The Betrayal of the American Dream (24 page)

Most of the victims facing foreclosure who have talked with Santillo, Graf, and other foundation volunteers in Cape Coral are not first-time homeowners. Many had owned homes for years, but found themselves in financial trouble after unscrupulous salesmen signed them up for exotic mortgages with hidden interest clauses that were ticking time bombs. When the interest rate shot up, many lost their home.

John Aguiar is a veteran of the Gulf War, a former intelligence analyst for the Army who took part in Operation Desert Storm in 1990. After graduating from high school in Chicago, he trained at the U.S. Army’s legendary intelligence training post at Fort Huachuca, the secretive enclave in remote southern Arizona, where he learned the intricacies of signal intelligence and mapping. After Saddam Hussein invaded Kuwait, John was deployed to Iraq to provide reconnaissance for the infantry.

When his tour of duty ended, he returned to Chicago and married Syrena, his high school sweetheart. They bought a house in suburban Chicago, where their daughter and son were born. In 2002, with John concerned that his job might not be secure, they moved to Cape Coral, where Syrena’s parents lived. John was a midlevel manager in the trucking industry, a field that had become chronically unstable after Congress deregulated the industry in 1980. Only months after he and his family moved to Florida, his former employer—Consolidated Freightways, one of the nation’s oldest long-haul truckers—filed for bankruptcy and went out of business.

In Cape Coral the Aguiars bought a lot and built a house that reflected their values and their way of life. It was nothing fancy: a one-story Cape rancher with three bedrooms, two baths, and a two-car garage. There were no granite countertops, no Jacuzzi—just the basics, in keeping with what they could afford. “We didn’t do lavish things,” said Syrena, “but we sank everything into the place. This was the home we had always wanted.” It was where they planned to raise their kids and retire. To support the family, John landed a job with a building materials company.

Their troubles began when the city of Cape Coral hit them with an unexpected bill for $20,000 to connect to the city’s water and sewer system. When they built their house, they had been led to believe that city water and sewer were years away, so they had spent $22,000 to drill a well and build a septic system. To come up with $20,000 more, they were forced to refinance.

Their original mortgage was a 6 percent fixed-rate loan, but this time the mortgage company substituted an adjustable rate. “I didn’t know it was an adjustable-rate mortgage until it was a done deal,” said Syrena. “Then it was too late.” At first they were able to handle the new monthly payment, which rose from $1,100 a month to $1,400.

But the interest rate on the new mortgage continued to climb just as the Florida economy began to falter. Worried that his job in a housing-related field might not be safe, John began moonlighting twenty to twenty-five hours a week on nights and weekends at a Home Depot. Then his company closed its office in his area and he lost his day job.

John and Syrena scraped to pay the mortgage, cutting back on expenses and depleting their savings and retirement accounts. Their monthly mortgage payment soared to $2,000. “The mortgage payment just kept getting higher,” said John, “and we kept sending out one more payment, one more payment, one more payment, until we could figure out what we were going to do.” They tried to negotiate with their mortgage company to lower the interest rate, “but they didn’t want anything to do with us,” said Syrena.

The Aguiars were swept aside by one of the powerful forces driving foreclosures: the company servicing the mortgage did not own the loan and thus had no incentive to offer the family an arrangement that might let them stay in their home until they got back on their feet financially. In 2009, with their mortgage company turning a deaf ear, the Aguiars could no longer come up with the ever-higher monthly mortgage payments and were facing foreclosure. Just before they were to appear in foreclosure court, the mortgage company gave them permission to short-sell their house. It sold fairly quickly—at a loss—and the family moved in with Syrena’s parents.

Unable to find work in Florida, John took a job in shipping with a trucking company in Chicago. Syrena and their daughter and son remained in Florida, where the children attended schools that both parents said provided them an excellent education. Meghan, fourteen, hoped to become a veterinarian; eleven-year-old Jacob’s goal was to be a robotic engineer. John couldn’t visit them for nearly a year after he took the Chicago job, in part because of unexpected medical problems that included a hospital stay for complications from diabetes. So when the family wanted to get together, it usually had to be by phone.

