Rich Get Poorer, Poor Disappear

As the poor and the formerly middle class Nouveau Poor become the American majority, they will finally have the clout to get their needs met.
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Ever on the lookout for the bright side of hard times, I am tempted to delete "class inequality" from my worry list. Less than a year ago, it was the one of the biggest economic threats on the horizon, with even hard line conservative pundits grousing that wealth was flowing uphill at an alarming rate, leaving the middle class stuck with stagnating incomes while the new super-rich ascended to the heavens in their personal jets. Then the whole top-heavy structure of American capitalism began to totter, and -- poof! -- inequality all but vanished from the public discourse. A financial columnist in the Chicago Sun Times has just announced that the recession is a "great leveler," serving to "democratize[d] the agony," as we all tumble into "the Nouveau Poor..."

The media have been pelting us with heart-wrenching stories about the neo-suffering of the Nouveau Poor, or at least the Formerly Super-rich among them: Foreclosures in Greenwich CT! A collapsing market for cosmetic surgery! Sales of Gulfstream jets declining! Niemen Marcus and Saks Fifth Avenue on the ropes! We read of desperate measures, like having to cut back the personal trainer to two hours a week. Parties have been canceled; dinner guests have been offered, gasp, baked potatoes and chili. The New York Times relates the story of a New Jersey teenager whose parents were forced to cut her $100 a week allowance and private Pilates classes. In one of the most pathetic tales of all, New Yorker Alexandra Penney relates how she lost her life savings to Bernie Madoff and is now faced with having to lay off her three-day- a-week maid, Yolanda. "I wear a classic clean white shirt every day of the week. I have about 40 white shirts. They make me feel fresh and ready to face whatever battles I may be fighting ..." she wrote, but without Yolanda, "How am I going to iron those shirts so I can still feel like a poor civilized person?"

But hard times are no more likely to abolish class inequality than Obama's inauguration is likely to eradicate racism. No one actually knows yet whether inequality has increased or decreased during the last year of recession, but the historical precedents are not promising. The economists I've talked to -- like Biden's top economic advisor, Jared Bernstein -- insist that recessions are particularly unkind to the poor and the middle class. Canadian economist Armine Yalnizyan says, "Income polarization always gets worse during recessions." It makes sense. If the stock market has shrunk your assets of $500 million to a mere $250 million, you may have to pass on a third or fourth vacation home. But if you've just lost an $8 an hour job, you're looking at no home at all.

Alright, I'm a journalist and I understand how the media work. When a millionaire cuts back on his crème fraiche and caviar consumption, you have a touching human interest story. But pitch a story about a laid-off roofer who loses his trailer home and you're likely to get a big editorial yawn. "Poor Get Poorer" is just not an eye-grabbing headline, even when the evidence is overwhelming. Food stamp applications, for example, are rising toward a historic record; calls to one DC-area hunger hotline have jumped 248 percent in the last six months, most of them from people who have never needed food aid before. And for the first time since 1996, there's been a marked upswing in the number of people seeking cash assistance from TANF (Temporary Aid to Needy Families), the exsanguinated version of welfare left by welfare "reform." Too bad for them that TANF is essentially a wage-supplement program based on the assumption that the poor would always be able to find jobs, and that it pays, at most, less than half the federal poverty level.

Why do the sufferings of the poor and the downwardly-mobile class matter more than the tiny deprivations of the rich? Leaving aside all the soft-hearted socialist, Christian-type, arguments, it's because poverty and the squeeze on the middle class are a big part of what got us into this mess in the first place. Only one thing kept the sub-rich spending in the 00s, and hence kept the economy going, and that was debt: credit card debt, home equity loans, car loans, college loans and of course the now famously "toxic" subprime mortgages, which were bundled and sliced into "securities" and marketed to the rich as high-interest investments throughout the world. The gross inequality of American society wasn't just unfair or aesthetically displeasing; it created a perilously unstable situation.

Which is why any serious government attempt to get the economy going again -- and I leave aside the unserious attempts like bank bailouts and other corporate welfare projects -- has to start at the bottom. Obama is promising to generate three million new jobs in "shovel ready" projects, and let's hope they're not all jobs for young men with strong backs. Until those jobs kick in, and in case they leave out the elderly, the single moms and the downsized desk-workers, we're going to need an economic policy centered on the poor: more money for food stamps, for Medicaid, unemployment insurance, and, yes, cash assistance along the lines of what welfare once was, so that when people come tumbling down they don't end up six feet under. For those who think "welfare" sounds too radical, we could just call it a "right to life" program, only one in which the objects of concern have already been born.

If that sounds politically unfeasible, consider this: When Clinton was cutting welfare and food stamps in the 90s, the poor were still an easily marginalized group, subjected to the nastiest sorts of racial and gender stereotyping. They were lazy, promiscuous, addicted, deadbeats, as whole choruses of conservative experts announced. Thanks to the recession, however -- and I knew there had to be a bright side -- the ranks of the poor are swelling every day with failed business owners, office workers, salespeople, and long-time homeowners. Stereotype that! As the poor and the formerly middle class Nouveau Poor become the American majority, they will finally have the clout to get their needs met.

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