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One Year After the Crash: the Progressive Media Speaks

One Year After the Crash: the Progressive Media Speaks

On Thursday, the U.S. Census released new data on the economic straits many American households faced in 2008. The grim report illustrates a nation enduring its highest poverty level in decades, coupled with a significant decline in middle class financial security. But one year after Lehman Brothers filed for the largest bankruptcy in U.S. history, not a single law has been passed to protect ordinary citizens from Wall Street’s excess.

Just how bad was 2008 for the ordinary U.S. household? As Kevin Drum emphasizes for Mother Jones, median household income plunged $1,860 last year. That’s the biggest decline since the Census began tracking incomes in the 1970s. The poverty rate increased from 12.5% to 13.2%, the highest level since 1997, and the total number of people living below the poverty line surged by 1.5 million to 39.8 million. Nearly one-fifth of all children in the United States are now poor. To fit the Census definition of poor, families have to be pretty hard up: A family of four must be living on less than $22,025 to qualify.

The Census data does not include any of the economic damage the U.S. sustained this year. In February 2009 alone, the economy shed a staggering 741,000 jobs. That fallout has hurt the poor more than anyone else, as Andrew Leonard explains for Salon.

“In 2008, the rich got less rich, while the poor got even poorer,” Leonard writes. “Which just goes to show that a falling tide lowers all boats—with one difference: The boats belonging to the rich probably still float, while the poor have smashed into the rocks.”

Lest there be any doubt, President Barack Obama’s economic stimulus package was absolutely critical for the nation’s economic health. The Census believes programs enacted under the stimulus will keep a total of 6.2 million people from falling into poverty, including 2.4 million children. To put that number in perspective, over the entire course of the George W. Bush Presidency, the number of people living below the poverty line climbed by 8.2 million, while the number of children in poverty increased by 2.5 million. Were it not for the stimulus Obama pushed through, the Bush legacy would be 75% worse, and almost 100% worse for children.

What is most alarming about the Census figures is the fact that workers were already treading a difficult path before the financial crisis sent the economy off a cliff. After years of economic “growth,” the median income was lower in 2007 than it was when President Bill Clinton left office. And the majority of people entering poverty during the Bush years did so prior to the great crash of 2008.

Another recent report from Jeannette Wiks-Lim of the Political Economy Research Institute drives this point home. In an interview with Jesse Freeston of The Real News, Wiks-Lim discusses the projected path of decent jobs in the U.S. economy, based on data from 2006, well before the crisis broke out. Wiks-Lim defined a “decent job” defined as one that pays $17 an hour plus health insurance, but found that in 2006, a full 65% of workers in the U.S. were paid below that benchmark. Equally distressing, her study indicates that by 2016, the number of decent jobs will be roughly the same as in 2006. Job-quality stagnation will persist even though the economy is likely to grow over this time period. That growth will be going to those who are already well off, Wiks-Lim says, while ordinary workers will face the same problems.

There are frightening long-term trends in this data. In 1975, average pay for workers outside the managerial class was $18.23 per hour, according to the study. But by 2007, those wages dropped to $17.42 per hour. These wage declines came despite major growth in economic output over those three decades, and despite an 85% increase in worker productivity.

While workers experienced increasing pressure on their pocketbooks, Wall Street gambled away their retirement investments. Lehman Brothers filed for bankruptcy one year ago today, a move which created chaos in the financial sector and heavy damage in the rest of the economy. Things were looking bad for the economy before Wall Street imploded, but the financial crisis made those problems a lot worse. “In a modern society, a credit freeze means instant death to the real economy, since virtually every enterprise, big and small, runs on credit,” Les Leopold explains for In These Times. “When the financial sector froze, it pushed the real economy off a cliff.”

But incredibly, after a year marked by massive financial bailouts, not one new law has been signed to protect our economy—and taxpayers—from Wall Street. Not one. Even the modest plans to rein in executive pay for taxpayer-supported companies have proved toothless. Leopold notes that President Barack Obama’s refusal to crack down on the banks has left both the financial regulatory process and other important progressive plans—like overhauling the broken health care system—in a precarious political state. The largesse we have shown for bailed-out bankers gives conservatives ammunition against other, more productive activities.

