Who Stole the American Dream? (58 page)

If there can be protests and government action against a lopsided division of the economic spoils in Israel, why not in America?

If there can be an “Arab Spring” among peoples who have never known democracy, why not in the homeland of democracy?

Why not a springtime for American democracy? A jobs-first crusade? A movement to reclaim the American Dream?

We are at a defining moment for America. We cannot allow the slow, poisonous polarization and disintegration of our great democracy to continue. We must come together and take action to rejuvenate our nation and to restore fairness and hope in our way of life. We see the challenge. It is now time: We the People must take action.

SCORES OF PEOPLE CONTRIBUTED
to this book, whether by giving me interviews, by sharing their expertise with me, or, as colleagues, by their reporting for the PBS documentaries that we created together. I am grateful to all of you. But several people made special and continuing contributions to my work and deserve to be singled out for particular acknowledgment and appreciation.

My first reader and editor and the most important believer in this project has been Susan Zox, my wife and longtime collaborator in journalistic enterprises. Susan has deftly managed to find that indefinable but vital place that combines enthusiasm and support with a helpful critical eye and that enables an independent-minded friend to offer sometimes difficult advice to keep a writer from getting off track. Susan also provided a wonderful environment for me during two years of writing—relief, amusement, and incredible patience with my long hours and selfish concentration on the work at hand. Her belief in this book and her backing have been invaluable.

I have been most fortunate to have Kate Medina, one of the finest and most dedicated editors in modern American publishing, as my editor for this book and three previous books. In a publishing world much focused on coping with new technologies and new marketing challenges, Kate personifies the time-tested virtues of classical editing—working closely with an author on the substance, voice, and architecture of the book. The final version of
Who Stole the American Dream?
has benefited greatly from the skill, passion, and care that Kate invested in this book, and I am most grateful.

I owe a debt of gratitude as well to my researcher, Owen Smith, who for two years dug into a mountain of books, often impenetrable government reports and documents, and online sites to seek out the information that I tasked him to find. Owen has been tireless, tenacious, and ingenious as a researcher and reporter and in mastering the technical challenges in our project. Through it all, he has been a cheerful, unflappable colleague and companion whose support has been essential to me.

David Black, my literary agent, has been a resourceful and knowledgeable friend and ally from start to finish. For a writer who last published a book in the mid-1990s, David has been a steadying influence, wise in his comments and advice, patiently tutoring me on how the world of American publishing and the audience of readers have changed in the past seventeen years.

Olga Seham, a former Random House editor, brought a fresh and extremely helpful perspective to the late stages of editing. She combined an immediate enthusiasm for my book and its range of topics with thoughtful and provocative questions that prodded me to fill holes and answer questions that needed sharper, smarter explanations. Quite a few chapters bear the imprint of her tough-minded critiques and my responses to her friendly challenges.

Anna Pitoniak, as Kate Medina’s assistant, has been resourceful, ubiquitous, and ever invaluable in shepherding me and variations of my manuscript through the byways of a large publishing house. I found her personal reactions and editing suggestions insightful and her quick and lively interest in this book project helpful and heartwarming.

I owe special thanks and appreciation to WGBH, the PBS station in Boston, to
Frontline
, and to my friend David Fanning, the founder and senior executive producer of
Frontline
, for granting me permission to use material from my reporting on several
Frontline
documentaries.

My appreciation goes as well to my colleagues at Hedrick Smith Productions, especially Rick Young, Catherine Rentz, and Cory Ford, for sharing their reporting and insights with me. I am grateful,
too, for the generous assistance of David Heath, formerly of
The Seattle Times
and more recently of the Center for Public Integrity, on the topics of Washington Mutual, Long Beach Mortgage, and the intricacies of exotic home mortgages.

Many scholars and academicians have provided me with assistance, but several deserve special recognition because they responded so generously to my repeated inquiries and requests: Larry Mishel, director of the Economic Policy Institute, and his EPI colleague Robert Scott; Jack VanDerhei and Dallas Salisbury of the Employee Benefits Research Institute; Alicia Munnell and Andy Eschtruth of the Boston College Center for Retirement Research; pension consultant Brooks Hamilton; Karen Friedman of the Pension Rights Center; Tom Mann of the Brookings Institution; Norman Ornstein of the American Enterprise Institute; Robert Lawless of the University of Illinois; Alan Tonelson of the U.S. Business and Industry Council; Ron Hira of the Rochester Institute of Technology; Winslow Wheeler of the Center for Defense Information; and the researchers who track money in politics for the Center for Responsive Politics.

JANUARY
1914
—Henry Ford announces the $5 day—reckoning that if workers are well paid, they can afford to buy Ford’s Model T cars, and Ford could move into mass production. Ford’s strategy sparks a trend.

1948 “
TREATY OF DETROIT
”
—Labor agreement between General Motors and the United Auto Workers union gives GM labor peace and autoworkers annual pay increases, health benefits, and monthly pensions, setting a pattern for other industries, ensuring that gains from U.S. economic growth are shared between labor and management.

1950
—Top CEO salary in America: GM chairman Charlie Wilson is paid $663,000, roughly $5 million in today’s dollars, and about 40 times the annual wage of his average assembly line worker. Corporate ethic frowned on CEOs taking stock grants as unfair “competitive avarice.” Economists call this period “The Great Compression” because the income gap between the rich and the middle class is at its narrowest in the twentieth century.

MID
-1940s
TO MID
-1970s
—Heyday of the middle class, when the U.S. economy is driven by the dynamics of “the virtuous circle.” Companies paid high wages and tens of millions of families had steady income to spend, generating high consumer demand. Robust consumer demand propels businesses to invest in new plants and
technology and to hire more employees, fueling the “virtuous circle of growth” to another round of expansion and higher living standards.

