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Kathleen Newman & Barbara Ehrenreich: Bush Has Ignored the Working Poor and Failed to Address Growing Economic Inequality

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During last night’s State of the Union, President Bush pushed for Congress to approve a $150 billion economic stimulus. Newman and Ehrenreich examine how Bush’s plan fails to help most homeowners facing foreclosures and fails to expand benefits for the poor, such as unemployment insurance or food stamp allotment. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: President Bush delivered the State of the Union Monday, the last of his presidency. The President claims success in the US occupation of Iraq, touting the so-called troop surge he announced one year ago. Bush also repeated his threatening rhetoric against Iran, vowing to confront those who challenge what he called “our vital interests in the Persian Gulf.”

On the domestic front, Bush proposed spending $300 million to send low-income children to private or religious schools, while at the same time calling on Congress to reauthorize the No Child Left Behind Act. Bush also urged lawmakers to approve a new surveillance bill that would grant immunity to telecom companies that aided warrantless spying on US citizens. And for the first time in a State of the Union speech since 2006, the President mentioned the ongoing recovery efforts on the Gulf Coast. Bush announced this year’s North American Leaders’ Summit with Mexico and Canada will be held in New Orleans.

But Bush opened his speech on the nation’s economy, the top issue among voters, according to polls. Bush urged Congress to make his tax cuts permanent and approve the economic stimulus deal reached last week with House Democrats.

    PRESIDENT GEORGE W. BUSH: As we meet tonight, our economy is undergoing a period of uncertainty. America has added jobs for a record fifty-two straight months, but jobs are now growing at a slower pace. Wages are up, but so are prices for food and gas. Exports are rising, but the housing market has declined. At kitchen tables across our country, there is a concern about our economic future.

    In the long run, Americans can be confident about our economic growth. But in the short run, we can all see that that growth is slowing. So last week, my administration reached agreement with Speaker Pelosi and Republican Leader Boehner on a robust growth package that includes tax relief for individuals and families and incentives for business investment. The temptation will be to load up the bill. That would delay it or derail it, and neither option is acceptable. This is a good agreement that will keep our economy growing and our people working. And this Congress must pass it as soon as possible.

AMY GOODMAN: As part of the compromise, House Democrats agreed to Bush’s refusal to include additional funding for food stamps and unemployment benefits. But the plan faces opposition in the Senate, where Democrats are already rebuffing Bush’s plea for unfettered approval. Hours before the State of the Union, Senate Finance Committee Chair Max Baucus of Montana unveiled a plan that would boost individual tax rebates to $500 and extend unemployment benefits for thirteen weeks. Other Senate Democrats are vowing to add more provisions, including heating assistance and food stamps for low-income Americans.

To talk more about the State of the Union and the economy, I’m joined now by Katherine Newman, professor of sociology and public affairs at Princeton University. Her latest book is The Missing Class: Portraits of the Near Poor in America. On the phone with us, we’re joined by Barbara Ehrenreich, well-known commentator, writer, author. Her latest book is called Nickel and Dimed.

Katherine Newman, let’s begin with you. Your response to the stimulus package and the state of the economy today?

KATHERINE NEWMAN: Well, the stimulus package will certainly help the missing class that is the nation’s near poor, who are families of four at $20,000 to $40,000. It will help them, because they need the money that will come to them by virtue of being in the working poor. But it’s not going to rescue the economy, and as a consequence, the kinds of jobs that they have are likely to ratchet up in unemployment, and that’s going to have a deleterious effect on them. The absence of the SCHIP bill, which would have had a hugely positive effect on the near poor, is a real tragedy, and I expect we will revisit it. So there wasn’t a whole lot in this for them, and I don’t think the stimulus package is going to stimulate —


KATHERINE NEWMAN: SCHIP was the bill that would have extended child health insurance. And it’s especially important for the group of people that I wrote about, because they are the ones whose employers don’t provide healthcare, but they earn too much to qualify for Medicaid. And that’s the group, which is over fifty million Americans in the near poor, who would have really benefited from the SCHIP bill.

AMY GOODMAN: Barbara Ehrenreich, your book is called Nickel and Dimed. Can you talk about President Bush and what he is proposing, his latest — the last speech that he gives in his State of the Union, your last book called Bait and Switch?

BARBARA EHRENREICH: Well, he’s just — excuse me — pushing the same stimulus package that went through the House, which is, I think, terribly inadequate on many levels, in some ways as Katherine has mentioned. But there’s a possibility that the Senate will leap ahead and add extended unemployment insurance and expansion of food stamp allotment and some other things that would really help the people who are hurting most economically now.

But I think, you know, there’s a real failure, of course, on his part to realize that the economic problems are really beyond stimulus right now. You know, this huge category of the working poor or the poor, plus what Katherine Newman calls the missing class, this is part of the problem for the whole economy. This is where, you know, the credit crisis arose with foreclosures, mostly among people at that economic bracket. This is where consumption has been going down, as we saw very vividly at Christmas time. So if you don’t address that fundamental inequality, you’re going to continue to have a big problem in this economy.

