being in a state of “crisis”, not only for its being behind the rest of the developed countries that have nationalized but for being a drag financially, physically, and mentally upon already burdened working people who either didn’t have insurance or couldn’t afford what they did have.

The record shows that when he had the chance to make a change he dealt in the insurance companies, the HMO’s, the drug companies – make that the entire health profit industry – but zero advocates for national healthcare.

Once in the White House, Obama continued his strong support of TARP, bailing big banks out of crisis. What distinguished this crisis from the healthcare crisis was the class of people waiting to be rescued. The rich and powerful are not used to waiting and in a week’s time Wall Street and its enablers in Washington got their dream fix, essentially a massive socialization of trillions of dollars in guarantees to finance capital. One crisis adverted, at least temporarily, the other morphed into the tepid Affordable Care Act, written with the pen and ink of the healthcare industry.

Another example of the ongoing class war is the jobs situation and how it is being dealt with. There are not enough good paying jobs for the people who need them, largely because the people who don’t need them have pinched the availability of good paying jobs in the interest of maximizing shareholder profits. That’s through plant closings, downsizing, outsourcing, offshoring, union busting, and taking wage advantage of a surplus worker pool.

It’s bad for the country when there are too few good paying jobs. At the extremes it leads to disillusionment, anxiety, depression, despair, and social unrest. It’s bad for government coffers also because of decreased payroll taxes. And when it comes to a certain point it is detrimental even to finance capital that expects and relies on working class consumption. No money, no spend.

Domestic needs are taking a back seat to our imperialism, a psychopathic use of American power bent on world domination. If you can beat them, why join them? All this national treasure, manpower, and brainpower could be directed toward repair and replacement of our 20th century infrastructure. A modern layer of this infrastructure is high speed internet. Access to fast broadband connections are the new necessity for the 21st century and many countries are putting the U.S. to shame in this department, the NSA notwithstanding.

What happens if we put these two desirable things together? 1) Putting people to work 2) Rebuilding infrastructure. What comes to mind and what came to mind at the beginning of the Obama presidency is a public works program on a grand scale, the template of which was created in 1933 as part of the New Deal. Whatever consideration Obama gave to the much talked about idea it is certainly not part of the present deal.

But it’s not too late. It may even be a better time because efforts to boost the economy with easy money have proven inadequate. Federal Reserve bond buying and low interest rate policy have done wonders for Wall Street and corporate profit and loss statements but, again, that’s just the impatient rich and powerful. The jobs aren’t coming back even with real negative interest rates.

Obama and his advisors are aware of predictions of economic stagnation into the foreseeable future, but they are also aware of the nervousness of finance capital whenever a socialist idea is advanced. Maybe it’s time for the president to convince them that it’s in everyone’s interest. More realistically considering Obama’s penchant for pleasing the owners, maybe it’s time for finance capital to convince the president that the government is the employer of last resort. FinCap wins anyway.

As Ye Sow, So Shall Ye Reap

Paul Craig Roberts

The year 2014 could be shaping up as the year that the chickens come home to roost.

Americans, even well-informed ones, don’t know all of the mistakes made by neoconized and corrupted Washington in the past two decades. However, enough is known to see that the US has lost economic and political power, and that the loss is irreversible.

The economic cost of this lost will be born by what remains of the middle class and the increasingly poverty-stricken lower class. The one percent will have offshore gold holdings and large sums of money in foreign currencies and other foreign assets to see them through.

In the political arena, the collapse of the Soviet Union presented Washington with the grand opportunity to reallocate the Pentagon budget to other uses. Part of the reduction could have been returned to taxpayers for their own use. Another part could have been used to improve worn out infrastructure. And another part could have been used to repair and improve the social safety net, thus insuring domestic tranquility. A final, but perhaps most important part, could have been used to begin repaying the Treasury IOUs in the Social Security Trust Fund from which Washington has borrowed and spent $2 trillion, leaving non-marketable IOUs in the place of the Social Security payroll tax revenues that Washington raided in order to fund its wars and current operations.

Instead, influenced by neoconservative warmongers who advocated America using its “sole superpower” status to establish hegemony over the world, Washington let hubris and arrogance run away with it. The consequence was that Washington destroyed its soft power with lies and war crimes, only to find that its military power was insufficient to support its occupation of Iraq, its conquest of Afghanistan, and its financial imperialism.

Now seen universally as a lawless warmonger and a nuisance, Washington’s soft power has been squandered. With its influence on the wane, Washington has become more of a bully. In response, the rest of the world is isolating Washington.

The prime minister of India, Manmohan Singh, recently declared China and Russia to be India’s “most important partners” with whom India shares “common strategic interests.” Prime Minister Singh said: “ India and Russia have always had a convergence of views on global and regional issues, and we value Russia’s perspective on international developments of mutual interest.”

India joined China in expressing concerns about the Federal Reserve’s practice of printing money in order to cover Washington’s vast red ink. The BRICS (Brazil, Russia, India, China, South Africa) are taking steps to create their own method of settling trade accounts in order to protect themselves from the looming dollar implosion,

China has forcefully called for a “de-Americanized world.” After watching the “superpower” offshore a large part of its GDP to China and then add to the diminished tax base the burden of $6 trillion in wars that brought no booty and served no US interest, China has concluded that American power is spent. The London Telegraph thinks “it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources.”

The Obama regime attempted to attack Syria based on the sort of lies that the Bush regime used to invade Iraq, only to be slapped down by the British Parliament and Russian government. This rebuke was followed by the childishness of the government shutdown and threat of default. Consequently, the Washington morons have lost their monopoly on economic and political leadership. A few days ago the British government announced a historic agreement that permits British investors direct access to China’s markets and allows Chinese banks to expand their operations in Great Britain.

In Australia, the US dollar will no longer be used as the currency in which to settle the Australian trade accounts with China. Instead of dollars, trade will be settled in the Chinese currency.

Washington served as cheerleader, as did most economists and libertarians, while US corporations, greedy for short-term profits and executive bonuses, offshored US industry and manufacturing, calling it free trade. The obvious and predicted result is that China’s demand for resources needed to fuel its industrial and manufacturing power now dominates markets. This means that the US dollar is being displaced as world currency. The only market that America dominates is the market for financial fraud.

