Third World America – Politicians Abandoning Middle Class (for Super Rich) and Betraying the American Dream

Third World America Politicians Abandoning Middle Class (for Super Rich) and Betraying the American Dream

Third World America Politicians Abandoning Middle Class (for Super Rich) and Betraying the American Dream [Hardcover]

Arianna Huffington (Author)

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Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream [Hardcover]

Arianna Huffington (Author)

Third World America: How Our Politicians Are … (Hardcover)

by Arianna Huffington

Arianna Huffington and Mary Matalin: Author One-to-One
In this Amazon exclusive, Arianna Huffington and Mary Matalin discuss issues raised in Arianna’s new book Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream. Arianna Huffington is the cofounder and editor-in-chief of the Huffington Post, a nationally syndicated columnist, and the author of 13 books. Mary Matalin is the author of Letters to My Daughters and the editor-in-chief of Threshold Editions and worked in the White House for presidents Ronald Reagan, George H.W. Bush, and George W. Bush.

Mary: In August, thirty thousand Americans stormed government offices for a chance to apply for a few hundred Section 8 housing slots. That same month, a relentlessly “get’er done” kind of guy, Mort Zuckerman, penned an Wall Street Journal op ed entitled, “The End of American Optimism.” All confidence indicators are scraping rock bottom, including the all-powerful political “right track/wrong track.” No one in the “ruling class” dares utter the word malaise, but they all wear it like a wet, wool mantle. And now you, my eternally optimistic friend! You and I came to Our Nation’s Capital at the same time–I like to joke when you were a conservative, I was a moderate! Whatever our politics, we have always both been optimists. So when you gave me a copy of your manuscript, I was surprised by the title, Third World America. Thank goodness I was reading your manuscript side-by-side with one of my current favorite new books by Matt Ridley, The Rational Optimist, whose ten-thousand-year view gives one space for easier breathing.

Arianna: I know “Third World America” is a jarring phrase, but I wrote this book as a warning, a way of saying that if we don’t change course–and quickly–that could very well be our future. Growing up in Greece, everyone knew someone who’d left to find a better life in America. That was the phrase everyone associated with America: “a better life.” When I came to live here in 1980, I knew that there was no other place I’d rather live. And I still feel that way. But something went wrong–terribly wrong–and put our country on a very dangerous path that threatens to transform us into Third World America. Wherever I looked, and in so many of the stories we covered on The Huffington Post, I kept seeing all the ways the middle class was getting the short end of the stick. It was the way that Washington rushed to the rescue of Wall Street but forgot about Main Street. It was the daily drumbeat of depressing statistics: One in five Americans unemployed or underemployed. One in eight mortgages in default or foreclosure. One in eight Americans on food stamps. Upward mobility has always been at the center of the American dream–a promise that if you work hard and play by the rules, you’ll do well and your children will have the chance to do even better. But now, that promise has been broken–and America’s middle class is under assault. The American Dream is becoming a nightmare–one of our own making. But the book, at its core, is, in fact, optimistic. It’s partly a critique of the many ways things are broken–but it’s also a practical guide for how to fix them.

Mary: Not only did we come to Washington together, we came up with the same worldview. My people escaped from (then) Yugoslavia “for a better life.” Croatians (Dalmatians) and the Greeks go back to antiquity, characterized by a smart, hard work ethic and sound, ahead-of-the-curve reasoning. It is not accidental we gravitated to this country, where our hopes and dreams could be realized by not just our effort, but through the opportunities available only in the unique American system, which I will get to in a minute. For the millions of Americans like us, your sad chronicling of the dream gone bad is almost unfathomable but for all Americans even more outrageous is the failure of “the system” to anticipate it–and worse–to have tools to alleviate it. In their seminal, bestselling opus, This Time Is Different, Drs. Reinhart and Rogoff replace hundreds of years of empirical data with decades of smart-guy theories to expose the fallacy and fantasy of economic theorists who think they are smarter than their predecessors. So what we are all in shock over was eminently knowable; worse, the perps who didn’t see it coming are the least hurt by the devastation they wreaked on the middle class.

Arianna: That’s definitely a beyond left and right conclusion! What became clear while writing this book is that the decline of the middle class was no accident. It was the result of tricks and traps. Tricks in the ways we financed our homes. Traps in the ways credit card companies used hidden fees and fine print and skyrocketing interest rates to get their hands on our money, driving more and more people into debt. So, yes, the game is rigged. Our financial system has become a bad carnival game where the rich always get the grand prize and the average American walks away empty-handed. We’ve gone from an economy where we make things to an economy where we make things up: default credit swaps, derivatives, CDOs and the like have turned Wall Street into a casino. Actually, a casino is fairer: at least you know the odds going in. And for me, the answer to the question of how we got here has to start in Washington, where special interests run the show–and where lobbyists outnumber elected officials 26 to 1. Unfortunately, there are no lobbyists for the American Dream. Now, I know you played a lobbyist on HBO … so I’m curious what your take on the role special interests now play in Washington. For me, this is one of those questions that is beyond the right vs. left framing the media loves to apply to every issue in Washington. I think both sides are under the influence of a small financial elite.

Evanovich: Hahaha! On the HBO series, K Street, I was terrible playing a lobbyist (overcoming my natural ideologue persona was impossible), but making a fool of oneself is a small price to be in the wake of Steven Soderbergh’s genius (not to mention breathing the same air as George Clooney–who is beautiful on the inside, too). I used to think lobbyists provided an economy-of-scale representation for busy Americans, but when I learned how many hard working, highly productive and profitable industries connected to the oil business did NOT have lobbyists to protect them from the “arbitrary and capricious” moratorium in the aftermath of the BP spill, it was a sad, revelatory moment. These are men and women whose families had lived and prospered on the water for centuries; who turned fishing and shrimping vessels into bigger businesses, providing indispensable services and thousands of jobs in the process, all while preserving a one-of-a-kind American culture. I am still not anti-lobbyist (there are many good and necessary ones), but you and I surely agree on a couple of points: 1) there has to be a more accessible/successful way to petition the national government in a national crisis; 2) taking meetings with lobbyists at the coffee shop so they don’t appear on the White House visitors’ log is hardly transformational transparency; 3) as you note in Third World America, there is no transparency in the legislative process when the work is done, the cake is baked long before the floor debate begins. No transparency, no accountability. No accountability ends in tyranny.

Arianna: Exactly, the media like to pretend that something’s at stake when a big bill is being debated in the House or Senate, but by then the game is often over. The real fight happens behind closed doors. And the lobbyists usually win. Let’s talk financial regulation: while we may not agree on how the new rules will effect the economy moving forward, or on what the role of government should be when it comes to regulating the financial system, I think we might find some beyond left and right common ground on the role morality has to play in all this. For me, there will never be enough regulators or government regulations to make a difference if Wall Street doesn’t tap back into the notion that businessmen have responsibilities above and beyond the bottom line. There is a reason Adam Smith’s free-market gospel, The Wealth of Nations, was preceded by his Theory of Moral Sentiments. He understood that economic freedom could not flourish without a firm moral foundation. How do you see the balance between government regulation and a free market driven by more than the bottom line?

Mary: We agree on the shortcomings of the ridiculously heralded Financial Regulations bill … most glaring for me: the omission of the toxic twins, Fannie and Freddie, the fertile crescent of the housing mess. I think we could also agree that financial instruments are a different free-market animal from goods and services, and therefore, institutionally subject to differing assumptions (excellently analyzed by Anatole Kaletsky in Capitalism 4.0). We also agree on regulatory capture being the provenance of both parties. But, most important, we agree–as does America–that all the rules, regulations, punishments, and penalties can never succeed in proffering prosperity for all as a sound moral foundation can and does and has. The philosophical departure of Adam Smith and David Hume from power to plenty as a governance organizing principle spoke to the natural law (or, if you will, God) imbuing each individual with the inalienable right to personal, economic, political, and moral liberty, inextricably intertwined, obviously. It took this country to truly apply–not just blather and revolt–those principles to everyman.

Arianna: Here’s another thing I think we’ll agree upon: the suffering we are seeing all across America is definitely bipartisan.

Mary: In his many eloquent works, Michael Novak notes, whatever its sharp and messy edges, no system has better served humanity than capitalism. It raises up the poor, it protects human rights, it is a necessary condition for democracy. It doesn’t know right/left, red/blue. But it does rest absolutely on virtue. As we all know, our founders’ overwhelming concern about staging a representative republic was “are we virtuous enough?” One of the silver linings of this tumultuous time is the astounding back-to-basics effort of millions of Americans: studying their own history; being shocked and awed by their own heritage; reassessing their own virtue of citizenship.

Arianna: When I was talking to and writing about the people whose stories I tell in the book, politics rarely came up. And while I think it’s essential that we hold our leaders feet to the fire–and point fingers at those who are responsible for creating the policies that are killing the American Dream–I think that the way we are going to keep America from becoming a Third World country is by each of us getting more involved and reaching out to one another. We need to remember that democracy is not a spectator sport–and take action.

Mary: And this is where we always come together, girlfriend. “Decline” is a choice. An examination of conscience (in the religious or just citizenship way), a commitment to assuming proportionate responsibility to the rights we exalt, a demand for universal virtue must occur concomitant to action. Third World America offers some timely, interesting, and innovative prescriptives for action, even if a few come from left field! Your call to action is certain to get right, left, and center–who aren’t already–in gear.

Arianna: In fact, writing this book ultimately did leave me feeling hopeful. And that’s because I was again and again struck by the resilience, creativity, and acts of compassion that I discovered taking place all across America. That’s why the last section of the book is filled with the specific steps we–as individuals, as families, and as a country–need to take to stop our free-fall. So often, our desire to take action gets derailed by our uncertainty over exactly what action to take, and how to best make a difference. I wanted to try to help bridge the gap between intention and involvement–and inspire each of us to do the things we need to do to make sure we never find ourselves living in Third World America.

From Booklist

*Starred Review* Could the U.S. be on the brink of becoming a Third World nation? Syndicated columnist Huffington argues that overspending on war at the expense of domestic issues and the alarming decline of the middle class are troubling signals that the U.S. is losing its economic, political, and social stability—a stability that has always been maintained by the middle class. She pinpoints the beginning of the decline to the Reagan era, with its denigration of a government safety net. But she is nonpartisan in assigning responsibility to George W. Bush and Bill Clinton for supporting monied interests over those of the middle class; she then takes aim at Obama for expending more money to bail out Wall Street than Main Street. She also points to loss of manufacturing jobs, outsourcing, and globalization, all with emphasis on corporate profits at the expense of workers. Although the U.S. has faced similarly fearful times during the late 1800s and the Great Depression, the middle class was not threatened, as it is today. She offers possible solutions for the decline, including creating jobs to rebuild national infrastructure, reforms in home and credit lending, and tighter restrictions on Wall Street. An engaging analysis of troubling economic and political trends. HIGH-DEMAND BACKSTORY: The Huffington Post founder is sure to get some media traction with her assertion that the American Dream is an outdated concept. –Vanessa Bush

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109 of 127 people found the following review helpful: 

5.0 out of 5 stars How to Thwart the Assassins of the American Dream, September 7, 2010

By Janet M. Tavakoli (Chicago) – See all my reviews

This review is from: Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream (Hardcover)

Arianna Huffington paints a grim picture of the State of the Union: “Every day, Americans, faced with layoffs and tough economic times, are forced to use their credit cards to pay for essentials such as food, housing, and medical care–the costs of which continue to escalate.” P. 77.

