Third World America

How Our Politicians Are Abandoning the Ordinary Citizen

Arianna Huffington

• Publisher: Collins
• Year: 2011
• Print ISBN: 9780007437313
• eBook ISBN: 9780007437337
• Topic: Business
• Subtopic: Business General
• Index: Business

Features updated material and a special foreword from Arianna for the UK audience

It's not an exaggeration to say that the hard-working, average citizen on an average income is an endangered species and that the American Dream of a secure, comfortable standard of living has become outdated. The USA is in danger of becoming a Third World nation.

The evidence is all around: its industrial base is vanishing, taking with it the kind of jobs that have formed the backbone of America's economy for more than a century; the education system is in shambles, making it harder for tomorrow's workforce to acquire the information and training it needs to land good twenty-first-century jobs; its infrastructure – roads, bridges, water, and electrical systems – is crumbling; its economic system has been reduced to recurring episodes of Corporations Gone Wild; and its political system is broken, in thrall to a small financial elite using the power of the chequebook to control both parties. And America's middle class, the driver of so much of the country's economic success and political stability, is rapidly disappearing, forcing this democracy to confront the fear that it is slipping as a nation – that its children and grandchildren will enjoy fewer opportunities and face a lower standard of living. It's the dark flipside of the American Dream – an American Nightmare of their own making.

Arianna Huffington, editor in chief of the must-read Huffington Post, has her finger on the pulse of America and unflinchingly tracks the gradual demise of the nation as an industrial, political, and economic leader. In the vein of her fiery bestseller Pigs at the Trough, Third World America points fingers, names names, and details who's killing the American Dream. Calling on the can-do attitude that is part of America's DNA, Huffington shows precisely what needs to be done to stop the free fall and keep the country from turning into a Third World nation. Third World America is required reading for anyone who is disturbed by the United States' steady descent from twentieth-century superpower to backwater banana republic.

Chapter 1
THIRD WORLD AMERICA

“Third World America.”

It’s a jarring phrase, one that is deeply contrary to our national conviction that America is the greatest nation on Earth—as well as the richest, the most powerful, the most generous, and the most noble. It also doesn’t match our day-today experience of the country we live in—where it seems there is, if not a chicken in every pot, then a flat-screen TV on every wall. And we’re still the world’s only military superpower, right?

So what, exactly, does it mean—“Third World America”?

For me, it’s a warning: a shimmering foreshadowing of a possible future. It is the flip side of the American Dream—an American nightmare of our own making.

I use it to sum up the ugly facts we’d rather not know, to connect the uncomfortable dots we’d rather not connect, and to articulate one of our deepest fears as a people—that we are slipping as a nation. It’s a harbinger, a clanging alarm telling us that if we don’t correct our course, contrary to our history and to what has always seemed to be our destiny, we could indeed become a Third World nation—a place where there are only two classes: the rich . . . and everyone else. Think Mexico or Brazil, where the wealthy live behind fortified gates, with machine-gun-toting guards protecting their children from kidnapping.

A place that failed to keep up with history. A place not “ taken down by a foreign enemy, but by the avarice of our corporate elite and the neglect of our elected leaders.

The warning lights on our national dashboard are flashing red: Our industrial base is vanishing, taking with it the kind of jobs that have formed the backbone of our economy for more than a century; our education system is in shambles, making it harder for tomorrow’s workforce to acquire the information and training it needs to land good twenty-first-century jobs; our infrastructure—our roads, our bridges, our sewage and water and transportation and electrical systems—is crumbling.

And America’s middle class, the driver of so much of our creative and economic success—the foundation of our democracy—is rapidly disappearing, taking with it a key component of the American Dream: the promise that, with hard work and discipline, our children will have the chance to do better than we did, just as we had the chance to do better than the generation before us.

Nothing better illustrates the ways in which we have begun to travel down this perilous road than the sorry state of America’s middle class. So long as our middle class is thriving, it would be impossible for America to become a Third World nation. But the facts show a different trajectory. It’s no longer an exaggeration to say that middle-class Americans are an endangered species.

“The middle class has been³ under assault for a long time,” President Obama said early in 2010 while announcing a series of modest proposals to bolster what he called “the class that made the twentieth century the American century.”