When industrial, manufacturing, and tradeable professional service jobs are offshored, they take US GDP and tax base with them. The foreign country gets the benefit of the relocated economic activity. Due to the revenues lost from jobs offshoring, there is a large gap between federal revenues and federal expenditures. As Washington’s irresponsible behavior has raised so many doubts about the dollar’s value and the government’s commitment to stand behind its massive debt, foreign countries with trade surpluses with the US are less and less willing to recycle those surpluses into the purchase of US Treasury debt.

Today the two largest holders of US Treasury debt are not investors or even foreign central banks. The two largest holders are the Federal Reserve and the Social Security Trust Fund.

As for those $6 trillion wars, that’s to pay for national defense to protect us from women, children, and village elders in far away countries devoid of air forces and navies, and to provide those recycled taxpayer monies from the military/security complex that find their way into political contributions.

The Wall Street gangsters sighed for relief over the last minute debt ceiling agreement. This shows how short-term Wall Street’s outlook is. All the October agreement did was to push off the crisis to January and February. The “debt ceiling agreement” did not produce a new debt ceiling that would last beyond February, and it did not resolve the large difference between federal revenues and expenditures. In other words, the can was again kicked down the road. A repeat of the October fiasco won’t play well.

Obamacare is causing the premiums on private insurance polices to rise substantially, almost doubling in some situations unless people move to the uncertain exchanges, and Obamacare’s raid on Medicare payroll tax revenues has resulted in a cut in Medicare payments to health care providers. The result is a further reduction in consumer discretionary income and a further drop in the economy.

This in turn means a larger federal budget deficit and the need for the Federal Reserve to purchase more debt.

Another reason the Federal Reserve is faced with increasing, not tapering, quantitative easing (money printing) is the decline in foreign purchases of US Treasury bills, notes, and bonds. As the instruments pay interest that is less than the rate of inflation, holding Treasury debt makes no sense when the dollar’s value and the potential of default are open questions.

According to reports, not only are foreign governments, such as China, ceasing to buy US Treasury debt, China has started to sell off its holdings, substituting gold in the place of US Treasury debt.

This means that the bonds must be purchased by the Fed or interest rates will rise as the increased supply of bonds on the market drives down bond prices. The only way the Fed can purchase a larger supply of bonds is by printing more money, that is, by more quantitative easing.

With the world moving away from using the dollar to settle international accounts, as the Fed prints more dollars the rate at which foreign holders of dollar assets sell off their holdings will rise.

To get out of dollars requires that the dollar proceeds from selling Treasuries, US stocks and US real estate be sold in the currency markets. The selling of dollars drives down the exchange value of the US dollar and results in rising US inflation. The Fed can print money with which to purchase Treasury debt, but it cannot print foreign currencies with which to purchase dollars.

The decline in the dollar’s exchange value and the domestic inflation that results will force the Fed to stop printing. What then covers the gap between revenues and expenditures? The likely answer is private pensions and any other asset that Washington can get its hands on.

Initially, private pensions will be taxed at a rate to recover the tax-free accumulation in the pensions. The second year a national emergency will be used to confiscate some share of pensions. Those relying on the pensions will find themselves with less income. Consumer spending will decline. The economy will worsen. The deficit will widen.

You can see where this is going, and there seems to be no way out. Policymakers, economists, and corporation executives are in denial about the adverse effects of offshoring, which they still, despite all the evidence, maintain is good for the economy. So nothing will be done about offshoring. Republicans will blame the budget deficit on welfare and entitlements, and if those are cut consumer spending will decline further, widening the budget deficit. Inflation will rise as incomes fall, and social cohesion will break down.

Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America.

September employment report: According to the Bureau of Labor Statistics (BLS), September brought 148,000 new jobs, enough to keep up with population growth but not reduce the unemployment rate. Moreover, John Williams (shadowstats.com) says that one-third of these jobs, or 50,000 per month on average, are phantom jobs produced by the birth-death model that during difficult economic times overestimates the number of new jobs from business startups and underestimates job losses from business failures.

The BLS reports that 22,000 of September’s jobs were new hires by state governments, which seems odd in view of the ongoing state budgetary difficulties.

In the private sector, wholesale and retail trade produced 36,900 new jobs, which seems odd in light of the absence of growth in real median family income and real retail sales.

Transportation and warehousing produced 23,400 new jobs, concentrated in transit and ground passenger transportation. This also seems odd unless the price of gasoline and pinched budgets are forcing people onto public transportation.

Professional and business services accounted for 32,000 jobs of which 63% are temporary help jobs.

So here you have the job picture that the presstitutes, hyping “the jobs gain,” don’t tell you. The scary part of the September job report is that the usual standby, the category of waitresses and bartenders, which has accounted for a large part of every reported jobs gain since I began reporting the monthly statistics, shows job loss. Seven thousand one hundred waitresses and bartenders lost their jobs in September. If this figure is not a fluke, it is bad news. It signals that fewer Americans can afford to eat and drink out.

The unemployment rate that is reported is the rate that does not count as unemployed discouraged workers who are unable to find jobs and cease to look. This favored rate, the darling of the regime in power, the presstitutes, and Wall Street, also is not adjusted for the category of “involuntary part-time workers,” those whose hours have been cut back or because they are unable to find a full-time job. Obamacare, as is widely reported, is causing employers to shift their work forces from full time to part time in order to avoid costs associated with Obamacare. The BLS places the number of involuntary part-time workers at 7,900,000.

The announced 7.2% unemployment rate is a meaningless number. The rate can decline for no other reason than people unable to find jobs drop out of the work force. You are not counted in the work force if you are discouraged about finding a job and no longer look for a job.

The phenomena of discouraged workers shows up in the measure of the labor force participation rate, which has declined in the 21st century. The opportunities for American labor are so restricted that a rising percentage of the working age population have given up looking for jobs.

Yet, the Obama regime, the Wall Street gangsters, and the pressitute media tell us how much better the economic situation is becoming as more small businesses close, as memberships decline in golf clubs, as more university graduates return home to live with their parents, who are drawing down their savings to live, as Fed Chairman Bernanke has made it impossible for them to live on interest payments on their savings.

