MILWAUKEE. -- For many Americans Lavern and Shirley remain the enduring icons of the city of Milwaukee. Barack Obama was a teenager when the sitcom about two independent young women working in a beer factory was a popular hit in the late 1970s. But the sad truth about Milwaukee is that Lavern and Shirley don't work here any more.
After 30 years of deindustrialization, Milwaukee is a shell of its former self and the Great Recession has left the city reeling. Into this mix on Monday, steps President Obama, here to celebrate Labor Day in a city where labor is on the rack.
Jobs Situation Disastrous
The job situation in city and across the state of Wisconsin is disastrous. A new statewide jobs report indicates that one in twenty jobs were lost since the recession began in 2007. A quarter of black workers are unemployed, numbers not rivaled since the Great Depression.
The assault on wages continues as profitable companies squeeze even more concessions of their workforce. Marching in the Labor Day parade with President this year are the 140 remaining members of United Electrical Local 111. This will be the last march Labor Day march for this 73 year-old local. It was founded in 1937 and at it's height represented some 6,5000 Allen-Bradley employees. But the company (now called Rockwell) is intent on moving production overseas and contracting out the remaining tasks to nonunionized workers even though it tripled its global profits in 2009.
Milwaukee's flagship manufacturer, Harley-Davidson, is threatening to move out of its longtime home in the Milwaukee are to Kansas City, Missouri. Even though the firm was profiled recently in the Wall Street Journal for its "soaring profits," Harley wants to carve $50 million dollars of its payroll off the backs of its 2, 000 workers. The company slogan "the road starts here" is not as inspiring when it is the low road of cut wages and benefits.
What does Milwaukee need? "Massive investment in the economy," says Wisconsin AFL-CIO president David Newby who will welcome President Obama to the Milwaukee Labor Fest on Monday.
"The private sector is sitting on 1.8 trillion in cash reserves. They are not investing it to modernize production facilities or hire new workers. In the absence of private-sector investment we need another large infusion of public-sector funds to prime the pump, to get people back to work, leading productive lives, paying taxes and by doing so reducing the deficit," says Newby.
Foreclosures and Personal Bankruptcy on the Rise
Two years after the financial crisis began, foreclosures and personal bankruptcies are on an uptick. Milwaukee is seeing a steady rate of about 500 foreclosures a month, while in Wisconsin as a whole, August filings jumped 14% from this time last year. These are not families taking a loss on pricey investment homes; these are families that are being forced out of their modest homes and communities in a daily tragedy that is spreading well into the middleclass outer-ring suburbs.
In a sign of more trouble in the future, a growing number of Wisconsin homeowners had trouble staying current on their mortgage payments in the second quarter than earlier this year. Plus, bankruptcy filings in Wisconsin rose 16% during the first half of this year.
What does Milwaukee need? The answer is simple says Bethany Sanchez, Director of the Metropolitan Milwaukee Fair lending Program, with homes in foreclosure or simply underwater "Wisconsin families need a principle reduction on their mortgages" she says flatly.
According to Sanchez, HAMP, which is the federal government's flagship program for helping distressed homeowners "has simply not been effective. There are no sticks and not enough carrots to force lenders to do something meaningful." Tragically many people get foreclosed upon while their loan modification is being review under HAMP, something that is supposedly not allowed. In Milwaukee, the big bad banks are US Bank, Deutche Bank and Wells Fargo, all institutions bailed out by governments and taxpayers, but doing nothing to help citizens in distress.
"The Only Answer is the Federal Government"
Like the majority of states, Wisconsin's state government is also reeling. The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. As a result, even after making very deep cuts, states continue to face large budget gaps. The state of Wisconsin is facing a $2.5 billion dollar budget gap for the coming year and this is on top of already steep cuts it has made.
When the private sector is not doing the job and the state has its hands tied by a balanced budget requirements, "the only answer is the federal government," says Center on Wisconsin Strategy economist Laura Dresser.
But isn't the federal government broke? Where are they going to get the money?
"Lets start with the Bush tax cuts," says Dresser. The Bush tax cuts enacted in 2001 and 2003 disproportionately benefit the wealthy and are set to expire in December 31, 2010.
President Obama has proposed extending the cuts for individuals making less $200,000, but allowing them to expire for the wealthiest Americans. The Congressional Budget Office estimates that letting the tax cuts expire would generate some $700 billion over the next decade. Others, like AFL-CIO President Richard Trumka who will be on the stage with Obama in Milwaukee, think that the President can do more by "making Wall Street pay" for the disaster it caused with a modest tax on high-speed, high-volume speculative trading.
But as Laverne and Shirley would tell the president: The only way to get "on the track now" is to make smart federal investments in Milwaukee and cities like it across the country. The President has many bold options to get the economy moving again. The question is if he has the courage to pursue them or if on Labor Day he will announce another weak proposal with little chance of success.