Third World America: Chronicling the Assault on America's Middle Class...and the Solutions 9AUG10

"The latest job numbers are out -- and they're not good."

That's a phrase we've heard a lot lately -- and will likely continue to hear for the foreseeable future. According to the Bureau of Labor Statistics, while the unemployment rate remained unchanged at 9.5 percent, the economy actually lost another 131,000 jobs in July. The only reason the unemployment rate didn't go up was because so many people had quit looking and dropped out of the workforce. Tens of thousands of people throwing in the towel is definitely not good news. More "not good news": the number of Americans unemployed for 26 weeks or more is now over 6.5 million.

Clearly, we're not in the middle of a normal recovery. Wall Street may have its casino up and running again, but Main Street shows no signs of bouncing back anytime soon. From foreclosures to unemployment to household debt to bankruptcies, the American middle class is under assault -- and America is in danger of becoming a Third World nation.

I detail all the ways this is happening -- and the reasons why -- in my upcoming book, Third World America. Just as important, I also talk about the steps we can all take to help stop the slide. As soon as I finished writing the book, I knew I wanted to keep telling the stories of the middle class families whose lives have been turned upside down by the economic crisis -- and to provide interactive tools that would allow people to get involved.

That's why HuffPost is launching a "Third World America" section to bear witness to what is happening to the American middle class in small towns and big cities all across the country. And we will, every day, focus on the solutions that are making a difference in the lives of ordinary Americans.

And we want you to be a big part of this section. If you or someone you know has been struggling with unemployment, foreclosure, bankruptcy, or credit card debt, we want to hear about it. Visit our interactive map, share your story, and leave your mark.

Though it is far from what dominates the debate in Washington, every day brings fresh evidence of the new reality that America is entering. And it's not just about dismal unemployment figures and gloomy foreclosure numbers. As the New York Times reported last week, Hawaii has gone beyond laying off teachers and has begun laying off students -- closing its public schools on 17 Fridays during the last school year. In the Atlanta suburb of Clayton County, the entire bus system was shut down. Colorado Springs turned off over 24,000 of its streetlights. The Philadelphia Inquirer reports that Camden, New Jersey is soon to permanently shutter its entire library system. And last month the Wall Street Journal reported on the trend of cash-strapped states and counties giving up on the idea of maintaining paved roads, allowing them instead to turn back into gravel. And those localities that can't even afford to put gravel down are just letting the roads, as the Journal put it, "return to nature." A seminar at Purdue University on this trend was entitled "Back to the Stone Age."

Though the particulars of our country's transformation are painfully real to the rest of the country, Washington and Wall Street remain blind to our trajectory toward Third World status.

Witness the joint appearance on Fareed Zakaria's CNN show by former Treasury Secretaries Paul O'Neill and Robert Rubin. According to both of them, we don't need a second stimulus. "We are moving forward at a pretty gradual pace," said O'Neill, "but I don't think things are terrible." Is "not terrible" the new definition of success? And I don't doubt that things are not terrible for O'Neill -- in fact, I bet the roads leading to most of his houses are still paved.

As for Rubin, he "wouldn't do a major second stimulus, because I think...we run a risk that it could be counterproductive in creating a lot of additional uncertainty and undermining confidence."

Uncertainty? I guess that's true in the sense that the nearly 15 million people without a job are currently quite certain they don't have one; if a new stimulus bill were passed, there will at least be some welcome uncertainty as to whether they would be one of the lucky ones getting hired.

In Rubin's mind, what would create more "certainty" is -- drumroll, please -- deficit reduction. "I would try over the next six months to put in place a very serious beginning of deficit reduction that would take effect at some specified time in the future," he said. "I think that could do a lot for confidence."

As Duncan Black writes:

"Can someone get me some of the Very Serious Person crack rock so I can understand the very sophisticated economic model such that all that matters is 'confidence' and that confidence could be undermined by fiscal stimulus?"

