For most of us (John McCain excepted), the collapse of Lehman Brothers, Fannie Mae, Freddie Mac, Bear Stearns, Merrill Lynch, AIG (and others no doubt yet to come), is a clear sign something major has gone wrong with our financial system.
One of the main culprits in this debacle is the deregulation of the financial industry—which happened in large part through the efforts of McCain economic adviser Phil Gramm, who as senator, pushed through legislation allowing institutions to combine commercial banking and investment services.
But while the sound of crashing investment firms along Wall Street echoes loudly across the nation, if you listen real carefully, you can hear in homes around the country the distinct cry of millions in America’s middle- and working-class who are experiencing the Crunch of economic hardship.
Far from the hedge fund managers and golden-parachuted CEOs, the working women and men of this nation are working harder for far less pay, spending time away from their families juggling two and three jobs to afford health care and food and often collapsing under the weight of debt accumulated to pay for education, housing and medical bills.
Between the mid-1940s and mid-1970s, inflation-adjusted wages doubled for most U.S. workers, but between 1979 and 2007, they grew only 7 percent Since 1979, productivity, or output per hour, has grown 70 percent—10 times as fast as real wages.
As a result, income and wealth are more unequally distributed in the United States than in any other developed country and are more unequal today than at any time since the 1920s. Even more alarming, American intergenerational economic mobility is falling and is already lower than in many European countries.
The economic shock waves caused by the current financial and housing crises will impact every American—and many others around the globe—through slower growth, lost jobs, and decreased wealth in housing, financial assets, and pensions. In fact, the Economic Policy Institute (EPI) this week released data showing there now are fewer jobs for jobless workers. In July, 8.8 million unemployed workers were actively seeking jobs in the United States—and finding only 3.4 million job openings. That means an average of 2.6 job seekers for every available job—an increase of more than 60 percent from just a year and a half ago, when there were just 1.6 job seekers for every job opening.
But what’s eating away at the ability of millions of us to build our American dream extends far deeper than the current morass and has much longer roots than the financial meltdown.
A book by EPI economist Jared Bernstein goes a long way toward helping us understand the causes of our individual and national economic strife. Crunch: Why Do I Feel so Squeezed? (And Other Unsolved Economic Mysteries) distills big economic questions into bite-sized chunks that make complex economic issues clear.
In fact, Bernstein begins each short chapter with a question, followed by a lively discussion whose main points are conveniently summed at the end (with footnotes tucked judiciously at back).
Here’s one example, with a question many working families are asking themselves.
My dad had a full-time job, but my mom didn’t, and they managed to raise, feed, house and educate two kids on one salary. I can’t do that today. Why not? What happened?
Bernstein explores how it now takes two incomes to support a family because men’s earnings have fallen and women’s participation in the labor market is offsetting the loss. At the same time, prices of key components of the middle-class budget are rising faster than middle-class incomes—resulting in the middle-class Crunch.
A chapter on "Unemployment: Wall Street vs. Main Street," highlights the competing goals of corporate profit-makers and the rest of us. Another chapter examines why those Econ 101 textbooks are wrong when asserting that government laws raising wages for workers require layoffs (gotta watch those long-held economic shibboleths).
And then there’s the complex issue of job outsourcing. The main problem with outsourcing jobs, Bernstein writes, is when a country, say the United States, ships out family-supporting jobs and replaces them with low-wage, no-benefit jobs. The sort of thing McCain and his entourage of bottom-feeder lobbyists support.
McCain is the guy who opposed a requirement that the government buy American-made motorcycles. He said all Buy American provisions were "disgraceful." His campaign advisors include Rick Davis, the lobbyist whose DHL deal could result in thousands of lost jobs in Ohio, and Randy Altschuler, an outsourcing broker who advises companies on how to ship jobs overseas.
Bernstein’s solution to outsourcing would emphasize green manufacturing and leveraging our nation’s market access to force others to play fair. Sen. Barack Obama is on the same page. He proposes a federal Renewable Portfolio Standard and wants to extend the Production Tax Credit, which have the potential to create hundreds of thousands of new jobs and increase renewable energy production. Obama also would make the research and development tax credit permanent to help create higher-paying jobs.
Another key solution Bernstein proposes is improving the nation’s labor laws to level the workplace playing field so more workers have the chance to join together to form unions. Union workers make more money, have more health care and retirement security and job safety. But when workers try to form unions, they often are subject to employer harassment and intimidation. Like those of us in the union movement, Bernstein supports passage of the Employee Free Choice Act, which would level the workplace playing field by enabling employees to sign up for a union through a majority verification (card-check) process or labor board election, whichever they choose.
Obama is a strong supporter of the Employee Free Choice Act—he co-sponsored it in the Senate and voted for it last year. McCain, for all his blathering about Sarah Palin’s union-member husband, opposes unions and voted against the Employee Free Choice Act. Worse, McCain voted FOR a bill that would have eliminated unions altogether.
Jared Bernstein can tell us a lot about what’s going on now and how we got to where we are. Maybe he even can tell us how we can keep McCain out of the White House. Help me welcome him to Firedoglake Book Salon.