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PORTSIDE  October 2010, Week 4

PORTSIDE October 2010, Week 4

Subject:

Attack on the Middle Class!!

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Date:

Wed, 27 Oct 2010 17:44:56 -0400

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Attack on the Middle Class!!

First they came for your paycheck. Then your house. What's next?

By James K. Galbraith
Mother Jones
November/December 2010
http://motherjones.com/politics/2010/11/galbraith-social-security-middle-class [1]

THE REMARKABLE thing about the American middle class is
that we still have one, given the job losses, housing
bust, and 401(k) wipeout of the past three years-and
considering that for 35 years, politicians (and the
bankers who own them) have been hammering away at
middle-class institutions. The assault began in the
1970s, when New York City's fiscal crisis [2] and
California's property-tax revolt [3] marked the start
of a long decline in public services. Next came the
recession and anti-union policies of the early 1980s,
whose whip's end hit the black working class especially
hard. (Automakers have long been among the nation's
largest private employers of African Americans. In the
late '70s, one in every 50 African Americans [4] in the
workforce was employed in the industry.) Thanks to the
UAW, the automakers provided good jobs and pensions for
workers who, in many cases, had a high-school education
at best. When Chrysler hit the ropes in 1979, Congress
did pitch in with a $1.5 billion loan guarantee [5] (I
worked on that bill as an economist for the House
banking committee), but the decade that followed still
pummeled autoworkers-as they did all of American
manufacturing.

The consequences are still unfolding. Total employment
of manufacturing workers peaked [6] in 1979, and three
decades later, we're in the endgame. Jobs in the sector
are down [7] by about a third since 2000-some 6 million
lost. Most of them will never be replaced. Nothing can
stop the Chinese, Koreans, Vietnamese, and others from
making shoes and ships and sealing wax at wages we
can't compete with. And nothing will.

For a time in the 2000s, some of those job losses were
offset by gains in the other hard-hat sector:
construction. But the Great Recession put an end to
that. Since 2007, a quarter of construction jobs have
disappeared [7], more than 2 million in all-about as
many as were lost in manufacturing, but from a much
smaller base.

Those numbers tell of the next big middle-class
tragedy-the housing bust. Homeownership was a great
American success story. It rose for 60 years [8],
peaking around 2004-and for most of those six decades
it was an honest business, more or less. But in its
last five years, the long boom was kept alive by the
greatest financial swindle in world history. In the
collapse that followed, an enormous amount of middle-
class wealth was wiped out. Homes were once a source of
pride, safety, and collateral. Now they're often a
burden-and homebuilding is at lows not seen since World
War II.

Is it a shock that after the Citizens United decision,
Target was among the first companies to write a huge
check to a political campaign?

With manufacturing and construction on the ropes,
service jobs now practically comprise the whole economy
[9]. Our rich folks today make their money in finance
and technology; the upper middle class lives on trade,
law, and medicine; and the middle class teaches and
works in the civil service. The working class cooks,
cleans, trucks, soldiers, stocks, repairs cars, makes
beds, changes bedpans, and rings up sales. Today there
are more salespeople, more hotel and restaurant
workers, far more lawyers, doctors and accountants, and
almost twice as many education and health workers as
there are people producing tangible goods.

This isn't all bad. Conditions in stores, restaurants,
and hospitals are often better than in factories. Jobs
are more stable because labor in these businesses is
mainly a fixed cost-an assembly line can be idled at a
moment's notice, but a store needs salesclerks even
when business is down. Goods made abroad are cheap,
which helps consumers. The health and education sectors
now have almost 30 percent more workers than they did
in 2000, and that means, in part, more and better
services in these areas.

The downside is that because many of these jobs aren't
unionized, wages are lousy. The only thing that
reliably bolsters service wages is the federal minimum
wage: When it rises [10], as it did from $6.55 to $7.25
in 2009, service jobs above the minimum are forced up
[11] (PDF) as well (to maintain the spread). And when
Congress doesn't raise the minimum, real wages decline
with inflation.

Is it any surprise that today our leading reactionaries
come from retail behemoths like Wal-Mart [12]? Is it a
shock that Target was among the first companies, in the
wake of the Supreme Court's Citizens United [13]
decision, to write a huge check [14] to a political
campaign? That fast-food chains are tenacious opponents
[15] of a higher minimum wage? That hotel owners from
New Orleans [16] (PDF) to Santa Monica [17] (PDF) have
fought against "living wage" laws? Having thwarted the
unions, they now target the government-its taxes, its
regulations, and above all, its wage standards.

So: Most of the nation's remaining jobs are in
services, where pay depends largely on acts of
Congress. Houses are no longer valuable commodities.
Private pensions are largely kaput, and many 401(k)s
were also wiped out in the crash. What's left to
protect economic security for ordinary Americans?

The answer, of course, is Social Security and Medicare
[18]. They remain by far our greatest social policy
achievements. Today, a 60-year-old man in the US has an
expected life span of 20 more years [19] (PDF)-well
above what was the case 50 or even 40 years ago [20]
(PDF), when Social Security didn't relieve poverty and
Medicare was just getting underway. Improved medical
care is surely part of that. But income security is
also an important factor. People who are not poor live
longer than people who are [21].

Social Security prevents poverty. It's wealth, exactly
like a big bond that you can't sell.

And Social Security prevents poverty. It's wealth,
exactly like a big bond that you can't sell. If the
monthly benefit is $1,000 and the interest rate is 2
percent, the bond is worth $600,000-and that's a bond
you own, right now. You don't have to save for it:
You've paid for it, up front, via the payroll tax. And
there's more. As health care expert Harold Pollack [22]
has pointed out [23], Social Security's Disabled Adult
Child program [24] (PDF) is an insurance policy worth
more than $400,000, protecting you if you happen to
have a mentally or physically disabled loved
one-something that could be only a car crash away.