During the 2008 campaign⁴, Barack Obama’s guiding principle was that he “would not forget the middle class.” Indeed, David Plouffe, Obama’s campaign manager, told me after the election, “We held that North Star in our sights at all times. We made many mistakes along the way, but we always remembered that we were running because, as Barack put it, the dreams so many generations had fought for were slipping away.” Well, you’d need a pretty powerful telescope to see that North Star these days.

According to Plouffe, Obama and his team⁵ decided that he should make a run for the White House because “the core leadership had turned rotten” and “the people were getting hosed.” But the extent to which the people have continued to be hosed and the middle class assaulted becomes shockingly clear when the baby steps taken to bail out Main Street are compared to the all-hands-on-deck, no-expenses-spared bailout of Wall Street. In fact, the economic devastation of the middle class is a lot more threatening to the long-term stability of the country than the financial crisis that saw trillions of taxpayer dollars funneled—either directly or through government guarantees—to Wall Street.

The middle class is teetering on the brink of collapse just as surely as AIG was in the fall of 2009—only this time, it’s not just one giant insurance company (and its banking counter-parties) facing disaster, it’s tens of millions of hardworking Americans who played by the rules. This country’s middle class is going the way of Lehman Brothers—disappearing in front of our eyes. A decline that began decades ago has now become a plummeting free fall.

Just how bad things have⁶ gotten was succinctly—and bracingly—summed up by Elizabeth Warren, chair of the Congressional Oversight Panel charged with monitoring the Troubled Asset Relief Program (TARP): “One in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings.”

The Bush and Obama administrations bailed out America’s big banks because it suddenly became imaginable that the financial system might collapse. When we take a hard look at what’s happening to America’s middle class, its disappearance suddenly becomes not only imaginable but, unless drastic action is taken, inevitable.

SHORTING THE MIDDLE CLASS

In April 2010, the shot heard⁷ around the country—or at least around Wall Street and Capitol Hill—was the Securities and Exchange Commission suing Goldman Sachs for fraud. It was big news in itself, as Goldman Sachs has become the poster child for the deep disconnect between Wall Street and Main Street. But much more important than the Goldman case in particular was the light it shed on what the financial and political elite had been doing to America for the last thirty years: shorting the middle class.

The American people have been sold on the very American idea that working hard and playing by the rules would ensure some modicum of prosperity and stability, while at the same time Wall Street has been overseeing a massive transfer of wealth from the middle class to the richest Americans. Ordinary working Americans were seen as the counterparty in a zero-sum bet—in Wall Street parlance, the proverbial “dumb money” at the table.

The results have been devastating: a disappearing middle class, a precipitous drop in economic and social mobility, and, ultimately, the undermining of the foundation of our democracy.

The human toll of the shorting of the middle class is tallied every day on websites such as Recessionwire.com, Layoff-SupportNetwork.com, and HowIGotLaidOff.com, where the casualties of Wall Street’s systemic scam share their personal stories. One tale in particular struck me as emblematic of the place America’s middle class finds itself these days. It feels like a dark reboot of the American Dream. Think Horatio Alger rewritten by O. Henry—or Rod Serling.

It’s the story of Dean Blackburn of Alameda, California. The first part of his life was a classic American success story. Raised in Minnesota by a single mom who worked as a teacher, he was “middle class by default.” Through a combination of smarts and hard work, he made his way to Yale, then, for seventeen years, he steadily progressed up the economic ladder, gaining skills as a project manager, analyst, and IT director.

Then came February 2009, when, at age thirty-five, he was laid off on the last day of the month. His boss chose that day because it meant the company would not have to pay for another month of his health coverage. “Looking back on it,” he told me, “that hurt more than the layoff itself—just knowing that the president of the company was exactly that calculating and that unfeeling about my own and my family’s well-being.” The timing, Blackburn continued, “put those ‘family days’ and company picnics in a weird new light.”

Fourteen months later, Blackburn was still looking for a new job. His wife, who had taken a year off work when their daughter, Robin, was born, was eager to return to a full-time job. They faced the double challenge of finding an affordable preschool for their two-year-old as well as the jobs that would pay for it. Meanwhile, they tried to maintain their sanity by participating in life as they once had, “but we look at the numbers constantly now, and worry about what will happen when our savings run out,” Blackburn told me. “Not if, but when.”

