“When I graduated from Muncie Central High School, you could go just about anyplace and get a job—a decent job,” says Dennis Tyler. Tyler has represented Muncie’s Delaware County in the Indiana State House since 2007, and this past November he became the first Democratic mayor of Muncie in two decades. Before embarking on a political career, Tyler, who is sixty-nine, spent more than forty years in the fire department. For most of that time, he worked out of a firehouse just a mile and a half from where he grew up on Muncie’s Southside. “You could go to Borg Warner, and if you didn’t like Borg Warner you could leave and go to Chevrolet; if you didn’t like Chevrolet you could leave and go to Delco; if you didn’t like Delco you could leave and go to Acme-Lee, or dozens and dozens of other little places that were spinning off mom-and-pop tool-and-die shops.”
“At one point,” he recalls proudly, “the Southside of Muncie was almost completely built by people working in them factories.” Working people may have built south Muncie, but it was a pair of sociologists that put the city on the map. Ever since Robert and Helen Lynd christened Muncie Middletown in 1929, journalists, academics, and presidential hopefuls have flocked to this blue-collar city in eastern Indiana, for a look into the petri dish of American life or simply some Joe-the-Plumber-style street cred.
Last summer, with the nattering of congressional debt-ceiling debates and reports of ballooning corporate profits making headlines, I went in search of what Middletown has become today. Once as wholesome a symbol of the American Dream as the family breadwinner and apple pie, the very idea of Middletown now seemed a pale shadow of present realities, as the stark prose of unemployment statistics and eviction notices inscribed a very different kind of story onto the lives of millions of Americans.
Which are the Middletowns of our new era of precarious living? Is it Muncie, whose denuded industrial landscape tells a familiar story of Rust Belt decline? Or is it the new industrial landscapes of Smyrna and Spring Hill, Tennessee, where jobs that look a lot like those the residents of Muncie once had have become posts for a downwardly mobile working class? Or is it Sun Belt boom-cities like Nashville, where the promise of postindustrial transcendence has created its own reserve army of low-wage service employment, condemning many to lives of permanent poverty and vulnerability? Or is it some byzantine conurbation of them all, a commons of the American Nightmare—a Middletown of the 99 percent?
Muncie was my first stop, for it seemed as good a place as any to begin a tour of working-class life in America, to discover what it once had been and what it had become.
When Dennis Tyler came of age, Muncie’s working class was prospering. From the 1880s, when a natural-gas boom brought pioneering industrialists like the Ball brothers to the region to manufacture glass products, through the 1970s, Muncie’s population grew fifteen times over, nearly twice the rate of New York City. By the middle of the twentieth century, the “City of Eternal Gas” was churning out much more than those ubiquitous Ball canning jars: Delco car batteries for General Motors, transmission casings for Chevrolets and Fords, tread rubber for Goodyear tires, electrical transformers for Westinghouse, bridge caissons, iron castings, television plates, machine tools, steel wires, glass insulators, lawn mowers, stove and refrigerator parts, and probably a kitchen sink or two.
To be sure, factory work took its toll. Buck Owens, who, like many others, moved to Muncie from the Appalachian foothills of Tennessee during the 1950s, recalls grueling days at the old Frank Foundry on East 8th Street. “You’d come out and your arms would be just about as rusty as an old ten-penny nail. You’d have to take a bath, and even then you couldn’t get the rust off.” Still, rust was the price Buck paid for a greater measure of security than he could find on the farm. He and his wife, Sue, began to raise a family in their new home and eventually sent their two children off to college. For Muncians of their generation, work was plentiful and paid enough to afford one of the modest single-family homes crowded amid the small and large industrial plots that covered the city south of the White River, which meanders through the middle of Muncie.
