The Middle of Nowhere
The rich get richer as those in the former middle class do what theY can to survive
By Joan Trossman Bien 01/27/2012
Victor Herrera still finds himself waking up in the middle of the night, only now, there is no before-dawn job waiting for him. Until recently, Herrera had been delivering the Los Angeles Times to readers in Ventura County. But after nine years of paper delivery for different newspaper companies, Herrera lost his job when the Times outsourced home delivery to its local competition, the Ventura County Star.
Luckily, it was Herrera’s second job — he also works days at the mail sorting center for Bank of America. But even B of A has cut the number of employees in the area recently.
Paper delivery was not an easy job, especially during the rainy season, but Herrera said one thing made it worth the effort.
“We mainly do this because around Christmas is when we get our tips. But they didn’t wait until the end of the year. That’s what got to me the most, during the holidays. It just shows you that the CEOs, they get their annual bonuses.”
Herrera has a house in Simi Valley, a wife and two young children. With his wife’s part-time job and his two jobs, the family was just able to get by. “We own our house and we are making the payments, but it gets pretty close sometimes. Right now, we’re stretching it, you know how it is. I’m looking everywhere I can cut some expenses.”
Woodland Hills psychologist Kat Derrig-Palumbo said she is hearing more stories of frustration and despair from those who are unemployed.
“For people in their thirties and forties with houses and families, they know they have to do whatever they can to take care of their children. They have experience but often have to take jobs that are well below their level of experience.”
The parade of economic disasters that have marked the past decade have been unlike anything experienced by the country since the Great Depression. As bad as that was, some of what is now occurring, especially the housing market collapse, is deeper and longer lasting than it was during the 1930s. References to the Great Depression, the worst financial disaster in US history, are being used more often now. Americans have experienced not just one disaster, but a series of disasters that began with the dot-com collapse in 2000 and continued with the financial meltdown in 2007, the Great Recession in 2008-2009, the accompanying real estate debacle, which is still heading downhill, massive budget deficits, two very expensive wars and a jobless recovery. What has occurred in quick succession has created a new and disturbing paradigm in America.
Despite a roaring and spirited economy born of the ashes of the Depression, the past 30 years have shown signs of economic troubles that were either masked or ignored and which are now leading inexorably to the sputtering, creaking, lop-sided economy we have today.
Before the Great Depression, a distinct class system was part of our culture. Called The Gilded Age, the carefree wealthy lived in a rarified world, untouched and mostly unaware of the pain that afflicted the rest of America.
Today, we risk sliding into another Gilded Age. Here are a few items that reflect the chasm between the extremely privileged and the vast majority of America:
According to the US Department of Education, for the age group 25-34, the median income in 1980 was $38,100 (in figures adjusted for 2009). In 2009, the median income for the same age group was $37,500.
In 1961, for those earning more than $380,000, there were 12 tax brackets, ranging from 62 percent to 91 percent, according to the Institute for Policy Studies. Today, for the same earnings, there is one tax rate — 35 percent.
Currently, 57 members of Congress are in the wealthiest 1 percent, and 11 percent has a net worth of more than $9 million.
Here in California, three members of Congress enjoy a similarly impressive net worth (not including primary residence or personal property). According to analysis from USA Today, US Rep. Darrell Issa has a total net worth of $448,125,017; Rep. Nancy Pelosi is worth $101,123,032, and Sen. Dianne Feinstein is worth $69,046,622.
Meanwhile, a top minimum-wage employee who works 40 hours a week earns $18,720, placing him or her well beneath the official poverty level ($24,343).
The signs of increasing poverty, which the US Census Bureau now estimates to affect 49 million Americans, can be seen in the daily lives of families everywhere. In the past four years, the number of children who qualified for a government subsidized lunch has grown 25 percent. The US Department of Education said that in 2009, 52 percent of the nation’s fourth-graders were enrolled in the federal lunch program. The number of children in families now eligible for food stamps in 2010-11 grew by 2 million over the previous year. It now stands at 14 million.
