American Dream in trouble

It may not feel like it for many Americans. But with the Dow breaching 14,000, shareholders and investors have recovered the more than $8 trillion in wealth lost during the recession and attained levels of paper wealth [emphasis added] they haven’t seen since the Roaring Oughts.

American Dream Fades for Generation Y Professionals

Generation Y professionals entering the workforce are finding careers that once were gateways to high pay and upwardly mobile lives turning into detours and dead ends. Average incomes for individuals ages 25 to 34 have fallen 8 percent, double the adult population’s total drop, since the recession began in December 2007. Their unemployment rate remains stuck one-half to 1 percentage point above the national figure.

In a Rust Belt town, a teenager’s climb from poverty: Tabitha Rouzzo yearns to take a different path than those around her in New Castle, Pa., but leaving poverty requires a more exhaustive effort than it once did in America.

Her New Castle [PA] was the one that existed now: white, working class, with poverty that had deepened into the second and third generations. Nearly three-fourths of the students in Tabi’s school qualified for free or reduced-price lunches, and one-third of New Castle families with children younger than 18 had incomes beneath the poverty level.

This is not a good time to be starting out in life. Jobs are scarce, and those that exist often pay unexpectedly low wages. Beginning a family — always stressful and uncertain — is increasingly a stretch. The weak economy begets weak family formation. We instinctively know this; several new studies now deepen our understanding.

When the labor market operates smoothly, it creates an economic escalator. Just out of high school or college, young workers typically switch jobs frequently until they find something that fits their talent and temperament. Job changes often mean higher pay; people move to advance themselves. The more they succeed, the more confident they feel in marrying and having children.

The most startling evidence of the broken escalator is the collapse in marriages and births. Marriage has been declining for years. Now, in a new study, the Pew Research Center finds that in 2011 the U.S. birth rate (births per 1,000 women between the ages of 15 and 44) fell to its lowest level since at least 1920, the earliest year of reliable statistics. From 2007 to 2011, the U.S. birth rate dropped almost 9 percent. The total fertility rate — the estimated number of children born to adult women in their lifetime — has fallen four straight years to 1.9 (the replacement rate is 2.1).

A half-century ago, America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today’s dollars, including health and pension benefits. Today, America’s largest employer is Walmart, whose average employee earns $8.81 an hour. A third of Walmart’s employees work fewer than 28 hours per week and do not qualify for benefits.

Here are some of the issues that are making some politicians and political thinkers uneasy:

Are large segments of the American workforce — millions of people — at a structural disadvantage in the face of global competition, technological advance and ever more sophisticated forms of automation? Is this situation permanent?

Will the share of profits from improving corporate productivity flowing to capital and to high-earning C.E.O.s continue to grow, while the income of wage earners stagnates and their share of profits declines?

Has the surging wealth and income of the top one percent and of the top 0.1 percent reached a tipping point at which the political leverage of the very affluent decisively outweighs the influence of the electorate at large?

Is it possible that in the United States and Europe, democratic free market capitalism is no longer capable of providing broadly shared benefits to a solid majority of workers?

— Typical of large corporations, adjusted for inflation, skyrocketed from $1.8 million in the 1980s to $9.2 million in the first half of the 2000 decade.
— California has the seventh-widest gap between rich and poor in the nation (New York has the widest). The U.S. has the largest inequality gap of all the wealthy industrialized nations.

Joseph Stiglitz: ‘The

The Huffington Post | By Bonnie Kavoussi
Posted: 10/03/2012 12:11 pm Updated: 10/03/2012 4:58 pm

Rising from rags to riches isn’t the American dream, it’s an American fairytale, according to Nobel Prize-winning economist Joseph Stiglitz.

“The American dream has become a myth,”Stiglitz, an economics professor at Columbia University, told the German news magazine Der Spiegel in an interview published Tuesday. “The belief in the American dream is not supported by the data.”

There’s evidence to support such claims. The U.S. has less economic mobility than Canada and much of Western Europe, according to economic research cited by The New York Times. Seven in ten Americans that start out in the bottom fifth of family income stay in the lower class as adults, and more than six in ten Americans that start out in the top family income quintile stay in the upper class as adults, according to a July report by the Pew Charitable Trusts.

While the data may not be there to back the idea of the American dream, there are some that still consider it to be pretty important. Republican vice presidential nominee Paul Ryan, for his part, said last year that “70 percent of Americans want the American dream. They believe in the American idea. Only 30 percent want the welfare state.”

Der Spiegel that in spite of anecdotes about poor people becoming rich, overall “the life chances of a young U.S. citizen are more dependent on the income and education of his parents than in any other advanced industrial country for which there is data.”

U.S. workers endure ‘lost decade’ of declining wages

By Kevin G. Hall
McClatchy Newspapers
Published: November 17, 2012 – 11:06 PM

WASHINGTON: The nation’s high unemployment rate captures the headlines with each monthly jobs report, yet many Americans may be surprised to learn that real earnings, when adjusted for inflation, have declined across most industries and sectors since the Great Recession.

Since 2002, in fact, it’s effectively been a lost decade for workers.

Equally troubling, real wages are now about the same level as they were in December 2005.

Put another way, wages have clawed back from the recession only to the level of seven years ago.

“The recession was unprecedented, and the stagnation of wages has really been going on for some time,” said Martin Kohli, the chief economist of the New York office of the Bureau of Labor Statistics.

“If you are unemployed or , that is the most important issue,” he said.

“But if you’re working, and your income has gone down, or you haven’t had a wage increase in a number of years, that problem is the bigger issue for you.”

The problem makes recovering from the recession harder, he said, because without wage growth, it’s harder for Americans to pay down their debts.

In fact, real wages have been on a mostly downward slope for more than 40 years.

Crunching numbers

Researchers at the Hamilton Project, part of the center-left research center the Brookings Institution, recently calculated that the median working-age man with a job earns about 4 percent less, when adjusted for inflation, than he did in 1970.

The numbers look better for women, but they tell a different story, because women historically numbered fewer in the work force and earned less the further back you go.

There are many explanations for the declining earnings.

One is that the Federal Reserve successfully tamed inflation, so wages aren’t racing to keep pace with rising prices.

Another is the decline in labor unions, whose members enjoyed higher wages and better benefits.

Yet another explanation is that productivity — a worker’s output per hour — has improved greatly thanks to computers, automation and other breakthroughs.

Subject of debate

Productivity’s role in falling real wages is a subject of debate in economic circles, partly because workers used to share in the benefits of rising productivity but have shared less so over the past decade.