According to the US census bureau, real median household income in 2012 was $51,017, down 9% from $56,080 in 1999, 13 years ago. In contrast, annual compensation in 2012 for US CEOs broke all records. Two CEOs were paid more than $1 billion, and the worst paid among the top ten took home $100 million. When the presstitutes speak of economic recovery, they mean recovery for the one percent.

America is in the toilet, and the rest of the world knows it. But the neocons who rule in Washington and their Israeli ally are determined that Washington start yet more wars to create lebensraum for Israel.

Early in the 21st century the liberal Democrat Senator from New York, Chuck Schumer, and I coauthored an article in the New York Times about the adverse effects on the US economy of jobs offshoring. The article caused a sensation. The Brookings Institution in Washington quickly convened a conference which was covered by C-SPAN. C-SPAN rebroadcast the conference several times. During the conference I said that if jobs offshoring continued, the US would be a third world economy in 20 years.

Wall Street quickly shut up Senator Schumer, but I am sticking by my forecast. Indeed, I think we are already there.

Americans’ Economic Prospects And Civil Liberties Have Been Stolen

March 24, 2013 |  — Paul Craig Roberts


My latest book, The Failure Of Laissez Faire Capitalism And Economic Dissolution of the West, is available as an ebook in English as of March 2013. My book is endorsed by Michael Hudson and Nomi Prims and has a 5 star rating from Amazon reviewers (as of March 23, 2013). Pam Martens’ review at Wall Street On Parade is available here.

Libertarians who have not read the book have had an ideological knee-jerk reaction to the title. They demand to know how can I call the present system of crony capitalism laissez faire. I don’t. The current system of government supported crony capitalism is the end result of a 25-year process of deregulation. Deregulation did not produce libertarian nirvana. It produced economic concentration and crony capitalism.

Below is my Introduction to my book.

Not only has your economy been stolen from you but also your civil liberties. My coauthor Lawrence Stratton and I provide the scary details of the entire story in The Tyranny of Good Intentions. In the US law is no longer a shield of the people against arbitrary government. Instead, law has been transformed into a weapon in the hands of the government.

Josie Appleton documents that in England also law has been turned into a weapon against the people. Anglo-American law, the foundation of liberty and one of the greatest human achievements, lies in ruins.

Libertarians think that liberty is a natural right, and some Christians think that it is a God-given right. In fact, liberty is a human achievement, fought for by Englishmen over the centuries. In the late 17th century, the achievement of the Glorious Revolution was to hold the British government accountable to law. William Blackstone heralded the achievement in his famous Commentaries On The Laws Of England, a bestseller in pre-revolutionary America and the foundation of the US Constitution.
In the late 20th century and early 21st century, governments in the US and Great Britain chafed under the requirement that government, like the people, is ruled by law and took steps to free government from accountability to law.

Appleton says that the result is a “tectonic shift in the relationship between the state and the citizen.” Citizens of the US and UK are once again without the protection of law and subject to arbitrary arrests and indictments or to indefinite detention in the absence of indictments.

In the US, citizens can be detained indefinitely and even executed without due process of law. There is no basis in the US Constitution for these asserted powers. The unconstitutional powers exist only because Congress, the judiciary and the American people have accepted the lie that the loss of civil liberty is the price paid for protection against terrorists.

In a very short time the raw power of the state has been resurrected. Most Americans are oblivious to this outcome. As long as government is imprisoning and killing without trials demonized individuals whom Americans have been propagandized to fear, Americans approve. Americans do not understand that a point is reached when demonization becomes unnecessary and that precedents have been established that revoke the Bill of Rights.

Introduction to The Failure of Laissez Faire Capitalism and Economic
Dissolution of the West: Towards a New Economics for a Full World
The collapse of the Soviet Union in 1991 and the rise of the high speed Internet have proved to be the economic and political undoing of the West. “The End Of History” caused socialist India and communist China to join the winning side and to open their economies and underutilized labor forces to Western capital and technology. Pushed by Wall Street and large retailers, such as Wal-Mart, American corporations began offshoring the production of goods and services for their domestic markets. Americans ceased to be employed in the manufacture of goods that they consume as corporate executives maximized shareholder earnings and their performance bonuses by substituting cheaper foreign labor for American labor. Many American professional occupations, such as software engineering and Information Technology, also declined as corporations moved this work abroad and brought in foreigners at lower renumeration for many of the jobs that remained domestically. Design and research jobs followed manufacturing abroad, and employment in middle class professional occupations ceased to grow. By taking the lead in offshoring production for domestic markets, US corporations force the same practice on Europe. The demise of First World employment and of Third World agricultural communities, which are supplanted by large scale monoculture, is known as Globalism.

For most Americans income has stagnated and declined for the past two decades. Much of what Americans lost in wages and salaries as their jobs were moved offshore came back to shareholders and executives in the form of capital gains and performance bonuses from the higher profits that flowed from lower foreign labor costs. The distribution of income worsened dramatically with the mega-rich capturing the gains, while the middle class ladders of upward mobility were dismantled. University graduates unable to find employment returned to live with their parents.

The absence of growth in real consumer incomes resulted in the Federal Reserve expanding credit in order to keep consumer demand growing. The growth of consumer debt was substituted for the missing growth in consumer income. The Federal Reserve’s policy of extremely low interest rates fueled a real estate boom. Housing prices rose dramatically, permitting homeowners to monetize the rising equity in their homes by refinancing their mortgages.

Consumers kept the economy alive by assuming larger mortgages and spending the equity in their homes and by accumulating large credit card balances. The explosion of debt was securitized, given fraudulent investment grade ratings, and sold to unsuspecting investors at home and abroad.

Financial deregulation, which began in the Clinton years and leaped forward in the George W. Bush regime, unleashed greed and debt leverage. Brooksley Born, head of the federal Commodity Futures Trading Commission, was prevented from regulating over-the-counter derivatives by the chairman of the Federal Reserve, the Secretary of the Treasury, and the chairman of the Securities and Exchange Commission. The financial stability of the world was sacrificed to the ideology of these three stooges that “markets are self-regulating.” Insurance companies sold credit default swaps against junk financial instruments without establishing reserves, and financial institutions leveraged every dollar of equity with $30 dollars of debt.

