Sept. 20 (Bloomberg) --“Wall Street has been overseeing a massive transfer of wealth from the middle class to the richest Americans,” says Arianna Huffington.
Her new book, “Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream,” describes how ordinary families have gotten clobbered during the last 30 years. Making ends meet is ever harder.
Huffington, the energized (three BlackBerries!) founder of the news website Huffington Post, wants to galvanize people into action before it’s too late.
We spoke at Bloomberg’s New York world headquarters.
Lundborg: Why is the middle class so important?
Huffington: Who wants to live in a country of extremes, where you need to live behind gates and your children have to be protected by bodyguards so they’re not kidnapped?
We had a middle class that believed in the American Dream, in upward mobility. When these things disappear, people operate out of fear and not out of the sense that we’re all in this together.
Lundborg: You point out that everyman Homer Simpson, a factory worker supporting a family on one income, has become a middle-class fantasy.
Huffington: The game is rigged now to the point where staying a member of the middle class, let alone advancing, is becoming a matter of chance, like buying a lottery ticket.
Lundborg: What to do?
Huffington: What is missing is the sense of urgency that existed when we were trying to save Wall Street.
Lundborg: What are some of the more promising programs?
Huffington: A payroll tax holiday, an infrastructure bank that creates jobs that can’t be exported, a green bank that addresses renewable energy and new technologies, tax credits, R&D credits, visas that allow immigrants with ideas to come into this country.
Lundborg: How is President Obama doing on the economic front?
Huffington: Obama is brilliant and cares, but personnel is policy.
He picked the wrong people. One of Obama’s problems is that he has a reverence for establishments. If you have a rotten status quo, you need to be willing to take on establishments or you’re not going to be able to change anything. People are not going to give up power without a battle.
Lundborg: You say he should fire Larry Summers.
Huffington: His ideas are toxic for the country. He was one of the architects of the abolition of Glass-Steagall, which is at the heart of what went wrong.
If you allow institutions to take excessive risk with the expectation that because they pose a systemic risk they will be bailed out by the taxpayer, you’re undermining the capitalist system.
Lundborg: Should all the financial powerhouses have been allowed to fail?
Huffington: No, but if they were going to be rescued, they should have been rescued with major strings attached: with clawbacks, with clear expectations about what they were going to lend to create jobs, with clear guidelines about no bonuses.
Tea Party Anger
Lundborg: You cite MIT Professor Simon Johnson’s sobering study of corporate profits. Between 1973 and 1985, the financial industry’s share topped out at 16 percent, whereas just before the crisis, it stood at 41 percent.
Huffington: The financial system is supposed to be a facilitator. It has to add value for the economy, and when it doesn’t then you have the unmooring of the real economy from the financial economy. And that’s not healthy.
Lundborg: Are you surprised by the targets of the Tea Party anger?
Huffington: The heart of the Tea Party movement is the anger at the fundamental injustice of what happened. They move from that legitimate anger to anger at government in general.
I get what they’re saying -- the government completely screwed up.
Lundborg: What are their solutions?
Huffington: Demagogues don’t need solutions. In times of economic anxiety and genuine anger at the establishment, demagogues thrive.
They don’t operate on rationality but tap into people’s fears. They’re focusing on immigrants, on Muslims, and that’s potentially explosive.
Lundborg: What’s your biggest fear right now?
Huffington: It’s that we’re not going to do enough in time to save the middle class and that would mean that we’re not going to do enough in time to prevent us from becoming third world America.
Iraq and Afghanistan are perverse priorities. One sign of a declining empire is to spend money we don’t have on military adventures.
We should be spending those billions a week rebuilding our infrastructure and creating jobs.
Lundborg: How do we mitigate the power of the special interests?
Huffington: Lawrence Lessig’s Fix Congress First -- to bring public financing of elections -- is the only possible solution. Why do we allow the special interests to buy politicians and buy public policy?
To buy this book in North America, click here.
(Zinta Lundborg is an editor for Muse, the arts and culture section of Bloomberg News. The opinions expressed are her own. This interview was adapted from a longer conversation.)
To contact the reporter on this story: Zinta Lundborg at email@example.com.
To contact the editor responsible for this story: Manuela Hoelterhoff at firstname.lastname@example.org.