The White River had always been an important dividing line in Muncie. When the Lynds first came in the 1920s, it appeared to them an unbridgeable class boundary: political and economic power in the city lay with the industrialists and professionals on the north side, while the working class to the south was marginalized and acquiescent. But in the half-century that followed, the rise of industrial unionism throughout the Midwest would narrow the gap between north and south Muncie. Not only did wages and living standards go up, but as union members banded together to elect labor-friendly politicians or support one another in their workplace struggles, the political dynamics of the city shifted as well. Muncie became a union town.
The Lynds warned their readers not to draw too much from their case study of Muncie: it was simply a typical American city, not the typical American city. But for a generation or more after the book was published, Muncie became as apt a metaphor as any for the socioeconomic mean that defined the country. What were the Middletowns of the New Deal era, after all, if not so many Muncies: the rapidly growing, blue-collar, unionized cities of the North? And what did New Deal America promise if not so many Middletowns: the opportunity of full employment, the prosperity of union wages, the security of the career job and the thirty-year pension, the upward mobility implied by the notion that these were constituent elements in the making of an American “middle class”? The semantic resonance between the Lynds’ chosen pseudonym for Muncie and that and other peculiarly American optimisms of averageness—like the benign renderings of an imagined “Middle America”—was, if not intentional, at least fortuitous. Muncie may not have been the American Middletown, but literally as well as figuratively, it came to signify working-class life in the heart of the twentieth century.
But then, Muncie’s economy went into reverse. Between 1979 and 2009, manufacturing jobs dropped by more than half, and all the largest union employers—Borg Warner, which at its peak employed upward of 5,000 UAW members at three transmission plants; Chevrolet and Delco Remy, which employed thousands more—shut their doors or left town. In the process, the poverty rate ballooned to 29 percent, and the local tax base collapsed. Instead of coming to Muncie for work, people now followed the jobs out: from a peak of around 77,000 in 1980, the population shrank to 70,000 by 2010, and would have gone much lower if the city hadn’t begun furiously annexing surrounding suburbs to the north and west. By any measure—population loss, abandoned homes, crime—the brunt of these changes were felt south of the White River.
In more subtle ways too, the transition away from a high-wage manufacturing economy began to reorient the city along its old fault lines. In 1918, the Ball family bought a small teachers’ college on the northwest side of town and donated it to the state of Indiana; today, Ball State University and Ball Memorial Hospital are the two biggest employers in the county. As job loss wracked the Southside, and Ball State matured into a large research university and medical center, the locus of economic growth and political power shifted back toward north Muncie.
Corner stores and restaurants closed down in Dennis Tyler’s old neighborhood, and fire and foreclosure devastated the housing stock. Meanwhile, retail outlets and fast food chains opened up around campus, and new subdivisions cropped up on the far north side to house the middle-class professionals working in Ball State’s classrooms and the hospital’s operating rooms. Muncie literally began growing apart from its blue-collar heritage, reinscribing the old class divide in new shades of town-and-gown.
Elected officials and developers now herald Muncie’s research facilities, not its industrial workforce, as the city’s greatest economic asset. Without the education and skill-sets necessary to thrive in Muncie’s new postindustrial landscape, the old working class—when its members find work at all—has been relegated largely to low-wage service jobs at the university or surrounding it.
“They’re all dead-end jobs, like this one,” a woman named Sandy tells me across a picnic table behind a family motel on a gaudy three-mile stretch of strip malls that used to be the northern city limit but today is Muncie’s busiest commercial thoroughfare. She and the other women on the housekeeping crew take their cigarette breaks here, surrounded by the parking lots of a Burger King, an IHOP, and a supermarket. Most of them hail from the Southside, like Beth, a woman in her mid-forties who lost her job at a bar that closed around the same time that her husband was laid off from a $13.25-an-hour job at a local machine shop. The women, none of whom wanted their last names used, make $7.25 an hour to clean the motel’s 101 rooms, and although they can get twenty-five or thirty hours of work during busy periods, in the winter they’re lucky to get two days a week. None of them would dream of quitting—a paycheck of any kind is hard enough to come by these days. “I had been applying everywhere for a very long time,” says Christie, the youngest on the crew. “It just so happened that I walked down here on the right day.” With an older woman’s cynicism, she says she will “probably” be working at places like the Signature Inn for the rest of her life.