When they had their house in Cape Coral, Syrena recalled, she and John felt like they had everything:

“We had our family. We had good jobs, we had a nice house that we built, we had a dog, we had a cat, and we were happy. And then one day we woke up and everything started going backward on us. We just want to get our lives back together.”

In an earlier time, things would have been different. After World War II and the Korean War, the federal government oversaw housing programs that did not permit the kinds of financial gimmickry by Wall Street, banks, and investors that have proven so destructive to the Aguiars, other veterans, and millions of other middle-class Americans.

“We had the American dream,” said Syrena, “and it was taken from us.”

CHAPTER 8

GLOBALIZATION SHANGHAIED

A
merican politicians are always talking about creating jobs. So why is it they are always killing jobs?

A look at two industries reveals a pattern. Rose growing and circuit board manufacture could hardly seem more different, but what happened to them was the same. How it happened and why it happened is a story often repeated in America, and the tale almost always ends badly.

A generation ago, greenhouses that grew long-stemmed roses flourished in American communities from coast to coast, supplying florists with abundant homegrown bouquets on Valentine’s Day, Mother’s Day, and other special occasions. Many greenhouses had been owned by the same families for generations, and some towns, like Madison, New Jersey, which called itself “The Rose City,” proudly defined themselves by the industry.

Today almost all the greenhouses are gone. More than 90 percent of the roses sold in America are imported, mostly from Colombia. They are grown on the high plateau near Bogota and harvested by peasants, then loaded into jumbo jets for flights to Miami. The most common explanation as to why this happened is that American growers couldn’t compete because of cheap labor and ideal growing conditions in the Andes. Those were certainly factors, but there’s a more important reason. The U.S. government helped drive the American rose industry out of business.

Starting in the 1960s, the U.S. Agency for International Development (USAID), the arm of the State Department that encourages economic growth in poor nations, gave Colombia financial assistance to spur the growth of its flower-export industry. U.S.-funded technicians helped Colombian growers cultivate their crops and create a distribution network to get their flowers to market. In so doing, U.S. taxpayers helped pay the start-up costs for an industry that eventually would destroy one of America’s own.

Once Colombia’s flower industry was firmly established, producing ever-greater quantities for export, the federal government, no doubt at the urging of the State Department, allowed the flowers to be imported into the United States without facing high tariffs. Colombia’s first flower exports, carnations, quickly overwhelmed American carnation growers. Roses, a much more lucrative crop, came next.

As rose imports quickly cut into the domestic industry, rose growers turned to the U.S. government for help, starting in the 1980s. They didn’t get it. Almost every time they lodged a complaint with U.S. trade authorities concerning unfair trading practices, government officials sided with Colombian growers and against U.S. companies.

This has been the pattern for years in scores of U.S. industries: domestic producers plead for help only to encounter indifference and denial about what is happening to their companies. In response to an impassioned plea from domestic rose growers in 1984, the U.S. International Trade Commission issued this adamant refusal to intervene:

Imports of fresh-cut roses from Colombia have had no material impact on the domestic industry.... The domestic industry is in a healthy condition; domestic production, shipments, profits and productivity have all increased....

Potential increases in imports from Colombia present no threat of material injury to the domestic industry because the industry has exhibited the strength to withstand import competition, and the projected increase in imports is small relative to the domestic market and past increases.

Were U.S. trade officials blind to what was happening, or were they just in the grip of special interests? In the end it made no difference to the American rose growers. The assertion that the U.S. industry was healthy was just plain wrong. The rose industry was already dying, due to Washington. When the trade commission claimed all was well, rising imports accounted for 22 percent of domestic consumption. By the end of 2011, imports had taken over all but 10 percent of the market.