When the bubble burst, the former bankers running the US Treasury provided massive bailouts at taxpayer expense for the irresponsible gambles made by banks that they formerly headed. The Federal Reserve joined the rescue operation. An audit of the Federal Reserve released in July, 2011, revealed that the Federal Reserve had provided $16 trillion–a sum larger than US GDP or the US public debt–in secret loans to bail out American and foreign banks, while doing nothing to aid the millions of American families being foreclosed out of their homes. Political accountability disappeared as all public assistance was directed to the mega-rich, whose greed had produced the financial crisis.

The financial crisis and plight of the banksters took center stage and prevented recognition that the crisis sprang not only from the financial deregulation but also from the expansion of debt that was used to substitute for the lack of growth in consumer income. As more and more jobs were offshored, Americans were deprived of incomes from employment. To maintain their consumption, Americans went deeper into debt.

The fact that millions of jobs have been moved offshore is the reason why the most expansionary monetary and fiscal policies in US history have had no success in reducing the unemployment rate. In post-World War II 20th century recessions, laid-off workers were called back to work as expansionary monetary and fiscal policies stimulated consumer demand. However, 21st century unemployment is different. The jobs have been moved abroad and no longer exist. Therefore, workers cannot be called back to factories and to professional service jobs that have been moved abroad.

Economists have failed to recognize the threat that jobs offshoring poses to economies and to economic theory itself, because economists confuse offshoring with free trade, which they believe is mutually beneficial. I will show that offshoring is the antithesis of free trade and that the doctrine of free trade itself is found to be incorrect by the latest work in trade theory. Indeed, as we reach toward a new economics, cherished assumptions and comforting theoretical conclusions will be shown to be erroneous.

This book is organized into three sections. The first section explains successes and failures of economic theory and the erosion of the efficacy of economic policy by globalism. Globalism and financial concentration have destroyed the justifications of market capitalism. Corporations that have become “too big to fail” are sustained by public subsidies, thus destroying capitalism’s claim to be an efficient allocator of resources. Profits no longer are a measure of social welfare when they are obtained by creating unemployment and declining living standards in the home country.

The second section documents how jobs offshoring or globalism and financial deregulation wrecked the US economy, producing high rates of unemployment, poverty and a distribution of income and wealth extremely skewed toward a tiny minority at the top. These severe problems cannot be corrected within a system of globalism.

The third section addresses the European debt crisis and how it is being used both to subvert national sovereignty and to protect bankers from losses by imposing austerity and bailout costs on citizens of the member countries of the European Union.

I will suggest that it is in Germany’s interest to leave the EU, revive the mark, and enter into an economic partnership with Russia. German industry, technology, and economic and financial rectitude, combined with Russian energy and raw materials, would pull all of Eastern Europe into a new economic union, with each country retaining its own currency and budgetary and tax authority. This would break up NATO, which has become an instrument for world oppression and is forcing Europeans to assume burdens of the American Empire.

Sixty-seven years after the end of World War II, twenty-two years after the reunification of Germany, and twenty-one years after the collapse of the Soviet Union, Germany is still occupied by US troops. Do Europeans desire a future as puppet states of a collapsing empire, or do they desire a more promising future of their own?

Has Everyone Improved Except Working People?

A Middle Class Income is a Luxury
by DAVID MACARAY


Not to wax nostalgically, but when we look back at the social progress made over the last half-century or so, we have much to be proud of. Granted, in many instances it was unfortunate we had to wait so long before these progressive measures took root, but late to the party or not, the fact that they were eventually adopted and became part of America’s social landscape is, by far, the bigger story.

Over the course of the last half-century, we’ve seen real progress in civil rights, abortion rights, and gay rights; we’ve seen the birth of an anti-war movement, the rise of Second Wave feminism, the embrace of automobile safety and environmental consciousness (establishment of the EPA), acknowledgement of the rights of disabled citizens (passage of the ADA), liberalization of marijuana laws, laws against the harassment of pets, and passage of the 26th amendment, allowing 18-year olds to vote.

But alarmingly, over this same period, working people have been more or less victimized. The labor movement has not only failed to progress commensurately, it seems to have done a crisp about-face and begun marching in the opposite direction. Not to wallow in self-pity here, but while other groups (minorities, women, the disabled, stoners, teens, pets, et al) have all been given a well-deserved boost, the working-class appears to have had a “Kick me” sign attached to its backside.

Labor unions watched in disbelief as the gains made prior to and just following World War II were watered down beyond recognition or, in many instances, were summarily wiped off the slate entirely. One of the results of this systematic assault on working people is the battered state of today’s rapidly shrinking middle-class. In that ongoing rat-race we euphemistically refer to as the “global economy,” the rats are clearly winning.

The contrast between labor’s role, then and now, is staggering. Consider one example: In 1950, a milestone agreement was forged between labor and management. The media christened it the “Treaty of Detroit.” You don’t hear much about it today, even in labor circles, but without question it stands as a landmark in the social and economic history of the United States. Indeed, if any single event can be said to have “invented” the American middle-class, it was the Treaty of Detroit.

The U.S. labor situation following WWII was a mess. Disgruntled workers and lengthy shrikes were the order of the day. Workers who’d been asked to sacrifice during the war, but who’d seen U.S. industrialists reap enormous war-time profits, now insisted on getting their fair share, and were willing to hit the bricks for months at a time if that’s what it took to get it. But in 1950, Walter Reuther, president of the United Auto Workers made a deal with the Big Three automakers (GM was first, Chrysler and Ford soon followed) that changed everything.

Reuther promised the Big Three that if they gave workers health care and pensions, unemployment benefits, increased vacations, and COLAs (cost of living allowance), the UAW, in return, would not go on strike for five years. That’s five years of guaranteed labor peace—five years of no crippling strikes, five years of no idle factories; five years of every single car coming off Detroit’s assembly line being sold to a commodity-starved postwar public—in return for benefits the companies could easily afford. (Granted, this was back when companies paid more attention to their employees than their shareholders)

This arrangement—particularly company-provided health care and pensions—not only instantly became the gold standard of organized labor, but it’s been the template for union-management negotiations ever since. With European-style national health care off the table (it was anathema to U.S. politicians), it fell to businesses to provide it. Health care and pensions were no longer regarded as “luxuries”; they were now as integral to the job as general wages.