The diminished expectations that characterize life on Muncie’s Southside have begun to seep into the homes of those who left the factory behind. Sara Rogers and her husband, Tom, are both public school teachers; the children of blue-collar families that made good, they have, by all outward appearances, survived Muncie’s decline quite well. They raise two children from previous marriages on a combined income of $90,000 and live in a spacious three-bedroom home in a subdivision six miles north of downtown Muncie. They are what Tom would call “comfortable”—which he is quick to distinguish from “confident.”
The gap between comfortable and confident got much wider in the spring of 2011, when a Republican-dominated state legislature passed a battery of laws that tightened school standards, imposed a merit-pay system on teachers, limited their collective bargaining rights, and diverted substantial funds from an already struggling public education system to a private voucher program. Inspired by their counterparts in Wisconsin, the Democratic minority—Dennis Tyler included—decamped to Illinois in a futile attempt to forestall the passage of bills that, as Dennis puts it, “just choked the life out of average people.” For Tom and Sara, the education reforms have meant the difference between doing work they love and waiting anxiously for the other shoe to drop.
“In the last few years, we both have really looked hard at, ‘Is this really what we want to be doing?’ But you almost feel trapped,” Sara explains. Their mortgage is their largest monthly expense, but with the downturn in the local housing market their home is no more valuable today than when Sara bought it, despite costly improvements they’ve invested in making. To keep up with family expenses, Tom spends almost every day of his summer vacations working construction jobs around Muncie. As for their teacher’s salaries, Tom says, “it’s not the income, it’s the benefits. Sara’s diabetic, insulin-dependent. So to just drop it and go ‘bye-bye insurance’ would be crazy.” “We both still love kids and love teaching,” Sara says, “but we just don’t love the things that have been coming at us. It used to be that if you didn’t like a job you could quit. Now, if you have a job, you’d have to be a fool—you don’t quit.”
More than anything else, it is this new sense of insecurity that is the hallmark of working-class life in Muncie today: total and devastating on the Southside; creeping and ominous for the once upwardly mobile; filling the physical and psychic space left bare by the defueling of the City of Eternal Gas.
When I ask Sara and Tom what they expect for their children’s generation, they are of two minds. Sara, torn by maternal affection and familial ties, wants her son, Kyle, who is eight, to stay in Muncie, near her and her parents and the city they’ve called home. Tom is less sentimental about his three daughters, the youngest of whom is seventeen. “I would want my daughters to go away from here. Not away from here, but I would want them to go where they can thrive, where they can pursue their goals, their dreams, whatever.” Opportunity, once the magnet that drew people to Muncie, has been replaced by the dull compulsion of just—barely—getting by.
“Your gaze on life changes,” Tom says. “Instead of spending a lot of time and effort seeing the big picture for your kids and family…you’re focusing on the immediate all the time. And I’m not just talking about us as teachers: it’s a cloud that hovers all over the Midwest—well, probably over the whole country now. It’s just a cloud that hovers.”
The Temp Life
It’s a cloud that LaDonna Johnson of Spring Hill, Tennessee, a powerfully built woman with long blonde hair and a Midwestern drawl, knows all too well. She first encountered it as a young woman in the mid-1980s, when she was laid off from a GM truck assembly plant in Flint, Michigan, that was slated for closure. It was the beginning of the first major rounds of contractions for American automakers and the beginning of a new chapter in the lives of autoworkers like LaDonna. She had become a member of a new class of nomads known as “GM gypsies.”