Our mediocre grammar school and high school educational system continues its downward slide. The Great Recession is squeezing school budgets.

Meanwhile, multi-national corporations avoid taxes, while enjoying bailout loans and fat government contracts.

The over-hyped American Recovery and Reinvestment Act of 2009 earmarked only $72 billion of the $787 billion appropriation of taxpayer dollars to projects to improve the country’s infrastructure.

Top subprime lenders included Wells Fargo; Countrywide, purchased by Bank of America, Washington Mutual, now part of JPMorgan Chase; CitiMortgage, part of Citigroup; First Franklin (now closed), purchased by Merrill Lynch, which was purchased by Bank of America; ChaseHome Finance, part of JPMorgan Chase; Ownit, partly owned by Merrill Lynch, which was later purchased by Bank of America; and EMC, part of Bear Stearns, which was purchased by JPMorgan Chase. Most of the rest depended on massive loans from Wall Street. Many of these lenders were sued by states for fraud and paid billions in settlements.

According to trade publication “Inside Mortgage Finance,” top mortgage backed securities underwriters included now defunct Lehman Brothers, Bank of America’s Countrywide Securities, Morgan Stanley, Bank of America’s Merrill Lynch, JPMorgan’s Bear Stearns, and Goldman Sachs.

This doesn’t even include collateralized debt obligations (CDOs), and structured investment vehicles (SIVs) and credit derivatives, all of which amplified losses.

Fannie and Freddie do not make loans. They purchase mortgage loans and earn fees for guaranteeing payments on the loans. In 2006, Fannie and Freddie accounted for 33% of total mortgage backed securities issuance. In the first half of 2010, they accounted for around 64% of new issuance. They were forced to pick up the slack and buy more when Wall Street’s private label securitization Ponzi scheme blew up. Fannie and Freddie did not create the housing bubble, and they are now Wall Street’s dumping ground.

At the start of the meltdown, the IMF and the U.S. administration estimated losses of $2 to $2.5 trillion. Unemployment and the losses are now shockingly worse. What was merely a recession escalated into the Great Recession.

According to William K Black, after the much tinier S&L crisis, there were over 1,000 successful felony prosecutions, several thousand successful enforcement actions, and roughly 1,000 successful civil actions. This time Congress gave us the Great Cover-up. Bank officers dodged jail time and collected billions in bonuses.

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream names the culprits and gives a roadmap for solutions. Congress must start over on financial reform, regulate derivatives, commodities trading, break-up the Too Big to Fail financial institutions (update Glass-Steagall), and more. We deserve better than a third world economy divided by ultra-rich on one side and debt-ridden middle class and dirt poor citizens on the other.

We’ll need a Constitutional amendment requiring full public financing for political campaigns (for starters). Our politicians have shown us how willing they are to be owned by special interest groups that will buy votes, buy a campaign, or just buy them off. As Arianna Huffington explains: “If someone’s going to own the politicians, it might as well be the American people.” (P. 172)

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65 of 75 people found the following review helpful: 

5.0 out of 5 stars Blood On Our Hands, September 8, 2010

By Bobby Lexington “Southern Man” (Austin, TX) – See all my reviews

This review is from: Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream (Hardcover)

The current chapter being written about the American man of 2010 is haunting. Huffington shows us how the very political system our Founders created has been hijacked and used to fill the pockets of those soulless enough to steal from their own (see the Right Wing). The system no longer works for the middle class. Our politicians simply do patchwork, reacting to what the media says–putting their fingers on a different leak everyday. It has become apparent– and Huffington points this out–that running for, and taking office, is nothing more than a way to protect one’s financial interests–or better yet–to line one’s own pockets. Huffington articulates this pervasive corruption quite poignantly. We see how the media has become the fourth branch of government–often setting the political agenda by creating the very stories they report on (i.e. CNN poll question: is Obama a Muslim?/results covered on a 24 hr. loop). And many of those news-created stories perpetuate the Right’s agenda of delaying any legislation designed to benefit the middle and working classes. In fact, an eye-popping inditement of this 21st Century media is on full display in the book: 71 Days: The Media Assault On Obama. Huffington gives us a gift by unveiling an America that is drowning in propaganda, tabloid-news-programming, racism, capitalistic greed, and an ever-growing imperialistic philosophy regarding our role in the world. It’s an America whose politicians are destroying the middle class at warp speed. The middle and working classes cannot afford for Sarah Palin to set the political agenda. But all she has to do is tweet something irrelevant and the media will run with it–ignoring any meaningful economic legislation that needs attention. Who suffers as a result? We do.

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4.0 out of 5 stars Good — but Misses the Importance of Technology and Globalization, September 9, 2010

By Robert StryzinskiSee all my reviews

This review is from: Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream (Hardcover)

Adrianna Huffington does a good job of describing the ongoing destruction of the middle class. I found the real-life stories of individuals and families that have been impacted particularly compelling. The degree of income concentration in the United States is really quite shocking.

My major complaint is that Huffington fails to indentify advancing technology as a primary driving force behind income inequality. This is an important point because if technology (along with globalization) is a major culprit, then it tells us something about the future: Things are very likely to get even worse. We’re sure to see more advanced automation and also new technology that makes it even easier for companies to offshore work. Even the upper middle class is not going to escape this tend. The basic reality is that technology and globalization are making our labor worth much less and giving workers less and less bargaining power.

For a great overview of this issue–and a focus on the future rather than the past–I’d strongly recommend this book: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. It shows how advancing technology will very likely lead to structural uemployment and even more extreme concentration of income into the hands of the few. As someone who works in the technology field, I’m convinced that the trends described in this book are already well underway and explain, at least in part, the situation that Huffington describes. As “The Lights in the Tunnel” points out, this problem may ultimately be so big that it defies conventional solutions. I highly recommend that anyone concerned about the plight of middle class Americans check out this book and give these issues some serious thought.

Third world America

Sep 14, 2010 by Luiza Ch. Savage

Danny Wilcox Frazier/Redux/ Robert Galbraith/Reuters/ Shannon Stapleton/Reuters

In February, the board of commissioners of Ohio’s Ashtabula County faced a scene familiar to local governments across America: a budget shortfall. They began to cut spending and reduced the sheriff’s budget by 20 per cent. A law enforcement agency staff that only a few years ago numbered 112, and had subsequently been pared down to 70, was cut again to 49 people and just one squad car for a county of 1,900 sq. km along the shore of Lake Erie. The sheriff’s department adapted. “We have no patrol units. There is no one on the streets. We respond to only crimes in progress. We don’t respond to property crimes,” deputy sheriff Ron Fenton told Maclean’s. The county once had a “very proactive” detective division in narcotics. Now, there is no detective division. “We are down to one evidence officer and he just runs the evidence room in case someone wants to claim property,” said Fenton. “People are getting property stolen, their houses broken into, and there is no one investigating. We are basically just writing up a report for the insurance company.”

If a county without police seems like a weird throwback to an earlier, frontier-like moment in American history, it is not the only one. “Back to the Stone Age” is the name of a seminar organized in March by civil engineers at Indiana’s Purdue University for local county supervisors interested in saving money by breaking up paved roads and turning them back to gravel. While only some paved roads in the state have been broken up, “There are a substantial number of conversations going on,” John Habermann, who manages a program at Purdue that helps local governments take care of infrastructure, told Maclean’s. “We presented a lot of talking points so that the county supervisors can talk logically back to elected officials when the question is posed,” he said. The state of Michigan had similar conversations. It has converted at least 50 miles of paved road to gravel in the last few years.

Welcome to the ground level of America’s economic crisis. The U.S. unemployment rate is 9.5 per cent. One in 10 homeowners are behind on their mortgage payments. Home sales are at record lows. While the economy has been growing for several quarters, the growth is anemic—only 1.6 per cent in the second quarter of this year—and producing few new jobs.

Even with interest rates at unprecedented lows, there is anxiety about the possibility of a double-dip recession. Sales of existing homes are at their lowest level in 15 years, and new home sales plummeted this summer to the lowest levels on record. Property and sales tax revenues have shrunk. And nowhere is this more apparent than at the local government level, where officials are being forced to roll back the everyday hallmarks of modern civilization.

Cincinnati, Ohio, is cutting back on trash collection and snow removal and filling fewer potholes.

The city of Dallas is not picking up litter in public parks. Flint, Mich., laid off 23 of 88 firefighters and closed two fire stations. In some places it’s almost literally the dark ages: the city of Shelton in Washington state decided to follow the example of numerous other localities and last week turned off 114 of its 860 street lights. Others have axed bus service and cut back on library hours. Class sizes are being increased and teachers are being laid off. School districts around the country are cutting the school day or the school week or the school year—effectively furloughing students. The National Association of Counties estimates that local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks. A July survey by the association of counties, the National League of Cities, and the U.S. Conference of Mayors of 270 local governments found that 63 per cent of localities are cutting back on public safety and 60 per cent are cutting public works.

In August, the U.S. Congress passed a US$26-billion stimulus extension bill, aimed in part at saving teacher jobs. But it’s a finger in the dike. Jacqueline Byers, director of research for the counties association, said many local governments have yet to confront the full impact of the real estate crisis on government revenues because they do tax assessments only every third year. A fundamental transformation is under way. “When we come out of this recession we’re going to see government functioning very differently,” says Byers. “We are seeing more public-private partnership than we ever had for things like recreation and parks. We are seeing some of them privatize libraries. They lease the library to a private corporation that employs the workers who don’t carry retirement or health benefits.” Or they could wind up like Hood River County, Ore., which in August closed its three libraries altogether.

Some governments are looking for creative ways to replace plummeting property and sales tax revenues. Facing a US$1-billion budget shortfall, Montgomery County in Maryland appealed for corporate sponsors to step up and adopt porta-potties in its public parks. In the end, the privies were saved by a combination of park employees taking early retirement, a few private sponsorships, and a negotiated discount from the supplier, Don’s Johns. Meanwhile, Montgomery County’s school system, banking on its reputation for high standards and test scores, took the unusual step of selling its curriculum to a private textbook publisher, Pearson, for US$2.3 million and royalties of up to three per cent on sales. As part of the deal, county classrooms can be used as “showrooms”—which critics said effectively turns students and teachers into salesmen for a corporation. But the superintendent, Jerry Weast, told the Washington Post, “I tend to look at this from the perspective that we are broke.”

