Half Measures and Lukewarm "Reform" Won't Save the Middle Class

For about thirty years now the American middle class, (and by "middle class" I mean those of us who make about $45,000 to $75,000 per year), has been taking it on the chin. And for that reason half measures and lukewarm "reform" isn't going to cut it. So let's get real just for a moment.

In the heyday of Republican dominance of Washington (2003-2007), Wall Street titans inflated the housing sector into the mother of all bubbles. They securitized bundled mortgage debt knowing the foreclosure rate would be astronomical. They hedged their bets with "credit default swaps," which they criminally pumped up to a "notional" value of $62 trillion. They sold off thousands of exotic "financial products" to unwitting clients from Iceland to China. White-collar criminals at the "ratings" agencies, Moody's and Standard and Poor's, gave triple-A imprimaturs to this toxic financial sludge. This racketeering took advantage of the quintessential desire on the part of millions of Americans to own their own homes. It was about the most unpatriotic thing one could do to the country. So pervasive was the cheerleading in favor of the pillage commentators like David Brooks, Stephen Moore, and others celebrated the onset of a free-market, Republican-dominated "Ownership Society."

Disgusting.

In reality, the schemes, graft, corruption, and criminality unleashed in those years ended up doing far more damage to the United States of American than Al Qaeda ever could. The American middle class has been devastated. Those who haven't lost their homes find themselves with "upside down" mortgages (when the amount owed exceeds the value of the home), unemployed, and seeing their retirement accounts evaporate. Although the situation would have been far worse had the bailouts and economic stimulus package not been passed these measures did little to shore up the American middle class. The money went to bankers and construction companies.

During the Great Depression President Franklin D. Roosevelt created the Home Ownership Loan Corporation (HOLC) that targeted people not only who were going to lose their homes but those who found themselves with upside down mortgages as well. Thus far the federal government hasn't lifted a finger to help people with these kinds of mortgages. The Democrats in Congress and the Democratic administration might be on the verge of making that age-old Democratic mistake of only helping those who are in the most need while ignoring the broad middle class. Remember those "Reagan Democrats?"

In the next few months we'll see whether President Barack Obama has really learned anything from studying the history of the 20th century. The New Deal and Great Society reforms that helped the most people and became the most popular were not those aimed at the destitute, but those that helped the middle class sustain the American dream. The thirty-year class war the rich launched against the working people in this country (and reached its apogee during the George W. Bush years), has left the middle class reeling and wounded. Only bold federal action that puts something concrete in the palms of middle-class Americans can begin to turn these dire social conditions around.

President Obama must give middle-class people something they can hold in their hands; something real. No amount of promises of "change," no matter how well intentioned, will suffice. If we have nothing to show for our efforts organizing to elect Democrats to Congress and to the White House this whole "Hope" endeavor will reek of yet another political con job. In the current context, President Obama can become a failed president in a heartbeat.

Let's hope that on September 9th when Obama speaks to a joint session of Congress he outlines not only a bold program to provide health care for all Americans, but also a set of equally bold proposals to lift the middle class out of its currently dismal economic condition.

 

 

Follow Joseph A. Palermo on Twitter: www.twitter.com/N/A

Comments

[tonycartman]

Good one Dr. We're expecting now Obama's position. I believe he's doing his best to help and this includes foreclosure crisis. People need to receive some hope from the man who made them dream.

[DrInsula]

Great article, Dr. Palermo! I still wonder why these truths are not getting any traction in the wider public. I mean, if teabaggers want to protest something, why not the decades-old war on the middle class?? It seems to me that their viciousness arises mainly from the sneaking suspicion that they have been shafted; but, like an abused hostage, they cannot target their anger appropriately or in the right direction, so they foam at the mouth about "socialism­." That aside, even most scholars seem to be silent on this topic, except for Dr. Dean Baker. Do you find that people in general do not want to hear about what has really been done to them? THANKS for writing about htis in such an eloquent fashion.

[ElementalPraxis]

"if teabaggers want to protest something, why not the decades-old war on the middle class??"

What do you think the protests against the central bank and globalization are?

Who has suffered the most from globalization and from debt dependency and cheap money policies that destroy the dollar?

It's the middle class.

What are the tea parties protesting?

The Fed. The globalists.

If you really cared about the middle class, you'd be exposing the phony Left's collaborations with Wall Street and the globalists. Instead, it's the same old tired jokes about teabaggers.

[ElementalPraxis]

Democrats in Congress did the most to block attempts to regulate the amount of risky sub prime loans being written, and Democrats blocked efforts to stop Fannie and Freddie from purchasing those loans.

You can look it up.

The New York Times, from way back in September, 2003:

"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government­-sponsored companies that are the two largest players in the mortgage lending industry.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken."

http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html?sec=&spon=&pagewanted=print

Here is what Barney Frank said on that day:

"'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

[Emerald1943]

The current health care debacle is at the top of the list of the causes for the decline of the "middle class".