Though we are used to thinking of the history of deindustrialization in terms of the hollowing out of cities like Muncie or Flint, the last thirty years have meant something quite different for Spring Hill and Smyrna, Tennessee. Nissan broke ground on its first American assembly plant in Smyrna in 1981; four years later, GM purchased 2,000 acres of farmland in Spring Hill to build a plant for its new Saturn line. Today, the South is the most heavily industrialized region in the country, but work on the new “southern automotive corridor,” as the axis of plants that now stretch from Kentucky through Alabama, Tennessee, and Mississippi is known, looks much different than it once did on Muncie’s Southside.
LaDonna moved to Spring Hill in 1990, thanks to the employee relocation clause in her union contract, and went to work installing windshields and back glass on the first Saturn models. She joined a small army of industrial migrants from other recently shuttered plants. When Spring Hill added a third shift in 1993 and increased its workforce to 7,000 people, many saw Saturn as an escape from the inevitable decline of places like Muncie.
“Everyone in that plant came from somewhere else: California, New York, Ohio, Michigan,” recalls Tony Ball, who had been laid off in Wyandotte, Michigan, when Saturn opened. “I was a fitter-welder, working in a fabrication shop making $12 an hour with a wife and two kids, and I’m thinking, ‘Man, I can go back to General Motors, in a brand-new plant—I’m good for the next twenty years. I’m gonna take my little happy butt down there, move my family to Tennessee, get ‘em out of Michigan, and retire a happy man.”
When I met LaDonna and Tony last summer, they had been laid off for the last year and a half. The Saturn experiment came to an end in 2007, and now just over a thousand workers were left making engines and other component parts in the Spring Hill facility. Some of their coworkers had already uprooted their families once again, taking voluntary reassignments to GM plants in Texas, Kansas, or Ohio, still hoping to put in the years necessary to qualify for the company pension and lifetime health coverage. Johnson chose not to: her elderly parents, who had relocated to Tennessee to be closer to her and her sisters, had spent much of the last year in and out of the hospital, and she wanted to be close enough to care for them at the end of their lives. But the decision came at a cost: by July, she was down to her weekly $275 unemployment checks. “I’ve just cut back on everything—I don’t have cable, I don’t have Internet. I didn’t even go home on Christmas. It was the first time in my entire life I wasn’t in Michigan.”
According to GM’s staffing rules, plant openings anywhere in the country that are not met with voluntary reassignments can be filled with “force” moves, which require laid-off workers to take reassignments of at least six months. If they refuse, they lose their health insurance, which lasts for twenty-four months after a layoff. “I had almost made up my mind that I would turn down a forced move, because I’ve always had really great health,” LaDonna tells me. “But then a month ago I woke up and the left side of my face was paralyzed. I thought I had had a stroke. I went to the hospital and they diagnosed me with Bell’s Palsy. So now maybe I need these benefits. The bill for the hospital emergency room—you’re talking a couple thousand dollars. That would bankrupt me.”
She got some hopeful news in September, when GM and the UAW reached an agreement to reopen the Spring Hill plant as part of their latest contract. But how long the 1,700 jobs that are supposed to return here over the next four years will remain is unclear, and the prospect of a forced move always lingers for her and the other GM “gypsies” as they attempt to navigate the uncertain future of the American auto industry.
“I never thought I was going to have to make this decision between my parents and my health insurance. I always thought I was going to retire out of General Motors. And now, holy shit, what a nightmare this turned into.”
The only thing more precarious than being an itinerant GM worker, it turns out, is working for a Japanese automaker. Maybe in Japan there’s still something called lifetime employment, but in Nissan’s Smyrna plant, forty miles east of Spring Hill, permanent insecurity comes with the job.
Like the other foreign automakers that have concentrated in right-to-work states in the South over the last thirty years, Nissan has kept the UAW out of Smyrna and its two other U.S. plants, in nearby Decherd, Tennessee, and Canton, Mississippi. Employment-at-will, which is how Nissan prefers its relationship to its 13,000 American workers, implies no long-term commitment in the event of injury, illness, layoff—one reason why so many of the workers on the line today are younger than LaDonna and Tony. Nissan is not a place that many people retire from. And, in 2006, the company made it a lot harder for those who might want to when it cut retiree health coverage and switched all new hires from a defined benefit pension to a 401(k). After Nissan bought out a third of its Smyrna workforce a few years ago, it started replacing many of them with temporary subcontracted employees starting at lower rates than direct hires.