“We have a horrific feedback loop where Main Street’s anger is directed as much against the government as it is against Wall Street,” Leopold writes. “In fact, more and more people are turning against the administration because it looks as if it sold out to the banks. … The outrage-turned-anti-government has spilled into the health care debate and now undermines badly needed government intervention into our wasteful health insurance industry. If we roll over on the Wall Street fight, anti-government politicians will ride to power on populist anger. ”

And make no mistake, Wall Street is pushing back as hard as it can against even the most obvious reforms. Writing for The American Prospect, Tim Fernholz details the massive push by the Chamber of Commerce against the creation of a Consumer Financial Protection Agency. The CFPA would do just what its name implies—regulate all financial products that target consumers, and nothing else. It’s a simple and much-needed reform, but Wall Street is spending a lot of money to keep it from happening.

Our entire system of economic value has become inverted, as Wendell Berry argues in an essay for The Progressive. Anything that creates financial profits is considered economically productive, while environmental impacts and social benefits are viewed as economically unimportant. “Only in a financial system, an anti-economy, can it seem to make sense to talk about ‘what the economy needs,’” Berry writes. “In an authentic economy, we would ask what the land, what the people, need.”

The U.S. is frequently referred to as the richest nation in the world. Free-market ideologues and conservative pundits often couch their preferred policies as a defense of U.S. prosperity—there’s even a right-wing astroturf group called “Americans for Prosperity.” But more than 13% of the nation lives in poverty while the government backs paychecks for millionaire bankers. The problem is obvious to everyone, but if we do not demand change, Wall Street will ride the status quo to another economic catastrophe within a few short years.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. This is a project of The Media Consortium, a network of 50 leading independent media outlets.

For more on the Lehman collapse:  A Year After Lehman’s Collapse: No Reform in Sight

 

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Tom Fewster via istockphoto

by Zach Carter, Media Consortium

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7 comments

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3:43AM PDT on Sep 18, 2009

The problem is very simple the people are still letting the banksters control their money, all the other hype is just that, hype and bullshit.

8:35AM PDT on Sep 17, 2009

While disagreeing with some of the article as it relates to the cause of the financial meltdown, sorry but I am an investment advisor, I agree with the overall synopsis of our current economy. I agree totally with Rex J's comments about the funding of many congressmen by lobbyist and corporations. I think the problem is that those we depend on to fix the problem, ie., congress, were part of the problem in the first place. I would feel very uncomfortable predicting that any president has the ability to fix the US economy. Doesn't mean the end of the world as we know it, but I wouldn't anticipate a quick fix...Paul

11:41AM PDT on Sep 16, 2009

I can't figure out what is wrong with this Congress! We made it so clear in our voting that we wanted a huge change - including regulation of business and banking. How clear do these evil doers have to make it that they will throw any of us out on the street to give themselves one more automobile? Apparently our "leadership" - how I hate putting that word in this comment! - simply wasn't paying attention. We put you there and all the campaign contributions in the world won't put you back in if you let us down. Pay attention!

6:24AM PDT on Sep 16, 2009

There were some things that Bush and Cheney did in a hurry before leaving the White House. I know they did a rush on reinstating their version of the World Trade Agreement. Perhaps we need to examine all the things they set up on their way out the door to better understand what is going on.

5:52AM PDT on Sep 16, 2009

I watched the news yesterday and they talked about just this subject. The report said, Obama wants tough regulations on banks and businesses so that nothing like this will ever happen again but nothing has come out of congress so far because these guys (congressmen) recieve so much money from these banks and Wall Street firms that nothing will get done. Both sides are bought and paid for just like in healthcare, bought and paid for. The only way to prevent this stuff from happining is to prohibit corperate donations to politicans.

5:10AM PDT on Sep 16, 2009

Obama has caved in to the money groupps. We are going nowhere but down.

3:07PM PDT on Sep 15, 2009

The trend is towards bankrupting the country. If Obama can secure a couple things for the nation, like infrastructure, health care, education, before the IMF is finally able to force us to accept their loans, then it will at least make the transition to a truly debtor nation a little less painful for the majority of us near the bottom.

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