If the Congress does not pass the public option, I don't know what's going to happen to the nation. We are getting to the tipping point where we can't take any more.

I wrote a comment some months ago when the financial meltdown began that bears repeating here...

If they take all our jobs, all our money, all our homes, and limit our education, what kind of "third-world" country will we be in ten years?

It looks to me like we are getting there really fast!

BTW, march with us in Washington DC on Sunday, Sept. 13th in support of the public option! We have no choice...t­his legislation MUST be passed!

[Joseph Palermo]

The journalist William Kleinknecht points out in his book on Reagan: "While failing to eviscerate fifty years of welfare programs overnight," Reagan "dramatically altered how Americans viewed the role of government and the poor." That's what Obama is failing to do: alter how American view the role of government -- unless he can pull that off we won't have the liberal reforms the middle class so desperately needs -- the venom toward anything with the word "government," attached to it, like the words "liberal" or "social" represents probably the most successful propaganda effort in a democracy in the history of the world.

[Tony Dickey]

The French rose against the Crown because most nobles had figured out how not to pay taxes. The nobles had inherited power but really controlled little. They didn't control the business sector, the media or the education system. Now, those who figured out to not pay their fair share control most of these.

Just sayin...

[Tony Dickey]

The middle-class voted in Reagan and Bush, cheered them on as they stole from the middle-class. The middle-class feeds into the "pull yourself up by your bootstraps" b.s. They bought the SUVs and oversized homes our planet and society cannot afford. They shop at Walmart and support shallow media culture. Unless the middle-class wakes and demands real solutions like health-care reform, stronger support for labor and stops feeding into materialist solutions to fill the voids it tries ignore, the middle-class will have no one to blame but themselves.

[Joseph Palermo]

Tony, you're correct, the Teamsters endorsed Reagan in 1980, how weird is that? Carter just alienated everyone inside the Democratic coalition.

[Emerald1943]

Good post, Tony! I completely agree! Fanned!

[Tony Dickey]

tx, fanned back

[Dude23]

What middle class? You guys are talking about something that practically doesn't exist anymore... there is almost no middle class really to speak about saving. The government for decades has waged war on the middle class and, well, the government has won the war. What blown up bits of a middle class that still exist are left-overs on the final battle field that will slowly go under and join the ranks of the impoverished. Congratulations Government you have won your war on the middle class by wasting all the money, consistently raising the taxes, screwing up public education, letting 20 million illegals in the country, exporting all the jobs, crashing the economy and wiping out the entire middle class' savings and selling off the country to china and incurring massive debt we can not pay off. Oh yeah, and there are the small issues of bankrupting SSI and Medicare; Funny how pushers always get you hooked and dependent then run off when you need their product the most.

There is no middle class unless you consider upper poverty to be middle class. Middle class people can afford a couple cars, a house large enough for the whole family and one parent earns a large enough salary for the whole family. Good luck finding too many of those people anymore.

One problem we have in the USA is we keep redefining what middle class is.

[Joseph Palermo]

Dude, you're correct, if you factor in the debt to savings ratio you see a "middle class" that is really in a kind of debtor's prison.

[Citizenofreality]

As a member of the middle class, in these past three years I have watched all the money we saved for thirty years, including investments we promised ourselves we'd never touch, dwindle away to nothing. Our new health insurance is junk, costing us over one fourth of our monthly income and carrying a yearly deductible of $6000, with no guarantee it will cover anything IF we do meet the deductible. I have lived frugally and worked hard all my adult life, I have paid my taxes and not complained, I am not asking for government assistance or a free ride, but I heard shouts of "Get a job" and "I'm not payin' for YOUR healthcare" at a rally I attended last month, this is the mentality we are up against. Sometimes I despair for my country and wonder if it will ever change.

[Joseph Palermo]

It has been an unfortunate episode how terrible the middle class has been fleeced and lied to.

[dogdiva]

I HEAR THAT! I can tell my own family at times thinks I'm sucking up the welfare even though I've pay premiums of $600 a month for $7500 deductible to this day and every penny of my taxes. The only difference between them and myself is that their employer gets a big tax break for buying them insurance and they pay $150 for their entire family. Just asking to buy into a non-profit system has apparently earned me a reputation as a 'welfare queen' (something that never existed in the first place)

I'm 60 and on a fixed income. The 'crash' depleated my principle and there's no way to get it sustainable again. Insurance takes 30% of my income.

"Sometimes I despair for my country and wonder if it will ever change" AMEN TO THAT!!!

[helen]

I love my country, but am seriously thinking of moving to the UK or Ireland, not because the job situation is any better, but because I am one of those 50-somethings devastated by the trillion dollar war, unsustainable debt, bank bailouts, outer space insurance health premiums, and being self-employed.