These cuts in infrastructure and education are more than just a temporary belt-tightening in response to a recession. They threaten long-term damage to American’s economic foundation—a foundation that has long been eroding. When the eight-lane Interstate 35 bridge collapsed in Minneapolis in 2007, killing 13 people and injuring 145, the American Society of Civil Engineers warned that the infrastructure deficit of aging postwar highways and bridges amounted to US$1.6 trillion. More than a quarter of America’s bridges were rated structurally deficient or functionally obsolete. Steam pipes have exploded in New York City and the levees failed in New Orleans.

Despite its position as the world’s unrivalled superpower, international comparisons show the U.S. slipping on a number of fronts. On education, the United States has been falling behind, in everything from science and engineering to basic literacy. The U.S. once had the world’s highest proportion of young adults with post-secondary degrees; now it ranks 12th, according to the College Board, an association of education institutions. (Canada is now number one.) In 2001, the U.S. ranked fourth in the world in per capita broadband Internet use; it now ranks 15th out of 30 nations, according to the Organisation for Economic Co-operation and Development. “We have been involved for three decades now in paring back public commitments and public spending, and that started with the Reagan revolution. We are living with the outcomes and consequences,” says Michael Bernstein, an economic historian at Tulane University in New Orleans.

Meanwhile, prolonged rates of high unemployment are taking a toll on families today, and will for years to come. Studies have shown that the longer a person is unemployed, the more difficult it is to find a job—partly because skills deteriorate, and partly because employers become suspicious of why someone hasn’t worked for a year. “The United States is expanding its underclass of a whole group of individuals who will become less employable, less integrated, more subject to criminal and other deviant behaviour—and probably become part of the larger problem of structural poverty in America as well,” says Sherle Shenninger, director of the economic growth program at the New America Foundation, a Washington think tank.

Arianna Huffington sees an even starker big picture emerging from the reams of bad economic news. “As we watch the middle class crumbling, for me this is a major indication that we are turning into a Third World country,” said Huffington, founder of the Huffington Post, in an interview. “The distinguishing characteristic of the Third World country is you have the people at the top and the rest—you don’t have a thriving middle class,” says Huffington, whose new book is entitled Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream.

America is moving “from the Jetsons to the Flintstones,” she argues. “The American dream was already based on the idea you could work hard and do well and your children will do better. Now we are confronted with downward mobility across the board. You have the phenomenon of unprecedented numbers of college grads who can’t get jobs.” The current public sector cutbacks in education and infrastructure will only make things worse, Huffington says. “You are both hurting people in the present, and basically undercutting your economic growth and prosperity in the future.”

But the problem isn’t simply a product of the current recession or the 2008 financial crisis. It is now well understood that for years Americans lived beyond their means on borrowed money.

The real estate bubble enabled many homeowners to borrow against inflated house prices, giving families the feeling that their wealth was increasing. It was all a mirage. Low interest rates and easy credit allowed consumers to spend enthusiastically, masking the fact that the standard of living and incomes were stagnating, and public and private investment was lagging.

Over the past decade, private sector job growth was sluggish. Combined with recession job losses, there are now only as many private sector jobs as there were in early 1999, a decade ago, while the population continues to grow. And incomes stagnated for a full decade—the longest such period since the U.S. Census Bureau has been keeping track of household income.

“There is certainly a serious erosion of both the American social contract and the American dream for a great majority of Americans,” says Shenninger. “There is a worrying trend that the private sector has not been able to generate jobs for now more than a decade.”

While business productivity increased—workers created more output per hour of work—that did not follow the traditional model of translating into higher wages. “Eighty to 90 per cent of productivity gains went to corporate profitability—which means that in order to make up for the gap in demand, working families resorted to relying on rising housing prices and debt,” says Shenninger. Workers lost the ability to bargain for wage increases as they competed with lower-wage workers in Europe, Asia and other emerging markets. Meanwhile, corporate earnings exploded.

Clyde Prestowitz, a former Reagan administration trade official and president of the Economic Strategy Institute, says the scope of the problem came into focus for him one day last year when he read, in the same newspaper, that China was launching a new 240-mile-an-hour high-speed train, and then an article about city leaders in Pittsburgh considering a tax on university tuitions in order to fund the municipal employees’ retirement pension plan. “I thought, the Chinese are building world-record trains and we’re taxing kids who go to school!” says Prestowitz. “We’ve been in decline for quite some time—we haven’t recognized it and have been fooling ourselves. But we’ve gotten to the point it’s hard to not see.”

There are numerous theories about the path America took to get where it is. Prestowitz blames the American approach to trade and globalization. A former trade negotiator who worked on NAFTA and advised Ronald Reagan’s commerce secretary, he argues that at the root of the problem is a long-term American naïveté about global trade, a case he makes in his book The Betrayal of American Prosperity.

American jobs are being lost not only to low-wage competition from emerging economies, but to strategic policies by foreign governments to dominate critical sectors of the economy, or to keep their currency values low to promote exports. “Other countries recognize the importance of economies of scale and promote the development of certain industries, whether solar panels, or semiconductors, and we don’t,” says Prestowitz.

High-tech plants and research labs of companies such as Intel, Applied Materials, General Electric and BP have been moving to China because the Chinese are offering subsidies in the form of free energy, free infrastructure, reduced taxes and discounted utilities. Prestowitz made the argument earlier this year to a meeting of White House economists who were debating the administration’s funding for alternative energies such as battery technologies. “My position was, if you spend all this money and not do anything about currency manipulation by China, South Korea, Singapore, Taiwan, Malaysia, Thailand, if you don’t do anything about the investment incentives being offered to companies like Applied Materials, if you don’t deal with all those things and just give money to some battery company—forget it, that’s money down the rathole.”

Prestowitz accuses successive American administrations of sacrificing trade issues to geopolitics. “The highest priority for the U.S. government is national security. We need a base somewhere or a vote at the UN, and we make an economic concession,” he says. Exhibit A: “The Obama administration has bent over backwards to avoid calling China a currency manipulator,” he noted.

Huffington blames politicians’ domestic economic policies: first, Republicans for tax cuts and deregulation that favoured top earners and corporations, and now Democrats for failing to undo the damage. As a candidate, Barack Obama accused George W. Bush of ignoring the middle class, she notes. But now Huffington criticizes Obama for campaigning on prioritizing the middle class and then failing to do so in the White House. “What happened is he picked an economic team whose primary focus has been Wall Street and who dramatically underestimated the depth of the crisis,” she says. “The emphasis has been on fixing Wall Street, which was bailed out without any strings attached, and which turned around and cut lending instead of lend more.”

Shenninger points in part to foreign policy: waging expensive wars overseas rather than spending the money at home. “Our priorities are horribly distorted,” he says. “We spent billions on new energy plants in Iraq and most of the money got siphoned off. We are spending billions of dollars trying to build schools in Afghanistan. But we are not willing to borrow at historically low rates to keep teachers at work or improve public infrastructure at home.”

Whatever the causes, the way out is not clear. While some critics are calling for a major program of reinvestment in public infrastructure and reviving parts of the U.S. manufacturing base, the politics do not favour it. In a speech in Milwaukee on Monday, Obama asked Congress to pass a US$50-billion infrastructure spending program to refurbish roads, runways and railways. But concerns about government deficits among Republicans and some Democrats make it unlikely that any large spending package could pass Congress—especially after the gains the GOP is widely expected to make in the mid-term elections on Nov. 2.
Republicans are calling for aggressive spending cuts. When Democrats pushed through their spending bill for local governments, Republicans called it a “bailout” of profligate local governments that overindulged public sector unions with generous salaries and benefits. House Republican whip Eric Cantor called Obama’s latest call for infrastructure spending “another play called from the same failed Keynesian playbook,” adding, “We need to cut spending immediately and end the environment of uncertainty that continues to impede real private-sector job creation and growth.” The GOP members on the House budget committee have identified US$1.3 trillion in potential cuts to federal spending. House minority leader John Boehner calls federal spending “a job killing agenda.” “ We have to remember that, even when spending is not at record-setting levels, each dollar the government collects is taken directly out of the private sector,” Boehner said in a recent economic speech. He added: “I’m not afraid to tell you there’s no money left. In fact, we’re broke.”

But where does that leave people like the good citizens of Ashtabula County, Ohio? How can they be safe from criminals without a fully staffed local police force, TV station WKYC asked a local judge in April. “Arm yourselves,” came the reply from Ashtabula County Common Pleas Judge Alfred Mackey. “Be very careful, be vigilant, get in touch with your neighbors, because we’re going to have to look after each other.”

And so they did. In July, a group of farmers removed the safeties from their shotgun triggers and surrounded a trailer in which a suspected house robber was hiding while they waited for the county’s last, lone squad car to arrive.

Jeremy Rifkin

Author, ‘The Empathic Civilization: The Race to Global Consciousness in a World in Crisis

Posted: September 9, 2010 01:59 PM



Third World America:

Why I Wrote the Book and What We Need to Do to Save America’s Middle Class


Growing up, I remember walking to school in Athens past a statue of President Truman. The statue was a daily reminder of the magnificent nation responsible for, among other things, the Marshall Plan.

Everyone in Greece knew someone who’d left to find a better life in America. That was the phrase everyone associated with America: “a better life.”

I was sixteen when I first came to this country, as part of a program called the Experiment in International Living. I spent the summer in York, Pennsylvania, staying with four different families. I went back to Athens and then soon went to Cambridge and London. But part of me remained in America.

When I came to live here in 1980, I knew that this time would be for good — and that there was no other place I’d rather live. Thirty years later, I still feel that way.

But something went wrong — terribly wrong — and put our country on a very dangerous path that threatens to transform us into Third World America.

It’s a jarring phrase, I know, 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-to-day 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.

So why did I call my new book, which is being released today, Third World America?

For me, it’s a warning, a way of saying that if we don’t change course — and quickly — that could very well be our future.

Wherever I looked, and in so many of the stories we covered on the Huffington Post, I kept seeing all the ways the middle class was getting the short end of the stick.

It was the way that Washington rushed to the rescue of Wall Street but forgot about Main Street. It was the daily drumbeat of depressing statistics: One in five Americans unemployed or underemployed. One in nine families unable to make the minimum payment on their credit cards. One in eight mortgages in default or foreclosure. One in eight Americans on food stamps.

Upward mobility has always been at the center of the American Dream — a promise that if you work hard and play by the rules, you’ll do well, and your children will have the chance to do even better.

Well, that promise has been broken, and America’s middle class is under assault. The American Dream is becoming a nightmare.

What became clear while writing the book is that the decline of the middle class was no accident. Middle-class America didn’t suddenly lose its mojo. It was the result of tricks and traps. Tricks in the ways we financed our homes. Traps in the ways credit-card companies used hidden fees and fine print and skyrocketing interest rates to get their hands on our money, driving more and more people into debt.