Clem (again, no last name), a cheerful Californian who moved to Tennessee six years ago to work in the Smyrna Plant, helps coordinate the many onsite computers that keep this fully automated facility running. Over an after-work drink at Willie’s Wet Spot, a mile and a half down the road from the plant, she tells me about life as a member of Nissan’s casualized workforce. Her current employer, a Falls Church, Virginia-based company called Computer Services Corporation, was awarded the contract to provide IT services to Nissan’s American facilities in 2009. But there have been others, and as Nissan swaps one vendor for another to reduce its operating costs, there is no guarantee her own contract will be renewed. When she is rehired she loses whatever seniority she accrued with her previous employer. Clem knows that every next time might be her last; she’s seen too many other workers let go as they approach retirement age. Her last raise came a few years ago, and even then failed to match the rising cost of living.
For GM and Nissan temps alike, the inhabitants of this new industrial landscape, the far horizon looks depressingly similar. At this rate, Clem figures, “I’ll have to work until I die.”
Busted in Boomtown
The only way out and up, we’ve been told, is in the refashioning of a twenty-first century economy delinked once and for all from the country’s blue-collar past. From Richard Florida’s paeans to the “creative class” to the much-touted success of the new “eds and meds” industries; from Muncie’s Ball State-driven makeover to the rapid growth of Sun Belt boomtowns like Dallas, Charlotte, or Atlanta, the promise of a postindustrial future has long been held out as a high-tech salvific for Middletown’s deindustrialized soul.
So I left the southern automotive corridor and headed to Nashville, one of the fastest growing cities in the Southeast. One in eight Nashville workers are employed in the health care industry today, and hospitals and universities now drive this once-sleepy state capital and country music mecca, recently ranked the fourth-best city for college graduates by Forbes. The crown jewel of Nashville’s economic success is Vanderbilt University and Medical Center, whose 330-acre campus sits just west of the city’s downtown. In fact, with 23,000 employees, nearly 6,000 nurses, and another 12,000 students in residence, Vanderbilt is many ways a city unto itself. Today it is the largest employer in the state, behind only FedEx’s global hub in Memphis.
For many of its workers, though, Vanderbilt’s success is at best a cruel joke, made at their expense. Jackie Lucas, a soft-spoken woman in her mid-forties, moved to Nashville in the early nineties, in flight from her own deindustrializing Middletown of Trenton, New Jersey. It turned out to be a rude transition. When Jackie first arrived, she took three minimum-wage jobs—day shifts at McDonald’s, night shifts at two commercial cleaning companies—just to cobble together rent. She and her teenaged daughter moved into public housing and came to rely on food stamps for the first time in her life. Her eighteen-hour workdays took a toll on her daughter, who began cutting school and getting into trouble, and Jackie finally decided there had to be a better way.
But when she was hired on as cook in Vanderbilt’s new freshman dining hall, things didn’t get much better. In 2006, when a campus-wide coalition of workers and students brought national media attention to Vanderbilt’s paltry pay practices, many of the lowest-paid workers on campus were making less than $8 an hour—two dollars below what the coalition calculated to be the living wage in Nashville, and a few million shy of what Vanderbilt’s top executives were making. Jackie’s union, Laborers’ Local 386, had established a small presence on campus in the early 1970s. But with less than 3 percent of Vanderbilt’s workforce under contract, it struggled to narrow the pay gap between the electricians, janitors, cooks, and groundskeepers it represents and the doctors, research scientists, professors, and university administrators who are the public face of the university. The Living Wage Campaign succeeded in winning substantial pay gains for Vanderbilt workers, but, in the summer of 2011, some full-time employees were still earning below the federal poverty threshold for a family of four. It is not uncommon for Local 386 members to work second or third jobs, and some have to commute to campus from homeless shelters.