But that’s all changed. Things have regressed so dramatically, we now feel trapped in a hideous, atavistic nightmare, unable to wake. Health care is once again regarded as a luxury. A defined pension is a luxury. A full-time job is a luxury. Union membership is a luxury. A middle-class income is a luxury. In fact, everything north of genteel poverty is a luxury. In some ways, it feels like the storied American Labor Movement never happened.

Is Obama the Worst US President Ever

I Ain't Joking
by RON RIDENOUR


Yes, I mean it: the worst ever!

We’ve had James Monroe and his doctrine of supremacy over Latin America. We’ve had Theodore Roosevelt and his invasion of Cuba; Nixon, Reagan, Bush-Bush and their mass murder, and all the war crimes and genocide committed by most presidents. Yes, but we never had a black man sit on the white throne of imperialism committing war crimes.

And there he is, murdering even more people in Afghanistan than Bush, backing coups in Latin America, continuing to undermine Iraq, sending drones, mercenaries, saboteurs to Pakistan, Somalia, Yemen, Uganda, Libya and now Syria. He bores deeper into several African countries, rich with oil and minerals, than his white predecessors, Democrats and Republicans. The US is eliminating the few secular governments that there were in the Middle East and North Africa.

Obama is busier fulfilling total USAmerican world domination than even Bush, Reagan and Nixon.

He is the president for US corporations. With his black Kenyan roots he can walk into Africa’s rich parlors and black “White Houses” and communicate with these butchers better than any of the capitalist class’ earlier presidents, all of them white.

Obama is worse than them, precisely because he betrays all his black “brothers and sisters” in the US, all except a few rich and opportunistic ones. He was the hope; he would improve their lot, and that of the poor, the working people. But he has done nothing of the sort. Instead, he takes from the poor and middle class  to give to the rich, the worst criminals on Wall Street, the war industry, the oil and mineral industries. Virtually all of his economic advisors hail from Wall Street and in many cases were central figures in the enormous economic crimes of the last few years that have stolen hundreds of billions, even trillions of dollars from the poor and the middle class. His top militarists, Homeland Security thugs, and CIA killers are some of those that Bush used — most of them Republicans.

As commander in chief, he has had the national hero Bradley Manning tortured. He seeks to destroy Wikileaks and its founder Julian Assange. I gave a speech in front of the US embassy in Copenhagen when Obama was to receive the Nobel Peace Prize, for Christ Sake

Here are excerpts:

“We live in a state of permanent war and Obama continues this system, as he must, because no president of the USA can significantly moderate or abolish that brutal system. It is of no consequence what one’s color, gender or sexual preference is. Changing or abolishing imperialism can only occur when gigantic numbers of productive and service workers wake up and fight for such. And we must do so with our own political parties not the dominating capitalist parties, Democratic or Republican, or in Denmark with the current array of political parties.

Tomorrow this black president for capitalism and its wars-for-profit will receive the so-called Nobel Peace Prize. This is an absurd hypocrisy, even more so as it occurs just days after he announced sending 30,000 more murdering US troops to Afghanistan where the resistance forces, fighting for their country’s legitimate sovereignty, will righteously receive them with weaponry.

The media fail to mention that this is the second time Obama has sent additional troops to Afghanistan. Within his first 100 days in office, he ordered an additional 17,000 troops to supplement the 38,000 then present. Soon, there will be nearly 100,000 US troops and some 40,000 more from other countries, including the Banana Republic of Denmark.

While Bush was tied down in Afghanistan and Iraq, Obama takes up imperialism’s demand for blood in Latin America. The nine ALBA (Bolivarian Alliance of the Peoples of Latin America) countries have formed a cooperative trade, political and social network in the past five years and are making deep inroads into capitalism’s territory. Bush was powerless to combat this development which started by Cuba and Venezuela, in 2004. But the new “black” president saw a weak link in Honduras where the oligarchy and the thoroughly US-dominated military organized a coup d´etat with Obama-backed generals assisting. Then came the illegal elections a week ago, held under an armed curfew, which Obama declared to be legitimate even as the real president (Manuel Zelaya) and his patriotic supporters in the hundreds of thousands sought to have him reinstated.

Since that speech, Obama also supported the removal of progressive Catholic priest and President Fernando Lugo in Paraguay.

The first “black” president ran on a peace ticket, a position which he has reversed. Nor has he significantly fulfilled any other of his somewhat progressive campaign promises, such as closing down Guantanamo’s torture factory.

“I Have a Dream Drone” has become Obama’s mantra.

Inequality Rages as Dwindling Wages Lock Millions in Poverty

Tuesday, January 15, 2013 by Common Dreams 
New study shows just how hard 'working poor' got hit in wake of 2008 crisis
- Jon Queally, staff writer

The official unemployment rate in the US may be slowly ticking down (mainly due to the fact that after a year, unemployed workers are no longer considered unemployed even though they still need work and aren't included in the BLS data), but the rank of those who classify as 'the working poor' has continued to skyrocket, according to a new report.

Hit hardest by the trend of stagnant wages are those in service industries, like retail jobs, food preparation, clerical work and customer assistance.

Along with overall income inequality growth in the US, a new report by Working Poor Families Project says that over 200,000 families fell into poverty in 2011 even with both parents working.

National job growth saw a recovery from the worst days following the 2008 housing crash and subsequent financial crisis, but even as the recession ebbed in some areas or for some groups, many middle class or lower-middle class workers who returned to employment did so with much reduced wages.

As lead author of the report, Brandon Roberts, points out in an op-ed at Reuters on Tuesday:

These are not just the unemployed. Rather they are families that, despite having a working adult in the home, earn less than twice the federal poverty income threshold – a widely recognized measure of family self-sufficiency. They are working, but making too little to build economically secure lives. And their number has grown steadily over the past five years.

They are cashiers and clerks, nursing assistants and lab technicians, truck drivers and waiters. Either they are unable to find good, full-time jobs, or their incomes are inadequate and their prospects for advancement are poor.