Here’s the bottom line: The fix is in. The game is rigged. The dice are loaded. And it starts in Washington, where special interests run the show — and where lobbyists outnumber elected officials 26 to 1. Unfortunately, there are no lobbyists for the American Dream.

Our financial system is similarly rigged — it’s become a bad carnival game where the rich always get the grand prize and the average American walks away empty-handed. We’ve gone from an economy where we make things to an economy where we make things up: default credit swaps, derivatives, CDOs and the like have turned Wall Street into a casino. Actually, a casino is fairer: At least you know the odds going in.

Given this, you might be surprised to hear that writing Third World America ultimately left me feeling hopeful. But it did. It’s because, as I was traveling around the country or discovering online sites where people affected by the economic crisis are gathering and connecting (places like, RecessionWire, Project Bounce Back and We’ve Got Time to Help), I was again and again struck by the resilience, creativity and acts of compassion taking place all across America.

They convinced me that we can turn things around, as long as we demand more from our political and business leaders — and more, much more, from ourselves.

I’m in no way letting Washington off the hook. Indeed, the last section of the book, which is filled with the specific steps we — as individuals, as families, and as a country — need to take to save ourselves from a Third-World future, starts with what must be done to fix a democratic process that is badly broken and to put millions of Americans back to work.

At the same time, this moment in history demands that we stop waiting on others — especially others living in Washington — to solve the problems and right the wrongs of our times.

There is no doubt: Times are hard. The “new normal” is a punch in the gut, a slap across the face and a pitcher of icy water dumped on our heads. It’s a chill running up our national spine.

The question is, what are we going to do about it? Are we going to shut off the lights, curl up in a ball, and slap a victim sticker on our foreheads? Or are we going to shake off the blows, take a deep breath, hitch up our pants and head back into the fray? Are we going to wallow in despair or rage against the fading of the American Dream?

The preamble of the Constitution starts with “We the People.” And we have never needed the active participation of each one of us more urgently than now. We can’t save the middle class and keep America a First-World nation without each of us making a personal commitment and taking action — without each of us doing our part. We can’t just sit on the sidelines and complain. It’s up to us: We the People.

Americans have always been a positive, forward-looking people. A can-do attitude is part of our cultural DNA. And that mindset is a prerequisite for turning things around. Without it, the seeds of change and innovation will wither in a soil of negativism and defeatism. With it, we can shake off our cynicism and avoid the slow slide to Third World status. As a country, we have an unparalleled track record for marshalling our forces and rising to meet great challenges — see our response in the wake of Pearl Harbor or the Soviets’ launch of Sputnik. It is one of our greatest strengths.

In looking at the leader in the mirror, we are just following that very American urge to take matters into our own hands and get things done. Tip O’Neill said, “All politics is local.” And, in the end, all problem solving is personal. So we have to ask ourselves: What are we going to do to help ourselves — and one another?

That’s why writing Third World America was actually just the beginning of a larger journey, one that continues with our Third World America section, where you can find out more about what you can do to help yourself, help your family, and help make a difference in the lives of others.

It’s a place for you to share your stories of struggle and success; a place to connect with others looking to take action; a place to learn about ways you can use your skills, time and money to have a positive impact on those in need.

I’m also going to be traveling around the country for the next few months, speaking about the practical steps we can all take to help each other through the hard times and strengthen our communities. And we are crowdsourcing part of the tour. Click here to find out where I’m going to be speaking and how you can get your group, school, organization or town on the schedule. We’ve already had dozens of great submissions (see a slideshow of some of them here), so be sure to add yours to the mix.

Winston Churchill reportedly said, “America can always be counted on to do the right thing, after it has exhausted all other possibilities.” Well, we have exhausted a hell of a lot of possibilities, and for millions of the unemployed, the underemployed, the ones whose homes have been foreclosed, and the ones who’ve declared bankruptcy or can’t pay their credit card bills, the process has already been deeply painful.

It’s time now to do the right things.

Watch this video to learn more about the positive steps we can take to rebuild the middle class and restore the American Dream:
P.S. Fixing America’s broken educational system is vital to rescuing America’s middle class. And that fix has to start with reforming how we treat our nation’s teachers. So be sure and check out this post from Academy-Award winning filmmaker Davis Guggenheim. His new film, Waiting for Superman, opening later this month, is a devastating look at America’s educational system and what needs to be done to turn it around.


Third World America: Is Anyone Listening?

What’s Your Reaction:

I grew up on the South side of Chicago in the 1940s and 50s. My father and mother raised four children in a house that was less than a 1000 square feet. The stairwell to the second floor was so low that we had to stoop over on the walkup. Later in life, my mother confided in me that when she first saw the house she wept and told my father she “couldn’t raise four children in a house that small.” My dad consoled her and told her “not to worry, that it was only temporary — that things were looking up.” My dad was a true believer in the American Dream. My mother died in that same house 63 years later.

The breadwinners in our neighborhood worked in the steel mills nearby in East Indiana and in the sprawling Chicago stockyards. They were policeman, fireman, municipal workers, mechanics, house painters and assorted tradesman.

And here’s the rub. We all were convinced that we were part of the “great American middle class.” It was only when I went to college that I became aware of the term “working class” and that I was a product of it.

Americans have long entertained the idea that we are all middle class, or aspiring middle class. The aspiration itself is a kind of a promissory note that if we get a good education and work hard, we can pass through our initiation phase and become a full fledged member of the middle class; or at least we can sacrifice during our lifetime so that our children can become members of this very special club.

Every generation, until recently, bought into the idea that if not a classless society. America is, nonetheless, an overwhelmingly middle class society, where merit rules, hard work matters and the reward for a lifetime of putting one’s nose to the grindstone is the most coveted prize of all — the realization of the American Dream.

And to be frank, for two centuries the American Dream had legs. Succeeding generations came to America, often destitute but full of hope, and they and their offspring moved on up. As late as the 1960s, we could justifiably boast that we were the most middle class society in the world and millions of Americans could offer demonstrable proof — their own achievement of the America Dream.

Unfortunately, I have seen the middle class shrink and the American Dream plummet in my lifetime. Today the United States ranks 31 out of 33 OECD nations in income disparity — that is, the gap between the handful of the very rich at the top and the millions of working poor at the bottom. Only Mexico and Turkey fare worse in disparity of income. And, for the first time, our own US Census tells us that many immigrants are not making it out of poverty and becoming part of the American middle class and will never taste the sweetness of the American Dream.

What has happened to the great American Experiment that was, for so long, considered the gold standard to which millions of people in the world looked for inspiration and guidance?

Arianna Huffington has taken us on a difficult journey — a kind of collective self-discovery. Her new book, Third World America, is hard to read, not because of the way it’s written — the prose is eloquent and riveting — but because of what she’s telling us. She lays bare the unraveling of the American Dream at the hands of the “special interests” on Wall Street and their friends in high places in the Executive and Legislative branches of government.

The book is really about two intertwined stories: the first is the story of the coup d’état — the systematic dismantling of the coveted American way of life by the rich and powerful; and the second is the very personal, heart-wrenching stories of some of the millions of families whose lives have been ruined as a result of that coup. By the end, we come to understand that the great numbness hanging over America today resembles a post-traumatic stress disorder, the kind of battle fatigue that soldiers experience after long periods of engagement in war zones — except this is not a hot war or a cold war but a stealth war executed with ruthless calculation and designed to rob millions of Americans of their birthright. It succeeded.

But now, at least, there is no longer any way to claim we didn’t know. Arianna is asking us to quit living in a kind of mass denial about what’s happened to our country. As she said, we need to “connect the uncomfortable dots” and the most important connection she makes is the financing of elections by special interests. The bottom line is that our elected officials are, to a great extent, beholden to the corporations that “donate” millions of dollars to their campaigns to ensure that their voice will be heard above all others when it comes to drafting and passing legislation. It’s a national disgrace.

President Obama had a moment in which he could have turned America around and put us back on track but he chose not to understand the opportunity presented to him or seize it. When Wall Street was threatened with collapse in the Fall of 2008 and desperately needed the American people to bail them out with hundreds of billions of dollars, the president could have demanded a quid pro quo. That is, in return for the tax payers’ bailout of Wall Street, the business community would have to accept the passage of legislation that would end private financing of elections and require that all elections be publically financed as they are in many other democratically elected governments in the world. Wall Street would have had no choice but to capitulate. It didn’t happen. In fact, I suspect that no one in Congress even thought about taking such a course of action. Why would they since most of them owe their public careers, in large part, to the generosity bestowed on them by the Wall Street interests that they are supposed to oversee and regulate?

As to the recent bitterly divided 5-4 Supreme Court decision that corporations have a Constitutional right to make contributions to politicians, I suspect that the passage of tough, uncompromising legislation mandating an end to the practice might have led to a different outcome — or, at the very least, forced an interesting debate between the Court and the public about the relationship between financial and political power and the governance of America.

Unless we end this despicable practice of buying elections, we will continue to witness a free fall of the American Dream, a shriveling of the American Middle Class and an erosion of what was once the greatest social experiment in modern history. Is anyone listening?

Related News On Huffington Post:

Third World America Stories Archive

Gene Epstein Philadelphia, PA A philanthropist with a novel plan to stimulate the economy: he will donate $1,000 to a charity every time a small…

Robert Reich

Former Secretary of Labor; Professor at Berkeley; Author, ‘Aftershock: The Next Economy and America’s Future

Posted: September 24, 2010 09:16 AM

The Super Rich Get Richer, Everyone Else Gets Poorer, and the Democrats Punt

The super-rich got even wealthier this year, and yet most of them are paying even fewer taxes to support the eduction, job training, and job creation of the rest of us. According to Forbes magazine’s annual survey, just released, the combined net worth of the 400 richest Americans climbed 8% this year, to $1.37 trillion. Wealth rose for 217 members of the list, while 85 saw a decline.

For example, Charles and David Koch, the energy magnates who are pouring vast sums of money into Republican coffers and sponsoring tea partiers all over America, each gained $5.5 billion of wealth over the past year. Each is now worth $21.5 billion.

Wall Street continued to dominate the list; 109 of the richest 400 are in finance or investments.

From another survey we learn that the 25 top hedge-fund managers got an average of $1 billion each, but paid an average of 17 percent in taxes (because so much of their income is considered capital gains, taxed at 15 percent thanks to the Bush tax cuts).

The rest of America got poorer, of course. The number in poverty rose to a post-war high. The median wage continues to deteriorate. And some 20 million Americans don’t have work.

Only twice before in American history has so much been held by so few, and the gap between them and the great majority been a chasm — the late 1920s, and the era of the robber barons in the 1880s.

And yet the Bush tax cuts of 2001 and 2003, which conferred almost all their benefits on the rich, continue.

Democrats have decided to delay voting on whether to extend them for the top 2 percent of Americans or for the bottom 98 percent until after the mid-term elections.

