The New War on the Working Poor

Politicians thrive on the combination of hypocrisy and amnesia, but some of us remember what was going on 20 years ago.  Back then America’s economic problems, its social problems, its government fiscal problems, were being blamed exclusively on the dependent poor, particularly Blacks, Latinos, immigrants, and other poor people living in America’s older cities.  That’s where all the money was going, we were told, in a decade-long propaganda campaign.  And in a massive anti-welfare crusade, the programs and benefits for such people were cut across the country, and spending on them fell dramatically.

One of the arguments was fairness.  What about the working poor?  And sure enough, as many of the welfare dependent found jobs, money was shifted to the other American welfare system, the one for people who work.  This includes the Earned Income Tax Credit (EITC), unemployment when you lose your job, food stamps if it doesn’t pay enough to get by, and disability insurance if your health or other problems mean (given the state of the labor market) no one wants to hire you.  At one time this was thought of as a good thing.  But now, as the country goes bankrupt as a result of the debts run up by Generation Greed and the promises it has made to itself but was unwilling to pay for, there is a new war on the working poor.  An attempt to blame American’s economic, social and fiscal problems, and find solutions that shift the sacrifices to, the sorts of people that bought into resentment of the dependent poor 20 years ago.  Suckers.

The past two years has seen a shift in policy that would have been unimaginable 20 years ago.  For decades – seven or eight of them in fact – the duration of state unemployment insurance had been set at 26 weeks.  But now, it has been slashed in state after state, starting in Michigan and moving on to North Carolina, where it is now as little as 12 weeks.  Ignoring evidence that employers were refusing to consider hiring the long-term unemployed, that state blamed workers’ own laziness for their plight just as welfare recipients were blamed a generation ago.  These workers, the state has decided, should be willing to accept jobs paying much less, and accept their fate if no one will hire them even at that level.

At the federal level, the past few months has seen an attack on food stamps.  Again, most of those who receive this benefit are or were working.  But instead of being considered people who paid their dues and did their best but were a victim of circumstances, food stamp recipients are being portrayed as lazy, shiftless, bums.  The goal of those seeking food stamp cuts has been to preserve subsidies for agribusiness while reducing food assistance to the working poor.

Behind this new demonization is rising government costs.  And there are two primary reasons costs are rising.

First, from the bottom a larger share of Americans who might once have been entitled to very little under the “welfare” system have spent at least some time in the workforce over the past 20 years.  Perhaps they used to hustle a few bucks working off the books, something that entitled them to nothing, but were subsequently able to land a low wage job, entitling them to unemployment insurance.  That means the cost of unemployment insurance is higher that it once was, because such people would not have received it.

Second, from above American business continues to succeed in reducing the wages and benefits of most American workers, causing more and more of them to qualify for benefits for the working poor.  Many of those receiving unemployment insurance, food stamps, the EITC or disability insurance today were once part of the middle class, or are the offspring of those who at one time were in the middle class.  The great economic innovation of the past 30 years, the one that top executives have paid each other so much money for achieving, has been to pay U.S. workers less but still sell them more, with debts covering the difference.  But the Great Recession exposed how much poorer Americans really are.  They are now working poor, not middle class, and their eligibility for public benefits reflects this.

One can see this in a sample budget McDonalds prepared to advise its employees to live on the minimum wage.  In addition to working more than 70 hours per week in two jobs, the firm allocated zero dollars for food.  How is that possible?  Food stamp eligibility, presumably.  And it also included almost nothing for health insurance. “Perhaps McDonalds is tacitly admitting that many low-income workers, including McDonalds employees, can’t afford health insurance and simply make do without it,” Time Magazine admitted while otherwise praising McDonalds for being “realistic.”

The budget also included $100 in savings out of a total monthly income of $2,060.  Not enough given that younger generations should be saving one-third of their pay for income and health insurance in retirement, since they will bear the burden of any Social Security and Medicare cuts required by the promises wealthier older generations have made to themselves but have been unwilling to pay for.  Since they have “time to adjust.”

This whole situation reveals the essential problem of the U.S. and in some ways world economy – it doesn’t add up.  If American workers started living within their means, business sales and imports would plunge, leading to more layoffs, lower wages and then even lower spending.  Even without adequate savings for retirement.  U.S. consumption has been too high, and mostly it has been too high at the top, but the only way those at the top can keep accumulating those pieces of paper that constitute their “wealth” is for other, less well off people, (or governments) to borrow the debts those pieces of paper also represent.  As for the kind of real investments that used to back such pieces of paper, why invest when the prospect for future sales is so bleak? Among other things, all those income supports for the former middle class are deferring the collapse or at least limiting the damage. Until the final collapse.  Which Generation Greed hopes to defer long enough so that hopefully they are gone, or at least “grandfathered” with regard to any fallout.