“Since 2002, few have seen wage growth. … This idea of a ‘lost decade,’ it’s already happened. We’re well into our next lost decade,” said Heidi Shierholz, a labor economist at the Economic Policy Institute, a liberal research center.

“A key thing is that from the 1970s up to 2000, middle-income … families didn’t get their fair share, but they still saw some growth. Since 2000, nothing.”

From the end of the 2001-02 recession to the start of the recession in late 2007, the United States witnessed the weakest business-cycle recovery record for job growth, Shierholz said.

For reasons that economists don’t fully understand, the only occupational category that’s shown a significant increase in wages since December 2005 is office and administrative workers.

Virtually every other occupational group is below the 2005 level or is 1.5 percentage points or less above that 2005 level.

Consumption decisions

Some conservative economists argue that wages alone don’t tell the whole story on workers’ well-being.

“Consumption might be an even better measure. People may experience short ups and downs in their income stream, but consumption decisions are based on incomes over a lifetime,” said Aparna Mathur, a researcher at the American Enterprise Institute, a free-market research center.

“If you look at consumption, you see that inequality hasn’t changed a lot over the last 30 years. You don’t see the widening of inequality in the consumption tables.”

Narrowing of gap

What the index misses, Mathur said, is government transfer programs.

This includes everything from the earned income tax credit and several other state and federal tax preferences to food and medical assistance for single mothers and poor families.

The poor have seen their spending power rise, Mathur said, despite the fact that they’re on the lower rungs of the income ladder.

“You see a narrowing of the gap there. People in the lowest income, households earning less than $20,000, are still able to afford things like computers, printers and microwaves,” she said, suggesting that total expenditures on food, clothing and entertainment haven’t fallen.

“People’s standards of living have been going up over time.”

Slack in market

For veteran economist Neil Dutta, the head of economic research at Renaissance Macro Research, the answer to why wages have remained flat for so long isn’t complicated.

“To me, it’s very simple. There is just such a massive amount of slack in the labor market. You are getting less incrementally in earning power for each job created … that’s across the board, across industries,” Dutta said.

That’s a fancy way of saying that with so many Americans out of work or looking for better jobs, employers have the upper hand.

“This is a very depressed labor market. … When you have that many people competing for every job that’s available, it’s going to keep wages” flat, Dutta said.

As Washington turns in the coming weeks from the presidential election to the long-term debt issues facing the nation, the discussions will center on whether the country can afford programs such as Social Security and Medicare in their current form.

So far, these debates have focused little on how potential cuts in federal benefits may affect retirement for younger generations of workers who already are seeing employers shrink their safety nets.

The confluence of events is creating a dichotomy in the nation’s workforce and a massive burden for the country that will not be fully evident until the next generation approaches retirement.

“We have a looming retirement-income crisis in this country,” said Diane Oakley, executive director of the National Institute on Retirement Security. “The problem is we won’t see the ultimate brunt of it until 30 years down the road when it is too late to do something about it.”

Young workers are having little or no say in any of this, but the changes will affect them most.

“How the hell do I get ahead?” said Sandra Conchar, 27, director of community relations at Potomac Pizza, a local restaurant chain. “And retirement? Oh, God.”

The Real Source of Middle-Class Money Woes
Income and net worth are two key determinants of how Americans feel about their own finances

September 12, 2012

There are many reasons middle-class Americans feel squeezed right now: The high unemployment rate (8.1 percent), rising cost of college tuition, or the fact that close to one-third of homeowners are underwater. But it’s a combination of three other factors that led the Pew Research Center to label the 2000s a “lost decade” for the middle-class: declining household income, shrinking net worth, and a smaller middle class.

[See 10 Signs Americans Families are Falling Behind.]

“Income peaked in 1999 and it has not yet returned to that peak,” says Paul Taylor, coauthor of the report and executive vice president of the Pew Research Center. “It’s the first decade in modern U.S. history where that’s the case,” he adds.

While income tends to be more volatile as people lose and gain jobs, Taylor says net worth is also a valuable measure of financial security, because it indicates whether people are able to afford an unexpected medical bill or other unplanned expenses. “It’s enormously important to people’s sense of economic well-being,” says Taylor.

Pew measured the size of the middle class by defining it as those earning between two-thirds and double the national median income. Around 51 percent of Americans fell into that category in 2011, compared to 61 percent in 1971. Taken together, these numbers show that “the middle has gotten poorer and smaller,” says Taylor.

Survey respondents’ perceptions of the economy and their own well-being also reflect those negative numbers. Among middle-class adults, 85 percent said it was more difficult now than it was 10 years ago to maintain their standard of living, and most respondents also agreed that “It is more difficult to get ahead today than it was 10 years ago.” Meanwhile, the majority of middle-class respondents said they “had to reduce household spending in the past year because money was tight.”

[See 10 Smart Ways to Improve Your Budget.]

Respondents also estimated that it takes a household income of $70,000 a year for a family of four to live a middle-class life. (Pew estimates that the median income for a four-person household is just under that figure.)

Young people had a particularly rough decade. Their income declined and a greater share are unemployed now than 10 years ago. In addition to the challenging job market, Taylor points out that the housing market was rough on young people as well. Many of them bought their first homes at bubble prices, and then watched as those homes lost value, and in many cases became worth less than the money owed on them.

“That’s affected people of all ages, but older adults tend to have purchased their houses longer ago, already paid of their mortgages, and purchased at pre-bubble prices,” explains Taylor.

Young adults, in fact, were the only age group where the percentage of people who describe themselves as “middle class” declined between 2012 and 2008. In 2012, 4 in 10 young adults labeled themselves “lower class,” compared to just 1 in 4 in 2008.

Adults age 65 and older fared best over the last decade; their income grew the most—10 percent—between 2001 and 2011. Taylor attributes that to the fact that many sources of income for older Americans, such as Social Security and proceeds from retirement accounts, are fixed, so they are relatively immune to economic swings.

[See 10 Questions That Will Help You Earn More Money .]

Still, Americans have managed to retain their optimism, especially over the long term. Most respondents said their own standard of living beats that of their parents at the same age. Given the growth in income over four decades, that statement rings true: Since 1970, median household is up 32 percent. “Over the long haul, in the long arc of their lives, Americans are doing better, but they had a very bad decade,” says Taylor.

Respondents also drew a distinction between their own personal finances and those of the country, and they tended to be more optimistic about the former. More Americans believe their children’s standard of living will be better than their own than believe it will be worse (43 percent versus 26 percent).

“It’s a phenomenon in survey research: ‘The world is going to hell, but I’m doing okay,’” says Taylor, adding, “It’s hard to beat the optimism out of the American public.”