Democrats have thereby given up a defining issue that could have enabled them to show the big story of the last three decades — the accumulation of almost all the gain from economic growth at the top — and to make a start at reversing it.

When will they ever learn?

Robert Reich is the author of Aftershock: The Next Economy and America’s Future, now in bookstores. This post originally appeared at


Huffington to Obama: Don’t Kill the Middle Class

— By Mother Jones

| Tue Sep. 7, 2010 7:33 AM PDT

Blogger/activist/author/commentator/entrepreneur/bold-name Arianna Huffington has a new book out, and David Corn, in a column cites it as yet another sign of progressive impatience with President Barack Obama. Noting that Democrats and progressives who foresee an electoral nightmare approaching are beginning to draw up explanations that blame Obama for muffing his administration’s message on the economy, Corn writes:

Into this burgeoning storm rides Arianna Huffington, and, in her usual fashion, she has upped the ante by essentially saying that if Obama doesn’t rev up the recovery efforts, the United States will soon disintegrate into a Third World nation. Her assault comes in the form of a book called Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream, which is being released today. Obviously, Huffington…finished writing her book months ago — before progressive and Democratic impatience with Obama became as intense as it is these days. And though she doesn’t slam Obama personally, he’s certainly in the middle of her radar screen.

The big idea of Huffington’s book rests on one main pillar: the decline of the middle class. She writes, “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 everybody else. Think Mexico or Brazil.” Citing all the stats—the Bush and Obama administrations devoted hundreds of billions of dollars to financial firms, while millions of Americans lost their jobs and hard-pressed states cut social services (precisely when they are needed the most)—she complains:

The human consequences of the financial collapse are largely missing from our national debate. I’m referring especially to the people who had steady jobs; people with college degrees; people who were paying their bills, saving for retirement, doing the right thing — and who have, in many instances lost everything. The daily miseries being visited upon them are unfolding across the country.

So why is there no sense of urgency coming out of Washington?

As Corn notes, “That’s a direct poke at the guy in the White House.” And it reflects a growing sentiment in left-of-center circles: in his handling of the economic mess, Obama has fallen short in his diagnosis and prescription. The president has in recent days begun unveiling new economic initiatives—expanded business tax credits and an $50 billion infrastructure bank—but it may be too late for him to reshape the 2010 political terrain with such measures, or to reshape the attitudes of progressives who believe Obama has let them, and the country, down.


How to Restore the American Dream



By FAREED ZAKARIA Fareed Zakaria – 49 mins ago

The American dream for me, growing up in India in the 1970s, looked something like the opening credits of Dallas. The blockbuster TV series began with a kaleidoscope of big, brassy, sexy images – tracts of open land, shiny skyscrapers, fancy cars, cowboy businessmen and the very dreamy Victoria Principal. We watched bootlegged copies of the show, passed around on old Betamax cassettes. America (certainly the CBS soap-opera version of America) seemed dazzling and larger than life, especially set against the stagnant backdrop of India in the 1970s. Everyone I knew was fascinated by the U.S., whether they admitted it or not. Politicians who denounced the country by day would go home in the evenings and plot to send their kids to college in “the States.”

Of course, the 1970s were actually tough times in America – stagflation, malaise, the aftermath of Vietnam and Watergate – but they were brutal in the rest of the world. Hyperinflation racked most third-world countries; coups and martial law were familiar occurrences, even affecting staunchly democratic India, where emergency rule was enforced from 1975 to 1977. Set against this atmosphere of despair, the U.S. looked like a shining city on a hill. (Watch a video about Joe Klein’s roadtrip across America.)

A few years later, when I got to America on a college scholarship, I realized that the real American Dream was somewhat different from Dallas. I visited college friends in their hometowns and was struck by the spacious suburban houses and the gleaming appliances – even when their parents had simple, modest jobs. The modern American Dream, for me, was this general prosperity and well-being for the average person. European civilization had produced the great cathedrals of the world. America had the two-car garage. And this middle-class contentment created a country of optimists. Compared with the fatalism and socialist lethargy that was pervasive in India those days, Americans had a sunny attitude toward life that was utterly refreshing.

But when I travel from America to India these days, as I did recently, it’s as if the world has been turned upside down. Indians are brimming with hope and faith in the future. After centuries of stagnation, their economy is on the move, fueling animal spirits and ambition. The whole country feels as if it has been unlocked. Meanwhile, in the U.S., the mood is sour. Americans are glum, dispirited and angry. The middle class, in particular, feels under assault. In a Newsweek poll in September, 63% of Americans said they did not think they would be able to maintain their current standard of living. Perhaps most troubling, Americans are strikingly fatalistic about their prospects. The can-do country is convinced that it can’t. (See pictures of Cleveland during the recession.)

Americans have good reasons to worry. We have just gone through the worst recession since the Great Depression. The light at the end of the tunnel is dim at best. Sixteen months into the recovery, the unemployment rate is higher than it was in the depths of all but one of the postwar recessions. And as government spending is being pared back, the economy is showing new signs of weakness.

Some experts say that in every recession Americans get gloomy and then recover with the economy. This slump is worse than most; so is the mood. Once demand returns, they say, jobs will come back and, with them, optimism. But Americans are far more apprehensive than usual, and their worries seem to go beyond the short-term debate over stimulus vs. deficit reduction. They fear that we are in the midst of not a cyclical downturn but a structural shift, one that poses huge new challenges to the average American job, pressures the average American wage and endangers the average American Dream. The middle class, many Americans have come to believe, is being hollowed out. I think they are right.

Going Global
For a picture of the global economy, look at America’s great corporations, which are thriving. IBM, Coca-Cola, PepsiCo, Google, Microsoft, Apple, Intel and Caterpillar are all doing well. And they share a strategy that is becoming standard for success. First, technology has produced massive efficiencies over the past decade. Jack Welch explained the process succinctly on CNBC last September. “Technology has changed the game in jobs,” he said. “We had technology bumping around for years in the ’80s and ’90s, and [we were] trying to make it work. And now it’s working … You couple the habits [of efficiency] from a deep recession [with] an exponential increase in technology, and you’re not going to see jobs for a long, long time.” Welch gave as an example a company owned by the private-equity firm with which he is affiliated. In 2007 the business had 26,000 employees and generated $12 billion in revenue. It will return to those revenue numbers by 2013 but with only 14,000 employees. “Companies have learned to do more with less,” Welch said. (Comment on this story.)

Next, companies have truly gone global. The companies on the S&P 500 generate 46% of their profits outside the U.S., and for many of the biggest American names, the proportion is much higher. You might think of Coca-Cola as the quintessentially American company. In fact it is a vast global enterprise, operating in 206 countries. “We have a factory in Ramallah that employs 2,000 people. We have a factory in Afghanistan. We have factories everywhere,” explains Muhtar Kent, the CEO of Coke. Nearly 80% of Coca-Cola’s revenue comes from outside the U.S., and an even greater percentage of its employees are in foreign countries. “We are a global company that happens to be headquartered in Atlanta,” says Kent.

America’s great corporations access global markets, easy credit, new technologies and high-quality labor at a low price. Many have had to cut jobs at home, where demand is weak, and have added them in the emerging markets that are booming. They are not “outsourcing” jobs. That word makes little sense anymore. They simply invest in growth areas and cut back in places where the economy is weak. None of them will ever give up on the American market – it is too large, too profitable and too central to their businesses – but the marginal dollar is more likely to be invested abroad than in the U.S.

Read “Encountering Anguish and Anxiety Across America.”

Watch a video of former President Bill Clinton on globalization.

While businesses have a way to navigate this new world of technological change and globalization, the ordinary American worker does not. Capital and technology are mobile; labor isn’t. American workers are located in America. And this is a country with one of the highest wages in the world, because it is one of the richest countries in the world. That makes it more difficult for the American middle-class worker to benefit from technology and global growth in the same way that companies do.

At this point, economists will protest. Historically, free trade has been beneficial to rich and poor. By forcing you out of industries in which you are inefficient, trade makes you strengthen those industries in which you are world-class. That’s right in theory, and it has been right in practice. As countries have traded with one another over the past two centuries, they have prospered, and average living standards in those countries (primarily in the Western world) have soared. Those places that kept themselves protected (mostly communist and third-world nations) found that they had crappy industries, shoddy goods, massive corruption and slow growth. (See TIME’s special “Out of Work in America.”)

And yet something feels different this time. Technology and globalization are working together at warp speed, creating a powerful new reality. Many more goods and services can now be produced anywhere on the globe. China and India have added literally hundreds of millions of new workers to the global labor pool, producing the same goods and services as Western workers at a fraction of the price. Far from being basket-case economies and banana republics, many developing economies are now stable and well managed, and companies can do business in them with ease. At some point, all these differences add up to mean that global competition is having quite a new impact on life in the U.S.

Two weeks ago, for example, I sat in a Nano, the revolutionary car being produced by Tata Motors in India. It’s a nice, comfortable midgetmobile, much like Mercedes-Benz’s Smart car, except that rather than costing $22,000, it costs about $2,400. Tata plans to bring it to the U.S. in two to three years. Properly equipped with air bags and other safety features, it will retail at $7,000. Leave aside the car itself, whose price will surely put a downward pressure on U.S. carmakers. Just think about car parts. Every part in the Nano is made to global standards but manufactured in India at about a tenth of what it would cost in America. When Ford orders its next set of car parts, will they be made in Michigan or Mumbai? (Watch a video about owning a Nano.)

This is not a hypothetical. Steven Rattner, who helped restructure the automobile industry, tells the story of getting a new General Motors plant online in Michigan by bringing management and unions together. “The unions agreed to allow 40% of the new plant to operate at $14-an-hour wages,” he says, “which is half of GM’s normal wages. The management agreed to invest in this new plant. But here’s the problem: workers at GM’s Mexican operations make $7 an hour, and today they are as productive as American workers. And think of this: $14 an hour translates into about $35,000 a year. That’s below the median family income. The whole experience left me frightened about the fate of the American worker.”

Alan Blinder is also worried. A distinguished economist and Princeton professor, Blinder is a former vice chairman of the board of governors of the Federal Reserve. In a now famous essay in Foreign Affairs, he argues that while we recognize the pressures placed on manufacturing jobs by international competition, technology ensures that service jobs are now similarly exposed. Since the service sector is a much larger part of the economy, Blinder estimates that 28 million to 42 million jobs will be “susceptible” to being shipped offshore – jobs such as customer-service representative and stock analyst, which we tend to think of as local. Blinder understands the benefits of free trade but worries that the new wave of offshoring is so big and fast that Western societies will have difficulty adjusting. The crucial distinction for the future, he argues, might be not between highly educated and less educated workers but between those jobs that can be done abroad and those – such as nurse or pilot – that cannot. (Comment on this story.)