Medicare has also been a huge success: popular,
efficient, and less costly per "unit of care" provided
than private medical care. Medicare is a big insurance
policy you've already paid for, in full, that takes
effect at 65-an age when private insurers wouldn't
touch you. That's wealth, too, a huge buffer between
sickness and bankruptcy.

Are you surprised that these programs are under attack?
The same forces that went after the unions in the
1980s, that relentlessly pushed free-trade agreements
while manufacturing jobs evaporated, and that destroyed
housing values in the 2000s- they're on the prowl
again. If Social Security and Medicare are cut, finance
and insurance companies will skim the cream-the
wealthier, healthier participants-while leaving
everyone else to fend for themselves. Social Security
and Medicare, they think, are easy prey, once we've
been softened up by scare stories about how they're on
the "brink of bankruptcy" and we "can't afford them."

It isn't true, of course. Social Security and Medicare
can't go bankrupt, just as the Pentagon can't. They're
not in some separate bank account or lockbox-they're
government programs that we either choose to pay for or
don't. And not only can we afford them, they're a
bargain, providing modest comfort and decent care to
people who would otherwise financially burden their
families-or die.

The attack will come right after the election, when the
Bowles-Simpson commission on deficit reduction [25]
issues its report. It will almost surely recommend deep
cuts in Social Security, probably in the form of an
increase in the retirement age. This is a direct cut in
benefits, targeted in an especially nasty way at
minorities and all others who work harder, earn less
[26] (PDF), and live shorter lives [27] (PDF) after
retirement than, say, college professors or senators.

The cochairman of that commission, former GOP senator
Alan Simpson [28] of Wyoming, has made his views clear.
In an August email [29] (PDF) to the head of OWL [30]
(née the Older Women's League), he called Social
Security "a milk cow with 310 million tits." He wants
you to think of Social Security as welfare, not
something you've earned-a boondoggle, rather than a
program that puts money into the economy every day.

The fact is, even if you were never an autoworker, were
never in a union, never owned a house, even if you've
never been sick and never got anything else from the
New Deal-whoever you are, Social Security and Medicare
help you right now. They support your business:
Spending by old folks is part of the income of small
and large companies everywhere, an effective and stable
support for the economy. Social Security provides
survivors' benefits that raise children in your
schools. It will keep your parents off your back. And
when you do get older, Social Security and Medicare
will protect you, and they will protect your children
from bankrupting themselves over you. That is, if these
programs are protected, now, from their assailants.

The House has agreed to vote on the Bowles-Simpson
package-whatever it eventually contains-if it passes in
the Senate. So it will come down to the Senate. Will
the Democrats hold the line? Or will they give in to
this assault on the last bastion of the American middle
class?

Links:
[1] http://motherjones.com/politics/2010/11/special-report-middle-class
[2] http://www.ncbi.nlm.nih.gov/pubmed/16449588
[3] http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true&amp;_&amp;ERICExtSearch_SearchValue_0=ED206051&amp;ERICExtSearch_SearchType_0=no&amp;accno=ED206051
[4] http://abcnews.go.com/Business/story?id=6694808&amp;page=1
[5] http://www.cfr.org/publication/17976/chrysler_corporation_loan_guarantee_act_of_1979_pl_96185.html?breadcrumb=%2Fissue%2Fpublication_list%3Fid%3D2%26page%3D67
[6] http://www.cbo.gov/doc.cfm?index=5078&amp;type=0
[7] http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=economic_indicators&amp;docid=14jy10.txt
[8] http://eadiv.state.wy.us/housing/Owner_0000.html
[9] http://jobs.stateuniversity.com/pages/16/American-Workplace-SHIFT-SERVICE-ECONOMY.html
[10] http://www.dol.gov/whd/minwage/chart.htm
[11] http://dll.umaine.edu/ble/minimum%20wage%20current.pdf
[12] http://www.wakeupwalmart.com/news/20060628-rc.html
[13] http://motherjones.com/politics/2010/06/citizens-united-effect
[14] http://minnesota.publicradio.org/collections/special/columns/polinaut/archive/2010/08/target_ceo_apol.shtml
[15] http://www.independent.ie/national-news/courts/fast-food-outlets-fight-pay-law-1700748.html
[16] http://depts.washington.edu/pcls/documents/research/LeviOlson_LivingWage.pdf
[17] http://www.irle.berkeley.edu/research/livingwage/livwage.pdf
[18] http://motherjones.com/politics/2009/05/security-blanket-how-social-security-can-save-us-all
[19] http://www.census.gov/compendia/statab/2010/tables/10s0103.pdf
[20] http://www.census.gov/statab/hist/HS-16.pdf
[21] http://www.bmj.com/content/311/7015/1282.extract
[22] http://www.ssa.uchicago.edu/faculty/h-pollack.shtml
[23] http://www.kaiserhealthnews.org/Columns/2010/September/090610pollack.aspx
[24] http://www.medicaid.alabama.gov/documents/apply/2A-General/2A-2.Gen.Elig.Info_12-2008.pdf
[25] http://www.whitehouse.gov/the-press-office/president-obama-establishes-bipartisan-national-commission-fiscal-responsibility-an
[26] http://www.bls.gov/news.release/pdf/wkyeng.pdf
[27] http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_21.pdf
[28] http://bioguide.congress.gov/scripts/biodisplay.pl?index=s000429
[29] http://library.constantcontact.com/doc209/1102372204926/doc/sVSMT2oCX0EFU3Or.pdf
[30] http://www.owl-national.org/Welcome.html

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