US Squashes Middle Class Into Poverty

UK BANNED Press TV has conducted an interview with Dr. Paul Craig Roberts, former Assistant Secretary of US treasury, Florida about the status of the US economy with almost 50 million Americans on food stamps.

The following is an approximate transcript of the interview.
Press TV: What do you think about what our other guest Mr. Stewart Stogel said about the closeness, if I understood him correctly, between the legislators and the corruptions or the lawmakers and the corporations. Is that playing a factor into this?
Roberts: The main cause I believe is the offshoring of the middle class jobs that’s been going on for about 15 years. It began in earnest with the collapse of the Soviet Union when China and India rethought their economic approach and opened their markets to foreign capital.
So we had first the move offshore of the well paid manufacturing jobs and then with the rise of high speed internet this was followed by the off shore movement of professional service jobs such as information technology, software engineer and so this sort of obliterated the ladders of upward mobility in American society that had kept a somewhat more equal income distribution.
And the other main contributor was the deregulation of the financial system. When that was de-regulated the banks were simply able to highly leverage equity with massive debt to drain more and more of income, fees and interest payments.
So, the income distribution has been severely hurt.
It is so badly skewed now that all of the evidence is clear – a very small percent of the population receives almost the entire gain and income increases and the wealth is being concentrated in the top, is extremely top heavy. So it has changed the complexity of the American economy and the American society for the worst.
If I may continue for just another minute... this problem, - I say this as a former member of the Republican Congressional staff and Assistant Treasury Secretary during the Reagan administration – the Republicans have been fighting for ideological reasons: the social safety net ever since Franklin Roosevelt put it in the 1930s; and president Johnson added to it in the 1960s. Many of them believe that we can’t afford and many of the others believe that it corrupts and undermines society and gives too big a role to government.
And so they see in the current circumstances, because of the large budget deficit, to cut back on these programs that they’ve been attacking for decades. I think they’re miscalculating and if I was still in the Treasury I would give them different advice because the economy is not recovering.
We had the jobs report today, there were only 74,000 – they were all temporary wholesale retail and trade jobs associated with the Christmas buying season. So they’re probably already gone.
If you have no recovery and you cut food stamps you are not only affecting people’s nutrition, but you are affecting the purchasing power; and if you don’t extend the unemployment benefits you are also affecting purchasing power and so you are basically shrinking the economy.
And when you do that you create a larger demand for the social safety net and the Republicans won’t be able to stand in the way of that because if you have a sinking economy you are just not going to be able to turn people out into the streets. 
Press TV: This is coming at a time that these very same lawmakers are obviously debating issues like the unemployment benefits. We know that 1.3 million Americans lost their benefits come the year end. They’re also contemplating on these food stamp laws; I could go on... and the minimum wage for example, which all affect these people.
Let’s take the idea of minimum wage – why is it that there has not been an increase in minimum wage, which has been a topic under much protest, at least I know in the capitals of New York and Los Angeles?    
Roberts: The businesses that employ the low-skill labor, they claim they can’t afford the cost of rising labor. And you have the free market ideology that an increase in minimum wage causes unemployment. So, those two arguments together have been fairly strong in resisting the minimum wage increase.
In actual fact there have been a number of economic studies – I think the first one came out in the 1980s and there have been others – where prominent economists have concluded that the rise in minimum wage does not really affect employment.
It remains to be seen what the real truth is or whether these studies will have any influence in moderating the power of the free market argument and the corporation argument.
I think that the notion that the minimum wage causes unemployment is under attack and it probably will result in more willingness to raise the wage. When that will occur I really don’t know.
But you see, in the United States according to the latest official wage statistics, 40 percent of the working population earn less than 20,000 dollars per year. Now, that might seem like a lot of money in many countries, but in the United States it’s not. The poverty level for a family of four is about 24,000.
So you’ve got 40 percent of people earning less than 20,000 per year. You’ve got 53 percent that earns less than 30,000 dollars per year.
So, the squashing of the middle class and the forcing of so many middle class people down into the bottom ranks; and the squashing of the bottom ranks – this is a very socially unstable situation and it’s certainly economically unstable. And it certainly interferes with an economic recovery.
In my day the Republicans would have been more sensitive of this, they would not have wanted this social instability; they would not have wanted a lack of recovery.

We’ve been now five years, essentially six years with no real recovery in the economy. The labor force participation rate has fallen sharply. People simply can’t find a job and they just stop looking, they’re no longer counted as unemployed.
These are real serious situations and the people in Congress are so tuned to campaign contributions that they mainly respond not to the constituents, but to the big powerful interest groups that finance their political campaigns.

So for them their success doesn’t depend on serving the public, it really depends on serving the people who provide funds for their re-election campaign. This is probably an even more important reason that they neglect the population – than the fact that they are much richer on average than the population.         
Press TV: This whole thing about neglect. First of all I’m shocked to hear about the 40 percent that you said earned 20,000 dollars – 40 percent of the population of the US, correct? And you said 50 percent earned 40,000 dollars, is that correct?
Roberts: 53 percent earn less than 30,000 dollars.
Press TV: Let’s switch gears a little bit back to the lawmakers actually and to how they have said based on this report in the New York Times that they actually benefited from the stock market since the stock market again, based on this report of the New York Times, had recovered.
And one of the stocks that they had actually invested in a majority of these lawmakers is General Electric. I have 74 members pumping cash into this corporation.
Does that raise an eyebrow for you, why they chose General Electric, the reasons why that would be one of the focuses of their investment?
Roberts: I wouldn’t know that.
But it’s easy to see why Congress would benefit from a rising stock market if half of them are millionaires because that means they have some money to put into the market.

And as long as the Federal Reserve is following its policy of quantitative easing, that is, it’s creating a thousand million new dollars annually. Most of that liquidity is floating in the stock market driving up the prices.
You see, we have a very nominal situation today in the United States. We have stock market at an all time high, but the economy is not going anywhere. There is no economic boom yet there is a stock market boom.

The only explanation for that is the Fed is printing the money and the liquidity is driving up stock prices. So if you’re worth a million dollars you have money that you can put into the stocks and it will rise with the market as the Federal Reserve drives up the market with liquidity.
That’s why they would be doing well whether they were in General Electric or anything else.   

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