Choose Your Poison: As the Economy Burns, GOP & Dems Fight Over How to Make Things Worse

Gandhi famously answered the question "What do you think of Western Civilization?" by saying "I think it would be a good idea." That phrase might come in handy the next time somebody asks what you think of a two-party democracy: It would be a good idea. As the economy burns to the ground, nobody's calling the Fire Department. Both parties want to throw gasoline on the fire, and their only disagreement is whether to use regular gas or unleaded.

Here's a challenge, if anyone's willing to take it: Can you read the statistics below without concluding that our current debate is a national disgrace? Both parties are pushing radical and counterproductive cuts that would devastate middle class and lower-income Americans, compounding the misery for ninety percent of us. Neither asks the top one percent of earners, some of whom caused this crisis, to help repair the damage after enjoying historically low tax rates.

And this isn't just somebody's opinion. These are the numbers talking, not me. John Boehner's plan is a radical right-wing assault on government that would have embarrassed previous generations of Republicans. Nevertheless, his party's base and members of the House will probably reject it. Harry Reid's proposal is also devastating - and his party's rank and file may very well support it. It's hard to know which is a sadder statement on the degraded state of our politics.

Both proposals would defer the most brutal cuts until after the election. Both try to insulate their architects from the consequences of their actions - actions which the public strongly opposes - by placing them in the hands of an unelected 'Super Congress' whose directives would be given a high pressure up-or-down vote. That's cowardice, not courage. A vote for either plan is a vote against democratic process, and a vote against the middle class and those in need.

Democratic failure of leadership

There are sane and courageous Democrats and independents, to be sure, like the Progressive Caucus in the House and Bernie Sanders in the Senate. But the party's leadership have become "leaders" in name only. Even Nancy Pelosi, who could once be counted on to be a voice of reason, has suddenly begun murmuring the mad mantra of austerity economics as her friends and supporters struggle to decode her words for a hidden explanation.

""It is clear we must enter an era of austerity," said Pelosi, "to reduce the deficit through shared sacrifice," "She said 'we must ,'" one told me yesterday, "so she might have meant 'she has no choice.'" But that's like trying looking for hidden messages in the gestures of kidnapped soldiers as they make their taped confessions to a hostile government. This is a time for clear calls to action, not coded signals sent by semaphore.

The Democratic failure starts at the top. The President has relentlessly sought to cut Social Security and Medicare, apparently to prove his "post-partisan" nature before the 2012 elections. He appointed a "deficit commission" led by two entitlement haters; had senior Administration officials privately tell people (including this writer) that "a deal will be done" to cut benefits (although Social Security doesn't contribute to the deficit); planned to include Social Security cuts in the State of the Union message, until a political backlash loomed: and now insists on including entitlements in these negotiations by saying "let's do all of it at once." (Who insists on negotiating cherished programs when your opponent has something as effective as the debt ceiling to use as leverage?)

It's a replay of health and financial reform. The President's relentless pursuit of a deal - any deal - that he can hang on his wall means he's eager to sacrifice popular and needed programs, both for expediency and to burnish his own chosen image as "above left and right." His focus on process over policy has led him to chide members in both parties of Congress to "eat their peas" by embracing explosive cuts that will harm the economy. This "ap-peas-ment" strategy would sacrifice the middle class in pursuit of "peas in our time."

Leader Reid and Leader Pelosi may feel that these are the only proposals that have a chance of being enacted. But they're not saying that. And they're certainly not proposing urgently-needed solutions to our jobs and housing crisis. Where is the real debate we should be having? Where is the distinction being drawn between Republican and Democratic policies, so that voters have a choice and not an echo? Not in Washington.

What do the numbers tell us about the debate we should be having? Here are the flickering vital signs for an economy on life support:

A dying middle class

Jobs and Wages

• The real combined figure for unemployment and under-employment is approximately 22 percent [1]
• The number of Americans who "live paycheck to paycheck," has gone from 43% in 2007 to 61% today [2], and more people are tapping their 401(k) accounts and other retirement savings.
• Total wages have fallen 5% from 2007 [3], or about313 billion (in fixed dollars). But incomes went up at the very top, so the real figure for everybody but the wealthiest among us is even worse.
• The median wage [3] fell by $159 to $26,261 between 2009 and 2010, which means half of all workers made $505 a week or less. The median wage is now $196 less than it was in 2000.
• From 1930 to 1980, income for the bottom 90% of Americans grew by 74%. Since 1980, the year of Ronald Reagan's election, it's grown 1%.