Jackie makes $12 an hour, but after taxes and other withholdings, her weekly take-home pay comes to less than $300. “If I didn’t spend a dime of that, it would probably just be enough to pay my rent, which is $850 a month. And that leaves so many other things—my lights, my water, my house phone, my cell phone, food.” Worse still has been the indignity of continuing to depend on public assistance while working at Vanderbilt and raising her second daughter. “I didn’t know what a food stamp was until I got into adulthood. I think sometimes I’m a little snobby, but I was never subjected to that as a child, and I don’t think I should have to subject my children to that.”
Jackie’s experience with the glitzy new “knowledge” economy is an all too common one. In cities as diverse in location and rich in industrial heritage as New Haven, Connecticut, and Birmingham, Alabama, university-hospital complexes have supplanted factories as the dominant actors in their local economies. While labor markets in the factory cities of old used to resemble a pyramid—where on-the-job training and experience made it possible for many workers to ascend the pay scale into middle class comfort—the labor markets of these new cities tend to look more like an hourglass, with a highly educated group of skilled professionals on the top, and a permanent underclass of workers like Jackie on the bottom.
Nowhere in Nashville are these divergent trajectories in sharper relief than the quads and cafeterias of Vanderbilt’s campus. But they are also visible in the taxicabs, hotels, and restaurants that cater to Music City USA’s bustling tourist trade and on the construction and cleaning crews that build and tend to the homes and offices of Nashville’s professional class. And most of Local 386’s members, like Jackie, come from the city’s disproportionately black or foreign-born working poor.
Immigration is a relatively new phenomenon in this part of Tennessee, as much a sign of the region’s recent economic growth as the college grads that have flooded into Nashville or the population booms that made small cities out of rural outposts like Smyrna and Spring Hill. In the last twenty years, Nashville’s foreign-born population has increased fourfold, and Tennessee now has the third-fastest growing Latino population of any state in the country.
Carla, twenty, and Armando, thirty-eight, have found a different set of hardships in the new Middletowns of the South. Both were born in Mexico and came to Tennessee for the same reason that thousands of Tennesseans had gone to places like Muncie in decades past: jobs. Carla’s family settled in Nashville when she was five, so that her stepfather could open a small contracting business during the midst of the local housing boom. In 2006, after winding his way through Ontario, Michigan, and North Carolina for ten years, Armando moved to Shelbyville, sixty-five miles southeast of Nashville, when he heard from a relative about a new Mexican restaurant looking for kitchen help.
Both arrived in Tennessee without Social Security cards. When the local economy was flush, this wasn’t much of an issue for the Mexican immigrants who settled here. Many found easy work with employers happy to look the other way, like the large Tyson poultry processing plant in Shelbyville that was known to hire undocumented immigrants.
Things began to change a few years ago. After three managers at the Shelbyville plant were indicted for smuggling Mexican workers into the United States. Tyson replaced many of its Latino employees with Somalian refugees, many of whom have settled here legally, along with significant numbers of Ethiopians, Kurds and others, thanks to the city’s status as a refugee resettlement center. Shelbyville’s Latino community struggled because of it, and other local businesses started shutting down, including the restaurant where Armando worked. And when the local construction industry collapsed with the national real estate market, Carla’s stepfather’s contracting business went under. Soon her parents had to file for bankruptcy, and during Carla’s senior year in high school, their home was foreclosed.
Since 2007, Nashville’s municipal government has enrolled in the Department of Homeland Security’s controversial 287 (g) and Secure Communities programs, which empower local law enforcement officials to act as quasi-immigration agents, creating a new climate of fear and uncertainty that has left many immigrants in the area—documented or not—scared even to drive their cars to work.
