Poverty And The Crumbling Structure Of The American Economy

Poverty And The Crumbling Structure Of The American Economy

As the United States economy withers away into a ghost town, the truth is that the economy has been eroding for years; it is only now in the darkest of hours that one can hear the violins play while the foundation of the United States – the middle class – crumbles into debt and unemployment. “Public Home Auction” signs are now more prevalent in American neighborhoods than the once familiar white picket fence; the average American’s erstwhile dreams of prosperity have been held hostage for years by social negligence and politically sanctioned acts of corporate predation.

As a consequence, the hopes and future of many Americans are shackled by the ball and chain of seemingly interminable economic woes and unemployment anxieties made that much heavier by the great disparities of wealth that currently suffocate the perishing American middle class. The picture, then, is certainly a grim one: national poverty has hit a nearly 20-year high, unemployment rates remain stagnant around 10 percent, and many now speculate that the generational sobriquet of today’s 20 and 30-somethings will not begin with the words “prophet” or “hero” but rather the word “lost.”

Though for some, particularly the top decile of wealthy Americans, the outlook is not so dour. Reaping the benefits of across the board marginal tax rate deductions doled out by Ronald Reagen while simultaneously capitalizing on the profits from unregulated financialization, the economic elite took home nearly half of the wealth the United States in 2007. Such a disparity hasn’t existed since 1917, and so dramatic that it even eclipsed that of the “roaringly” disproportionate distribution of wealth seen in the precarious peak of the 1928 stock market. The benefits of this system have come in deluges for those chosen few, yet for everyone else have “trickled down” into a seemingly ceaseless drought.

Recently, a few dissenting members of the fiscal elite and political establishment have tried to salvage what’s left of the marrow of the increasingly anemic American economy with their proposal of a modest tax increase on those earning more than $1 million a year. The goal of the Buffett Tax, named for the high-ranking business rogue Warren Buffett, is to ensure that the top 1 percent pay at least the same annual percentage of their earnings as the middle class.

One would assume that after years of economic growth disproportionately enjoyed by the upper class, it would be the lower and middle class who would first cry of injustice of the Buffett Rule’s modest attempts to rectify economic inequality. Rather, it was Senator Paul Ryan, resident sycophant of the wealthy, who made the first of many hyperbolic and rather ironic claims that the proposal of the Buffett Rule was nothing more than Obama initiating class war.

Conversely, middle and lower class Americans have been intimidated into silence by years of economic insecurity and predation. It is the facts accompanied by the stories of those brave enough to share their suffering that must speak for the invasive growth of poverty. And make no mistake, the facts suggest that it is not the elite and unscathed few who should be angered and outspoken, but rather the masses.

In the United States, the current population of those living in poverty is 46.2 million. These individuals earn less than $11,100 per year; or for an average family of four, around $22,000. Keep in mind that these numbers reflect what the U.S. Government Federal Poverty Guidelines deem “not enough” as opposed to what is sufficient. Despite President Bush’s minimum wage increase from $5.15 per hour to a more tolerable $7.25 while in office, this increase did not correspond with the last 20 years of inflation, thus meaning that the real value of minimum wage is only $4.42 per hour, or 26 percent less than it was in 1979.

According to the US Department of Health and Human Services, a full-time minimum wage worker who works five 8-hour shifts every single week of the year earns approximately $13,624. Although these earnings do not take into account additional healthcare or transportation costs, this salary technically enables him or her to scrape past the poverty level. However, if he or she is the only one able to work in a family of three, this person is almost 25 percent under the $18,310 poverty level for a family of the same size.

While Bush does deserve credit for the Economic Policy Institute’s 2009 estimate that a full-time minimum wage worker’s salary would put his or her two person family above the poverty linefor the first time in over a decade, the unfortunate truth is that for larger families, this wage increase would improve nothing. According to the National Low Income Housing Coalition, in order to afford a two-bedroom apartment at 30 percent of an individual’s income (also known as the federal definition of affordable housing), a full-time minimum wage worker in a median state would have to work 87 hours per week, or almost 13 hours a day every single week of the year.

