America’s Middle Class: From Boom to Bust

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America’s Middle Class: From Boom to Bust

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A quarter of the American population are on food assistance.
By Victor Olevich
WASHINGTON (VR) – For decades, the road trip has been a part of the American national tradition, seen as the best way to tour the vast nation by its citizens and foreigners alike. From high school graduates and college students to European visitors from the Soviet literary duo Ilf and Petrov in the 1930s to the French postmodernist philosopher Jean Baudrillard in the 1980s, it remained a quintessential part of the American experience for those seeking to immerse themselves in the sights and sounds of the country.

Today, however, an altogether different type of sightseeing adventure is making a comeback in the United States. Poorism, more commonly known as “slum tourism”, confined for almost half a century to the most downtrodden areas of the Third World, and last seen in the U.S. during the Gilded Age, when New York’s wealthier residents toured the Lower East Side to see how the “other half” lived is once again in vogue in America’s metropolitan areas. Organized excursions through the “ganglands” of Los Angeles and the poverty-ridden areas of Bronx are only one in a growing number of symptoms of America’s growing income inequality.

With a quarter of the American population on food assistance, teen unemployment hovering above 50% and one out of five children under the age of 18 living in poverty, rising income inequality and the decline of the middle class has become a staple subject of practically every national election campaign in the United States.

From conservative politicians and pundits attributing the growing wealth disparity to a “culture of entitlement” to Democratic party leaders blasting the unfettered greed of Wall Street bankers and financiers, the Washington establishment is gripped by the problem at hand, but seems unwilling to offer and implement real solutions that would alleviate the plight of the American middle class and the poor.
The rise of the middle class, which by the 1950’s became the backbone of the American political and economic order, was initially prompted by Franklin D. Roosevelt’s New Deal reforms and further strengthened by America’s triumphant emergence out of World War II with superpower status.

Faced with severe economic distress and instability resulting from the Great Depression and fearing a potential repetition of Russian and European leftist revolutionary events on U.S. soil, the American establishment undertook a series of actions to provide and guarantee new rights and opportunities to the country’s struggling working class. Called a “traitor to his class” by conservative opponents of his New Deal policies, Roosevelt nevertheless played an important role in stabilizing the American economy and saving the privileged classes from which he emerged into the limelight of national politics only a decade earlier.
Under the New Deal, the Public Works Administration (PWA) and the Civilian Conservation Corps were established to provide jobs for millions of unemployed and displaced workers in public infrastructure projects. The Glass-Steagall Act was passed by Congress to increase regulation of the banking sector by the federal government and limit speculatory practices, which played a part in provoking the Crash of 1929 and the ensuing economic crisis.

The Securities and Exchange Commission was established in 1934 to curtail insider trading, fraud and other abuses in the nation’s financial markets. Furthermore, the Federal Housing Administration and the Home Owners’ Loan Corporation were given the task of supporting private home ownership in the country and simplifying mortgage procedures for potential homebuyers. Finally, the National Youth Administration (NYA) was created to provide employment and assistance to young adults under the age of 25.
The ascent of the United States, along with the Soviet Union, to global power, following Allied victory in World War II and the emergence of the Cold War struggle between the two superpowers prodded the American political and business elites to take further steps to nurture a more robust and inclusive middle class. The prospect of Soviet influence and the potential appeal of socialist propaganda to the poor and the disadvantaged in the West provided the impetus for sustaining economic policies conducive to middle class growth.

However, already by the late 1970-s – early 1980’s, as the appeal of socialist slogans from the Eastern bloc countries began to fade, Western business elites and their allies in the political establishment began a series of reforms under the seemingly idealistic branding of free market capitalism that eventually undercut the positions of the American middle class and led to its steep decline.
The rise of Margaret Thatcher in the UK in 1979 and the subsequent election of conservative Republican governor of California Ronald Reagan to the White House marked the ascent of neoliberal free-market orthodoxy as the basis for domestic economic policy on both sides of the Atlantic. As the defense budget increased dramatically in support of Reagan’s crusade against the “Evil empire”, with the American populace being perpetually bombarded by crude, fear-mongering anti-Russian propaganda along the lines of “Red Dawn” (1984) and “Amerika” (1987), spending on domestic assistance programs entered a period of significant decline.

Almost half a million Americans lost their benefits from the Aid to Families with Dependent Children (AFDC) program. At Reagan’s behest, federal spending on school lunch assistance programs for needy students was slashed by almost a third. Funds provided by the federal government to America’s cities were halved. Notably, the administration worked to bring down the power of the unions while the tax rate for the highest earners was cut dramatically from 70 percent to 28 percent.
After 12 years of conservative Reagan-Bush presidency, the White House went to Democratic Arkansas governor Bill Clinton. Once described by former Fed chairman Alan Greenspan as the “most conservative” U.S. president in the last half century, Clinton not only did not stop Reagan’s neoliberal agenda in its tracks but deepened its influence on American society. As Peter Beinart, an astute observer of the American political scene noted last year, “Reagan defined a new political era and Clinton ratified it”.

Abiding by his promise to “end welfare as we know it”, Clinton introduced public welfare reforms that once again significantly reduced federal spending on assistance programs for the poor and made it more difficult to gain eligibility for welfare payments. Even more ominously, the Glass-Steagall Act, an important piece of New Deal legislation designed to stabilize the banking sector and promote government oversight, was formally repealed by the Gramm-Leach-Bliley Act of 1999, passed by both houses of the U.S. Congress and signed by the president.
The virtual deconstruction of New Deal social and economic reforms in the neoliberal era, along with the effects of globalization processes, accounting for the decline of American manufacturing, and slack immigration laws, allowing businesses to keep wages for the lowest earners at the bottom, eventually led the country with a struggling middle class to the economic crisis of 2008 and the Great Recession that followed.

The presidency of Barack Obama, once hailed as a beacon of hope for the American middle class and the impoverished, has failed to deliver. Despite ever increasing productivity, the average income of the American workers continues to slide, while corporate profits continue to soar. Economic inequality has reached new, dramatic levels, with almost 50 million Americans living in poverty and the top 1% benefiting the most from the so-called economic “recovery”.
The “Hope and Change” rhetoric that accompanied Obama’ first presidential campaign in 2008 was for many a signal of a coming new “New Deal”. The administration’s failure to grapple with the most significant economic crisis of the generation raises the specter of political and economic instability in the coming years, with the Occupy Wall Street movement being but a harbinger of things to come.

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