As the national jobs crisis pushed unemployment in Tennessee close to 11 percent by 2009, undocumented immigrants like Carla and Armando found themselves in a particularly vulnerable situation. Caught between a slack job market on the one hand and an increasingly inhospitable legal climate on the other, many of these workers are ripe for exploitation.
Carla went to work in a pastry shop owned by family friends, hoping to save enough up money to attend college. They knew she was undocumented and agreed to pay her in cash, but after about a year they began withholding her wages, promising to pay her next week, then next month, then the following. “When it got to four months at a time,” she tells me, “I was like, ‘Hey, I need to get paid, I’m trying to save for school!’”
Fed up, Carla finally quit, but she’s still a long way from having the money she needs to get through college. Tennessee state law denies any financial aid to undocumented immigrants and charges them out-of-state fees three times higher than in-state tuition rates. Work, in other words, is both the only way that undocumented students like Carla can afford to go to school and increasingly difficult to come by.
“Nashville is my home—it’s where I grew up, it’s where my friends are, it’s where my boyfriend is, it’s where my family’s at. They all have a future here—but I don’t. I can work my butt off doing little minor jobs that don’t pay much to pay for school, and ultimately I still won’t be able to get a job at the end.”
Carla's situation may be unique to the immigrant experience, but in other ways it resonated throughout the many homes and workplaces I visited. In Smyrna and Spring Hill, Nashville and Shelbyville, Muncie south and north, the old bargains that sustained working people have broken down. In place of the old stabilities—of careers, of families, of communities—we have become a generation of the dislocated, a country of industrial gypsies and undocumented immigrants in constant search of the next job; of downwardly mobile public school teachers and autoworker permatemps; of impoverished servants to a postindustrial future and twenty-year-olds with no hope for one at all. Citizens all of the new Middletowns.
Armando now makes ends meet on a used-car lot since losing his restaurant job, but in Shelbyville these days, he tells me, “things are hard. Everybody’s looking for jobs, but there’s no way to get a job.” Instead, he spends a lot of time thinking about moving on once again. “I’ve been thinking of going to Mexico and then running away to Canada.” He’s heard that, “If you apply you can live there with a visa,” and I don’t ask what he would do when the visa expired.
“Because this is going bad, for everybody. It’s too hard. I came with the idea that I’d make my life here—have a family, a house, a car. Be somebody, like everybody. That’s what I wanted. I don’t know if it’s my bad luck, or whatever.”
“But now everything’s bad, you know?”
Last year, forty-three states reported increased home foreclosure rates. Nevada led the way for eleven consecutive months; in Clark County, which includes Las Vegas, nearly one in twenty homes is in foreclosure. Whole blocks have been foreclosed in Chicago. Nationwide, rates are nearing Depression-era highs -- ravaging working- and middle-class neighborhoods that fell prey to the soft sell and outright chicanery of predatory lenders in the heyday of the housing boom. These lenders have targeted the most vulnerable -- black and Latino borrowers have been twice as likely to receive subprime loans as whites; female homeowners, 30 percent more likely than male; black women, five times more likely than white men.
As the subprime mortgage debacle drives a recession that threatens financial markets around the world, the Democratic presidential candidates are pushing plans to address the crisis. John Edwards and Hillary Clinton are pledging substantial federal resources to stabilize the mortgage market and intervene on behalf of borrowers. Barack Obama's proposal is tepid by comparison, short on aggressive government involvement and infused with conservative rhetoric about fiscal responsibility. As he has done on domestic issues like healthcare, job creation and energy policy, Obama is staking out a position to the right of not only populist Edwards but Clinton as well.
Edwards's plan includes a mandatory moratorium on foreclosures, a freeze on rising interest rates for at least seven years, federal subsidies to help homeowners keep up with payments and restructure loans, and explicit measures to rein in predatory lenders and regulate the financial sector. Clinton's plan is weaker -- a voluntary moratorium, a shorter freeze, less commitment to new regulations -- but she has promised $30 billion in federal aid to help reeling homeowners and communities.
