A DC insider speaks to us about “Voices of Power”

This is someone we should listen to, with a message that must hear.  At the end are links to more information about this topic.

Voices of Power: Elizabeth Warren, interview by Lois Romano, Washington Post, 8 October 2009 — Warren is Chairwoman of the bank bailout Oversight Committee.  Excerpt from the transcript:

ROMANO: Do you agree with Michael Moore’s basic premise that capitalism as it is now has destroyed the country’s middle class?

WARREN: Well, I believe that the middle class is under terrific assault. And I don’t want to play this as a capitalism issue.

When we compare middle-class families today with their parents a generation ago ¿ we have basically flat earnings-a fully employed male today earns on average about $800 less, adjusted for inflation- than a fully employed male earned a generation ago. The only way that houses could increase or families could increase their household income was to put a second earner into the workforce, and, of course that’s now flattened out because there aren’t any more people to put into the workforce. So you’ve got, effectively, flat income in this time period ¿ with rising core expenses; housing; health insurance; child care; transportation, now that it takes two cars to get everywhere, two jobs to support; and taxes, because you’ve got two people in the workforce and we have a somewhat progressive taxation system. So that families are spending a lot more on what you describe as the basic nut.

The third leg to the triangle, and that is families, to deal with this, stopped saving and started going into debt.

And the debt side of where families both spend more money and are made much more vulnerable on mortgages, on credit cards, on check overdraft fees, all this side of it, the credit side of it really means that we have a middle class that a generation ago we would have described as solid, secure, dependable. If you could just get into the middle class, you could pretty much count on a fairly comfortable life and all the way through to a comfortable retirement.

That’s been hollowed out. Sure, there are people who are going to make it through just fine, but the vulnerability of families in the middle class has just ¿ it has gone up enormously.

ROMANO: What more can we be doing to protect the middle class, to protect what Michael Moore refers to as the “American Dream”?

WARREN: Oh, you know, the answer is we’re in trouble on so many fronts.

I will start with credit. We clean up the credit mess. This is like sewing up a hole in the bottom of someone’s pocket. This is literally tens of billions of dollars that are just falling out of the pockets of middleclass families and making their way over to a handful of very large financial institutions. We can change some laws, and we can fix that one.

I have to say on health care, I do studies on families filing for bankruptcy in the aftermath of serious medical problems. Whatever else is going on in the debate is the reminder that even with people with health insurance are paying enormous sums for medical care, whether it’s about copays, things that are denied and higher prices that they’re paying for their health insurance. So whatever we can do to bring those costs under control for middle class families will help enormously.

Sending the kids to college, the costs are just out of control. And we are putting debt loads on children unlike those we have ever imagined.

The housing crisis. The way in which most American families build wealth is not through the stock market. It’s by buying a home and paying it off. That is, for most Americans, their retirement account. They’ll get that house paid off, live on Social Security. That’ll be the in heritance for the children if they don’t have to spend it down for medical care.

The chaos in the housing market is destroying wealth for middle-class families. To the extent we’re popping a bubble, I get it. That’s what it’s going to have to be. But I worry now about overshooting in the other direction. You know, that just like a bubble pushes up too high, the collapse pushes down too low.

We’re watching more and more families go underwater on their mortgages and not by 5 percent, going underwater by 25 and 30 percent. And this is going to intersect with unemployment. As unemployment keeps going up, more and more people are going to lose their houses. That means it depresses the value of the houses next door because it’s all downward pressure on prices.

And, of course, the last one I would mention is the income front. As the pie grew throughout the 20th century, the portion that went to workers, went to the median earning family in the United States, it stayed the same percentage wise, but that meant a bigger and bigger pie was a bigger and bigger slice of pizza.

That began to shift in the ’70s, and, ultimately, what happened is that the pie kept getting bigger. It’s measured through productivity. It’s measured through GDP. But the proportion that middleclass families got in income began to shrink.

As we talk about things, like what we produce in the United States, do we really have any manufacturing base, if not hard manufacturing, do we have other intellectual products where we think we have a comparative advantage, those kinds of issues about how workers get back in the role of participating in the growth in our economy, that’s whether or not we’re going to have a strong and vital middle class.

And, you know, at the end of the day, it’s about these economic factors, but we have to remember we have fundamentally changed as a country.

In the 1950s and the 1960s, coming out of World War II, we said as a government, as a people, what can we do to support the middle class. You know that’s what FHA was to help people get into homes, right? VA, GI loans on education, we looked at policies, like whether or not they strengthen and support the middle class.

Somewhere, that began to change in the late 1970s, early 1980s, and the middle class instead became like a resource to be pulled from, and you know, they became the turkey at the Thanksgiving dinner. Who could who could carve off a piece? Who can get this little piece? Who could make a profit from this piece and that piece or squeeze down on the wages? And the middle class has gotten shakier and shakier, hollowed out.

The consequences of that are far more than economic. The middle class is what makes us who we are. It’s affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to ¿ basically to suck the poor up out of poverty and into middleclass positions. The middle class is what gives us political stability. It’s what gives us an America that’s all bought into the whole process that what we do is not just about a handful of folks at the top who profit from it. We all profit from it, and that’s why we work, and that’s why we vote, and that’s why we accept that the outcome of elections. And that’s why we’re safe to walk our streets, because we have a middle class for which this ultimately works, this country.