The report, which analyzed figures from the US Census in 2011, determined that nearly 10.4 million such families - or 47.5 million Americans - now live at or below poverty, defined as earning less than $45,622 for a family of four.

Data showed that the top 20 percent of Americans received 48 percent of all income while those in the bottom 20 percent got less than 5 percent.

Statistics also showed that roughly 23.5 million, or 37 percent, of U.S. children lived in working poor families compared with about 21 million, or 33 percent, in 2007, the report said.

"Although many people are returning to work, they are often taking jobs with lower wages and less job security, compared with the middle-class jobs they held before the economic downturn," the report said. "This means that nearly a third of all working families ... may not have enough money to meet basic needs."

“We’re not on a good trajectory,” Brandon Roberts, who manages the privately-funded Working Poor Families Project, told The Washington Post. “The overall number of low-income working families is increasing despite the recovery.”

And Reuters reports:

The group's analysis adds to the body of data focused on the slipping U.S. middle class even as there are signs of the nation's economy slowly coming back to life with improvements in the housing sector and lower unemployment rate.

For some Americans, the comeback has yet to begin.

Data showed that the top 20 percent of Americans received 48 percent of all income while those in the bottom 20 percent got less than 5 percent, the report said.

The analysis also found regional differences.

States in the South, such as Georgia and South Carolina, and those in the West, such as Arizona and Nevada, had the greatest increase in the number of working poor. The increase was slower in the Mid-Atlantic and Northeast.

"It's important to draw attention to the fact that there are real families behind those statistics," said Alan Essig, who heads the Georgia Budget and Policy Institute, adding that his state is still struggling with housing and unemployment.

And the Washington Post adds:

The growth in the ranks of the working poor coincides with continued growth in income inequality. Many of the occupations experiencing the fastest job growth during the recovery also pay poorly. Among them are retail jobs, food preparation, clerical work and customer assistance.

The Five-Step Process to FUCK the Middle Class Worker

Monday, January 14, 2013 by Common Dreams
by Paul Buchheit


It's so artfully done, and so diabolical, that one can picture secret seminars in subterranean Wall Street meeting rooms, guiding young business recruits in the proven process of taking an extra share of wealth from the middle class. Their presentation might unfold as follows:

1. Boost productivity while keeping worker wages flat.

The trend is unmistakable, and startling: productivity has continued unabated while wages have simply stopped growing. Improved technologies have reduced the need for workers while globalization has introduced the corporate world to cheap labor. In effect, the workers who built a productive America over a half-century stopped getting paid for their efforts.

Paul Krugman suggests that a "sharp increase in monopoly power" is another reason for the disparity. As John D. Rockefeller said, "Competition is a sin." That certainly is the rule of thumb in banking and agriculture and health insurance and cell phones. Yet despite the fact that low-wage jobs are increasingly defining the American labor market, apologists for our meager minimum wage claim an increase will worsen unemployment. So it remains at $7.25. A minimum wage linked to productivity would be $21.00 per hour.

2. Build up a financial industry that has no maximum wage.

This is where the money is. In 2007, before the financial crisis, a Harvard survey revealed that almost half of the school's seniors aspired to careers in finance. The industry's share of corporate profits grew from 16% in 1980 to an astonishing 45% in 2002.

And there's no limit to the earning potential. Hedge fund manager John Paulson conspired with Goldman Sachs in 2007 to bundle sure-to-fail subprime mortgages in attractive packages, with just enough time for Paulson to collect other people's money to bet against his personally designed financial instruments. He made $3.7 billion, enough to pay the salaries of 100,000 new teachers.

3. Keep accumulating wealth created by the financial industry.

Experienced schemers have undoubtedly observed that over the past 100 years the stock market has grown three times faster than the GDP. The richest quintile of Americans owns 93% of such non-home wealth.

In the last 25 years, only the richest 5% of Americans have increased their share of non-home wealth, by the impressive rate of almost 20 percent.

In just one year, the richest 20 Americans earned more from their investments than the entire U.S. education budget.

4. Tax yourself as little as possible.

The easiest and least productive way to make money - holding on to investments - is also taxed at the lowest rate. In addition to the capital gains benefit, tax ploys like carried interest, performance-related pay, stock options, and deferred compensation allow hedge fund managers and CEOs to pay less than low-income Americans, and possibly even nothing at all.

The richest 400 taxpayers doubled their income in just seven years while cutting their tax rates nearly in half. U.S. corporations can match that, doubling their profits and cutting their taxes by more than half in under ten years. The 1.3 million individuals in the richest 1% cut their federal tax burden from 34% to 23% in just 25 years.

5. Lend out your excess money to people who can no longer afford a middle-class lifestyle.

As stated by Thom Hartmann, "The 'Takers' own vast wealth, and loan it out at interest to everybody from students to governments.." Overall, Americans are burdened with over $11 trillion in consumer debt, including mortgages, student loans, and credit card liabilities.

Wealth has largely disappeared for the middle- and lower-income classes. More than $7 trillion has been lost in the decline of home prices since 2006. Young college graduates have an average of $27,200 in student loans, and the 21-35 age group has lost 68% of its median net worth since 1984, leaving each of them about $4,000. Median net worth for single black and Hispanic women is a little over $100.

So we're hanging on by the frazzled thread of debt that indentures us to the rich and makes it harder and harder to fight back against the theft of our middle-class wealth. As we struggle to support ourselves, the super-rich remain on the take, driving us ever closer to the status of most wealth-unequal country in the world.

You Can Kiss Public Education (and the Middle Class) Goodbye

All around us, our public institutions are disintegrating, and the most important public institution of all – our public education system – will likely be the next to go.

December 14, 2012  |  Alternet  | By Thom Hartmann, Sam Sacks

Quick - when you hear "public housing," what picture jumps into your mind? Or "public hospital"?

All around us, our public institutions are disintegrating, and the most important public institution of all – our public education system – is the next to be ghettoized.

Despite several progressive victories this Election Day, there was one significant defeat in Georgia, as voters approved of Constitutional Amendment 1 [3], which changes Georgia’s Constitution to give Republicans in that state the power to create charter schools as part of Georgia’s public education system. The result will be crucial taxpayer dollars being funneled away from free public schools and directed toward brand new, sometimes for-profit, privately-run charter schools.

