Crisis: A Death Knell for the Middle Class?
Business + Economy

Crisis: A Death Knell for the Middle Class?

In her new book, Arianna Huffington zeroes in on the real economic engine — average, hardworking Americans

Caitlin Curran/The Fiscal Times

Nearly a year after researchers at Rutgers University interviewed 1,000 unemployed Americans last summer, 80 percent were still out of work. To get by, 70 percent of them drew on retirement savings, 56 percent borrowed from family and friends, 42 percent went without medical care, and 18 percent felt forced to accept handouts at soup kitchens.

Arianna Huffington cites this study and many others to illustrate that the middle class is in serious danger, and that Washington still doesn't get it. In her forthright new book, Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream (Crown, $23.99), Huffington, the founder and editor-in-chief of the Huffington Post and the author of 13 books, says that at this point in time, "no occupation, at the middle-class level, has been spared … We could become a Third World nation, a place where there are only two classes: the rich and everyone else." Vivid language and a sober analysis of the economic downturn's effects complete the picture.

Photo by: Art Streiber

The Fiscal Times spoke with her this week about her new book.

TheFiscalTimes (TFT): You don't mince words. Explain why you're calling this country "Third World America."

Arianna Huffington (AH): It's a jarring phrase, but I'm sounding a warning. When Wall Street was in trouble, there was an incredible sense of urgency on the part of the entire establishment; Democrats, Republicans, the financial industry, everyone, who said, in effect, "We have to throw everything against the wall because we cannot allow the financial system to collapse." Well, we never had that same urgency, that same sense of throwing everything against the wall to keep the middle class from collapsing. That's what is happening.

The middle class is crumbling all around us. And we can't say we didn't know this, because we did know! The evidence was overwhelming. We still don't have the sense of an overwhelming response, but it will have to be overwhelming now, because everything has gotten worse, in terms of long-term unemployment, the fact that almost 3 million homes were foreclosed last year and another three million this year, and that every 30 seconds somebody else goes bankrupt.

TFT: What is your assessment of the president's new stimulus proposals announced this week, including new tax breaks for business and new infrastructure spending?

AH: I think it's too little too late. Obviously it's welcome, but we're actually finally talking about spending on infrastructure. We're talking about $50 billion. And I wonder, why didn't we do this a year and a half ago? Let us also remind ourselves that we gave more than $180 billion to AIG. We have very different responses when it comes to saving Wall Street and saving Main Street.

TFT: So has the president fallen short?

AH: Oh, listen, there is no question that Barack Obama deeply cares about what is happening in this country. I don't have any doubt about that. But he and his team miscalculated how profound this economic crisis is. Remember when we were told that unemployment would come down to 8 percent after the stimulus was passed? Clearly it was inadequate, looking back.

TFT: Do you think the new stimulus plans can and will influence the midterm elections?

AH: Oh, I don't think so, no. Unfortunately the cards for the midterms were dealt a while ago. Even if the president passes the infrastructure spending that he wants to do, which is very unlikely, none of it can have an impact by the November elections, which are less than two months away. And that's really unfortunate, because the other side has absolutely no plans at all.

TFT: What about extending the Bush tax cuts?

AH: Extending the Bush tax cuts to the richest Americans is absolutely nonsensical at this time. The idea that the richest Americans who are given tax breaks will turn around and hire people makes no economic sense at all.

TFT: You say that Americans have always been a "positive, forward-looking people," and you share suggestions for coping with today's hard times, including "tapping into our own resilience." Sounds great, but how does it actually play out?

AH: Some people are overwhelmed and crushed by what has happened: the loss of jobs and homes, the crippling personal debt, and so on. And some people not only survive but rebuild their lives on a stronger foundation. So the first step is tapping into our resilience to make this possible. The second step is developing our financial literacy. We need to understand our credit card contracts, our mortgage contracts, and everything else. The idea that someone is always going to be there to help us with those things is just wrong. And the third step is to think about our larger purpose in life. We need to ask what we can do to help others. This is essential because our lives are not just about our own needs.

TFT: This sounds... personal. Are there aspects of the economic crisis that touch you most?

AH: Maybe because I have two kids in college, I feel particularly saddened by the fact that so many kids graduating from college right now can't get jobs. That includes kids who worked hard, who played by the rules, who did everything they were supposed to do, and who now are victims of what is happening. They're suddenly questioning everything that brought them to this point.

TFT: Do you have hope that this will turn around?

AH: Oh, I have complete hope it will. And my hope is based on what individuals and communities can do. My hope is not about Washington. Taking action of some kind as individuals is really the key for me. That's what gives our lives meaning.

 An excerpt from Third World America, by Arianna Huffington:

There are those in our country who look at the struggles of the middle class — mortgages underwater, foreclosure notices on the door, mounting credit card bills in the mailbox, bankruptcy on the horizon — and think, "They got into this mess of their own free will; they're just getting what they deserve." Who told them to buy that house they couldn't afford, sign that mortgage without reading the balloon payment fine print, and run up those balances on a credit card that came with a teaser interest rate that is now 30 percent? Why should the rest of us, who were more prudent, be expected to carry the burden of the irresponsible?

This response ignores the ugly truth of what brought about this crisis. It wasn't a sudden spike in irresponsibility on the part of middle-class Americans. It was the inevitable byproduct of tricks and traps deliberately put in place to maximize profits for a few while creating conditions that would soon maximize misery for millions. The devastation was predictable — and, in fact, had been predicted by any number of Jeremiahs who saw the writing on the wall. Indeed, looking at the foreclosure crisis and the credit crisis — and the resulting bankruptcy crisis — it's hard to avoid the conclusion that, in many ways, things are working out exactly as planned.

In hindsight, it's as if a giant bear trap had been set for the middle class.

Excerpted from Third World America: How Our Politicians are Abandoning the Middle Class and Betraying the American Dream. Copyright © 2010 by Arianna Huffington. Reprinted by permission of Crown Publishers, an imprint of the Crown Publishing Group, a division of Random House, Inc., New York.