America: Who Stole The Dream? U.S. Policies Widen Gap Between Rich, Poor Laws Fatten The Wealthy At Expense Of American Workers

Let’s suppose, for a moment, that there was a country where the people in charge charted a course that eliminated millions of good jobs.

Suppose they gave away several million more jobs to people from other nations.

Finally, imagine that the people running this country implemented economic policies that enabled those at the very top to grow ever richer while most others grew poorer.

You wouldn’t want to live in such a place, would you?

Too bad.

You already do.

These are some of the consequences of failed U.S. government policies that have been building over the last three decades the same policies that people in Washington today are intent on keeping or expanding.

Under them, 100 million Americans, mostly working families and individuals - blue-collar, white-collar and professional - are being treated as if they were expendable. What was once the world’s largest, expanding middle class is now shrinking.

Most significant of all, the American dream of the last half-century - a dream rooted in a secure job, a home in the suburbs, a better life than your parents had and a still better life for your children - has been revoked for millions of people.

U.S. government policies consistently have failed to preserve that dream in the face of growing international competition, often favoring the very forces that shift jobs, money and influence abroad.

Return of the robber-baron

As a result, the United States is about to enter the 21st century much the same way it left the 19th century:

With a two-class society - a nation of have-mores and have-lesses.

There are, to be sure, some notable differences from a century ago. In the 1890s, most Americans were struggling to reach a middle-class lifestyle. By the 1990s, an overwhelming majority, having achieved it, were either losing it or struggling to hold on.

In the 1890s, government responded to the prodding of reform-minded citizens and began to slowly create a framework of rules to guide the economy, control the excesses of giant business trusts and their allies, and protect the interests of the average citizen.

By the 1990s, that framework was being dismantled.

One result: The income gap among Americans is widening, with the nation’s richest 1 percent accumulating wealth not seen since the robber-baron era and with the middle class contracting.

Who is responsible?

In a word: Washington.

Or, more specifically, members of Congress and presidents of the last three decades, Democrats and Republicans alike.

Winners and losers

Of course, other forces have pushed them - lobbyists, special-interest groups, executives of multinational corporations, bankers, economists, think-tank strategists, and the wheelers and dealers of Wall Street.

These are some of the emerging winners in this changing America.

The losers? Working Americans who have been forced to live in fear - fear of losing their jobs, fear of being unable to pay for their children’s education, fear of what will happen to their aging parents, fear of losing everything they’ve struggled to achieve.

The winners say if you’re not a part of this new America, you have no one to blame but yourself.

They say the country is undergoing a massive structural change comparable to the Industrial Revolution of the 1800s, when Americans moved off the farms and into factories.

They say you have failed to retrain yourselves for the emerging new economy. That you don’t have enough education. That you’re not working smarter. That you failed to grasp the fact that companies aren’t in the business of providing lifetime employment. And, they say, it’s all inevitable anyway.

It is inevitable that factories and offices will close, that jobs will move overseas or be taken by newly arriving immigrants, that people’s living standards will fall, that they may have to work two or three part-time jobs instead of one full-time job.

These things are inevitable, the winners say, because they are the product of a market economy, and thus beyond the control of ordinary human beings, and, most especially, beyond the control of government.

Don’t believe it.

These things are the product of the interaction between market forces and government policies - laws and regulations enacted or not enacted, of people finding ways to turn government to their advantage.

The policies that are driving these changes range across the breadth of government - from international trade to immigration, from antitrust enforcement to deregulation, from lobbying laws to tax laws.

Today, this series begins to examine these policies and their impact on American lives.

The have-mores and the have-lesses

Take a glimpse into the new America of Michael Rothbaum and Darlene Speer.

Rothbaum, a corporate executive, lives in an exclusive gated community called St. Andrews Country Club in Boca Raton, Fla. Set amid 718 acres of lakes and landscaped grounds, St. Andrews is typical of the luxury communities that many wealthy Americans now inhabit - self-contained enclaves sealed off from everyone else.

St. Andrews has its own 24-hour security patrol, shopping complex, sports pavilion, restaurants and two championship 18-hole golf courses where residents can play after paying a $75,000 membership fee.

Rothbaum lives in a 5,000-square-foot home, with pool and spa. According to the Palm Beach County Assessor’s office, the property is valued at $636,000.