Housing

• The average cost of a house nearly doubled between 1975 and 2008. Prices have been falling since the crisis, but tens of millions carry a worthless debt burden and can't unload their houses to achieve relief. Only the top 5% earners have seen their incomes increase enough to cover this explosion in housing costs.
• The number of employed Americans grew by more than 21 million between 1992 and 1990, but only 2.8 million more were on the employment rolls nine years later.
• 108 million people, 45 percent of working-age Americans, are either unemployed, underemployed, or "not in the labor force" (which often means they've given up altogether - there are 85 million people in that category).
• Residential real estate has lost more than six trillion dollars in value since 2008, after 57 consecutive months of decline - although a large chunk of that money is still being repaid as bank loans.
• Housing values are down by a third over the last three years. Even more ominously, they're down 4.6% since their 2009 lows, and they're still falling.
• Overall, middle-class Americans have lost an estimated $7.7 trillion in assets - and the end is not in sight.

Generational Decline

• College tuitions have gone up 900% since 1978. The country's total student debt is now greater than its credit card debt, and will reach1 trillion this year.
• Only 44% of those polled believe that children will have "a better life than their parents." Ten years ago that figure was 71%.

The bottom line? For the middle class, the dream is over. And it's not coming back unless strong action is taken.

Poverty USA

The overall figures are staggering:

• Since the financial crisis, more than two million Americans have fallen into poverty.
• More than 43 million Americans now live below the poverty line. More than 20% of this country's children now live in poverty, more than twice the figure for children in Great Britain or France.
• More than one household in twenty lives with "extreme food insecurity," which means normal eating patterns have been disrupted "at times" during the year because they didn't have money for food.

A new study by the Pew Research Center shows how devastating the new economy has been to minorities:

• Median wealth of Hispanic households fell by 66 percent from 2005 to 2009 (versus 16 percent for white).
• Median wealth for African Americans fell 53 percent.
• Median wealth of whites is now 20 times that of black households and 18 times that of Hispanic household, twice the difference that existed before the year 2000. (And that disparity was disgraceful.)
• Wealth disparities in this country are the greatest they've been in a quarter century, since this data was first collected.

Party on, Rich America!

Ready for some good news? When it comes to the wealthy, there's plenty:

• 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.
• The average income for Americans earning 50 million or more [3] surged from91.2 million in 2008 to518.8 million in 2009. In the midst of the recession, there were fewer of these high earners, but the survivors - just 74 people - made as much as the 19 million lowest-paid people in America.
• The top 5% of American households have seen their income increase by 103% since 1975 (as opposed to a 1% increase since 1980 for the bottom 90%).

Burning Down the House

By failing to fight for job-creating infrastructure programs, Democrats are losing a chance to put people to work and save the economy trillions. As a new report [4] explains, "the nation's deteriorating surface transportation infrastructure will cost the American economy more than 870,000 jobs, and suppress the growth of the country's Gross Domestic Product by $3.1 trillion by 2020." Savings include lost productivity and added travel time as well as safety and travel costs.

Austerity measures in Great Britain, on the other hand, have weakened the economy more than expected. The International Monetary Fund notes that a cut of themagnitude being debated here " typically reduces GDP by about 0.5 percent within two years and raises the unemployment rate by about 0.3 percentage point." And since both the Boehner and Reid plans leave the tough decisions until later, the actual impact could be even greater.

Austerity's already hurt us. As a senior Goldman Sachs analyst [5](not one of the trading guys you probably despise - an analyst) explains,"fiscal adjustment ... (in) the first quarter of 2011 showed the largest negative impact of government spending (cuts) on real GDP growth since the mid-1980s..." He estimates that we've already lost more than 1% of our growth through austerity measures like those being proposed by Reid and Boehner.

Who would be affected most by these cuts? The poor, as programs for them are cut back. Seniors, as Social Security and Medicare are slashed. (Yes, Mr. President and Leader Reid, the "chained CPI" and a raised retirement age are "slashes.") The middle class, as their taxes go up through a "chained CPI" and the elimination of deductions that benefit them. In other words, between 90% and 99% of the country would suffer.

Real Solutions

Where are the real solutions? We need an 18-month "job surge," where governments invest in job-creating programs that also build up our crumbling infrastructure. That will prime the pump and get the economy moving again.

If we can restore $313 billion in lost wages and then build to an acceptable employment level we'll see billions of dollars billions in added income -- which will leaded to new spending, which creates even more jobs. And the taxes paid by these newly-employed people would go a long was toward reaching the Boehner and Reid goals for cutting the deficit. The remainder could be addressed in a couple of years, once the economy's moving again.

Democracy Fail

The political posturing by leaders of both parties isn't just ruthless, or foolish, or cynical, though it is all of those things. It's counterproductive. The nation's two capitals - its political capital in Washington and its financial capital on Wall Street - aren't just refusing to help the suffering majority. They're actively working to inflict more damage. Don't believe for a moment our leaders will be there for you when you need them. The public will need to pressure them through calls, votes, and demonstrations.

The economy's burning, and the leaders of both parties are treating you the way Rhett Butler treated Scarlett O'Hara in Gone With the Wind: Frankly, my dear, they don't give a damn. Or if they do, they've either miscalculated badly or they're too intimidated to say so. Either way, it's up to us to act.