To understand the specifics of North Carolina, understand what the Great Recession has meant to the state.  More than perhaps any other state, North Carolina had attracted the best things coming out of the American economy while shipping the problems elsewhere, for 50 years.  In 1990 a large share of the heads of households on public assistance in New York City had been born (and poorly educated) in North Carolina and other South Atlantic states, then encouraged to head north for the help they needed.


Meanwhile better off people and businesses, including financial businesses, were encouraged to move south to North Carolina, for the lower taxes that went along with not educating or providing for those poorer people.

The result was a long boom, and the arrogance that comes with it.  Arrogance like the Southwest in the mid-1980s oil boom, New York in the late 1980s, late 1990s, and mid-2000s financial booms, Japan in the 1980s, the “Asian Tigers” in the early 1990s, California in the 1990s tech boom, and the “Celtic Tiger” and Iceland in the mid-2000s.  Arrogance like the real estate industry in the 2000s, like Wall Street over and over, like the IT industry over and over, like the oil industry over and over (“God Please Give Me Another Oil Boom I Won’t Mess It Up,”) etc. etc. etc. North Carolina was not prospering because it was lucky, getting more than it perhaps deserved.  Oh no.  It was prospering because they were better than everyone else, deserved what they were getting, and it would go on forever.

To me the biggest shock of the Great Recession was to see North Carolina get its economic ass kicked.  Needless to say, the state was not prepared.  Like shiftless New York, it had underfunded its state unemployment insurance fund, and was forced to borrow $billions from the federal government when it ran out of money.  In June 2013 North Carolina still had 101,600 fewer private sector jobs than it did in June 2007, even as thousands continue to move there expecting to find economic opportunity.  Its unemployment rate, at 8.8%, was not only far above the U.S. average but also above the 7.5% for New York State.  The state is facing a fiscal disaster.  Who is to blame?  The business leaders that created the lousy, unsustainable private sector economy?  Nope. The unemployed.

And there is no reason for it to stop at 12 weeks.  Although only seven states have cut the unemployment insurance duration beyond the traditional 26 weeks, there seems to something of a bidding war going on between “pro-business” and would-be “pro-business” states facing very hard times since the Great Recession.

If you don’t look too closely, what is going on elsewhere almost makes New York’s politicians look good.  Consider the recent misery tour by New York City’s candidates for Mayor, with rides on buses and bicycles, sleepovers in public housing projects, and weeks spent on the minimum wage or food stamps.  But this concern for ordinary people is nothing but symbolism for suckers.

The candidates for Mayor had already spent doing deals with those who really matter in exchange for endorsements, money and signatures.  Notably the public employee unions and the real estate and financial industries.  Those unions have been letting their members know in no uncertain terms what the real problem is – ordinary people have it too good.  They should be getting less in public services in exchange for more, so the producer interests can get more for less.  Over and above the tax increases and service cuts most New Yorkers have already experienced, to pay for the pension deals older and retired public employees have already happened. These interests had deals in hand before the candidates for Mayor suddenly started feigning concern for the less well off.


Unlike the candidates for Mayor, in fact, most of those who hold real power here don’t even bother with the symbolism.  They just serve the pension rich and the bonus rich/real estate industry openly.

The New York State Legislature, for example, recent passed a bill – without any debate or objections – giving ultra-luxury buildings massive breaks on New York City property taxes. “One57, the 90-story skyscraper in Midtown where asking prices top $10,500 a square foot, the tax break is an eye-popping 94.0%” according to the New York Times.  In that same organization, Assemblymember Peter Abbate has introduced legislation to exempt public employee pension income, which is already exempt from state and local income taxes, from consideration when considering eligibility for property tax breaks for poor seniors under the STAR program.  So the public employee unions don’t want their members paying property taxes, either.  So who pays how, or gives up what, for all these deals that do down all the time?

In a practical sense the war on the working poor – and the common future — has been going on far longer in New York than elsewhere.  But at least New York politicians don’t bother to demonize them the way those in North Carolina do.  I wonder how those working people, busting their ass in a low- or moderate-wage jobs with zero retirement benefits and perhaps no health insurance, or out of work after years and perhaps decades of working and having part of their compensation be contributions to unemployment insurance, feel about being branded shiftless welfare queens?  I’ll say it again.  Suckers.  If your are still reading, I’m done, so you can go back to watching porn or reading about the Kardashians (whoever they are).