As Blackburn dealt with the immediate financial struggles his extended unemployment brought, he became acutely aware of the broader implications of the shorting of the middle class. “Ultimately,” he says, “it’s not about a dip in corporate profits, but a change in corporate attitude—a change that means no one’s job is safe, and never will be, ever again.”

It’s one of the reasons he decided to start his own company, NaviDate, a data-driven twist on online dating sites: “It’s no longer a trade-off between doing what you love and having stability. Stability is long gone, so you better do something you love!”

Achieving middle-class stability has always been a big part of the American Dream, but, as Blackburn notes, mobility now is increasingly one way: “The plateaus of each step, which can be a great place to stop a bit and catch your breath, are gone. Now, it’s climb, climb, climb, or start sliding back down immediately.” The result: “The odds are you’re going to wind up at the bottom eventually, unless you get lucky.”

Luck. That’s what the American Dream now rests on. It used to be about education, hard work, and perseverance, but today the system is rigged to such an extent that the middle-class life is the prize on a scratch-off lottery ticket. The revelation of the corruption behind the financial crisis has put the very idea of the middle class and the American Dream, as Blackburn put it, “in a weird new light.”

A lot of people at the top of the economic food chain have done very well shorting the middle class. But the losers in those bets weren’t Goldman Sachs investors—they were millions of Americans whose sole crime was to optimistically buy into the American Dream, only to find it had been replaced by a sophisticated scam.

In November 2008, as the initial⁸ aftershocks of the economic earthquake were being felt, New York Times columnist David Brooks predicted the rise of a new social class—“the formerly middle class”—made up of those who had just joined the middle class at the end of the boom, only to fall back when the recession began. “To them,” he wrote, “the gap between where they are and where they used to be will seem wide and daunting.” But, in the time since Brooks wrote this, the ranks of the formerly middle class have swelled far beyond those who joined at the tail end of the boom. And for millions of Americans, that “wide and daunting” gap is also beginning to look permanent.

The evidence that the middle class has been consistently shorted is so overwhelming—and the results so potentially damaging to our society—that even bastions of establishment thinking are on alert. In a 2010 strategy paper⁹, the Hamilton Project—the economic think tank founded in 2006 by former U.S. Treasury secretary Robert Rubin (a big beneficiary of the shorting of the middle class)—argued “that the American tradition of expanding opportunity from one generation to the next is at risk because we are failing to make the necessary investments in human, physical, and environmental capital.”

Of course, it’s even worse than that. Beyond failing to make necessary investments for the future, we are actually cutting back on our current investment in people, with massive bud get cuts in education, health care, and social services in state after state after state, all across America.

At least forty-five states¹⁰ have imposed bud get cuts that hurt families and reduce vital services to their most vulnerable residents. Those affected include children, the elderly, the disabled, the sick, the homeless, and the mentally ill, as well as college students and faculty.

According to a report by¹¹ the Center on Bud get and Policy Priorities, at least twenty-nine states have made cuts to public health programs, twenty-four states have cut programs for the elderly and disabled, twenty-nine states have cut aid to K– 12 education, and thirty-nine states have cut assistance to public colleges and universities.

America’s states faced¹² a cumulative bud get gap of $166 billion for fiscal 2010. Total shortfalls through fiscal 2011 are estimated at $380 billion—and could be even higher depending on what happens to unemployment.

These are massive numbers¹³. But when you remember that we spent $182 billion to bail out AIG ($12.9 billion of which¹⁴ went straight to Goldman Sachs), you realize that this amount alone would be more than enough to close the 2010 bud get gap in every state in the Union. Toss in the $45 billion¹⁵ we gave t...

Table of contents

• Cover
• Title Page
• Dedication
• Contents
• NOTE: A WARNING FOR BRITAIN
• Preface
• Chapter 1 - THIRD WORLD AMERICA
• Chapter 2 - NIGHTMARE ON MAIN STREET
• Chapter 3 - AMERICA THE BEAUTIFUL DILAPIDATED
• Chapter 4 - CSI USA: WHO KILLED THE AMERICAN DREAM?
• Chapter 5 - SAVING OURSELVES FROM A THIRD WORLD FUTURE
• Acknowledgments
• Notes
• Index
• About the Author
• Praise
• Copyright
• About the Publisher