But Rubin's reasoning begins to make sense when you remember that he is only concerned with the confidence of a few hundred of his friends on Wall Street. And though he wasn't officially speaking for the Obama administration, he doesn't have to, since so much of the economic team at Treasury and the White House is composed of Rubin's acolytes. Here, for example, was Treasury Secretary Tim Geithner in his recent New York Times Op-Ed celebrating our wonderful recovery: "we are on a path to growth," but "uncertainty is still inhibiting investment."

It's not uncertainty that is stopping business from expanding capacity -- it's a lack of customers. Because the potential customers don't have jobs!

With this kind of muddled thinking by our "very serious" establishment, we're in for a long, bumpy ride. But you have to at least give Rubin credit for gall -- after all, he's one of the people responsible for the continued misery that millions of Americans wake up to every morning. And now he's back arguing against a practical solution to the mess he helped create. Talk about chutzpah.

The O'Neill and Rubin Continue-The-Misery Show certainly proves that this is not a left-right issue - the willful lack of awareness of the reality being experienced by so many Americans is truly bipartisan.

But it's going to take more than a new stimulus to stop our slide into Third World status. While pushing those in charge to do the right thing, we're also going to have to push ourselves.

In Waiting for Superman, his new documentary on America's failing public school system, Davis Guggenheim (the Oscar-winning director of An Inconvenient Truth) tells how the project began. Every day, while taking his children to their top-flight private school, he would pass several troubled public schools, filled with children not nearly as lucky as his own -- trying his best to not see the tragedy staring him in the face. Finally, after, as he puts it, "every morning betraying the ideals I thought I lived by," he decided to stop not-seeing the problem and do something about it. At the moment, our country is afflicted with an epidemic of not-seeing (indeed, it would seem to be a requirement for the job of Treasury Secretary).

Which is why we created our "Third World America" section. There, the crises will be seen and the stories will be heard. And there will be many ways for you to get involved -- things we can all do to make sure we never find ourselves living in Third World America.

You can start by taking our Pledge for the America Dream.

As the section continues to expand, you will also find ways to: share your story; bounce back from adversity; build your financial literacy; stay informed; become an American Dream watchdog by monitoring the behavior of business leaders and politicians; connect with others to take action; help others build skills, finds jobs, and save their homes; and more.

Unemployment, foreclosure, bankruptcy -- these are all isolating experiences. And that isolation takes its toll. A 2002 study by researchers at Yale found that "high unemployment rates increase mortality and low unemployment decreases mortality and increases the sense of well-being in a community." Indeed, the recession has coincided with an increase in the suicide rate.

So we all need to do our part. The attack on the middle class may be ignored in Washington, but we can see it -- and do something about it -- in our own communities.

Though we can't let our leaders off the hook -- or fail to speak out when they, and/or their former mentors who got us into this mess continue to put forth policies that will hasten the decline of America's middle class -- we have to take responsibility for our communities as well.

So take the pledge. Send us your stories. Resolve to stop not seeing what's going on in your community. And take action.

If we don't change course -- and quickly -- Third World America could very well be our future.

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The Rubin Con Goes On

ROBERT Rubin is a liar, a greedy pig who continues his campaign of deception of the American people and his corruption of politicians and the political system in his quest for more money and power. If anything, he should be facing criminal charges and fines for his role in causing this recession and profiting from it. Fareed Zakaria must have been neutered recently, I thought he was a better journalist than he showed himself to be in this interview.....as a matter of fact, he should just retire from journalism and become a full time political prostitute like so many of his colleagues...at least we would then know what to expect from him. Also note rubin's role in removing a honest and effective official from a government financial regulatory body so he and his cabal could commit their financial crimes against the nation and compare that with the current campaign by wall street and the financial community against getting Elizabeth Warren appointed and approved to head the CFPB.
 