Homeless students in Fairfax County may set record

Sunday – 10/21/2012, 12:17pm ET

FAIRFAX, Va. – The number of homeless students in Fairfax County public schools may hit a record-breaking high by the end of the school year.

The Washington Post reports that the count of homeless students may soon surpass 2,500, setting a new record. (

The county is one of the wealthiest in the country, but experts believe the rising number of homeless students is tied to the effects of the recession. The total number of homeless students in the county is likely to be 10 times higher than the number from 15 years ago.

School officials say at least 400 of the students classified as homeless are children who live without parents or guardians.

According to the Post, D.C. counted nearly 3,000 homeless students last year and Montgomery County registered more than 800.

Experts say the number of homeless students jumped during the recent recession and has continued to grow.

The federal Department of Education estimates there are more than 1 million homeless students nationwide — an all-time high.

The rate of suicide in the United States rose sharply during the first few years since the start of the recession, a new analysis has found.

In the report, which appeared Sunday on the Web site of The Lancet, a medical journal, researchers found that the rate between 2008 and 2010 increased four times faster than it did in the eight years before the recession. The rate had been increasing by an average of 0.12 deaths per 100,000 people from 1999 through 2007. In 2008, the rate began increasing by an average of 0.51 deaths per 100,000 people a year. Without the increase in the rate, the total deaths from suicide each year in the United States would have been lower by about 1,500, the study said.

The finding was not unexpected. Suicide rates often spike during economic downturns, and recent studies of rates in Greece, Spain and Italy have found similar trends. The new study is the first to analyze the rate of change in the United States state by state, using suicide and unemployment data through 2010.

“The magnitude of these effects is slightly larger than for those previously estimated in the United States,” the authors wrote. That might mean that this economic downturn has been harder on mental health than previous ones, the authors concluded.

‘Underemployed’ a term that isn’t going away soon

By Randy Tucker
DAYTON DAILY NEWS Sunday October 21, 2012 5:53 AM

It’s a situation that has become such a cliche in today’s struggling economy that MTV plans to launch a sitcom named after it: “Underemployed.”

The characters in the show are fictional, but the story line — college graduates struggling to land full-time jobs — reflects the haunting reality for hundreds of thousands of Ohio workers who have seen their hours reduced because business is slow or who simply cannot find a full-time job.

The number of people the government designates as involuntary part-time workers jumped to 8.6 million last month from 8 million in August — nearly double the figure from December 2007 when the Great Recession began, the U.S. Labor Department reported earlier this month.

In Ohio, there were an average of 233,000 involuntary part-time workers last year, up from 139,000 in 2007, according to the Ohio Department of Job and Family Services, which could only provide annualized figures.

All told, people working part-time — or less than 35 hours a week — now account for about 6 percent of all jobs, double their share before the recession.

“What you’re picking up on is the so-called underemployment rate, and you can look at those numbers a couple of different ways,” said James Brock, a Miami University economics professor. “Of course, you’d rather see more people working full-time than part-time. But on the other hand, part-time is better than no-time, which is what we had during the recession when we were losing jobs every month.

“Let’s not lose sight of the fact that we’ve just come one of the most severe recessions in modern history, so the recovery to full employment is not going to be as quick as everyone had hoped,” he said.

In the meantime, however, the prevalence of part-time workers will continue to be a drag on the economy because part-time work simply does not pay enough to stimulate consumer spending and overall economic activity.

“Part-time workers don’t get paid as much, they can’t afford as much, and they don’t have as many benefits, if any,” Brock said. “So, it’s not an ideal situation.”

The growing number of part-time workers have tempered national jobs figures that show a slowly improving labor market in which initial claims for jobless benefits have fallen to their lowest level in four years and the national unemployment rate dropped to 7.8 percent last month from 8.1 percent in August — slightly higher than Ohio’s 7.2 percent jobless rate.

Still, job growth remains tepid, averaging just under 150,000 jobs a month, and continued economic uncertainty has led more employers to cut back hours to reduce labor costs, creating even more part-time workers desperately seeking a full-time paycheck to replace their meager part-time wages.

“Depending on the time of the year, sometimes I’m making a little more money; sometimes I’m making a little less,” said Anna Beyerle, a 23-year-old University of Dayton graduate who took a paid internship with variable hours at the Downtown Dayton Partnership when she could not find a full-time job. “You definitely have to be really conscious of your budget and being able to save for when you’re not going to be making as much.”

Still, Beyerle, who shares a small apartment with a roommate, has remained optimistic about her future job prospects and is grateful for the contacts she’s made while working for the nonprofit.

“I’m doing more networking and talking to people and making business connections now,” she said. “Based on my conversations, I do think things are getting better in an economic sense. I recently talked to a company that is creating new positions. But at the same time, I’ve also had conversations with people who say they’d love to hire someone, but they just don’t have the money to do it right now.”

Beyerle’s uncertain future has forced her to put off major purchases that could help stimulate the economy.

“At this point in my life, I would like to be living by myself or living somewhere that’s a little bigger,” she said. “I’m hoping whatever position I have next will allow me to expand a little bit.”

Meanwhile, Beyerle is getting by on her paycheck and financial assistance from her parents, who have keep their daughter on their health plan in accordance with the Patient Protection and Affordable Care Act — commonly called Obamacare — that allows her to stay on her parents’ plan until she turns 26.

“Being able to stay on my parents’ health insurance for three more years is reassuring,” she said. “As much as I would like to find a job after this that gives me full-time benefits; in case that isn’t there when this position is up, this gives me a couple more years to figure things out.”

Looking for full-time work

Michael Hamm of Kettering does not have that luxury.

The 51-year-old music teacher has been working part-time giving marching percussion instruction to the drumline for Fairborn High School’s marching band since he was laid off from his full-time job as assistant band director at Wayne High School at the end of the last school year.

Hamm, whose been a music teacher in Dayton-area schools for more than two decades, has been supporting his wife and two children with savings, early withdrawals from retirement accounts and his income from his job at Fairborn.

“I work a couple of hours a week a Fairborn, plus get a stipend at the beginning of each month,” Hamm said. “It’s enough to pay a couple of my bills, but it’s nothing to live on. And once November hits, that’s done.

“I’m not in panic mode yet, but I am at the point where I realize if I don’t do something else, this is going to get really serious and very ugly really soon,” he said.

Hamm said he may have missed his best opportunity to land a full-time job because: “With teaching, if you don’t get hired in the summer, then you’re going to wait a whole school year, generally, if you’re going to get hired again.”

And he continues to battle what he believes to be age discrimination.