You can divide the American workforce in many ways, but any way you slice it, you see the same trend. People who get paid a decent wage for skilled but routine work in manufacturing or services are getting squeezed by a pincer movement of technology and globalization. David Autor, an MIT economist, has done an important study on what he calls “the polarization of job opportunities” in America. Autor finds that job growth divides neatly into three categories. On one side are managerial, professional and technical occupations, held by highly educated workers who are comfortable in the global economy. Jobs have been plentiful in this segment for the past three decades. On the other end are service occupations, those that involve “helping, caring for or assisting others,” such as security guard, cook and waiter. Most of these workers have no college education and get hourly wages that are on the low end of the scale. Jobs in this segment too have been growing robustly.

In between are the skilled manual workers and those in white collar operations like sales and office management. These jobs represent the beating heart of the middle class. Those in them make a decent living, usually above the median family income ($49,777), and they mostly did fine in the two decades before 2000. But since then, employment growth has lagged the economy in general. And in the Great Recession, it has been these middle-class folks who have been hammered. Why? Autor is cautious and tentative, but it would seem that technology, followed by global competition, has played the largest role in making less valuable the routine tasks that once epitomized middle-class work.

See a brief history of the middle class.

See 10 perfect jobs for the recession.

Recapturing the Dream
So what is the solution? It’s easier to identify the wrong answer than the right one. It would be pointless and damaging to try to go down a protectionist route, though polls show a stunning drop of support for free trade, even among college-educated professionals, its usual cheerleaders. But technology is a much larger driver of the hollowing out than trade. You cannot shut down this new world. How would you stop people from sending one another e-mails, which is what a lot of offshoring comes down to these days? Nor can you help a modern economy by shielding industries from world-class competitors, which just encourages greater inefficiency. I grew up in an economy made up of those kinds of industries, all tightly protected from “foreign exploitation and domination.” It added up to stagnation and backwardness.

There are solutions, but they are hard and involve painful changes – in companies, government programs and personal lifestyles. For more than a generation, Americans have been unwilling to make these adjustments. Instead, we found an easier way to goose the economy: expand consumption. During the early 1950s, personal consumer expenditures made up 60% to 65% of the U.S.’s GDP. But starting in the early 1980s, facing slower growth, we increased our personal spending substantially, giving rise to new economic activity in the country. Consumption grew to 70% of GDP by 2001 and has stayed there ever since. Unfortunately, this rise in consumption was not triggered by a rise in income. Wages have been largely stagnant. It was facilitated, rather, by an increase in credit, so that now the average American family has no fewer than 13 credit cards. Household debt rose from $680 billion in 1974 to $14 trillion in 2008. This pattern repeated itself in government, except on a much larger scale. People everywhere – from California to New Jersey – wanted less taxes but more government. Local, state and federal governments obliged, taking on massive debts. A generation’s worth of economic growth has been generated by an unsustainable expansion of borrowing. (Watch TIME’s video “Austin Shows How to Make New Jobs.”)

That is why the current economic debate between another stimulus and deficit reduction is frustrating. Right now, there is a strong case for government stimulus, since no one else is doing much spending. But then what? What happens after another year of federal spending? Consumers still might be cautious; do we really want them to spend like they did in the old days? Is the strategy simply to reinflate the housing bubble? In recent years, the left and the right in America have conspired in feeding consumption spending. The left expands government, much of which means more consumption (pensions, health care). The right focuses obsessively on tax cuts, which have a similar effect. The political system, pandering to today’s constituents, encourages both tendencies. But when will we invest for our children’s economy?

What We Need to Do Now
Ultimately American jobs are created from the bottom up by companies, not from the top down by government fiat. But there are measures we can take that will encourage the process. Here are the key ones:

Shift from consumption to investment. Fundamentally, America needs to move from consumption to investment. Everyone agrees that the best way to create good jobs in the U.S. is to create new industries and companies and to innovate within old ones. This means large investments in research, technology and development. As a society, this needs to become our strongest focus. (See how the future of work is changing.)

Despite substantial increases and important new projects under the Obama Administration, the federal government is still not spending as much on R&D as a percentage of GDP as it did in the 1950s. I would argue that it should be spending twice that level, which would be 6% of GDP. In the 1950s, the U.S. had a huge manufacturing base that could absorb millions of semiskilled workers. Today, manufacturing is a small part of the economy and faces intense global competition. The only good jobs that will stay in the U.S. are jobs related to knowledge and innovation. Additionally, in the 1950s, America was the only research lab in town, accounting for the vast majority of global scientific spending. Today, countries around the world are entering the arena. Two weeks ago, South Korea – a country of just 50 million people! – announced plans to invest $35 billion in renewable-energy projects. We should pay for this with a 5% national sales tax – call it an American innovation tax – which would be partly offset by a small reduction in income taxes. This would have the twin benefits of tamping down consumption and yielding some additional funds. All the proceeds from the tax should be focused on future generations, because we need to invest massively in growth. (Comment on this story.)

The often overlooked aspect of investment is investment in people. America has been able to create the future in large measure because it has tapped into the energies and work of immigrants. It has managed to invest in human capital by taking smart, motivated people from around the globe, educating them in the planet’s best higher-education system and then unleashing them in a dynamic economy. In this crucial realm, the U.S. is now disinvesting. After training the world’s best and brightest – often at public expense – we don’t find ways to make sure they stay here by giving them a green card but rather insist that they leave and take their knowledge to another country, where they will invent, inspire, build and pay taxes. Every year, we send tens of thousands of the smartest Indians and Chinese back home, which is a great investment – in the future of those countries.

Training and education. “Most jobs that will have good prospects in the future will be complicated,” says Louis Gerstner, the former CEO of American Express and IBM. “They will involve being able to juggle data, symbols, computer programs in some way or the other, no matter what the task. To do this, workers will need to be educated and often retrained.” We need more and better education at every level, especially job retraining. So far, most retraining efforts in the U.S. have not worked very well. But they have worked in countries that have been able to retain a manufacturing base, like Germany and parts of Northern Europe. There, some of the most successful programs are apprenticeships – which cover only 0.3% of the total U.S. workforce.

Read “The Workforce: Where Will the New Jobs Come From?”

See pictures of the recession of 1958.

There are advantages to the U.S. system. We don’t stream people too early in their lives, and we allow for more creative thinking. But the path to good jobs for the future is surely to expand apprenticeship programs substantially so industry can find the workers it needs. This would require a major initiative, a training triangle in which the government funds, the education system teaches and industry hires – though to have an effect, the program would have to be on the scale of the GI Bill.

Fiscal sanity. To pay for such initiatives, the government needs to get its house in order. The single most important aspect of this is getting health care costs under control, followed by other entitlement programs, especially pensions at the state level. Government today spends vast sums of money on current consumption – health care and pensions being a massive chunk of it – which leaves little money for anything else. We need a radical rebalancing of American government so it can free up resources to fund future growth. (Watch a video about being young and uninsured in America.)

Benchmark, benchmark, benchmark. There is now global competition for growth, which means the U.S. has to constantly ask itself what other countries are doing well and how it might adapt – looking, for example, at what other countries are doing with their corporate tax rates or their health care systems and asking why and where we fall short. Americans have long resisted such an approach, but if someone else is doing tax policy, tort litigation, health care or anything else better, we have to ask why.

There are things the U.S. does well. Most new jobs in America are created by start-ups and small companies, so the ease of doing business is crucial – and there’s good news there. The World Bank has a ranking of countries measured by the “ease of doing business,” and the U.S. is No. 4. That’s very good, but there’s a catch. Those rankings are divided into several categories. In most, like “starting a business,” the U.S. does well. But in one category it’s only 61st in the world, and that is “paying taxes.” (See six year-end tax tips.)

The American tax code is a monstrosity, cumbersome and inefficient. It is 16,000 pages long and riddled with exemptions and loopholes, specific favors to special interests. As such, it represents the deep, institutionalized corruption at the heart of the American political process, in which it is now considered routine to buy a member of Congress’s support for a particular, narrow provision that will be advantageous for your business.

The Work Ahead
My proposals are inherently difficult because they ask the left and right to come together, cut some spending, pare down entitlements, open up immigration for knowledge workers, rationalize the tax code – and then make large investments in education and training, research and technology, innovation and infrastructure. But the fact that it is a solution that crosses political borders should make it more palatable, not less. And time is crucial. The U.S. has considerable advantages, but every day other countries try to find ways to attract growth within their borders. People often note that America’s political system is broken. Perhaps the truth is more awkward: America needs radical change, and it has an 18th century system determined to check and balance the absolute power of a monarchy. It is designed for gridlock at a moment when quick and large-scale action is our only hope. (See Joe Klein talk to Southwestern residents about the economy.)

When I left India, the marginal tax rate was 97.5%, corporate taxation was punitive, and business was stifled or went underground. Were I to move from New York City to Mumbai today, my personal tax rate would drop, as would every other rate, from corporate to capital-gains taxes. (The long-term capital-tax rate in India is zero.) Singapore now ranks as the No. 1 country for ease of doing business, with a top tax rate of 20%. I know permanent residents working in the U.S. who are thinking of giving up their green cards to move to Singapore. To an Indian of my generation, this would have been unthinkable. The green card was a passport to the American Dream. But for young Indians, there are many new dreams out there, and new passports.

But there are reasons for optimism. The U.S. faces huge challenges, but it also has enormous advantages. “I’ve always been bullish on America,” says Coke’s Kent. “It’s the largest, richest market in the world. Look at the demographics alone. North America is the only part of the industrialized world that will be growing in people. It now has a higher birthrate than Mexico, for the first time in history.” Or listen to Alcoa’s German-born Klaus Kleinfeld, previously the head of Siemens: “I know the things that America has that are unique. The openness, the diversity, the dynamism – you don’t have it anywhere else. If you keep all these things, build on them, I still believe in the American Dream.” (Comment on this story.)

The term American Dream was coined during the Great Depression. The historian James Truslow Adams published The Epic of America in 1931, in an atmosphere of even greater despair than today’s. He wanted to call his book The American Dream, but his publishers objected. No one will pay $3.50 for a book about a “dream,” they said. Still, Adams used the phrase so often that it entered the lexicon. The American Dream, he said, was of “a better, richer and happier life for all our citizens of every rank, which is the greatest contribution we have made to the thought and welfare of the world. That dream or hope has been present from the start. Ever since we became an independent nation, each generation has seen an uprising of ordinary Americans to save the American Dream from the forces which appear to be overwhelming it.”

Today, those forces really do look overwhelming. But challenges like them have been beaten back before – and can be again.

Restoring the American Dream: A Fareed Zakaria GPS Special will air at 9 p.m. E.T. and P.T. on Saturday, Oct. 30, and at 10 a.m. E.T. and P.T. on Sunday, Oct. 31

See TIME’s special report “Remembering the Great Depression.”

See TIME’s photo-essay “Austin’s Way: New Jobs for a New Economy.”

