The Betrayal of America’s Middle Class Was a Choice, Not an Accident

Part of the Series

Walking the Walk

The outsourcing of good jobs, the elimination of pensions, rampant home foreclosures; skyrocketing higher education costs and mounting debt: Given these stark realities, the American middle class seems to be sinking fast. The renowned reporting team of Donald Barlett and James Steele insists it is no accident.

Trade policy, tax cuts and other incentives that have been implemented in Washington since the Reagan era have allowed corporations to score record profits at the expense of the American workforce. Donald Barlett and James Steele, recipients of two Pulitzer Prizes and two National Magazine Awards, powerfully advanced this thesis in their 1992 bestseller, “America: What Went Wrong?”

Now, in a new book, “The Betrayal of the America Dream,” they return to the same topic to examine what has happened in the two decades since. Having first come across Barlett and Steele’s work in the early 1990s, when they were writing the Philadelphia Inquirer newspaper series that ultimately became “America: What Went Wrong?”, I was excited to talk with the duo about the problems now facing our middle class – and about how we can pull ourselves from the abyss.

I started by mentioning their 1992 book and asking how things have changed for the middle class since then.

“Well, the easiest way to answer that question is it has been straight downhill,” Barlett responded. “If we made one mistake in that book, it was that we underestimated the speed with which the country would unravel – thanks in large part to the ruling class, which is having its way.” “When we wrote America: What Went Wrong?”, a lot of it was very controversial at the time,” Steele added. “We said wages were stagnating and going down, benefits were jeopardized or disappearing and our country was being divided into a nation of have-mores and have-lesses. We were accused of being alarmists. People just said, ‘This is a recession. Everything is going to be fine after that.’ We said, ‘Don’t believe it, because all of these forces are entrenched, and they’re going to make things increasingly worse for the middle class.'”

I asked the authors if they have seen any other developments in recent years that they did not expect.

“Back in ‘America: What Went Wrong?’ we talked very heavily about manufacturing jobs – blue-collar jobs,” Steele remarked. “Some of our critics at the time said, ‘Well, that’s okay. Those are dirty jobs. Let’s save the brain jobs, the knowledge jobs, here for America.’ One of the biggest findings in the new book is that the forces that eroded so many blue-collar jobs are now well into the service economy. A study by the Bureau of Labor Statistics a couple of years ago estimated that basically 25 percent of the entire service workforce, or roughly 30 million jobs, [are] in danger of being off-shored and outsourced. That’s a huge number. And, if anything, the Labor Department has underestimated the impact of globalization on the American workforce over the years.”

I noted that at the time that “America: What Went Wrong?” was published, I was working with the labor movement in Silicon Valley. From my vantage point as a labor leader in that setting, one of the book’s points that most interested me was that not all high-wage, high-skill countries were losing their manufacturing jobs or running massive trade deficits. It wasn’t simply wage structures that were won by unions that were driving jobs offshore and overseas. Instead, public policy in the US gave incentive to corporations to outsource and globalize. I asked Barlett and Steele to comment on this point from the perspective of today.

“You’re absolutely right on this basic issue,” Steele said. “One of the myths out there is that high wages paid to union workers are driving these jobs offshore. We make the point that in a whole series of key manufacturing sectors – like the auto industry – workers in places like Germany and Japan make more money through wages and benefits than autoworkers in this country. The idea that just high wages are the reason that companies are going offshore is complete malarkey. The main reason is the incentives provided by foreign governments; and then, when companies bring their product back to this country, there’s essentially no tariff on it. So there’s a tremendous incentive for big corporations to go abroad and not pay any penalty for it.”

Barlett made an additional point: “An integral part of this is the success that the elite have had in focusing attention on the budget deficit,” he said. “While it’s important in the scheme of things, it should be at the bottom of the list, the absolute bottom. At the top should be … and you never hear these two words uttered together … the trade deficit, because it is the trade deficit that results in lost jobs. In the decade of the 90s, the trade deficit was close to 8 trillion dollars. Each year it gets bigger and bigger. We haven’t had a trade surplus since the mid-1970s. Since then, it’s been annual trade deficits. Every one of those annual deficits translates into lost jobs. Yet no one talks about ending the trade deficit.”