“I’ve found that with my level of experience, nobody wants me to teach in Ohio,” Hamm said. “It’s all a matter of dollar signs. Districts all across the state would rather hire brand new, straight out of college and low on the salary scale.

“Those people are just as qualified as I am, but they don’t have my experience,” he said. “In the past, your experience was rewarded. It’s now a liability.”

With the presidential election less than a month away, a spike in the number of people working part-time for lack of a better option could dampen the enthusiasm of voters in the Nov. 6 election.

But last month’s increase in the number of part-time U.S. workers probably was not enough to sway voters one way or the other between President Barack Obama and GOP challenger Mitt Romney, said Bryan Marshall, a political science professor at Miami University.

“People have been focused on the issue of jobs for a very, very long time,” Marshall said. “And even though last month’s jobs numbers weren’t the ideal kind of jobs numbers for a recovery, it was still a positive move.

“That could help Obama because he can say we’re on the path, and we’re moving in the right direction,” he said. “But the Romney campaign says we still have incredibly high unemployment, and he can do better than Obama. People have already decided for the most part who they support when it comes to handling the economy, and the increase in part-time workers alone won’t have a dramatic impact.”

The American Dream’s empty promise

By Robert J. Samuelson, Published: September 23

It’s time to retire the American Dream — or at least give it a long vacation. We ought to drop it from our national conversation. This would be a hardship for politicians and pundits, who use “the American Dream” as a rhetorical workhorse embodying goals embraced by almost all Americans. That’s the problem. The American Dream has become so expansive in its meaning that it stifles honest debate and harms some of the very people it is intended to help.

Who can oppose the American Dream? No one. It captures our faith in progress, opportunity and striving. It reflects hopes for a large and stable middle class. Everyone would go to college, become a homeowner. Children would always live better than their parents.

This election often seems a contest over whether President Obama or Mitt Romney can best restore the Dream. To the extent people believe this, one outcome is certain: disappointment. The Dream’s ultimate appeal lies in its promise of personal fulfillment, which can’t be assured.

Curiously, history confirms this. Despite its present popularity, the phrase “the American Dream” came into common use only after the 1970s. By most accounts, historian James Truslow Adams coined it in his 1931 book “The Epic of America.” Adams imagined a “social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are.”

But the phrase languished, probably because it seemed contradicted by experience. For most Americans, life had always been a struggle. Little was guaranteed. By contrast, Adams’s lofty vision was utopian.

Now it’s become an informal entitlement. Credit Bill Clinton, if anyone, for this. He popularized the notion that Americans “who work hard and play by the rules shouldn’t be poor.” So, if people are purposeful and responsible, society — through government — should build pathways to the Dream and all it implies (a good job, decent home, more freedom and choice).

Personal responsibility warranted collective action. But in practice, the pathways often led to dead ends. A college degree, it was argued, meant better jobs; therefore, it made sense to subsidize loans allowing more students to go to college. With higher-paying jobs, borrowers could easily service their loans. This worked for some, though not for all. Many students were left with heavy debts and no degree.

A study from economists at the Kansas City Federal Reserve reports: Fewer than 60 percent of college freshmen graduate within 6 years; student debt now totals about $1 trillion; for 25 percent of borrowers, annual repayments exceed $4,584; default rates are almost 9 percent. “Defaulted borrowers may be sued, tax refunds may be intercepted, and/or wages may be garnished,” the report notes.

The plugging of homeownership — the quintessential symbol of “making it” — is another perverse pathway. True, homeownership is a laudable goal; it stabilizes neighborhoods, for example. But the promotion went overboard. Lax lending standards lured people into buying homes they could not afford, contributing to the 2007-09 financial crisis. Again, victims were the intended beneficiaries; since 2007, at least 5 million Americans have lost homes through foreclosure, reports CoreLogic.

There is nothing wrong with a little over-the-top optimism and hope. It is inevitable and even healthy, if it makes people feel good and inspires them to rewarding behavior. The trouble with our American Dream infatuation is that it transcends these common-sense boundaries. It has become a substitute for addressing real problems and a collective act of self-deception.

The invocation of the American Dream presumes that there are no conflicts among groups. With the correct mix of personal responsibility and government programs, everyone can achieve the Dream. But some conflicts cannot be wished away. One is between young and old. As baby boomers retire, federal spending on the elderly will soar. This will help retirees attain their dreams, while making it harder — through higher taxes or lower public services — for the young to realize theirs.

What also cannot be wished away are on-the-ground realities that impede middle-class status for more Americans. Only one-third of children born to the poorest fifth of Americans graduate high school with at least a 2.5 grade-point average and without having become a parent or been convicted of a crime, reports a Brookings Institution study. Brookings economist Isabel Sawhill notes that gaps have widened between the children of poor and well-to-do families on school test scores, college attendance and family formation. In his book “Coming Apart,” conservative scholar Charles Murray makes similar points.

Government has only limited power to offset these disadvantages. The appeal of the American Dream is that it’s disconnected from nasty facts and choices. It’s a slogan that shouldn’t survive — but will endure precisely because it’s an exercise in make-believe.

Income Inequality May Take Toll on Growth

The Cathedral Kitchen soup kitchen in Camden, N.J., which the Census Bureau says is the most impoverished city in the nation.

The yawning gap between the haves and the have-nots — and the political questions that gap has raised about the plight of the middle class — has given rise to anti-Wall Street sentiment and animated the presidential campaign. Now, a growing body of economic research suggests that it might mean lower levels of economic growth and slower job creation in the years ahead, as well.

Covered in gleaming snow, City Methodist Church Gary, Indiana was built in the 1920′s to hold a congregation of 950, complete with choir and one of the largest church organ’s in the state.

Gary, Indiana was founded in 1906 by the United States Steel Corporation as the home for its new plant and the town at one point had almost 200,000 people who needed entertainment during their personal time.

Frequently rated one of the ten most dangerous cities in the United States, Gary once boomed with jobs and opportunities but now faces the acute difficulties of America’s growing rust belt, with 22 percent of families in the once-great city now lying below the poverty line.

As Grocery Dies Off, Down-and-Out Town Lives On, if Barely

Published: September 16, 2012

MENDOTA, Calif. — Westside Grocery, serving this self-described Cantaloupe Center of the World since the 1940s, removed its gasoline pumps around 1980, the result of increased regulation. Fresh steaks and pork chops went by the wayside in the 1990s: too few could afford them.

Fresh milk was the next casualty. No one ever seemed to hurt for money for beer, but Westside Grocery eventually stopped selling that, too. “Too many alcoholics stinking of urine and worse,” said Joseph Riofrio, who took over the business from his father, who had taken it over from his. “But the truth is that the electricity for the cooler was getting expensive.”