The corruptions of journalism were on full display when CNN's Fareed Zakaria turned to Robert Rubin this past Sunday for advice on how to fix the financial crisis that he, as much as anyone, caused (full video below). I was trapped on a treadmill in front of an overhead television and unable to turn the thing off in time to avoid this assault on my mental and physical health.
As a result I was forced to hear Rubin, Bill Clinton's treasury secretary, insist that he always favored regulating toxic derivatives and is therefore not at all responsible for the ensuing economic meltdown. He was responding to the sole critical question from the CNN host, who quoted a question by New York Times columnist Paul Krugman: "Did all the senior members of the [Obama] economics team have to be protégés of Robert Rubin, the apostle of financial deregulation?" Unfortunately, Zakaria just rolled over when his guest simply lied in response:

"First of all, I am not the apostle of financial deregulation. Quite the contrary. On derivatives ... I developed a deep concern about the systemic problem that was created. When I was back at Goldman Sachs, it was a concern I had ... a concern I had when I was in government. And in fact, when I wrote my book in 2003, I was so concerned about it that I actually included that discussion in there."

Zakaria ended the show recommending it as his book of the week: "He wrote a great memoir that covered his two distinguished careers, both ... on Wall Street and in Washington. ... It was written with Jacob Weisberg, a great writer, the editor of Slate, and the two men weave a compelling tale that has many lessons for today."
To be charitable, I will assume that Zakaria has not actually read that book, which omits any discussion of the radical deregulation legislation that Rubin ushered through Congress and got the president to sign. Bill Clinton is on record stating that he got bad advice from Rubin and his handpicked successor, Lawrence Summers, on derivatives regulation: "On derivatives, yeah, I think they were wrong and I think I was wrong to take it," Clinton told ABC News last April 10.
Rubin and Summers were responsible for forcing Brooksley Born out of the Clinton administration because as chair of the Commodity Futures Trading Commission she had the temerity to suggest regulating the mortgage-backed securities that eventually proved to be so toxic. Instead, Rubin and Summers pushed the Commodity Futures Modernization Act, which Clinton signed into law in his last month in office, categorically exempting those suspect derivatives from any government regulation.
By then, Rubin had moved on to a $15-million-a-year job at Citigroup, which became a prime exploiter of the subprime housing market. As a result of its massive involvement with toxic securities, Citigroup, with Rubin in a leading role until early 2009, had to be bailed out by the federal government with a $45 billion direct investment and a guaranteed Fed protection for $306 billion in potentially toxic assets.
Citigroup, a merger of the old Citibank and Travelers insurance company, was made legal only by the Financial Services Modernization Act, which Rubin backed while treasury secretary. Then, in one of the most egregious conflicts of interest in U.S. history, he went to work for the new bank, which took advantage of the changes in the law to buy up the infamous subprime lenders, beginning with Associates First Capital. The Economist magazine wrote of that purchase that "it extends Citi's already huge credit card operation to a lucrative new niche (price insensitive, if default prone, borrowers)" and questioned whether investors would see Citi's bold new venture "as something smart, such as 'evolved credit extension,' or something seamy such as loan-sharking."
Rubin was a major proponent of the firm's seamy expansion into the mortgages that proved to be toxic, and by 2007 Citigroup was the second-largest subprime servicer, after the only slightly more infamous Countrywide. As the New York Times pointed out on Nov. 22, 2008, after a decade of flattering portraits of the man, finally acknowledging Rubin's role in Citi's disgrace: "The bank's downfall was years in the making and involved many in its hierarchy, particularly [CEO Charles O.] Prince and Robert E. Rubin, an influential director and senior adviser."
There is much more, and I haven't even touched on Rubin's shameful role in Enron's shenanigans. Enough said, though, to question not only Zakaria's journalism but, far more important, Barack Obama's leadership in first turning to Rubin as a key campaign adviser and then putting his disciples in charge of the U.S. economy.

• The Recession
• Citibank