Inevitably due to housing prices, individuals and families are unable to stay afloat and subsequently sink even deeper into poverty, and soon have no place to call home. While the definition of homelessness is a contentious one, in 2007 the National Law Center on Homelessness and Poverty estimated that 3.5 million people are likely to experience homelessness in a given year. To put this number into context, imagine that the entire state of Connecticut does not experience a regular or adequate nighttime residence at some point throughout an entire year. As more stringent ID and address voting registration requirements increase in states like Texas, it is much more difficult for the homeless population to vote. As a result, those who can legally help the most do not hear their voices, and consequently they cannot be answered.

Even more have begun to lose their once-firm footing in the middle class and have now joined those beneath them in the dregs of impoverishment. Sixty percent of households saw their income fall last year along with a 7% inflation-adjusted drop from a 1999 peak in median household income for middle class families. While the alleged “face” of homelessness is difficult enough to accurately define, the growing group of impoverished individuals is even more so. The potent cocktail of global market slow downs and slumps, cheap overseas labor, and a lack of government regulation that allowed rapacious lenders to manipulate high-risk and largely unfit borrowers into subprime and adjustable-rate mortgages, has resulted in a hangover so massive that even those who once considered themselves safe from poverty and economic strife now experience what was once thought confined to the lower class.

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Take, for example, Lyn Grotke of Fayette, Maine. A former homeowner equipped with a Master’s degree in Outdoor Education and a history of paying her bills on time, she now lives in a trailer while she anxiously waits for the federal housing assistance for which she applied over three years ago. What happened to her and what explains her current state and struggles is something that can happen to anyone: she broke her leg. After a lengthy recovery and when Grotke was able to return to work, no job welcomed her back. Grotke soon had to declare bankruptcy on her home, and now, despite the fact that she has found an occasional city consulting job supplemented by caring for children and the elderly, she still only earns between $200 and $800 a month.

According to her story in CNN Money, the slight income she earns on her own in addition to the $750 she receives in monthly food stamps is still not enough to meet her expenses. Grotke’s trailer costs $700 a month, and expenses like food, insurance, and gas tack on an additional $1,000 to her already high tab. Grotke, once a testament to the fruits that await a studious individual who seeks higher education and quality of life now feels weak, stuck, and helpless. “It’s very stressful,” she stated. “I’m in a loop I can’t get out of.”

There’s also Mary Ijaz, who lives in Monmouth, Oregon. For years, Ijaz lived a comfortable life at home with several children while her husband worked and earned enough to keep a Lexus and Land Rover in the garage of their former five-bedroom California home. And then, after a relatively common occurrence in the United States, Ijaz found herself living in a campground tent. According to the same series of stories on CNN Money, her husband decided to abandon her and her children one day and emptied out their bank accounts. Previously not a member of the work force, Ijaz was ill-equipped for the harsh competition so abundant during rough economic times as she had no college degree, limited skill sets, and decreased desirability since she had many children and was at the age of 46.

With the amount of government assistance she currently receives in the form of food stamps, cash assistance, and housing help, it would be relatively easy for the ignorant American to cast Ijaz and her children off as mere leeches with little-to-no incentive to ever get off of public assistance. This, however, is not the case. Ijaz views the community college Pell Grant she receives as a “complete turnaround.” At the moment, Ijaz is a straight-A student studying radiology so that she can soon support herself and her family on her own. And thanks to government assistance and the good grace of her sister, Ijaz, unlike Grotke, is optimistic toward her and her children’s futures–futures that will not involve government aid.

To some, the mere thought of any measure taken by the federal government to assist those in need is preposterous and potentially devastating to fiscal stability. However, recent census data shows that in 2010, unemployment insurance helped keep 3.2 million Americans out of poverty. Without this 99-week federal aid, these Americans would have increased the already impoverished 46.2 million citizens by nearly 7 percent.