Now Westside Grocery is gone. Last month, Mr. Riofrio, a City Council member and former mayor of this Central Valley town, where a street is named after his grandfather, pulled the plug — done in by a 38.7 percent unemployment rate, the foreclosure and credit crises and hoped-for economic help that never came. “How can a community in the heart of the most abundant farmland on earth suffer this way?” Mr. Riofrio said, fighting back tears.

Another question: If Mr. Riofrio, 50, cannot make it here, can anyone?

The Detroit of California. The Appalachia of the West. This town of 11,100 has been called both, and it is not an exaggeration. About half of Mendota’s residents, according to city officials, live below the poverty line. Alcohol abuse is unbridled. A recent killing appeared to be tied to the violent street gang MS-13.

Mendota has garbage collection, but you would not know it from looking at some of the front yards along Juanita Street. A squalid trailer park greets people arriving from Fresno, about 35 miles to the east; to the south is a prison, built in a former cotton field. Shopping is mostly done at Dollar City or the 99 Cents Store, both competitors of the 98 Cents Store.

Although Mendota is in especially bad shape, the entire Central Valley has been hit hard by the recession and sluggish recovery. Unemployment for the region is about 15 percent. Stockton, on the valley’s northern end, filed for bankruptcy protection in June. A homeless camp continues to grow at a Fresno exit along Route 99. Bakersfield, to the south, has perked up lately, but it has something the rest of the valley does not: oil and natural gas fields and proximity to Los Angeles.

Unemployment has long been a reality in Mendota, which was first settled in the 1890s as a railroad stop. California’s agricultural towns rise and fall depending on what crop needs picking and how much water is available for irrigation. Social problems are nothing new, either. “The fields have always been a magnet for impoverished people trying to find a way out,” said Rick Wartzman, the executive director of the Drucker Institute at Claremont Graduate University and the author of several books examining the Central Valley.

Still, Mendota’s unemployment rate is high even by farming community standards, which typically see a seasonal average of about 20 percent. As the worst of the worst, Mendota has gotten its share of attention over the years; in 2009, when Gov. Arnold Schwarzenegger needed a backdrop to announce that he had petitioned President Obama to declare Fresno County a drought disaster area, he chose Mendota.

But nothing ever seems to get better here. That disaster request was declined. Thousands of acres of surrounding farmland — once used to grow corn, bell peppers, tomatoes and melons — have been forced out of production because of salt buildup, the result of flawed irrigation and drainage systems. Thousands of additional acres have been left fallow because of a lack of water. This part of the Central Valley relies almost exclusively on federal irrigation supplies that have been curtailed amid environmentalist pressure to restore fish habitat.

“There is more than one root problem, which is what makes Mendota so tricky to deal with,” Mr. Wartzman said. “Immigration, water politics, labor patterns, the tendency for California to forget its middle, farm legislation — it all contributes to the downward spiral.”

Faced with vanishing farm jobs and the shuttering of related businesses, like a box-folding plant and the Spreckels sugar factory, Mendota has worked to lure prison builders, a frequent solution for struggling rural communities.

A for-profit prison company started construction on a facility but stopped, saying it had overextended itself. A 1,152-inmate federal prison opened here last year, but the expected jobs have yet to materialize. About half of the workers have been transferred from other facilities, and most of the jobs that are available require a college degree; fewer than 31 percent of Mendota residents have even graduated from high school, according to census data.

Westside Grocery, a caramel-colored building topped with a 7Up sign, stands at the corner of Stamoules and Seventh Streets. In recent years, Mr. Riofrio sold snacks, dry goods, cold medications and hardware items like work gloves. He extended credit, with some accounts allowed $600. Mr. Riofrio also served as a type of amateur pharmacist and translator, helping Spanish-speaking immigrants read their utility bills.

But on Aug. 10, “as the heat was approaching 111 and I sat alone in my store, I knew that the buck had finally stopped,” he said.

Mr. Riofrio locked the front door and went home. “He walked in the house at 1 p.m. and just kept repeating, ‘I’m done,’” said his wife, Paula Riofrio. “I said: ‘Done? With what? Joe, talk to me.’”

Mendota will not be left without a place to buy groceries. Bodegas are plentiful — mostly because they sell cheap beer: $1.49 for a 32-ounce Miller High Life — and a bigger supermarket remains. But another piece of the town’s already threadbare fabric is gone. “If things don’t change, pretty soon there is going to be no sense of community left,” said Maria Verdugo, a volunteer at the Westside Youth center a couple of blocks away.

Early this month, customers were still dropping by Mr. Riofrio’s store. A few hoped he had had a change of heart. Some, like Mayra Pantoja, had not heard the news. Ms. Pantoja, holding a baby and trailing two young children, walked up to pay her Dish television bill. “It’s gone? How can that be?” she said.

Her daughter pointed to a sign on the door: “Cerrado. Closed. Gracias.”

Rich-Poor Gap Widens to Most Since 1967 as Income Falls

The U.S. Census Bureau figures released yesterday underscored the struggles of American families in a sputtering economic recovery. The report also showed the income gap between rich and poor people grew to the widest in more than 40 years in 2011 as the poverty rate remained at almost a two-decade high.

Underemployment still rampant in Ohio
Jobless numbers falling, but people are overqualified for their jobs

9:00 PM, Oct 29, 2012
Written by
Lance Lambert

Overshadowed by a declining unemployment rate, underemployment continues to linger as many workers have given up on full-time employment.

The September jobless rate in Ohio dropped to 7 percent, the lowest rate in four years, though the underemployment rate remains significantly larger over the same period.

Quarterly data released Friday by the Bureau of Labor Statistics (BLS) showed the underemployment rate – including individuals who are unemployed, involuntary part-time workers and marginally attached workers – dropped to 13.6 percent. That’s still 4.4 percentage points higher than before the start of the recession in December 2007.

According to the government, 780,000 Ohioans are underemployed or unemployed, a number that does not include persons working more than 35 hours. The report does not compile local underemployment numbers.

A growing number of people are taking part-time jobs that pay less than their experience or education level, said Bob Pautke, president of Job Search Focus Group in Hyde Park.

Prior to the recession, around 60 people would come to the weekly jobs search meetings. After the slump hit, around 200 would come to the meetings, many of whom were underemployed, Pautke said.
“Many people have to take any job just to keep their house and pay their bills,” he said.

More people are working multiple part-time jobs, a practice Pautke cites as the only means of increasing the person’s take-home pay.