Many more workers would be happy just to have their pay raised up to minimum wage. They would also benefit greatly from qualifying for overtime pay and protection from the Fair Labor Standards Act. Currently, home care workers do not qualify for any protections. They are still classified as “companions” and essentially have the legal status of teenage babysitters. President Barack Obama announced in mid-December that he would change that status and offer care workers the same legal protections as all other hourly workers.
Political dynamics have changed radically and do not resemble any functional governmental process in U.S. history. Dr. Jose Marichal, assistant professor of political science at California Lutheran University, said the biggest factor in the paralysis of government has been a narrowing of viewpoints.
“Polarization is not unheard of in American politics, but it is much more polarized than in the recent past. Compare 1965 to today and you’d see that we had a number of conservative Democrats and liberal Republicans. Those are endangered species today. There are fewer members in the middle to broker compromise.”
One reason for the widening of the gap between the rich and the rest was summed up in 1982 by former Republican US Sen. Bob Dole, who said, “Poor people don’t make campaign contributions.”
Between 1979 and 2006, middle class after-tax incomes rose 21 percent. During the same period, the wealthiest 1 percent saw their incomes explode by 256 percent. Larger political contributions translate into political influence.
Analysts say everything changed in 1978, the year Ronald Reagan got some traction. Accelerating inflation hit double-digits. Reagan directed public anger against the very government he would soon lead for eight years. Supply-side economics and the trickle-down theory provided the rationale behind tax cuts for the wealthy. The benefits of those cuts were supposed to fuel corporate investment. But when the economy continued to sputter, even supply-sider Reagan was alarmed at the increasing budget deficit. He would go on to raise taxes 11 times during his presidency.
Since the 1980s, tax rates for the wealthy have dropped under every presidency, with the largest cuts coming under George W. Bush. Since then, the Republican Party has taken a very hard line against raising taxes. So far, vital government services have been slashed by $1 trillion. Yet the massive cuts for the wealthy and corporations have been preserved in full.
David Stockman, former budget director under President Reagan, told Rolling Stone in November 2011, “The Republican Party has totally abdicated its job in our democracy, which is to act as guardian of fiscal discipline and responsibility. They’re on an anti-tax jihad — one that benefits the prosperous classes.”
When, in April 2003, the Senate deadlocked on a bill that would give the wealthiest Americans steep tax cuts, Vice President Dick Cheney, a true believer in the power of wealth, cast the deciding vote. The tax rate on long-term capital gains dropped to 25 percent and the tax rate on stock dividends plummeted 60 percent.
Commenting on that tax cut, Stockman said, “It was a very destructive combination to have a national economy policy that stimulated debt-financed capital gains and then taxed the windfall at the lowest rates imaginable. That contributed, clearly, to the growing imbalance in household income and wealth.”
What exactly is middle class?
There is an inclination to define the middle class by income figures. However, the cost of living in some areas of the country is twice as high as other areas. Even the official poverty level is affected by the cost of living in different regions.
Attempting to define middle class is akin to what the late US Supreme Court Justice Potter Stewart said of pornography: “I can’t define it, but I know it when I see it.”
Being middle class generally means your household has enough money for a modest house, a car, food and perhaps a little bit left over for a vacation. It means you are getting by with what you have and have hopes for a better future.
The strength of private sector unions, whose membership is middle class, has had enormous influence on the rise and fall of wages and benefits for the middle class. Nelson Lichtenstein is a renowned professor of history at University of California, Santa Barbara. He said that as the fortunes of unions go, so goes the rest of America.
At the unions’ peak, about one-third of private sector working Americans were union members. Estimates of union membership now range from 11 percent down to 7 percent.
Lichtenstein said union victories have translated into better working conditions for other Americans. “Unions do put upward pressure on wages. When unions are strong politically, they push for various kinds of social policies, everything from health insurance to taxation policies, which have the effect of indirectly distributing public goods to working people. You can’t pass a law to just affect the members — everyone in that category will benefit with things like minimum wage and health insurance.”