Only Obama has not called for a moratorium and interest-rate freeze. Though he has been a proponent of mortgage fraud legislation in the Senate, he has remained silent on further financial regulations. And much like his broader economic stimulus package, Obama's foreclosure plan mostly avoids direct government spending in favor of a tax credit for homeowners, which amounts to about $500 on average, beyond which only certain borrowers would be eligible for help from an additional fund.
"One advantage to the tax credit is that there's no moral hazard involved," one of Obama's economic advisers explains. "There's no sense in which you're rewarding someone for taking too big a risk. If you lied about your income in order to get a bigger mortgage, then you're not qualified. Do you really want to give a subsidy to the guy who wasn't prudent?" Obama has used similar language on the campaign trail. "Innocent homeowners," he has promised, those "responsible" borrowers "facing foreclosure through no fault of their own," would get help restructuring their loans. But no such luck for those "claiming income they didn't have" or "lying to get mortgages."
"There's been less emphasis from the Obama campaign on the really dysfunctional role of the financial industry in the subprime mess," says Josh Bivens of the Economic Policy Institute. "Edwards and Clinton talk much more about regulation of the financial industry going forward, and to the extent that blame is placed, they tend to place it on the lenders for steering people into loans they couldn't afford."
Obama's disappointing foreclosure plan stems from the centrist politics of his three chief economic advisers and his campaign's ties to Wall Street institutions opposed to increased financial regulation. David Cutler and Jeffrey Liebman are both Harvard economists who served in the Clinton Administration, and they work on market-oriented solutions to social welfare issues. Cutler advocates improving healthcare through financial incentives; Liebman, the partial privatization of Social Security.
Austan Goolsbee, an economist at the University of Chicago who calls himself a "centrist market economist," has been most directly involved with crafting Obama's subprime agenda. In a column last March in the New York Times, Goolsbee disputed whether "subprime lending was the leading cause of foreclosure problems," touted its benefits for credit-poor minority borrowers and warned that "regulators should be mindful of the potential downside in tightening [the mortgage market] too much." In October, no less a conservative luminary than George Will devoted a whole column in the Washington Post to saluting Goolsbee's "nuanced understanding" of traditional Democratic issues like globalization and income inequality and concluded that he "seems to be the sort of fellow -- amiable, empirical, and reasonable -- you would want at the elbow of a Democratic president, if such there must be."
Robert Pollin, an economist at the University of Massachussets, believes "these three advisers generally reflect Obama's very moderate economic program, similar to Clintonism." Wall Street apparently has come to a similar conclusion. Obama had received nearly $10 million in contributions from the finance, insurance and real estate sector through October, and he's second among presidential candidates of either party in money raised from commercial banks, trailing only Clinton. Goldman Sachs, which made $6 billion from devalued mortgage securities in the first nine months of 2007, is Obama's top contributor. When asked if Obama would hold these financial institutions accountable for losses incurred by homeowners and investors, his campaign refused to comment.
But tax credits and continued deregulation won't solve the mortgage crisis, which threatens to dispossess more than 2 million homeowners this year. "There's no evidence that an unregulated market is going to be a stable market," Pollin says. "The unstable mortgage market is one indication of that. This is not anything new. What is new is that you have a serious presidential candidate who isn't really talking about it and doesn't have advisers that are prepared to deal with it."
If Obama is serious about his community organizing roots, then he would do well to take a lesson from groups like the Rainbow/PUSH Coalition and ACORN, which are calling for a moratorium on foreclosures of a year or longer and for the creation of a massive government loan agency on the scale of the Reconstruction Finance Corporation of the 1930s. "We need some serious federal government intervention to restructure loans, not repossess homes," says the Rev. Jesse Jackson. "Because it's not just the borrowers anymore, it's the economy itself. We're in for a very difficult economic season."