If the Census Bureau were to consider food stamps as another source of income assistance, this federal aid program would have lifted 3.9 million out of federally defined poverty. Furthermore, if the Earned Income Tax Credit (EITC), a federally refundable income tax credit for low-to-middle class working Americans, had been counted as income, an added 5.4 million tics would be taken off the poverty tally. On top of that, federally funded health programs like Medicaid and the Children’s Health Insurance Program provided health insurance to the many children who, due to no fault of their own, lacked coverage when their parents’ lost their jobs. As a result, in 2010, 570,000 fewer American children were without insurance, a number surprisingly smaller than the pre-recession data from 2007.

While the Obama Administration does deserve some praise for its relative successes in the prevention of increased poverty this past year, some of the company he keeps is markedly less impressive, and to a certain extent, indefensible. Serving as United States Secretary of the Treasury under Barack Obama, Timothy Geithner’s name has drawn quite a bit of recoiling from progressive groups in recent years. After reporting a $61.7 billion loss at end of the fourth quarter in 2008, the American International Group (AIG) received over $170 billion in taxpayer bailouts. This money, under Geithner’s rather attentive watch (given his close relations with the group as former President of the Federal Reserve Bank of New York), was to go into efforts to keep the company afloat, not to keep the pockets of their executives heavy and warm.

That, however, is exactly what happened. After receiving what was given to them by the already empty pockets of the American people, AIG proceeded to pay its financial executives $165 million in bonuses. Despite his efforts to deny his involvement in this scandal, Geithner still had to appear at a hearing before the House Ways and Means Committee. However, one can credit the skepticism and anger that stemmed from his testimony as one of the few instances in these past several years wherein many Democrats and Republicans could actually agree on something, albeit only in their mutual disdain for and distrust of Timothy Geithner.

Furthermore, President Obama’s economic pedigree, as fledgling as it may be, will be that much weaker so long as Jeffrey Immelt, COB and CEO of General Electric, remains on Obama’s Economic Recovery Advisory Board. Remarkably, 2010 marked the second year in a row wherein the multi-billion dollar company, thanks to corporate tax codes, loopholes, and offshore profits, paid nothing in taxes. And despite Immelt’s position and allegedly good intentions to bring the American economy back to life, GE laid off 21,000 workers between 2007 and 2009. Furthermore, the sincerity of his wishes to stimulate growth and renewed prosperity on American soil is spurious at best, given the fact that over half of current GE employees reside outside of US soil.

Hinting at insider crookedness and failure-to-launch syndrome in his recently written opinion piece, James Carville implores the President to “panic, fire, and indict” members of his own team if he wishes to see another term in office, or to even glimpse the ever-fleeting opportunity to feel the warmth of a bright fiscal year for the first time since he has assumed office. Carville states that this “[is] not going to work with the same team, the same strategy and the same excuses,” and that “it’s time to show them the exit.”

It seems to many today that the United States’ 30-year drift from a democracy to an ostensible corporatocracy has resulted in nothing but business-interest legislation and disparities of wealth so wide among the classes that it appears impossible for them to be rectified. Oddly enough, the fight comes from self-made billionaires like Warren Buffett who have lived the American Dream and want others to have the opportunity to do so as well; it comes from brusque basketball team owners like Mark Cuban who consider balanced tax brackets patriotic, not bellicose; it comes from employees like Ted Wechsler, recently hired hedge fund manager for Berkshire Hathaway who would warmly welcome a 20 percent tax hike and a lower salary. And it especially comes from women like Mary Ijaz and Lyn Grotke, who, despite the oppressive odds stacked against them, continue in their efforts to stay afloat and support their families.



Savannah Cox is a Foreign Languages/International Studies and Political Science double major at Bellarmine University, and has recently returned from the University of Granada, where she studied Spanish and Political Science. She has interned for the World Affairs Council of Kentucky and Southern Indiana as well as Congressman John Yarmuth. In her free time, she enjoys reading, strumming a ukulele, and consuming large amounts of salty carbohydrates.

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