Darlene Speer, on the other hand, works two jobs. She’s a full-time office worker and a part-time clerk at a video store in Marion, Va. She lives in a one-bedroom apartment in the mountains of southwestern Virginia.

Until 1992, Speer worked in the sewing department of Harwood Industries, a clothing manufacturer that was one of Marion’s largest private employers. But in August 1992, Harwood, whose principal owner was Rothbaum, announced it was moving all apparel production to Honduras and Costa Rica, where labor is much cheaper. The company said it was under pressure from retailers to cut costs.

Not that Darlene Speer and her co-workers drove Harwood Industries to Central America with their bloated salaries. After 13 years, Speer was earning less than $9 an hour.

But women in Honduras work for about 48 cents an hour.

Before leaving town, the company agreed to pay severance of about $1,200 to each employee. The total for 120 women amounted to less than one-quarter of the value of Rothbaum’s home.

On one side is America’s elite, those families and individuals with incomes that begin at around $182,000 and go up into the tens of millions of dollars - the top 1 percent of tax-filers in the United States. There are 1.1 million of them. Most are doing quite well, some spectacularly well.

They, and the 9 percent below them, are society’s have-mores.

The average income in the top 1-percent group, according to an IRS study of tax-return data, ballooned from $147,700 in 1980 to $464,800 in 1992 - a jump of 215 percent.

The top 1 percent saw their share of all income rise from 8 percent in 1980 to 14 percent in 1992.

Darlene Speer is one of the bottom 90-percenters, the 101.4 million families and individuals whose incomes range from minimum wage up to about $65,000. The group’s average income rose just 67 percent - from $13,200 in 1980 to $22,100 in 1992. In 1980, this group accounted for 68 percent of all income reported on tax returns. By 1992, the group’s share had fallen to 61 percent. In dollars, that represented a loss in income of 10 percent.

For this new America - of lagging earnings, a widening gap in incomes and wealth, a falling standard of living and a bleak future - you can thank Washington and the special interests, who have set the nation’s economic agenda for years to come.

‘There’s going to be bloodshed’

On a more personal level, the grim statistics reinforce the feelings shared by many working people but seldom voiced beyond family and friends.

In Inquirer interviews conducted over the last two years with scores of white-collar, blue-collar and professional workers, the picture of the new America is decidedly downbeat. From Washington to Los Angeles, Chicago to Biloxi, the moods ranged from mild pessimism to hopelessness.

One after another, workers talked about how their standard of living is dropping, how there is little job security, how loyalty to a corporation counts for nothing, how it is impossible to set aside money for their children’s education, and how the strain of both parents working is putting stress on families.

These are hard-working people, steeped in traditional American optimism and values, who once believed everything would turn out all right but now have doubts.

A number of those interviewed were bitter. These are not members of any right-wing militia or any hate group. They are ordinary people from a cross-section of society. They are factory workers and college graduates. They are Democrats and Republicans, although increasingly they are distancing themselves from both parties.

Consider the observations of three workers, who reflect a largely silent but growing sentiment.

A factory worker in Kansas: “Are we just going to keep lowering our standard of living? When that happens, nobody is going to have money to put food on the table. Then you are going to see a revolution, because people are not going to be able to feed their families.”

A former teacher in Illinois: “The level of hostility and anger and frustration is astonishing.”

A factory worker in Pennsylvania: “There’s going to be bloodshed before we get out of this.”

Legislating a deficit

How did the most emulated society of the 20th century reach a point where average citizens talk quietly and matter-of-factly of revolution and bloodshed?

It has come about gradually, the result of policies and decisions that have stacked the economic deck against middle America.

Pick a government policy, or a corporate business practice that is encouraged or abetted by a government policy, and it’s likely to be working against the average American: Foreign trade and imports. Immigration. Taxes. Deregulation. Antitrust. Mergers and layoffs. Retraining.

The trade policies are ostensibly intended to create jobs for Americans making products for export. Instead, they’ve wiped out jobs and driven down wages.

That’s because Washington policymakers have given foreign producers essentially unrestricted access to the world’s richest consumer market -the United States - without insisting upon the same access in return. Indeed, the government has actually subsidized foreign access to the American consumer. This, while our trading partners, like Japan, have maintained tight controls over their own markets.