In their writing, Barlett and Steele distinguish between global corporations and domestic corporations. I wanted to ask about this because I have seen many domestic companies that are still manufacturing in the United States. They rely on regional and national distribution. They produce jobs. They still remain unionized. Yet they barely stay in business. Government does nothing to help them. I asked what we can do to lift them up and emphasize the value they create for our country.

“You make a really good point here,” Barlett said, “because sometimes we forget this, especially in interviews, and speak about corporations generically. There is no comparison between the big international companies and the domestic businesses that are based in the US and cater to the US market. These people are being absolutely hammered by the tax code, by regulatory policies that are really not necessary, and they have no one speaking for them. They almost need to have a separate voice saying, ‘Look, we are really working for the best interest of American workers here, and we need some help.’ You’re absolutely right. They are being killed.

“Let me give you an example. We didn’t get to it in time to get it into the book, but you have this World Trade Center tower going up. The original design called for a special kind of glass sheathing around the base, because it’s really a bunker and the glass is to conceal the bunker. They issued a contract. A New Jersey glassmaker responded. New Jersey was one of those states with a major position in the glass industry for years. This was an old family company that dates back a hundred years. We went to see the factory floor. You could eat off of it. They’re struggling like crazy to stay in business. It’s third generation family ownership.

“They put in a bid and, naturally, they were beaten by the Chinese. It’s a unionized workforce. They love their workforce. They’re certainly not paid outrageously, but they couldn’t beat the Chinese wages. They lost the contract. What happens in the next year? The Chinese send in the result of their work and the glass is unusable – absolutely unusable. They have to abandon that whole project and come up with a new glass that didn’t require quite the same amount of work to refine it. The irony was that the New Jersey glass company has been making that glass, and has been using it, and was perfectly capable of delivering on the contract, but the United States is so hidebound in its trade policies and in its manufacturing that this company got no help. It’s an absolute disgrace.”

I wondered why these domestic manufacturers don’t have their own business associations, as do other segments of the business community.

“Well, a lot of them do have associations,” Steele said. “The problem is, you’ve got this mindset in Washington, in Congress and basically with almost every administration, that trade should be unrestricted.”

Barlett took a slightly different tack on the question: “This a sophisticated process. It really is,” he explained. “To get the kind of representation you need in Washington costs a ton of money. The domestic corporations just don’t have access to the kind of money that the multinationals do. Many domestic companies pay corporate taxes at a rate five, six, seven, eight times higher than the international companies. Some of the internationals don’t pay any taxes at all. The domestic companies get no comparable break whatsoever. That’s just wrong. It’s morally and ethically wrong. Congress takes care of the people who take care of them. It’s as simple as that.”

Playing devil’s advocate, I asked how the authors responded to people who would characterize their position on trade as being a rehash of old-school isolationism. In a world of global interdependence, I suggested, isn’t it unrealistic to think we’re going to go back and insulate our borders again?

Steele jumped in: “Anytime you talk about something other than the trade policy the US has now, somebody says, ‘Oh my goodness, you can’t throw up walls around the country.’ Well, we are not advocating that. We are simply saying that, from time to time, you need to tell our trading partners that they’re going to have to play by the same rules as we do, or they’re going to face some tariffs, taxes or barriers to some of their goods. “The best example of this is that every year or two the US Trade Representative’s office publishes a manual that’s called basically, ‘Trade Barriers to US Products,'” Steele explained.

“If you read this manual, you find out that Japan has had the same trade barriers up for 20 to 30 years. We’ve been negotiating agreements to end them. But, in fact, they don’t end, because the Japanese have figured out various ways to take care of their own industries.

“Unless at some point one of these trading partners knows that you’re going to be willing to get a little tough, nothing will ever happen. We’re the only country that runs these massive trade deficits, which impact jobs domestically. None of our other major trading partners do. The Japanese have a surplus, the Germans have a surplus, the French have only a small deficit. Nobody has this trade imbalance like we do, and that alone tells you there is something wrong with our trade policy.”

Barlett added, “The definition of insanity is doing the same thing over and over and expecting a different outcome. After 37 consecutive years of trade deficits, all accompanied by lost jobs, I don’t care what anybody says about throwing up walls. You don’t have to throw up walls, but you do need to do something different. If something isn’t done, this country is going to go down the tubes.”