Even though studies show [4] that costly private schools don’t produce any better educational results than free public schools, for-profit schools have popped up all around the nation in recent years because of how valuable they are to corporate America. In fact, the historic Chicago Teachers Union strike earlier this year was largely in response to the city’s push to open up more charter schools to replace traditional public schools.

Education is a recession-proof industry that will always be in high demand. The corporate money-changers know if they can get their hands on this industry, "reform" it to replace decently-paid teachers and faculty with McTeachers, and then get taxpayers to foot the bill, quarterly profits and lavish bonuses for CEOs can explode. Even in so-called "non-profit" charter schools, management can make big bucks.

And that’s exactly what Georgia’s Constitutional Amendment 1 accomplishes. Expect similar amendments to pop up in other state elections in the near future.

This is a major shot in the multigenerational war on public education part of our commons.

Ultimately, as more states pass charter school amendments like Georgia, and money is sucked out of public schools, then public schools will meet the same fate as the rest of the ghettoized public institutions in America.

Public education will be just like public housing, which most Americans think of as low-income, crime-ridden neighborhoods. Or it will be like public hospitals, which most Americans see as disease-ridden institutions filled with impoverished, sick people. Because, in both cases, these institutions principally serve the very poor, there’s little sympathy for Americans stuck in public housing or public hospitals. Little sympathy also translates into little funding, which perpetuates the cycle of poverty and the disintegration of our public institutions.

But up until the Reagan "reforms," public education had avoided this same ghettoizing fate. Historically, our public education system was a marvel for the rest of the world, producing generations of scientists, doctors, and engineers from all races and socio-economic classes. Whether you came from a wealthy family or a poor family, the American public education system didn’t discriminate. As much as possible, it was a multi-racial, multi-cultural, and multi-class public institution that produced great results.

But as state governments embrace for-profit charter schools, traditional public schools will be neglected and see their funding cut until eventually they, too, will suffer the same fate that ghettoized public housing and public hospitals.

Even prominent Republicans are owning up to this. After passage of Georgia’s Constitutional Amendment 1, Lee Raudonis, the former executive director of the Georgia Republican Party, penned an op-ed [5] for the Atlanta Journal-Constitution warning that passage of the amendment was, “an endorsement for a drastically altering public education as most Americans define it.”

Raudonis foresees a future in which there’s a “new type of public school” as a result of this move toward charter schools. He describes this new public school as, “one for those children whose parents were not motivated enough to move them into a charter or private school or for whom there were none available.”

After all, there will be a lot of low-income parents who simply can't afford to pay a bit more for a private education for their child or whose low-income neighborhood wasn’t chosen for a new charter school location. And, tragically, there's no shortage of poor parents who are dysfunctional because of the poverty-associated diseases of drug addiction and mental illness. The kids of these parents will be forced to into cash-strapped, forgotten public schools. As Raudonis concludes, “public schools will come to be viewed similarly to public housing and public hospitals, as places for children whose parents, for whatever reasons, cannot find a better alternative.”

This will mark the beginning of the end for not just public education in America, but also for the American middle class itself, which is shrinking faster and faster each day. Public schools will be the new dumping ground for the poor and the working poor. And just as public housing provides the bare minimum for its inhabitants, and just as public hospitals provide the bare minimum for their patients, the new ghettoized public schools will provide a bare minimum of education for low-income students.

The public education system itself will no longer be America's great equalizer, churning out successful students from all cultural and socio-economic backgrounds. Instead, it will shackle the poor, keeping them from learning the essentials needed to find that great job for the 21st century and move up the economic ladder into the middle class – to achieve the American Dream.

America needs to "just say no" to public funding of private schools.

The Lousiest Recovery of All Time--If It Can Really Be Called a Recovery at All

Global Depression Enters Year Five

by MIKE WHITNEY

 

Is this the lousiest recovery of all time?

Check it out: The number of people currently on food stamps in the US is at a record-high of 47.1 million. That’s more than twice as many recipients than in 2007 when the crisis began. And the percent of Americans living below the poverty line has skyrocketed, too. It’s gone from 12.3 percent in 2006 to 16.1 percent today. According to the Census Bureau, nearly 50 million people in America are now living below the poverty line. In other words, if you’re poor in America your numbers are growing and things are getting worse. Some recovery, eh?

And it’s not just the poor who are hurting either. The middle class is getting clobbered, too.

Unemployment is still way too high (U3 7.9%, U6 14.3%) and, according to the Fed’s Survey of Consumer Finances, middle income families have seen nearly 40 percent of their net worth go up in smoke since 2007. The bulk of the losses are attributable to the giant housing bust of ’07 which wiped out $8 trillion in home equity leaving the majority of baby boomers unprepared for retirement. It’s a desperate situation that no one seems to want to talk about, but the reality is that millions of people are going to have to figure out how to scrape by on next-to-nothing or work until they’re too senile to punch a clock. As far as these folks are concerned, the recovery is just a big joke.

So who’s really benefited from the so called recovery?

Well, that’s a no brainer: Wall Street and the 1 percenters, that’s who. Fed chairman Ben Bernanke has pumped enough uber-cheap money into financial markets to fill a small ocean, all with the clear intention of keeping stocks bubbly so his fatcat speculator friends can cream the system and take home even bigger bonus checks. The Fed’s quantitative easing program has sent stocks into the stratosphere, in fact, all three major US indices have more than doubled since the program was first launched in 2008. There’s only one drawback; it doesn’t do jack for the real economy. Oh, and another thing, its effect on stocks is only temporary, the equivalent of a sugar rush. Check out this post by Charles Biderman at TrimTabs and you’ll see what I mean:

“On September 14 the day of the most recent Fed easing, the S&P 500 peaked at 1466. And ever since then stocks have been selling off and opened today down about 6%.

