What Middle Class?

The Great Recession (aka Second Great Depression, Lesser Depression, the Long Recession, the Global Recession of 2009) officially ended in June 2009, according to the National Bureau of Economic Research, the group of economists in the United States who are in charge of telling us these things. Lasting 18 months, the Great Recession was the second only to the Great Depression, as most of us know. If we take the European definition for a global recession, i.e. two consecutive quarters of GDP contraction (corresponding to two quarters of US GDP contraction for a US recession), the Great Recession lasted from July 2008 through March 2009. The University of Hong Kong School of Social and Community Health estimated (http://www.bmj.com/content/347/bmj.f5239.pdf%2Bhtml) that there were an additional 5,000 suicide deaths as a result of the recession. According to the IMF, the recession was confined to only one calendar year - 2009 (http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf).

Speaking for myself, the years since the Great Recession officially ended have continued to be difficult. The majority of Americans consider themselves to be part of the middle class, and the American middle class had been most concerned with getting a "good education", generally college; internalizing middle class values and mannerisms; networking and learning socialization skills. But lately, in the last decade, it has become just getting by.

My mother was a New-Deal Democrat. Born in 1932, her teen-age years were during WW II. My grandmother was an RN and my grandfather an MD. They both left the continental US and were working in the Panama Canal Zone where they met. He server in the Army Medical Corp as a psychiatrist, taking care of battle fatigue. My father was an electrical engineer who served his ROTC obligation in the AirForce; he was killed in a C-124 crash when I was 6 months old. Both his parents were emigrants from Portugal. My grandfather was an electrician and my grandmother was a house wife.

I didn't have as much political interest as my mother did. I went to college in the Midwest, from 1976 to 1980. That was the era of multiple energy crises and oil embargoes, and Carter's malaise speech. I remember during my senior year, coming back from class one morning and watching on TV the debacle at Desert 1 and the failed Iran Hostage rescue mission. I remember thinking "Can't the U.S. do anything right?" So when Reagan was elected, I too thought things were going to get better. And they sorta did. We certainly spent enough to fix the military many times over.

I worked on a project for the Nuclear Regulatory Commission (NRC), trying to solve the problem of where to put the waste from reactors, power plants, bomb programs. For 9 years, I watched the contractors spend, the government talk, no one reaching agreement. Maybe no one wanted to. Maybe the whole idea was to keep spending, keep talking, and never solve the problem, so that the money keeps flowing.

Every year the Republicans claimed the deficit was going to bankrupt the nation and unborn generations, until it was time to pass more tax cuts, and spend more on defense. Then there was no problem with deficits. David Stockman, Reagan's Budget Director, was the darling boy when they were cutting taxes from 70% down to 28% (the lowest since Treasury Secretary Mellon had lowered them in the 20's, just before the Great Depression). But even Stockman realized the numbers didn't add up,and he lost his popularity in the Reagan White House.

But it wasn't Reagan who undid the New-Deal/Great Society Social Safety net. Reagan cut taxes and built up the deficits, and setup Clinton. Bill Clinton campaigned on bringing changes like FDR had in 1932. "To turn America around, we've got to have a new approach... we need a new covenant, a solemn agreement between the people and their government to provide opportunity for everybody... a new covenant to take back from the powerful interests... and give it back to the ordinary people of our country (October 23, 1991, Georgetown University Speech).

But just before he was inaugurated, he received a visit from Robert Rubin, CEO of Goldman Sachs and future Treasure Secretary for Bill Clinton, and Alan Greenspan, Chairman of the Federal Reserve. As documented in the BBC's "The Trap" (http://en.wikipedia.org/wiki/The_Trap_(TV_series)) Clinton was forced to choose political expediency and "cut our massive debt". Similar to an incoming Democratic President-elect in 2008, in 1992 massive deficits were built-up by Republican tax cuts and Republican spending, leaving the incoming Democratic President to capitulate to the Wall Street interests. Furthermore, Clinton compounded the error by buying in to the Reagan myths of "welfare queens" by signing the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 that undid LBJ's Great Society programs that had reduced poverty from 22% in 1963 to 12.6% in 1970.

Clinton was lucky in one regard. The economy took off and tax receipts went up, and as a result, the Treasury had a net surplus. There was even talk of paying off the National Debt. For a year or two, middle-class wages actually rose, something that hadn't happened since the 1970's. Unfortunately, it didn't last long.

During his 1992 campaign, when H. Ross Perot was running for president, Perot stated in one of the debates: "you make more making computer chips than potato chips." I'm pretty sure that $1 income from potato chips equals $1 income from computer chips. While my laptop runs better on Intel, I run better on Frito-Lays. Herman Lay got rich on potato chips. Stalin helped contribute to the demise of the Soviet Union by insisting that certain types of production (steel, for example) are "better" than others, and planning a whole economy around that one goal. So did Mao, insisting that steel could be made in the back yard. But Perot was right in a different regard: the technology that supports the manufacture of computer chips adds more to the overall level of technology than that for manufacturing potato chips. America bought into the idea of conversion from manufacturing to service, and then watched as many of the service jobs, especially the high-tech ones, were off-shored just as fast as the manufacturing jobs had been. CT scans were just as likely to be read in Bangalore as Detroit. Stalin was right in one regard, that manufacturing (heavy industry) is necessary for a leading country. And manufacturing jobs have historically have been the high-paying jobs that nurtured the middle class, first in Great Britain and then in America.

Then came another Bush president, 9/11, two wars, and America entered another era. Bush everyone to keep spending. Never before had a country tried to run a war without saving. The two world wars were synonymous with war bonds, cut-backs, restrictions, shortages. The middle-class was urged to tap their savings, take out that home equity, and spend, spend, spend. The bubble burst in 2008, leaving many home owners under water, and which group got bailed out? During the Great Depression, the Home Owner's Loan Corporation (HOLC) purchased and refinanced the mortgage's that home owners couldn't afford. Just as now, home prices had fallen a median 33%, and home owners were under water. The HOLC served two purposes: to help the home owner and relieve the lender. This time around, however, home owners have received little relief, a great divergence between FDR and Obama. Many call this "the biggest policy mistake of the Great Recession."

And today, summer of 2014, not much has changed. The middle class has shrunk. The number of people in poverty has risen. The number displaced from the middle class down to the lower class (economically speaking)by a job loss or medical problem or divorce or accident has risen. Income inequality has gotten larger. America continues to outsource its manufacturing, sending technology overseas. The population continues to age. More and more people feel like their children will have life worse then they did. And that, in a nutshell, is the reversal of the American Dream, that things will get better, that your kids will have a better life than you did.

America is in a tight place. We can't cut taxes and spend our way out. We can't inflate our way to prosperity. Other countries are tired of paying for our excesses. America needs to save and invest in infrastructure, R & D, and manufacturing plant. We need to retrain the people who's jobs have been lost. We need to realize that flipping burgers is not equal to making a product, an appliance or a vehicle. We need to stop the fighting among ourselves, stop the business versus labor, stop the Republican versus Democrat, stop the Conservative versus Liberal. We need to work together. In Germany, the average auto worker makes $67 an hour, is a member of the National auto workers union, they almost never strike, and they work together with management to make highly desirable cars. In the US, the average auto worker makes $33 per hour and gets less vacation and benefits. The CEOs of German and American companies get comparable pay. Shouldn't the workers?

Back in 1979, I felt shame when I heard about the failure of the Iranian hostage rescue mission. In 2006, I felt shame over Abu Ghraib and water boarding. Then, as now, I asked, can't America do better? The only thing I can control is myself, so I try to work hard and do the best I can. Is my country doing the same?