Why would I go? So that I can provide a meager living for myself and have health care. I cannot fool around while the bigwigs buy each other off. If my elected representatives and senators only care about Wall Street and K-Street, there's no hope for me. I don't have the money to play in their games.

I'm financially devastated. I have only two things left: my skills, and my health. And I'm sure as hell not going to let my country devastate my health. That's why I would leave.

[dogdiva]

I applaud you if you can manage it. I would do exactly the same thing if I could. I have family in the UK. It's tough to get a job, but there seems to be a greater acceptance of those who don't pursue the great American consumerism. Few here have any idea what it would be like to live without the pressure and worry of our health care system. I'm 60 and I totally get what you're saying.

It's not just health care. As I watch the growing number of dangerous and hateful citizens, I'm not sure this is a society I can live with. Just where is this huge centrist majority in the middle that's supposed to be a buffer with this kind of thing? If they are truly there, they are certainly quiet. Maybe they are just watching American Idol.

[moutonnoir]

Nothing will save our middle class.

[WinterParkMom]

The basis for any public option:
Coverage for EVERYONE who applies
Structured premium payments of not more than 100 per individual, 300 per family
Deductibles capped at $2000 and based on income (means testing every year like the va)
No mandates forcing people to purchase insurance (a windfall for private carriers)
No triggers (also a windfall to private carriers)
No subsidies to private insurance carriers
No taxes on employer provided benefits
If someone has private insurance and wants the public option, they can drop private with no problem and be covered immediately under public.
No mandates on employers to buy into the public option to cover employees. Has to be free choice.
Everyone with coverage gets treated for new or pre-existing conditions.
Fairly negotiated reimbursement to private pracitce, specialty doctors and hospitals
Fairly negotiated prices for medications, even on name brand stuff which has no generic equivalent.
AND MUST BE EFFECTIVE IMMEDIATELY. Within 1 month of the above bill passing, Americans must be able to start buying in and using it.
It must be administered by an autonomous federal agency. Monies paid in must not be co-mingled with any other money, does not go into the general fund so it can be looted.
The ONLY payouts from this fund will be for: payments to practicioners, pharmacies and admin. In 5 years if we see significant overages, those overages will only be used to suplement medicare and fund medical research and maybe scholarships.
See my next post on funding

[WinterParkMom]

47 million un insured
20 million under insured
Subtract 10 million poor/indig­ent/mental­ly ill, etc, who are uninsured and will have to get free care = 37 mill un-insured who can pay.
18.5 million can pay $50/mo = 925,000,000
18.5 mill can pay $100 = $1,850,000,000
20 mill under insured will switch and can pay $100 = 2,000,000,000
That is a grand total of $4,775,000,000
That is FOUR BILLION, SEVEN HUNDRED SEVENTY FIVE MILLION DOLLARS IN PREMIUM PAYMENTS PER MONTH. FIFTY SEVEN BILLION THREE HUNDRED THIRTY MILLION PER YEAR IN PREMIUMS FOR ONE SET OF PEOPLE.
That does'nt count the millions who'll switch from private companies if they can pay $100 or 200 per month and have their entire family covered even with pre-existing conditions. Repeal bush tax cuts asap another 700 billion.
After thinking about it more, institute a 1 penny federal sales tax on EVERY item. I can hear the opponents shouting about making the poor poorer, but my statement is 1 cent on each item NOT on every dollar or hundred dollars. From candy bars to big screen tv's to your house. 1 cent on everything. If your grocery bill was $100. for 53 items, your bill would be $100.53. That's not putting people in the poorhouse especially when we've been dealing with price increases. Also, if you're saving 300-500 per month on insurance, you have that money to spend and put back in the economy, save, or invest.

[dogdiva]

Can't you just imagine the falling about that would occur even for a penny an item! It just might be the thing that pushes the Republican militia to pick up arms! If you told them they could personally receive $100 worth of value back from that 1 cent tax they would happily fight it with their last breath. It's what should be done if there was even a modicum of courage in Washington and a scintilla of intelligence in the population.

I've gone broke trying to keep paying that $600 month insurance premium. There's no way, due to the extraordinary deductible, that I could actually get any health care. A depleted savings and the inevitable illness or injury that would cost me a minimum of $7500 are racing toward each other. There is no way to avoid the loss of everything. The good news is that when you're living in your car you can get medicaid.

[realpolitic]

Yes, anything that Obama can do to reform health insurance and extend it will help the middle class as well as the less fortunate. Most Americans at one time or another lose a job or change jobs and therefore may face loss of health insurance. Such reform would help the middle class be less vulnerable in transitions and economic downturns. Thus, we will see more sustainable growth as with greater security people do not come to rely on speculative bubbles.

[kittyarmy]

Thanks for putting it out there, Mr. Palermo.