But now that the glory days of unions have faded, Lichtenstein said, everyone suffers. “These things have a way of eroding. Minimum wage today, for example, is less than it was in the 1960s (comparatively).”
Lichtenstein made another point about the importance of unions in the workplace. “It’s impossible to have a bureaucracy large enough to enforce a law which affects 5 million workplaces. So, when you have unions, they become the policemen enforcing the law. When the unions are weak, all of that falls apart. That’s very clear today.”
In recent years, Republicans have proposed legislation that would completely de-fund the National Labor Relations Board or strip it of its powers. Elimination of collective bargaining, particularly of public employee unions, has become a prime objective of Republicans, as was seen in Wisconsin last fall.
Rep. George Miller (D-Concorde), recently speaking at a forum sponsored by the AFL-CIO said, “[Labor law] is the basic fundamental economic underpinning of the middle class in this country. It’s the wages and benefits of the working people.”
“Jobless recovery” is when a nation gets back on track without adding jobs. Or, your neighbors are buying new cars and large-screen TVs, but you still don’t have a job. Although the public may have moved on to the next issue, you, the long-term unemployed, have been passed by.
The psychological ramifications for the long-term unemployed are overwhelming.
“When older people are used to generating [income] and they lose their job, they have no way to generate,” Derrig-Palumbo said. “So they stagnate. Stagnation can lead to depression and anxiety, which can cause them to give up.”
Another group, those who were making a lot of money when they suddenly lost their jobs, experience an extra layer of humiliation.
“There are those with whom they used to socialize, going on trips together, the clothes, the handbags, the cigars, and then all of a sudden it is gone. That is a severe loss, because it is the loss of identity, of who they were within their community,” Derrig-Palumbo added.
Where’s the starting gate?
“For recent college grads, I think that many in that group question the time and money they put into it,” Derrig-Palumbo said. “They still have to pay off student loans. They are feeling defeated before they even begin. They often feel like losers and that they are being cheated. Ultimately, what it comes down to is they have to learn to be creative.”
College students intimately know what it feels like to have their world upended. In California, the Master Plan for higher education, which promised excellent schools for excellent students at little or no cost, has been abandoned. For the first time, students are paying a larger portion of tuition than the state. Rising tuition has stunned families who had been saving for their children’s college costs.
At Cal State universities, tuition has risen 29 percent in the past three semesters, and there is another 10 percent hike waiting in the wings. Financial aid for middle-class students is nearly non-existent. Faculty and facilities have been slashed along with classroom space, making it nearly impossible for students to graduate within four years. Meanwhile, the average student loan burden is now $24,000.
Some enterprising students have taken the initiative to start their own careers. “Jake,” a 23-year-old college student, who requested that his real name not be divulged, has three more semesters to go until graduation. A native of Israel, he moved with his family to California when he was 9. His skills are self-taught.
“I have my own graphic design studio with my partner in Studio City. We also do marketing and advertising for local companies. On the weekends and at night I am a photographer.”
Jake is a journalism major, but scoffs at the wages of working journalists. “I make enough money to live comfortably. Actually, I think I am doing well. I am doing much better than if I were a staff reporter somewhere. Financially, I could get married, but I don’t believe in marriage this early. I believe you should be established before you get married; otherwise, you have no business being married.”
Jake has already demonstrated the energetic determination necessary to succeed. If he wants to achieve an adventurous life as a photographer, chances are he will get there and on his own terms.
“I’m just waiting to get out of school to expand my photography,” he said. “Ideally, I wish I could become a full-time photographer for a travel channel and be sent to exotic places.”
Former newspaper deliveryman Victor Herrera says he gets angry thinking about his own situation, losing one job and being forced to live on what he makes at his second low-paying position.
“It makes me mad, but what do I get being mad?” he said. “The main thing is we have our health and the family is together. It is pretty hard to find work now. I haven’t given up, though, and I think I will get something else. I have faith in God. I have to think positive.”