Frank Foster, 56, of Oakley, used to pull in a six-figure income as a corporate trainer. After opening a business and seeing its doors closed, and a yearlong stint with no work, he has taken a position that pays half of his former salary.

Foster is not measured in the BLS underemployed statistics because he works full-time, but he considers himself underemployed because his skills are not used to their full potential.

After several years of full-time employment at a warehouse, Doug Matthews, 53, of Union Township, was laid off. He is now working part-time at a JC Penney store after spending several months looking for full-time employment.

“When I got laid off, I felt rejected, like I was not needed in the workforce and that they could hire someone younger,” Matthews said. He said he enjoys his new job and is lucky his home was paid off before he was laid off.

The negatives of underemployment are the increased cost of health care, Matthews said. He now pays more than $100 a month more for insurance.

Matthews’ increased health care expense is not isolated. According to the BLS’ consumer price index for the 15-county Cincinnati region, medical care costs have risen 9.5 percent from July 2011 to July 2012.

Problems beyond economic growth have led to the large number of underemployed, said Benjamin Passty, research assistant professor at the University of Cincinnati’s Economics Center.

The housing market and other factors that led to the recession are continuing to increase underemployment, Passty said.

“Many people have found work out of town but couldn’t sell their homes because their house is underwater, and (they) cannot afford to bring the needed amount to the closing,” he said. These individuals are forced to stay in their homes and take any work they can find.

Some people are having a hard time finding work because their industry shed jobs during the recession.

“Some industries, such as residential construction, had an oversurplus prior to the recession. Many of these jobs and industries are going” through long-term change and recovery, Passty said.

Ohio’s 13.6 percent underemployment ranks 22nd in the country, while neighboring Kentucky’s 14.3 percent ranks 28th. Nevada ranks worst with a rate of 21.4 percent.

The jobs numbers: never mind the quantity, check the quality
Behind modest jobs growth, the real story is full-time jobs with good benefits are still disappearing. America’s going part-time

Moira Herbst,Friday 5 October 2012 10.04 EDT

Job seekers in line in New York City, 2008. Photograph: Mario Tama/Getty

It’s heartening to see Friday’s news that the unemployment rate edged down to 7.8% last month. But let’s not get too caught up in celebrations. We need to look beyond the sheer quantity of jobs being created and into the quality of those jobs – something neither presidential candidate seems very interested in talking about.

Buried in the Friday’s jobs report is evidence that a disturbing trend continues: the creation of more part-time jobs, many of them low-wage, taking the place of solid middle-class careers. Positions in sectors like manufacturing continued to decline last month, replaced by new jobs in the healthcare, warehousing and retail industries. A lot of these jobs don’t allow workers to rack up enough hours to earn healthcare benefits – let alone break out of poverty.

The key data in the new report can be found in a table called “A-8″. It shows that more workers are in stuck in part-time jobs because their hours were cut back or they’re unable to find full-time positions. The number of workers in this category shot up to 8.5 million in September – an increase of 581,000 from last month. This month’s figure is nearly double what it was in September 2007, the eve of the recession.

It’s distressing to think that after 20th-century labor struggles won the battle for the 40-hour work week, the 21st-century struggle is a fight for enough working hours to make a living wage. That’s not what I’d call progress.

Here’s another sobering number: since September 2007, the number of Americans working full-time has declined by about 5.9 million, while the number working part-time jobs has increased by 2.6 million. (The blog Zero Hedge drew up this powerful graph in June to illustrate the trend.) During the recovery, job gains have been concentrated in lower-wage occupations, which grew nearly three times as fast as mid-wage and higher-wage occupations, according to a recent study by the National Employment Law Project.
The growth of part-time and temporary work is usually a leading indicator – meaning, a sign that the job market is beginning to heal. But we’ve reached nearly five years after the recession officially hit, and it’s time to face the fact that these employment trends are more structural than cyclical.

From academia to the retail sector, from government to warehouse work, employers are less and less committal when it comes to their workers. Offering part-time work – or even full-time jobs masquerading as freelance gigs – allows companies to offer stingier benefits packages or none at all. Those in low-wage or minimum-wage jobs often have no retirement security or health insurance. That means relying on Medicaid or even emergency room visits for illness or accidents – causing stress on workers and shifting costs from employers to taxpayers.

Benefits aren’t the only problem. Workers desperate to work full time now may also be sentenced to a lower-wage fate in the future. According to a recent study by the Johns Hopkins Institute for Policy Studies, women who work in part-time jobs have fewer training opportunities and are less able to advance and increase their pay over time.

Job growth projections show that we can expect the trend to continue. The healthcare and social assistance sector is expected to add the most jobs by 2020, with retail close behind, according to the Bureau of Labor Statistics. Large segments of both industries are notorious for low-wage and precarious work. Home care workers, for example, lack minimum-wage and overtime protections, while the retail trade has faced hundreds of lawsuits for wage theft.

In the retail sector, employers increasingly want an on-call workforce that they can hire when demand is high and ignore when business is slower. Workers at companies like Walmart are reportedly fighting for hours at their stores, patching together irregular schedules for meager paychecks.

Of course, access to fewer hours at one job means hustling for more shifts at another. About 6.9 million Americans were working multiple jobs in September, according to Friday’s jobs report. No wonder a large chunk of our workforce isn’t getting enough sleep.

Continuing on this path means becoming an ever more precarious, part-time nation when it comes to our working lives. But solutions to the part-time problem aren’t easy to come by. Many companies are loath to create good jobs in an uncertain economic climate, and it’s cheaper and less risky to take people on part-time.

The irony is that companies seeking to cut costs are sabotaging their own bottom lines by offering unsteady employment. People working part-time involuntarily have less money to spend on goods and services, and are less able to stimulate the economy. It’s a vicious cycle. Short of another economic boom that tightens the labor market, the only hope is organizing for better conditions in the workplace and the political arena.

Workers seeking more steady employment could join allies in campaigns for earned sick days or home care workers’ rights to push for new protections. They could propose that part-time workers earn the same hourly pay as their full-time counterparts, and pro-rated benefits, as they do in many developed countries.

Winning these kinds of rights would be a heavy lift in a political environment obsessed with job quantity instead of quality. But to avoid a descent into low-wage, part-time nationhood, we need to dream big – like those agitators pushing to limit the workday many years ago.

Personal interest income has dropped about $400 billion a year, notes economist Timothy Taylor on his blog.