Workers in old industries such as roses are often urged to learn a new trade so they can compete in the new economy. Woe to any of them who studied how to make printed circuit boards. From personal computers to cell phones, circuit boards are the heart and soul of all electronic devices. The internal plates to which chips and other components are attached, circuit boards connect the various parts of a device to make it work.

The circuit board industry developed in the United States and has been at the center of high-tech innovation. From a lone plant that opened in 1952 outside Chicago, circuit boards had become a $10 billion U.S. industry by 2000, one that produced 30 percent of the world’s supply. With that amount of business, the United States had all kinds of potential economies of scale to support the industry. To little avail.

With high technology constantly cited as pivotal to America’s economic future, one might have expected that this crucial cog in the high-tech machine would get an assist from Washington; after all, helping this industry would benefit not only industry workers but the nation as a whole. But Washington had other ideas. In the grip of free-trade ideas that would brook no actions that might be considered protectionist, Washington impassively stood by as foreign producers in China and South Korea, among others, subsidized and supported by their governments, undercut domestic producers.

Over the years, domestic manufacturers appealed to Congress for help, citing the unfair trade practices that were destroying them. Congress turned a deaf ear. By 2012, the U.S. industry had only a few hundred circuit board makers, and the nation’s output has shrunk to around $3 billion a year, less than one-third of what it was just a decade earlier.

The first plant that made circuit boards in the United States, Bartlett Manufacturing in Cary, Illinois, shut down in 2009, after fifty-seven years in business. Douglas Bartlett, whose father founded the company, said he could no longer compete against the predatory trade policies orchestrated by the Chinese government. With the loss of this domestic industry, the United States is forfeiting its high-tech future.

“Our kids are going to be fluffing dogs and doing toenails while the Chinese are making leading-edge devices,” Bartlett told
Manufacturing & Technology News,
a sophisticated Washington, D.C., newsletter that tracks globalization, foreign trade, and other issues affecting American manufacturers.

The Chinese were eclipsing the United States in more than just high technology. On a summer day in 2010, Arnold Schwarzenegger, then governor of California, paid a visit to a factory to thank an enthusiastic crowd of steelworkers for their hard work in casting the steel for one of America’s iconic bridges—the new Bay Bridge linking San Francisco and Oakland.

“There was one thing that I demanded from my staff, and that was that . . . I can go and visit the workers that are building our Bay Bridge, so that I have a chance to say ‘thank you, thank you, thank you for the great work you are doing,’” he told the assembled workers. “You have done an extraordinary job because so many of you go to work every day and do welding, painting, lifting, designing, shipping, all of those things in order to help us in California rebuild our Bay Bridge.”

The steelworkers erupted in applause and rushed to shake Schwarzenegger’s hand or stand next to him, a typical crowd reaction to the Hollywood movie star turned politician. It was the kind of scene that has played out countless times in America down through the years when politicians pay homage to those who actually build our monuments, from the Empire State Building to the Golden Gate Bridge.

But this time the setting wasn’t Pittsburgh, Chicago, or Los Angeles. Schwarzenegger was standing in a steel plant thirty minutes outside Shanghai. Zhenhua Heavy Industries had won the multibillion-dollar contract to cast the steel components that make up the eight-mile-long span across San Francisco Bay.

How did a landmark bridge project in America—one that presented a serious engineering challenge, the kind that was once the staple of American manufacturing—end up in the mills of Shanghai?

The story starts in 1989, the year the original bridge was severely damaged in the Loma Prieta earthquake centered south of San Francisco. The quake killed sixty-three people, including a motorist on the bridge when one section of the roadway collapsed. The bridge, which is often the nation’s busiest toll bridge—it carries nearly 300,000 vehicles a day—was described as “unstable” and had to be closed for a month for repairs.

Years of wrangling over the design and financing of the replacement bridge followed, but eventually local and state politicians agreed on a design for an innovative, self-anchored suspension bridge with a tower rising to the height of a fifty-two-story building. That’s the part of the bridge that will be memorialized by a “Made in China” label.