AMY GOODMAN: Barbara Ehrenreich is author of Bait and Switch: The (Futile) Pursuit of the American Dream. Katherine Newman, yes, your book is called The Missing Class. Who are they?

KATHERINE NEWMAN: They are the near poor, over fifty million Americans who are above the poverty line, but well below the middle class, and they tend to be forgotten almost all the time. They are earning too much to qualify for most of the benefits that we provide for the real poor, but they don’t earn enough to be completely secure, and as a result, they’re very vulnerable in an economy like this. They tend to be service-sector workers. And when contractions occur and unemployment rises, they are often the first to feel the brunt. But they are really the future of the nation. If they can’t make it, really no one can, and that includes more than 20 percent of the nation’s children who fall into this group.

AMY GOODMAN: The President gave slight mention to the nation’s housing crisis, but did not directly reference the surge in subprime mortgages that have sent home foreclosures to record highs.

    PRESIDENT GEORGE W. BUSH: On housing, we must trust Americans with the responsibility of homeownership and empower them to weather turbulent times in the housing market. My administration brought together the Hope Now Alliance, which is helping many struggling homeowners avoid foreclosure. And Congress can help even more. Tonight, I ask you to pass legislation to reform Fannie Mae and Freddie Mac, modernize the Federal Housing Administration and allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages. It’s a difficult time for many American families, and by taking these steps, we can help more of them keep their homes.

AMY GOODMAN: President Bush in his last State of the Union. Katherine Newman, homes, the housing crisis, what some call the subprime crimes?

KATHERINE NEWMAN: We actually saw a remarkable surge in the proportion of the Americans, low-income families who became homeowners in the last ten years or so. And I expect we’re going to see their equity almost completely wiped out, which will be a terrible tragedy for them, since they require that private safety net, just like everyone else does, for supporting their healthcare needs, their retirement, their children’s college possibilities. And they are the ones who are going to lose their equity and lose their homes. There’s something like two million households going into foreclosure. The rescue packages that have been passed so far will affect about 200,000 of them. It’s paltry. And they’ll wipe out in the inner city, where we actually saw some improvement because of increased home ownership, is going to be quite devastating.

AMY GOODMAN: Barbara Ehrenreich, your comment on the subprime crisis and, overall, what homes mean and what President Bush means for those who own homes in America?

BARBARA EHRENREICH: Well, the crisis, I think, was that finance capital got extraordinarily greedy, when it decided it could make a lot of money off of people who are basically poor, however we want to — you know, near poor, missing class, working poor, whatever, and leapt onto them with these dodgy high-interest loans. That’s part of, you know, what increased homeownership, or at least will have increased it rather temporarily.

But I think, you know, it all comes back to the huge inequalities in our society that mean that so many people work very, very hard year round, often with more than one job, and can’t get ahead. Now, this has always been seen as some sort of an anomaly of American society, you know, from outside of our country. It’s been seen, well, that’s strange, they have all these people who can’t get ahead. But now it’s become an international problem, because this has helped — that poverty, you know, through the subprime crisis, has helped contribute to turmoil in the international markets.

AMY GOODMAN: On taxes, President Bush urged Congress to make his tax cuts permanent. He said he would veto any tax increases passed by Congress.

    PRESIDENT GEORGE W. BUSH: Most Americans think their taxes are high enough. With all the other pressures on their finances, American families should not have to worry about the federal government taking a bigger bite out of the paychecks. There’s only one way to eliminate this uncertainty: make the tax relief permanent.

AMY GOODMAN: Katherine Newman, your response?

KATHERINE NEWMAN: Well, this regressive tax policy of Bush’s has robbed the nation of the money that we need to address the deficit. It has increased the largesse that has gone to the highest-income Americans, who have already benefited more than anyone else has from whatever economic growth we had. Meanwhile, we’ve got people at the bottom who are absolutely struggling.

If we really wanted to inject a stimulus, I’d say double the earned-income tax credit, and let’s get that money to poor people who will spend it, who are out there in the labor market killing themselves to try and survive. That would immediately put money in their hands, and they are the people who will stimulate the economy, if anybody can. But if we see these tax increases — these tax cuts become permanent for those at the very top, we’re going to see our economy tank and struggle, and those people who are the ordinary working people pay the price.

AMY GOODMAN: Barbara Ehrenreich, on this issue of taxes, you have written extensively about people — the same really missing class that Katherine Newman writes about. Your response also to the fact that, well, the House, the Democratic leadership, went along with President Bush in agreeing that they wouldn’t push forward on extending unemployment insurance or expanding food stamps?

BARBARA EHRENREICH: Yes, well, rather disappointing, but it would not be the first time Democratic-elect officials let us down on an actual policy decision. I don’t understand this, and I was appalled when Nancy Pelosi gave her argument, for example, for not increasing the food stamp allotment. She said that the increase they were going for would have only amounted to ten cents a day. Actually, it would have been more than that. Food stamps — current food stamps allotment being one dollar per meal is what it averages out to. So she said it wasn’t worth it, just ten cents a day. And I thought, well, wait a minute, why don’t you go for a little more then, so it would have been worth it? You know, this is — again, I say it’s not just a matter of temporary stimulus, although certainly increasing the food stamp allotment would free up a lot of other money for people so they could spend it, but it’s also about healing this long-term problem, this deep inequality which has really tripped us up.