Walmart supply chain: warehouse staff agencies accused of wage theft
‘They prey on people living on the edge,’ claim workers, who are already among the most vulnerable and lowest-paid in America

Paul Harris in Elwood, Illinois, Thursday 18 October 2012 16.23 ED

Walmart, which was not named in the class action suit, says it has taken steps to police standards in its supply chain. Photograph: Robert Yager for the Guardian

Phillip Bailey knows there are people worse off than him working inside the gigantic Walmart warehouse that dominates the small town of Elwood in rural Illinois.

He sleeps at a Catholic hostel in nearby Joliet and so has a solid roof over his head after a day of helping the endless flow of consumer goods supplying Walmart stores across America. Not all his colleagues can say that. One squatted in abandoned houses. Another lived rough in the woods in between work shifts. “He just set up a tent in there for a few weeks,” Bailey said.

Bailey is a warehouse worker in the outsourced Walmart supply chain that criss-crosses America, part of one of the most vulnerable workforces in the US. Bailey and his colleagues work for low pay and minimal benefits. Their recruitment is subcontracted out to myriad staffing agencies, and working conditions can involve tough, repetitive manual labour. Critics say it is a labour market reminiscent of countries like China, yet it exists here in the American heartland of the Midwest.

But Bailey and many other Walmart warehouse workers say they have to endure an especially shocking hardship: wage theft. Already very low-paid, they allege their pay packets are sometimes skimmed and squeezed by the staffing agencies subcontracted to employ them.

“They prey on people living in precarious marginal circumstances. People living on the edge. If that was not the case, they could not do what they do,” Bailey said.

The former green energy worker from Detroit has now joined a class action lawsuit recently filed against Roadlink Workforce Solutions, who supply staff to Walmart’s Elwood warehouse. The case alleges numerous ways in which wages are stolen or underpaid.

One method is for workers to be asked to appear for a shift, only to be sent home when not chosen for work. Despite turning up at 6.45am or earlier, they say they often receive no pay for their time. Elsewhere, workers say they are paid no overtime, or have time worked rounded down to the nearest whole hour. They also say retaliation for speaking out is common, which also results in lost wages.

After the suit was first filed, Bailey said, he was sent home early from his shift, seeing his pay packet cut. Another Roadlink worker at Elwood who is joining the complaint, Holly Kent-Payne, 25, said that she has simply not been paid for one day’s work. “My first pay check, they did not pay me for a whole day. That’s a whole day of my life gone,” she said.

A spokesman for RWS declined to comment on the case.

But the suit against Roadlink is just the tip of the iceberg. Since 2009 there have been five other suits filed against five different staffing companies which feed workers into the 3.4m sq ft Elwood warehouse. Of those cases, two have been confidentially settled. They, too, described wage theft.

‘It is not easy to get by’

Leticia Rodrigues worked at Elwood at the end of last year. She says she found herself often being paid by the task – effectively per truck or shipment of goods. Often jobs were so large she had to get other workers to help or take extra hours on her own time. That meant her wages dipped below the legal hourly minimum. “It would happen two or three days out of a four day week,” she said.

Robert Hines, who worked at Elwood in 2010, also says he was a victim of wage theft at Elwood. He described being asked to show up when no work was forthcoming. Hines says he was summoned into the warehouse, getting up at 4.30am to arrive at 5.30am, and was then finally being inspected by managers at 7am. Then, he says, he – along with most other workers brought in – were sent home, as all the available shifts had been doled out. There was no compensation for their time.

“I felt like an idiot. That’s my time. That’s less money to feed my family, less money to put clothes on their backs,” said Hines, 39.

There is little doubt that the workforce recruited for the warehouse industry – whether in Illinois or in other major hubs like New Jersey or the Inland Empire in California – is highly vulnerable. Many do not stay on the job for longer than a couple months. Few last a year.

Mike Compton, 36, works in Elwood but has spent time living in abandoned houses in Joliet. “I found one abandoned house that had working electricity still. And a fridge,” he said. He reckons that if he worked all 52 weeks of the year – he has no paid vacation – he would bring home a total annual salary of just $15,000. “It is not easy to get by,” said Compton.

Workers’ rights campaigners say the Walmart supply chain is set up in a way that makes wage theft likely. They say Walmart’s vast commercial power and relentless focus on driving down costs squeezes the margins of firms it subcontracts its supply chain out to. Those firms, in turn, squeeze their own subcontractors as they eke out a profit. At the bottom of this process are the workers.

The Elwood warehouse, for example, only shifts Walmart goods. But it is run by logistics giant Schneider. In turn, Schneider outsources most staffing to recruitment agencies. Those layers of outsourcing, critics say, have led to an exploitative industry where wage theft becomes part of the system.

“There are lots of low-skilled, low-paid workers and its easy for employers to chisel away at them. Wage theft is rampant in this industry. It is a perfect storm for wage theft,” said Cathy Ruckelshaus, an expert on the warehousing industry at the National Employment Law Project.

Leah Fried, an activist with Warehouse Workers for Justice which is seeking to organise warehouse employees in Elwood, was more blunt. “Is it their business model to rob people? Because it seems that way,” she said.

A good business model?

Stopping that practice is the aim behind the repeated lawsuits against wage theft. Chicago lawyer Chris Williams, who lodged the Roadlink suit, said such legal steps were often the only recourse for workers unaware of their rights or afraid to speak out. “The hope is Walmart and its subcontractors will decide this is not a good business model because they keep getting sued,” he said.

Schneider spokeswoman Janet Bonkowski said the firm held its subcontractors to high standards. “When we utilise third-party vendors, we contractually require full compliance with all required laws and that all parties conduct business ethically,” she said.

Walmart spokesman Dan Fogleman pointed out that Walmart was not named in the RWS suit and had taken steps to police standards in its supply chain. “We take allegations of workplace issues very seriously,” he said. Fogleman added the company had not uncovered any systemic problems, but is drawing up a protocol for third-party run warehouses in the future that will include random inspections by an independent group.

But there has already been worker unrest at Elwood. Recently hundreds of workers and supporters gathered outside the gates of the gigantic facility and held a rally. Police in riot gear were called and several people were arrested, including local religious leader Pastor Craig Purchase.

“The system is a modern version of sweatshop labour from the early days. I had to get involved,” he said. His arrest was the first time he had ever been detained by police.

Elsewhere in the US, conditions in the outsourced parts of the Walmart supply chain have also been the focus of protest. In the Inland Empire in California, a lawsuit was launched at a Schneider-run warehouse in Mira Loma that alleged wage theft by staffing agencies hired by the company to recruit workers.

At other warehouses in southern California, unsafe working conditions have been the subject of complaints to the state’s labour board, and there have also been walkouts, strikes, and a six-day “march to the sea” by scores of warehouse workers trying to highlight their complaints.