View this article on


Arianna Huffington on Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream


One out of every six Americans are in government anti-poverty programs. More than 50 million Americans are on Medicaid, 40 million receive food stamps, and ten million receive unemployment benefits. The prospects for a speedy recovery from the Great Recession appear dim. We speak with Arianna Huffington, co-founder and editor-in-chief of the Huffington Post, about her latest book Third World America. [includes rush transcript]

Filed under economy


Arianna Huffington, co-founder and editor-in-chief of the Huffington Post and the author of thirteen books. Her latest is Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream.

Rush Transcript

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JUAN GONZALEZ: Are middle-class Americans becoming an endangered species? One out of every six Americans are in government anti-poverty programs. More than 50 million are on Medicaid. Forty million receive food stamps. And ten million receive unemployment benefits. The prospects for a speedy recovery from the Great Recession appear dim.

Now President Obama has argued that his administration made the right decisions to move the country forward. He told ABC’s George Stephanopoulos Wednesday that he is going to keep working at it ’til he gets it right.

    PRESIDENT BARACK OBAMA: Our options are limited. I mean, the fact of the matter is, is that when we came in, the day I was sworn in, we were losing 800,000 jobs a month. The next month, 600,000. The month after that, 600,000. And across the political spectrum, what people said we had to do was make sure we don’t have a complete financial meltdown and make sure that we prevent this economy from going into a deep depression. We succeeded in doing that. The economy is now growing. And for eight consecutive months, we have added jobs. 

    Now, I am somebody who tends to not have a lot of pride of authorship. If people out there had a whole host of ideas that would allow us to accelerate this job growth faster and put more people to work faster, I would be happy to steal ideas from anybody—Republican, independent or Democrat. Part of the challenge we’ve got is that we are working through a very difficult time. And are there ways that I potentially could have explained the circumstances of our situation better, communicated those more effectively? I’m sure that there are. And, you know, I’m going to keep on working at it ’til I get it right.

AMY GOODMAN:Well, our next guest might argue otherwise. One of her recent columns is called “Memo to America’s Middle Class: Obama Is Just Not That Into You.” Arianna Huffington is the co-founder and editor-in-chief of the Huffington Post, author of thirteen books. Her latest is called Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream. Arianna Huffington joins us here in New York.

Welcome to Democracy Now!

ARIANNA HUFFINGTON:Thank you. It’s great to be here in your new digs.

AMY GOODMAN:Well, it’s great to have you. Third World America—why Third World America?

ARIANNA HUFFINGTON: I deliberately chose a title that is very jarring. You know, we don’t associate America with the third world. But I chose it because I really believe that we are on this trajectory, where the middle class is crumbling. And the middle class is the foundation not just of American prosperity, but American democracy and democratic stability.

And what I was seeing, since Cassandra has always been my favorite heroine growing up in Greece, is that there isn’t the sense of urgency that is needed if we really believe this is happening. And so, by using that title, Third World America, and by providing the data and the stories to back it up, I’m hoping that we will bring that sense of urgency that, as you saw from the interview with the President, is missing. You know, it was the sense of urgency that everybody had that famous weekend when they saved Wall Street, you know, when everybody, all the establishments—political, financial, Democratic, Republican—came together, and they said, “We simply cannot afford to allow the financial system to collapse. We don’t exactly know what will save it, but we’ll throw everything against the wall, because we can’t afford that.” That has been completely missing. You know, we’ve had endless conversations about jobs are a priority, jobs will be our focus, but it’s not really happening. The President asks for all ideas. You know, we’ve all been screaming many ideas—you know, Republican, Democrats, you know—from the payroll tax holiday to a really serious infrastructure and jobs program, to a green bank, to an infrastructure bank, to tax credits for small businesses. You know, the ideas are out there. What is missing is that sense of urgency and the political will.

JUAN GONZALEZ: Well, you talk especially about the inability so far of the administration to craft solutions to, for instance, the foreclosure crisis, to really help the millions of Americans that are facing foreclosure. Why do think it’s been so difficult to have that same kind of urgency for unemployment, for the housing crisis, as they have had for solving the bank meltdown?

ARIANNA HUFFINGTON: Well, I’m so glad you brought up foreclosures, because it kind of sums up everything. The fact that the cramdown amendment that Dick Durbin, Senator Durbin, was shepherding through the Senate—the fact that that amendment failed, which would have allowed over a million families to stay in their homes, simply by being able to negotiate, to have a loan modification, that tells you everything you want to know about how broken our system is. That was after the banks had wrecked the economy, after they had been bailed out by taxpayers. They still had the power to kill this amendment.

And also, I say in the book, how is that even in their own interest? You know, how many millions of homes do banks want to own? And what are they going to do with them? Especially as we know that property values immediately go down, all the surrounding properties suffer, when a home is foreclosed. Not to mention what it does to families. You know, all the stories, the heartrending stories that I write about, of families moving with school children in motels or with grandparents—with the latest Pew numbers yesterday about how many children are now being brought up by grandparents—in homeless shelters. This is like a kind of a gateway calamity that affects everything.

AMY GOODMAN: And yet, this is—you wrote Pigs at the Trough. That was under the Bush years. This is the Obama years, and you’re writing Third World America.

ARIANNA HUFFINGTON: Well, that’s why in section five, which is really, for me, the most important section of the book, because it’s about solutions. And, you know, we can sit here and go through the first four sections of the diagnosis of the problem and what’s wrong, but in the end, I feel we need to recognize that we need to move from hope to Hope 2.0. And Hope 2.0 is about us. It’s about what people can do, what communities can do. Of course we are going to keep calling on the government to do the right thing, but right now we have to just change the wind, because politicians will keep putting their fingers up and see which way it’s blowing, and it has to be blowing in a different direction.

And so, I really feel that it starts with a lot of very personal decisions. And a lot of them are not political. They have to do with tapping into our own strength and resilience, because I see, from the people I talk to, how many are crushed by the loss of a job, the loss of a home, and how others find that resilience in them, and not only survive, but manage to rebuild their lives in an even deeper way. I mean, I write about Brenda Carter, who lost her job after thirteen years in HR. And, you know, she had to just literally collect all her belongings from her—and I remember my editor said, “We have to cut 20,000 words. Let’s cut all this thing about what exactly she took out of her office—her plants, her pictures. We don’t really need that.” I said, “No, we do need that, because everybody understands that.” You know, you’ve built your life, you have your little office, and you have everything there, and suddenly you have to take it all down after thirteen years. She filed hundreds of job applications. She never got another job. So, what did she do? She started cooking praline candy and selling them, first door to door, then online. She got a real estate license. She improved her tack ability. So she’s rebuilding her life after months of depression. So that’s like key, to not let ourselves be defeated by what’s happening.

JUAN GONZALEZ: But let me ask you about this Hope 2.0, because it seems to me that part of the problem is that so many of the popular movement activists who had Hope 1.0 and who, when Obama came into government, either, one, became part of the—you know, got appointments in the administration, or, even worse, I think, became sort of targets by the administration whenever they were raising too much of a ruckus. They were called in by the administration, that gave them access, whether it’s the immigration rights advocates, whether it’s the labor unions, and basically said, “Hey, you’re not helping. You’re not helping our situation to get reform.” So they have, in essence, been disarmed. The activists have been either co-opted or increasingly the administration becomes the break on their ability to mobilize a popular movement. What can be done about that?

ARIANNA HUFFINGTON: Well, first of all, I can understand the reluctance to criticize when the alternative is John Boehner as speaker or Sarah Palin as president. I mean, obliviously, I don’t share the reluctance, and it hasn’t stopped me or you from calling things as we see them, but I can understand that—do we really want to hand the country back to the Republicans? Do we really want to hand the country to those whose only solution is to prolong all the tax cuts, including to the richest Americans, etc., etc.?

But what is happening right now is that we really need to put that aside and just rebuild a grassroots movement, and also look at what we’re doing in our own lives, right down to how do we build our own financial literacy? You know, many people really go into these mortgages, go into these credit cards, without a full understanding of the tricks and traps hidden in there. So there are very specific steps that need to be taken. And there is one other thing, which is, what are we doing to give back in our community? So, what I’m saying is, as well as our political activism, what are we doing to be much more hands-on in the lives of our communities? Because even unemployed people are doing amazing things, and that’s where my optimism is coming from. You know, Seth Reams, who lost his job as a concierge in Portland, Oregon, and started this group called, and so now, you know, literally, people flood his little operation with calls for asking for babysitting help, for help to move from their apartment, whatever is needed. So that kind of culture is also something we need to build.

AMY GOODMAN: You mentioned green jobs earlier. Today in the Washington Times, their main story is about, well, saying, “Noticeably absent from President Obama’s latest economic-stimulus package are any further attempts to create jobs through ‘green’ energy projects, reflecting a year in which the administration’s original, loudly trumpeted efforts proved largely unfruitful.” Why? Why did he back off? First he fires Van Jones, or they get rid of Van Jones, and then green jobs is out the window, when it can be one of the most productive forms of employment.

ARIANNA HUFFINGTON: Well, that’s really the fundamental problem. The audacity to win was replaced by the timidity to govern. And there is timidity everywhere. I mean, there are really no bold measures. And at a time of this huge economic crisis that we’re facing, we cannot just deal with things in this incredibly cautious way. I mean, the stimulus is a very good example. You know, I write in the book that Lloyd George said it best—you know, the English prime minister—when he said that you cannot jump across a chasm in two leaps. And that’s what they try to do, you know, and so falling into this abyss, which may be a double-dip recession. We don’t know exactly what it’s going to be, but it’s not good. And they’re beginning to recognize it’s not good and changing the rhetoric, at least. But the point is that at the time many people predicted it. Even Christine Romer, we now know, had really advocated in her different scenario a stimulus high enough to actually make it work, because now, what the right is doing is saying, “You know, we gave all that money, and it hasn’t worked.” So the inadequacy of the solution is now being used to undermine the very idea of government stepping in and helping—unless, of course, it’s to save Wall Street.

JUAN GONZALEZ: I’d like to ask you about education, because you touch on it quite a bit in the book. You say that our high schools have become dropout factories. We have one of the lowest graduation rates in the industrialized world. Over 30 percent of American high school students fail to leave with a diploma. And even those who do graduate are often unprepared for college. Now, the Obama administration has made a big issue of education with its Race to the Top, and you seem to support some of the initiatives. You certainly back the idea of being able to fire teachers who are not performing and doing away with outmoded union protections. But you also have a—you condemn its emphasis on testing as a means of determining whether public schools are improving. I’m interested in your take on this, how the Obama administration is doing on education, and also their big emphasis on charter schools, on the creation of charter schools. Do you think that that is a way to reform public education in the United States?