Not surprisingly, imports have soared, far outstripping exports. In 1996, the United States will record its 21st consecutive merchandise trade deficit - a record unmatched by any other developed country. By year’s end, cumulative trade deficits since 1976 will add up to $1.9 trillion.

Because of all those imported products, 2.6 million manufacturing jobs in the United States have been wiped out since 1979.

At the same time that trade policies were creating a surplus of laid-off manufacturing workers and managers, Washington rewrote immigration laws, leading to a record flow of immigrants, competing for a declining number of good jobs.

Tax policy over the last three decades has worked steadily against the middle class. Among the effects: America’s largest and most powerful businesses now pay federal income tax at a fraction of the rate they once paid.

Consider this: If corporations paid federal income tax today at the effective rate paid in the 1950s, the Treasury would collect an extra $250 billion a year - more than wiping out the federal deficit overnight.

All of which brings us back to Marion, Va., and the men and women who once worked for Harwood Industries and who lost their jobs, thanks to U.S. trade policies.

For more than half a century, Harwood Industries, a maker of men’s pajamas, robes and casual clothing, was one of the fixtures of the Marion economy. It employed several hundred seamstresses, cutters, warehousemen, packers, mechanics and office workers.

By national standards, the pay was never good. In 1992, the average for women in the sewing department was $6.75 an hour, roughly $14,000 a year. But Harwood did have a health plan, the women were close to family and friends, and it provided steady work.

Until Aug. 31, 1992, when Harwood announced it was closing the sewing operation, eliminating 120 jobs.

For years, Harwood had been shuttering plants in the United States and, under pressure from retailers to cut costs, shifting production offshore - first to Puerto Rico, then Nicaragua, and finally to Honduras and Costa Rica.

For Darlene Speer, the shutdown hurt, both personally and financially. “I loved my job, but after the way they treated us at the end, I was almost glad to get out of there,” she said. “We all worked so hard. They didn’t close it because of our work.”

Speer, divorced and the mother of two grown children, ultimately wound up with two jobs, with a furniture maker and a video store. Together, she said, the two equal roughly what she earned annually at Harwood.

“But you can’t look back,” she said. “I’ve gone ahead with my life. … But I’ll tell you, it’s hard to start over.”

With Marion’s closure, the company ceased to manufacture in the United States.

For many American apparel-makers, Honduras has become the country of choice in recent years. The Central American nation of 5.3 million people has been highly successful in attracting U.S. plants because of cheap labor, no taxes and a solicitous government.

Harwood built its first plant there in 1980.

Having successfully transferred all of Harwood’s operations abroad, Michael Rothbaum, who then was the company’s chief executive officer, subsequently offered some words of advice to American manufacturers who might be considering a Caribbean operation.

After first warning that the process was not easy - think of it “as if you were starting a plant on the moon,” he wrote in a trade journal - he then assured them it was worth it. If “approached correctly, the savings in labor costs can be significant.”

Rothbaum went on to paint a picture of the average worker:

“Caribbean employees work longer hours, from 44 to 48 per week, and they travel further to work, sometimes two hours by bus each way. Some also attend school at night. For many, the only decent meal they get each day is the one served in your cafeteria. …

“Medical care as we know it is not available, and people come to work when they’re sick. … To a great extent, you, the employer, must compensate for these differences in conditions through the social contract you make with your employees in order to achieve acceptable performance.”

If Rothbaum believes U.S. employers must enter into a social contract with their Caribbean employees, it is just such a contract that their abandoned employees in the United States believe has been broken - by cutting off jobs, wiping out benefits, lowering their standard of living.

One longtime Harwood employee at Marion, Garney Powers, after noticing how the company kept moving from one developing country to the next to cut costs, said he once asked a Harwood manager if there was any chance, as wages rose in developing countries, that Harwood might shift some of its manufacturing back to the States.

No way, the manager told him.

“There’s too many countries out there.”

1. The Middle Class Shrinks 2. Plight of U.S. production workers

MEMO: About this series: These stories by award-winning authors Donald L. Barlett and James B. Steele of the Philadelphia Inquirer explore the devastating effects that global trade and international competition are having on American jobs. Barlett and Steele tell you not only what is happening, but why - and who’s behind it. “America: Who Stole the Dream?” looks at the forces that are at work in driving down American wages and in creating an emerging two-class society in the United States of have-mores and have-lesses.