And every time we hollow that out, every time we take away a little piece of that, we run the risk that some of what we understood at America, some of what we know as America begins to die. That’s what scares me.

Who is Elizabeth Warren?

Elizabeth Warren (born 1949) is a Professor of Law at Harvard and Chairwoman of the Congressional Oversight Panel created to oversee the U.S. banking bailout, formally known as the Troubled Assets Relief Program. In 2007, she first developed the idea to create a new Consumer Financial Protection Agency, which President Barack Obama, Christopher Dodd, and Barney Frank are now advocating as part of their financial regulatory reform proposals.

In May 2009, Warren was named one of Time Magazine’s 100 Most Influential People in the World.

From Wikipedia.

Other articles about the dying middle class

For more information from the FM site

To read other articles about these things, see the following:

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A few of the posts about the death of the American Middle Class

  1. A sad picture of America, but important for us to understand, 3 November 2008
  2. America’s elites reluctantly impose a client-patron system, 5 November 2008
  3. Inequality in the USA, 7 January 2009
  4. A great, brief analysis of problem with America’s society – a model to follow when looking at other problems, 4 June 2009
  5. The latest figures on income inequality in the USA, 9 October 2009


Please share your comments by posting below.  Per the FM site’s Comment Policy, please make them brief (250 word max), civil and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

4 thoughts on “A DC insider speaks to us about “Voices of Power”

  1. Without a middle class, you can’t have democracy. You’ll get an America that looks vaguely like a democracy but actually functions like Mexico — a country owned by 35 superwealthy families) or Brazil (plush exclusive skyscrapers surrounded by a vast ocean of favelas, racked by uncontrollable violence (“Rio gangs shoot down police chopper, 2 cops dead“, AP, 17 October 2009).

    A wide variety of trends have converged to delete the American middle class. Another one is the reverse brain drain (“Beware The Reverse Brain Drain To India And China“, by Vivek Wadhwa, Tech Crunch, 17 October 2009).
    Fabius Maximus replies: That’s a feature, not a bug, to our ruling elites. Jefferson’s dream of economically independent citizens (farmers, craftsmen, small businessmen) lost almost immediately to those of Hamilton — who favored a plutocratic system centered around large businesses. The process accellerated with FDR, using the New Deal to cartelize the economy. This is just the latest phase in a long process.

  2. “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” –Louis D. Brandeis (Supreme Court Judge)

  3. mclaren I think the number for the US ruling families is a dozen or so.

    But, the share of wealth by ordinary people in the US expanded up to the mid-70’s. High taxes, estate taxes, captal gains, etc meant that the majority of total system wealth increase went to ordinary people.

    The the ‘big lie’ started’ and taxes went down (plus all sorts of loopholes ‘sprung’ up). As Buffet said, his tax rate was lower than his receptionist. Kerry Packer (now dead but once Australia’s richest person) used to boast about how little tax he paid.

    Plus the wealthy rip off social security systems (there is no end to their greed). Here in Melbourne the area with the greatest beneficieries of social security (income support, student help, health, etc, etc) is also the wealthiest area. They just strurture their income and wealth into ‘trusts’ and corporate structures, so they have low income and behold become eligible for all sorts of benefits .. which naturally they claim.

    A nice con job I call it.

    Oh and dont believe the hype about how a VAT would solve this. Companies dont pay VAT (they net it out). So everything they pay for, through all their companies, is VAT free .. while you and me pay 10% (or more) on everything we buy.

    Sheer looting and the smartest of them (and that is not many) know this, but they bet that the Govt security forces will keep the peasants in line. Do you really think all these new ‘security’ laws and systems are aimed at terrorists? No they are aimed squarely at you .. step out of line and….. better practice your breath holding skills for when you are waterboarded. And shock youself regularly to get used to tazers.
    Fabius Maximus replies: That is a great question, and one I’d never thought of. What is the structure of the ruling elites in the US? Or even of the wealthy? That would make a great sociology project. Size, degree of interrelationship (geographic, college, clubs, business), degree of intermarriage, mobility. Has anyone seen research on these things?

    I read what a great step forward it was when Fortune first published their list of the 500 richest in 1955. Do we know much more than we did then?

  4. As for the issue of debt .. look at Steve Keen’s site. He is arguably Australia’s greatest economists (and, IMHO, one of the greatest full stop). Buy his book, Debunking Economics, read his blog. Look at the debt to GDP numbers in his blog. And how he worked out how it is the private sector that creates money (not the Govt) in the ‘roving cavaliers of debt’ article (same blog).

    And for the curious look at his research site.

    Discover economic history, not the airbrushed excuses that current neo-liberal economics talks about now. What were Marx, Keynes, Fisher and Mynsky really arguing about? Why Adam Smith would be horified about modern economics.

    Discover the real Keynes, who if he could come back from the dead, would smite all those people who claim to his thoughts and ideas. He was too big, the people who have later claimed to be Keynesians are midgets in comparison. The man who famously said “of course I changed by mind, I had new data .. what would you do” to a detractor who accused him of changing his position.

    And Minsky, along with belatedly Fisher, the US’s greatest (and sadly unsung) economist.

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