ARIANNA HUFFINGTON: Well, first of all, I think that what the Obama administration and Arne Duncan are doing with education is the best thing they’re doing. They’re acknowledging the crisis. They’re acknowledging that what we’ve done has not worked. And it’s sort of coinciding with the release of this amazing documentary that I write about in the book called Waiting for Superman, that profiles Geoffrey Canada and the work he’s doing here in Harlem, and again, the amazing work of saying we’re going to put children first, we are not going to allow anything, including the tenure of bad teachers, or anything at all, to stand in the way. And that’s the kind of determination we need, because otherwise, what this documentary powerfully captures is the fact that getting a decent education now, if you’re in one of those completely dysfunctional public schools, is a matter of lottery. You know, are you going to be lucky enough to win one of the slots in a another decent school? And that’s like amazing, that this entire American Dream has come down to chance.

AMY GOODMAN: I wanted to ask you about Robert Gibbs’s comment on the professional left. Do you think he’s talking about you there, among others?

ARIANNA HUFFINGTON: Oh, I don’t really know exactly who he’s talking about, but I really think that this whole idea that has been perpetuated by the media, and by the White House, of dividing every issue into one that has a left and right position is incredibly undermining our ability to find real solutions. And at the Huffington Post, we now have a tagline that we call “Beyond left and right.” That’s different than bipartisanship. That’s different than “Let’s comes together and split the difference and just compromise and pass something.” That’s general consensus on things like Afghanistan, for example. When George Will came out against escalating in Afghanistan, we trumpeted it as a headline beyond left and right, because the media keep positioning anyone who wants to leave Afghanistan as some kind of peacenik lefty who doesn’t understand the realities of national security, when people from across the political spectrum, including the Cato Institute, are recognizing that what we are doing is fighting an unwinnable war that is not helping us in terms of our national security. And, in fact, we are buttressing a corrupt regime at the expense of what we can do at home. Two billion dollars a week. So there I was the other day on Morning Joe, and Joe Scarborough and Ed Rendell, who were on, both agreed we need to stop that. So, I mean, we need to say clearly that these are not all left-right decisions.

AMY GOODMAN: President Obama is holding his first news conference since the end of May today at the White House. What would you ask him?

ARIANNA HUFFINGTON: Well, I would ask him where is the fierce urgency of now, that he likes to quote, because that’s what is needed, because people are suffering.

AMY GOODMAN: I want to thank you for being with us, Arianna Huffington. Her new book is called Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream.




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Third World America
How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream
Arianna Huffington


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It’s not an exaggeration to say that middle-class Americans are an endangered species and that the American Dream of a secure, comfortable standard of living has become as outdated as an Edsel with an eight-track player. That the United States of America is in danger of becoming a third world nation. 

The evidence is all around us:

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, our transportation and electrical systems–is crumbling; our economic system has been reduced to recurring episodes of Corporations Gone Wild; our political system is broken, in thrall to a small financial elite using the power of the checkbook to control both parties.

And America’s middle class, the driver of so much of our economic success and political stability, is rapidly disappearing, forcing us to confront the fear that we are slipping as a nation — that our children and grandchildren will enjoy fewer opportunities and face a lower standard of living than we did.

It’s the dark flipside of the American Dream — an American Nightmare of our own making.

Arianna Huffington, who, with the must-read Huffington Post, has her finger on the pulse of America, unflinchingly tracks the gradual demise of America 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.

Finally, calling on the can-do attitude that is part of America’s DNA, Huffington shows precisely what we need to do to stop our freefall and keep America from turning into a third world nation.

Third World America is a must-read for anyone disturbed by our country’s steady descent from 20th century superpower to backwater banana republic.

From the Hardcover edition.


Joseph Stiglitz, professor of economics at Columbia University and Nobel Laureater…
“A voice of conscience in a time when we need conscience more than ever. . . Arianna Huffington is right: it’s not too late for citizens to wake up politicians or to take matters into their own hands. Time is short: read this book now.” –Elizabeth WarrenHarvard Law School professor and author of The Two-Income Trap “Luckily for Congress, the White House, and Corporate America, no one reads anymore, because if people discover this book, America will become a very different place.” –Bill Maher “Restoring the values that have made America strong — a thriving middle class and a sense of basic fair play — are of crucial importance to all Americans, left and right. Third World America is a powerful plea for our country to wake up so that we can change course — before it’s too late.” –Joe Scarborough “Politicians talk endlessly about “protecting the middle class,” yet, over the last 30 years, the middle class has taken a relentless pounding. In precise, graphic, and shocking terms that will bring the crisis home to everyone, Arianna Huffington explains why: special interests have become too powerful, money dominates our politics, and there is no sense of empathy or even shame amongst our elite. The national spirit that built America. . . lies in tatters. Turning this situation around will require strong new leadership. How long will that take? That depends on you–read this book and push hard for change” –Simon Johnson — professor of economics at MIT Sloan School of Business and co-author of 13 Bankers “Arianna Huffington is one of the very few people in America committed to say things the way they are and to expose the monstrous elephants in the room ignored by the dominant discourse. Even rarer, she does so in a lively, engaging, and, mostly, charming way.” –Nassim Nicholas Taleb, author The Black Swan “Third World America is simultaneously hard-hitting and empathetic. It makes the case that, as the world’s largest economy fights to define its future, a viable middle-class is essential to our country’s well-being and something we should all fight to ensure.” –Rob Johnson — Senior Fellow and Director of the Project on Global Finance at the Roosevelt Institute “The quick wit and sharp critique of Arianna Huffington will now be heard where they are needed most — in defense of our quickly disappearing middle class. Taking direct aim at the misguided policies that have protected the plutocracy at the expense of the middle class, Arianna explains in stark language where we will end up if we don’t change course. A must-read for all concerned citizens and thinkers. ” –Eliot Spitzer, former Attorney General and governor of New York. “With great passion and insight, Arianna tells it like it is. Blending outrage and optimism — indignation at how America’s crony capitalists have wrecked the nation’s great middle class, and unremitting hope that our people will rise and put things right — she explains what’s happened and what must be done. Here, clearly, is a book for our times.” –Robert B. Reich, Professor of Public Policy, University of California, Berkeley, and former U.S. Secretary of Labor “An alarming account of the plight of the American middle class.”

About the Author

ARIANNA HUFFINGTON is the cofounder and editor in chief of the Huffington Post, a nationally syndicated columnist, and the author of thirteen books. She is also the cohost of Left, Right & Center, public radio’s popular political roundtable program. She was named to the Time 100, Time magazine’s list of the world’s one hundred most influential people, and to the Financial Times‘s list of fifty people who shaped the decade. Originally from Greece, she moved to England when she was sixteen and graduated from Cambridge University with an MA in economics. 


Arianna Huffington Says Federal Government Has Failed the American Middle Class

Huffington Tells Diane Sawyer That as Middle Class Disappears, U.S. Could Become a “Third World America”


Sept. 7, 2010—

Arianna Huffington says that the Obama Administration has failed to take decisive action during the economic crisis, threatening the existence of the American middle class.

“There’s no question that the Obama Administration really underestimated the economic crisis,” Huffington, the creator of the Huffington Post and a liberal commentator said in an interview with ABC’s Diane Sawyer set to air tonight on “World News.”

“Remember, we had been told that after the stimulus passed, we would actually manage to get unemployment down to around eight percent. Well not only did that not happen, but the chances of double-digit unemployment are growing,” added Huffington, who also takes aim at Republicans.

Millions of Homes in Foreclosure

Huffington pointed to the flood of foreclosures as another massive failure by the Obama Administration. Some 2.8 million households received foreclosure notices in 2009, a record that could be matched or even surpassed this year.

“As a mother, I feel the idea of having to move your kids from your home into a motel — or often a homeless shelter — is so devastating,” Huffington said. “And seeing the impact this is going to have on a whole generation of children as they’re growing up like that makes me really disturbed about the fact that the administration did not do more to prevent foreclosure.”

Fears of a “Third World America”

In her new book, “Third World America,” Huffington outlines alarming statistics about the struggling middle class. The middle class is disappearing and the American dream is dying, Huffington says, but there’s still time to do something about it.

“The foundation of American prosperity, but also the foundation of American democracy has been the middle class,” Huffington said. “Because without a middle class, we become a third world country of extremes. You know, the very rich and the very poor, which increasingly is everyone else.”

Huffington argues that the trend has been going on for decades, but the middle class crisis has only gotten worse with the nation mired in recession.

Huffington Shares Alarming Statistics About Middle Class Economy

Among the most jarring statistics she cites, Huffington writes that every 30 seconds, someone declares bankruptcy in America. The average American is already $16,000 in debt.

“Is that the fault of the system, or did we all just go a little crazy and think that … the judgment day wouldn’t come?” Sawyer asked.

“”We need to take personal responsibility, no question about that. It’s a little bit like a culture of addiction,” said Huffington. “But you know, when it comes to drug addicts, we punish the drug peddlers.”

In Huffington’s view, the big banks and Wall Street firms have failed to come through for the American taxpayers who bailed them out. They’ve continued to profit off of fees and interest rates that she sees as traps that take advantage of consumers.

“That’s why one of the first steps I recommend in the book is financial literacy,” Huffington said. “We need to actually take responsibility for moving our families to safe financial ground.”

Foreclosure vs. Mortgage Negotiation

Huffington also suggests that Americans should be allowed to negotiate and modify the terms of their mortgages rather than go into foreclosure and lose their homes.

“This is not just good for them, it’s good for the entire neighborhood,” she said, noting the negative effects of foreclosure on neighborhood property values.

Huffington does not expect politicians in Washington to make her suggestions happen. Rather, she hopes that her book and accompanying website, will inspire people to take action for themselves, sharing their own stories and ideas.

“When people take action, it’s the greatest antidote to despair,” Huffington said.

Americans Come Forward with Ideas to Help the Middle Class

One such idea came from Gene Epstein, a self-made millionaire from Pennsylvania. He is now on a mission to get every small business to hire one employee for six months.

“I can almost guarantee you that within six months, we will be into the incredible upturn of economic prosperity,” Epstein said. “Only 10 percent [of small businesses taking action] will change the entire wheels of what we have in motion by having a half million people removed from unemployment compensation and turned into being productive.”

Another idea came from Seth Reams, an unemployed man from Portland, Oregon. Reams created an organization called We’ve Got Time to Help that allows the unemployed to volunteer, doing everything from mowing lawns to moving furniture.

Urging Americans to Take Action

Huffington’s campaign earlier this year, urging Americans to “Move Your Money,” spurred millions to withdraw funds from big banks and deposit them in community institutions, she said.

“We probably estimated about nine percent of Americans moved their money,” Huffington said, adding that some state pension funds have also jumped on the trend.

Now, Huffington calls it her vision of “Hope 2.0” for America, with a politically active and engaged middle class bringing their needs to the forefront, instead of waiting for a politician to address the problems.

“The truth is that democracy is not a spectator sport,” Huffington said. “It’s always been about people in their own communities taking matters into their own hands. And both changing things and demanding change from our elected leaders.”


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