On previous videos I predicted that the current QE would have very little impact on both the stock market and the economy. And that is what happened. Why did I predict that? Short term interest rates are already at zero and it has been five months now since mortgage rates reached current record low levels. So yes, as a result of Operation Twist after tax income rose to a $300 billion in annualized growth this past June through September. That was up from a $200 billion growth rate over the first five months of 2012. Since October, after tax income – remember this is a before inflation number – has dropped back to a $200 billion growth rate. In other words, the Fed this year will in essence print half a trillion dollars that will not improve after tax income nor help stock prices grow……

So the US economy is currently barely growing despite huge amounts of deficit spending and money printing.” (“Bernanke Put Dead and Very Little Chance Stocks Avoid Year End Sell Off”, Trim Tabs Money Blog)

This is Bernanke’s worst nightmare. Stocks are looking wobbly and his nutcase monetary theories are no longer working. But rather than change directions and admit his error, Bernanke has decided to double-down and throw the printing presses into high-gear. But how can he do that, you may wonder, after all, hasn’t the Fed already committed to purchasing $40 billion mortgage-backed securities per month for “as long as it takes” (QEternity) to lift GDP rises and reduce unemployment?

Yes, he has, but that doesn’t mean the Moneymaker in Chief doesn’t have more arrows in his quiver. He does. Here’s the story from Bloomberg:

“The Federal Reserve is embarking on the next step in Chairman Ben S. Bernanke’s journey toward greater transparency — tying its outlook for borrowing costs to measures of employment and inflation.

Policy makers “generally favored the use of economic variables” to provide guidance on the when they are likely to approve their first interest-rate increase since 2008, according to minutes of their Oct. 23-24 meeting released yesterday. Such measures might replace or supplement a calendar date, currently set at mid-2015.

A number of officials also said the Fed may need to expand its monthly purchases of bonds next year after the expiration of a program to extend the maturities of assets on its balance sheet, known as Operation Twist. The discussion indicates that Fed officials judge the economy still needs record stimulus to reduce an unemployment rate stuck near 8 percent.” (“Fed Moves Toward Tying Interest-Rate Decisions to Economic Data”, Bloomberg)

So what does it all mean? It means that Bernanke and his Merry Pranksters are ratcheting it up to the next level. It means they’re going to keep flooding the financial markets with liquidity until the jobless rate comes down. It doesn’t matter that QE hasn’t moved the dial on unemployment at all or that the Fed has already expanded its balance sheet by $2.5 trillion and that no one has any idea of how Bernanke is going get rid of his stockpile of junk assets without sending the markets into an Armageddon death-spiral. None of that matters. They’re just going to put their foot on the gas and let ‘er rip! Doesn’t that sound a tad reckless?
Here’s an excerpt from the FOMC statement on September 13 that helps to connect the dots:

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”

In short: “We’re not done yet, guys, not by a long-shot.”

This is supply side arrogance in the extreme. Bernanke continues to believe that the entire economy can be effectively run by moving levers at the Central Bank. He thinks that if you plop enough money into the top of the system, (financial markets) it will eventually dribble downwards to the worker bees. Fat chance. It hasn’t happened yet, but not from want of trying.
Bernanke is right about one thing though, inflation expectations are beginning to fade which means that disinflation or outright deflation are a growing threat to the economy. Take a look at this blurb from The Economist:

“….since mid-October, there has been an unmistakable reversal in the inflation-expectations trend. Based on 5-year breakevens, all of the September spurt has been erased. And 2-year breakevens are back at July levels. Given my optimism over the Fed’s September moves and the apparent strength of underlying fundamentals in the economy, I would like to disregard this trend, but one should be very reluctant to abandon guideposts that have served one well just because they’ve moved in an inconvenient way.” (“Monetarypolicy—Is there a problem?”, The Economist)

This is why Bernanke is wheeling out the heavy artillery, because QE3 hasn’t boosted spending or borrowing at all. Business investment is still in the doldrums and earnings have hit the skids in a big way. So where are all the green shoots? The only difference between 2008 and today is a steroid-inflated stock market and a few more multi-billionaire 1 percenters. Everything else is about the same, only worse.

If Bernanke was serious about fixing the economy, he’d stop all the monetary chicanery and let stocks nosedive by a couple thousand points. That would wake up Congress and force them to do their damn job. Zero rates and boatloads of liquidity just aren’t doing the trick, anyone can see that. In fact, all the hocus pocus and crackpot “accomodative” policies are just making people nervous and adding to the uncertainty. It’s time to get back to basics, fiscal stimulus.

Bernanke should follow the advice of Nomura’s chief economist Richard Koo. Koo has done extensive research on Japan’s 20 year running-battle with deflation and explained in excruciating detail what needs to be done to emerge from, what he calls, a balance sheet recession. Here’s a sample of his work:

“The most important lesson of the last 20 years in Japan and of the last four years in western economies is that monetary policy is ineffective when there is no private demand for funds…

“In Japan, there has been little or no private loan demand since 1995, when the BOJ brought interest rates down to near-zero levels. And neither the economy nor asset prices have recovered, even though, as BOJ Governor Masaaki Shirakawa has noted, the BOJ embarked on quantitative easing fully eight years before its counterparts in Europe and the U.S…..

When businesses and households not only stop borrowing money but start to work off their debt, the resulting absence of borrowers effectively traps central bank-supplied liquidity in the financial system, and as a consequence the funds neither stimulate the economy nor spark inflation……”

Sound familiar? And here’s more from the Financial Times via Economist’s View:

“Today, the US private sector is saving a staggering 8 per cent of gross domestic product – at zero interest rates, when households and businesses would ordinarily be borrowing and spending money. … This is the result of the bursting of debt-financed housing bubbles, which left the private sector with huge debt overhangs … giving it no choice but to pay down debt or increase savings, even at zero interest rates.

However, if someone is saving money or paying down debt, someone else must be borrowing and spending that money to keep the economy going. … With monetary policy largely ineffective and the private sector forced to repair its balance sheet, the only way to avoid a deflationary spiral is for the government to borrow and spend the unborrowed savings in the private sector….

The challenge now is to maintain fiscal stimuli until private sector deleveraging is completed.” (“Explain the disease to help US citizens”, Richard Koo, Financial Times)

Bernanke’s smart enough to know that more-of-the-same (QE) won’t get the economy back on track. He knows that Koo is right. But that doesn’t mean there will be a change in policy. There won’t be, mainly because QE reinforces the caste system where all the goodies go to the silk-stocking hotshots at the top and everyone else gets table scraps. It’s just plain old class warfare. And, guess what: their class is winning.