AUGUST
1963
—March on Washington led by Martin Luther King, Jr. Student sit-ins, Freedom Rides, other civil rights demonstrations, and citizen grassroots movements force change, demonstrating the political power of average Americans.

JUNE
1964
—Congress passes the 1964 Civil Rights Act with strong bipartisan support, outlawing segregation of public accommodations, following mass protests.

NOVEMBER
1964
—Barry Goldwater, a strongly anti-union, anti-government senator from Arizona, beats the mainstream Republican Establishment to win the GOP presidential nomination, but loses to Democrat Lyndon Johnson. Goldwater’s defense of political extremism and rejection of compromise as a matter of principle spark the birth and growth of the Republican New Right, culminating in today’s Tea Party.

MARCH
1965
—Bloody Sunday in Selma, Alabama: Civil rights protesters led by John Lewis are brutally clubbed by Alabama State troopers and sheriff’s deputies during a march for voting rights for African Americans.

JULY
1965
—Congress enacts Medicare with strong bipartisan support: 65 House Republicans and 13 Senate Republicans join majorities of Democrats in both chambers to pass President Johnson’s historic legislation.

AUGUST
1965
—Voting Rights Act is pushed through Congress by President Johnson, on the momentum of massive grassroots civil rights demonstrations. The act removes legal obstacles to the right to vote for African Americans, especially in southern states.

1965
—Consumer advocate Ralph Nader publishes his searing attack on U.S. auto industry,
Unsafe at Any Speed
, charging automakers with marketing defective cars, and giving consumer activism new political leverage. The burgeoning consumer movement presses Congress and the White House to create new watchdog agencies and standards for truth in packaging and truth in lending.

NOVEMBER
1967
—Pat O’Neill, at nineteen, starts a thirty-five-year career with United Airlines as a jet airline mechanic, working the overnight “graveyard shift” at Chicago’s O’Hare field. He works his way up to chief mechanic, making $60,000 a year, leading a crew that does repairs and safety checks so that planes are ready to be airborne by dawn.

APRIL
22, 1970—
EARTH DAY
—The largest single mass public protest in U.S. history. Twenty million Americans participate in marches, teach-ins, and other demonstrations to protest against pollution of the environment.

1970
—President Nixon, responding to public pressures, establishes the Environmental Protection Agency. Congress passes the Clean Air act in 1970, the Clean Water Act of 1972, and other strong laws to protect the environment. Nixon also sets up a Consumer Product Safety Commission and the Occupational Safety and Health Administration, and expands the powers of the Federal Trade Commission to protect consumers and curb the excesses of capitalism.

AUGUST
1971
—Corporate attorney Lewis Powell sparks a political rebellion with his call to arms for Corporate America. Circulated by the U.S. Chamber of Commerce, Powell’s memo warns that anti-business attitudes and government regulation are threatening to “fatally weaken or destroy” the American free enterprise system. Powell declares that business must arm itself politically, battle organized labor and consumer activists, and mount a long-term campaign to change the balance of power and policy trends in Washington.

1971–1972
—The CEOs of America’s biggest corporations, responding to Powell’s memo, organize the Business Roundtable, which becomes the most potent political lobbying arm of Corporate America. The National Association of Manufacturers moves its headquarters to Washington. In one decade the U.S. Chamber of Commerce doubles its membership and the National Federation of Independent Business (small business) grows from 300 to 600,000 members.

SUMMER
1971
—After graduating from high school, Pam Scholl and Mike Hughes land solid middle-class jobs at the brand new RCA television tube plant in Circleville, Ohio. For the next three decades, Scholl and Hughes and their classmates enjoy their version of the American Dream of secure jobs, rising pay, health benefits, and lifetime pensions—a solid middle-class standard of living.

1973
—The productivity of U.S. workers rises 96 percent since 1945, and average hourly compensation rises in tandem—94 percent from 1945 to 1973. Average Americans share in the nation’s prosperity. In the next three decades, from 1973 to 2011, worker productivity rises another 80 percent but hourly compensation rises only 10 percent. Ordinary Americans are cut out of their share of the nation’s economic gains.

OCTOBER
1976
—Inspired by their mentor, free market economist Milton Friedman, business school professors Michael Jensen and William Meckling propose in an academic study that CEOs be given stock options to align their interests with those of stockholders. Corporate boards, seeing an advantage because options are not charged as a company expense, adopt this “pay for performance” idea, and by 1980, 30 percent of CEOs are receiving stock option grants.

LATE
1970s
—Business mobilizes politically. The number of companies with Washington lobbying offices grows from 175 in 1971 to 2,445 a decade later. Along with 2,000 different trade associations,
businesses have a combined Washington staff of 50,000, plus 9,000 lobbyists and 8,000 public relations specialists. Business lobbyists and advocates now outnumber members of Congress by 130 to 1.

1977–1978—
In the pivotal 95th Congress under President Jimmy Carter and the Democrats, business shows its new political muscle. Its lobbyists block organized labor’s legislation and Ralph Nader’s push for a consumer protection agency. They win deregulation of airlines, railroads, and trucking. They get Congress to reject Carter’s plan to close tax loopholes for the rich and, instead, they push to cut the corporate tax rate and the capital gains tax on investment income from 49 percent to 28 percent.

1978—
Two major bills alter the economic landscape for decades to come. One is an obscure insert in the tax code, paragraph 401(k), initially intended to authorize supplemental executive retirement plans and later extended by the Reagan administration to rank-and-file workers. The other change updates U.S. bankruptcy laws, giving management control during corporate bankruptcy, paving the way for bankruptcies in the 1990s and 2000s that canceled provisions of union contracts.