Critics say that Walmart has a responsibility to these workers, even though it keeps responsibility for them at arm’s length by layers of subcontracting. “Walmart knows there is a problem,” said Ruckelshaus.

Certainly Bailey sees Walmart as the ultimate beneficiary of the wages he says are lost to Roadlink. The sums are not much – just a few dollars here and there as hours are rounded down or he is summoned for work and then turned away. But for him, already caught in desperately hard times, they mean an immense amount. “It is a big chunk of change for someone in my circumstances,” he said. “It is my money, but they treat us like prison labour.”

In what could only be described as economic cheerleading, Dimon stressed that the country is not in decline, but remains a world power with the “widest, deepest, most transparent” capital markets, immense innovation and work ethic.

Corporations, small businesses, consumer and the housing market are all in better shape, Dimon said. The problem, he said, is the uncertainty around taxes, policy and fiscal cliff is “a huge wet blanket” on an otherwise improving economy.

How business can bounce back from its 2012 election debacle

Karen Bleier/AFP/Getty Images – A jobs sign is seen on the front of the U.S. Chamber of Commerce building in this September 2, 2010 file photo in Washington, DC.

By Steven Pearlstein, Published: November 10

Holy Solyndra, Batman. It turns out businessmen are even worse at making political investments than politicians are in making business investments.

That’s right. After spending hundreds of millions of their own and shareholder dollars to knock off a tax-and-regulate administration and deliver a permanent Republican majority in Congress, business leaders now face the prospect of at least four years dealing with a president and lawmakers who won’t soon forget the nasty, misleading ads run against them. At the same time, the business community has succeeded in uniting the citizenry around the idea that something should be done to prevent monied interests from spending unlimited sums of secret cash to buy elections.

The poster boy for this stunning miscalculation and misallocation of shareholder funds is Thomas Donohue, the longtime president of the U.S. Chamber of Commerce who has turned the once-venerable business organization into a political money-laundering operation on behalf of the Republican Party.

As the election cycle began, Donohue vowed to spend $100 million on a positive national advertising campaign to educate the public on the benefits of free enterprise. If you go to the Chamber’s Web site, however, what you’ll find is a reel of unrelentingly negative and partisan TV attack ads aimed at Tim Kaine of Virginia, Sherrod Brown of Ohio, Bill Nelson of Florida, Tammy Baldwin of Wisconsin, Jon Tester of Montana, Angus King of Maine, Chris Murphy of Connecticut and Heidi Heitkamp of North Dakota, all of whom will be part of the newly enlarged and energized Democratic majority in the Senate. Data compiled by the Center for Responsive Politics show that the Chamber spent at least $32 million on 15 Senate races, 13 of which went the other way.

Never one to apologize, Donohue was out with a news release the day after the election declaring that the Chamber’s “principal goal” all along had been “to defend the pro-business gains we made in Congress in 2010 and ensure balance in the federal government when it comes to policies affecting business. That goal was achieved.” Thank Heaven for that, because it would otherwise raise questions about why the Chamber’s dues-paying job creators are paying Donohue nearly $5 million a year.

It is fortunate for the Republic that the Chamber no longer represents American business, and that there are genuine business leaders prepared to play a more constructive role in getting Washington to yes on a grand budget bargain before the country heads over a fiscal cliff. A group of 80 chief executives of the some of the country’s largest corporations have committed personal time and corporate money — $40 million so far — to provide political cover to politicians willing to move toward the “radical center,” as Honeywell’s Dave Cote put it, by backing a budget plan like that proposed by the bipartisan Simpson-Bowles commission.

The momentum generated by “Fix the Debt” already has triggered some quiet but unmistakable pushback from the Chamber, the National Federation of Independent Businesses, the National Association of Manufacturers (NAM) and Grover Norquist’s Club for Growth, which despite the election results continue to wage political jihad against anything that might involve higher taxes on the wealthy, businesses or investors.

Up to now, the corporate executives behind “Fix the Debt” have been reluctant to take on their own business lobby, at least in public, downplaying these differences. They also have not made it clear to business organizations such as the Chamber or NAM, to which they pay significant dues, that their continued participation is contingent on getting behind a grand bargain that balances spending cuts with tax increases. Without such a strong and unified push from business, the Republican right will remain intransigent and no deal will be struck.

Part of the challenge confronting the corporate chief executives is that they are being subtly undercut here in Washington by their own lobbyists, whose primary focus remains on preserving existing tax breaks, winning new subsidies and reducing the impact of new laws and regulations. Their personal success depends not on whether the nation’s long-term fiscal problem is fixed but whether they are successful in protecting the narrow short-term interests of their companies. And that is not easily accomplished by jeopardizing long-standing relationships with allies in Washington or Republicans on Capitol Hill.

I don’t mean to suggest that the only thing standing in the way of a budget deal is the intransigence of Republicans and their enablers in the business community. Right now, any bipartisan compromise will involve sizable cuts to Social Security, Medicare or Medicaid that would be unacceptable to Democratic leaders of the House and Senate, along with sizable contingents in their caucuses. Only President Obama has the incentive, the instinct and the freedom to negotiate such entitlement cuts and only he has the political standing to get a sufficient number of Democrats to follow.

How might he negotiate such a deal? Surely not by inviting leaders of both houses and both parties for a meeting at the White House, as is scheduled for next week. Not only will nothing be accomplished, but also to the degree that it results in a replay of the usual posturing, such a meeting will be detrimental.

The negotiations that need to happen are between the president and Republicans leaders in Congress. That means Speaker John Boehner and Senate Republican leader Mitch McConnell, both of whom are practical pols who enjoy deep respect in their caucuses. It also means Paul Ryan, who knows budget issues cold, is now a national figure and can lend legitimacy to any deal in the eyes of die-hard conservatives. For his part, the president should bring along his chief of staff and top budget expert, Jack Lew, along with Bruce Reed, the vice president’s chief of staff who headed up the Simpson-Bowles commission staff.

This small crew should meet privately at different locations at least three times a week between now and the end of the year. The early emphasis should be on building mutual trust and personal relationships, the missing ingredients in the failed negotiations last summer between the president and Boehner. They should agree that nothing is decided until everything is decided, and to say nothing in public until a deal has been struck, even as they consult privately with key allies. Their aim should be to lay a budget resolution before the new Congress when it convenes Jan. 2, with final votes prior to the inauguration.

The process won’t be pretty, the final votes will be close. If it succeeds — and I think it will — one factor will be the strong support from a business community that finally comes to understand that what’s good for America is also good for business — and not the other way around.

Job retraining is the solution, Obama and Romney say. But does it work?


About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
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