AMY GOODMAN: What about consumer debt, Katherine Newman?

KATHERINE NEWMAN: Consumer debt is absolutely catastrophic, and we’re going to see bankruptcy skyrocket, in part because of the bills that the Republican congress passed that provided bankruptcy — you know, stripped bankruptcy protection for precisely the people we’re talking about here. And the biggest source of bankruptcy is medical expenditures, people who are unable to pay for that appendix to come out or their elderly parents’ care. They’re loading up credit cards with medical care expenditures. Our medical care system clearly is out of control. And without addressing that fundamental reform, we’re going to see a lot more Americans, especially those in the near poor, pushed into bankruptcy.

AMY GOODMAN: We didn’t hear much about healthcare last night.

KATHERINE NEWMAN: No, we didn’t. And, of course, as I said before, the SCHIP bill would have been the most progressive thing that could have been done for the missing class in terms of healthcare. But I think the thing — the reason we didn’t hear about it is that Bush does not want to talk about what he has permitted to happen under his reign, and it’s going to be left to the next president or the next congress to deal with it.

I actually do believe we’re going to see some action moving us toward a more universal healthcare system, because the business community is unable to fund it, and we’re seeing these huge rises in the uninsured, and it’s sucking a huge amount of money out of the economy, rising healthcare costs, almost as bad as the gasoline costs. So I do believe we’ll see action on that, but not in this presidency and not in this congress.

AMY GOODMAN: Overall, what do you think are the structural changes that are needed to deal with the economy right now, to help what you call the missing class?

KATHERINE NEWMAN: Well, we need to see an increase in their earnings. We need to see the earned-income tax credit increase. We need to see them regain access to the housing market, so they can stabilize their own housing and their equity position. We need to see a huge amount of money injected into early childhood education, so that their children do not fall so far behind, as they do now. These are the families whose parents are working around the clock, and as a result, they can’t be there for their children in the way they need to be. So we need to increase our investment in education at the early childhood end. At the high end, we need to reform the tax structures so that there is some degree of fairness, increase the money coming to the low-income workers. We need to attack the irregularities in the regulatory system that mean that predatory lenders, payday lenders can rip these people off. We need to increase their options in consumer markets, provide them with better options for even purchasing, you know, a decent diet in their neighborhoods and cars that don’t run out on them, because you’ve got, you know, usurious lending in the car industry, as well. So there’s a million things that we need to do. It isn’t going to happen in this presidency.

AMY GOODMAN: And, Barbara Ehrenreich, do you see the opposition party, the Democratic presidential candidates, offering solutions?

BARBARA EHRENREICH: Somewhat more than the Republicans, I’d go that far. I just wanted to add to what Katherine said. You know, one reason for the credit crisis is in fact low wages. Easy credit in recent years has been a substitute for decent wages. And that’s quite a trap. You know, you won’t be able to save up and buy that house, but, boy, do we have a mortgage for you, ha ha. You know, that’s the kind of thing that’s been going on. If we don’t address, you know, the fundamental problem of so many working people in poverty, we are going to be continue to have a weak economy.

There are so many things we could do that I’d like to hear more Democrats talking about, and that is, you know, return to a progressive income tax system, you know, certainly not making Bush’s tax cuts for the wealthy permanent, but try to get really progressive again, as we used to be, and, you know, just repairing that safety net so that people can take a hit now and then like a job loss and get back on their feet. We don’t have that.

AMY GOODMAN: I recently heard John Edwards saying if he were not in the race, he doubts the word “poverty” would be raised again. Do you share that assessment, Katherine Newman?

KATHERINE NEWMAN: I absolutely share that assessment. As far as I’m concerned, he’s the only candidate who has actually made the issue of poverty central. And this is why I’ve been a supporter of his from the very beginning, because he understands these structural inequalities are not going to go away unless we attack the problem of poverty, which is something we did wholeheartedly during the Johnson years, and we came back to it in many ways in the years that followed. But it’s almost as though the poor don’t exist. And if we put together the poor, the thirty-seven million poor people in the US, with the over-fifty million who are near poor, we’re talking about almost a third of the American population. What are the Democrats going to do for them? I think the meltdown in the economy has frightened everyone to the point where we’re thinking only about the middle class. And while the middle class is important, this huge population, ninety million people, over 30 percent of the nation’s children, deserve some attention. And John Edwards was attempting to give it to them and still is.

AMY GOODMAN: We’re going to leave it there. Katherine Newman, thank you very much for being with us, professor of sociology and public affairs at Princeton University. Her latest book — she wrote it with Victor Tan Chen — is called The Missing Class: Portraits of the Near Poor in America. Barbara Ehrenreich with us on the phone, her latest book, Bait and Switch, author of thirteen books, including the New York Times bestseller Nickel and Dimed. She is a frequent contributor to the New York Times, Harper’s and The Progressive.

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