When the Financial Crisis Inquiry Commission issued their final report in 2011, the bi-partisan panel placed blame for the housing and financial crisis on everybody — the big banks, borrowers, federal regulators, independent rating agencies and the federal government. The 10-member commission, however, split along party lines, with six Democrats voting to adopt the report and its findings, and four Republicans issuing two dissenting reports. One of the Republican commissioners, Peter J. Wallison, placed the blame squarely on the shoulders of the U.S. government’s housing policies.
A new book by Hedrick Smith — titled Who Stole the American Dream? (Random House, 2013) — takes an approach similar to what the FCIC majority report concluded — namely that “all of us” are to blame for ruining the American Dream.
“Over the past three decades, we have become Two Americas,” writes Smith, a Pulitzer-Prize-winning former reporter for the New York Times in the prologue. “Americans sense that something is profoundly wrong — that we have gone off track as a nation. The timeline to our modern national quagmire lies embedded in a longer arc of our history, and that history, from 1971 to the present, is the focus of this book.”
From there, Smith takes readers on a sweeping 40-year journey of the American economic experience that documents the relentless decline of the middle class. A decline that, according to Smith, was engineered by corporate America.
Starting in 1971, Lewis Powell, one of America’s leading corporate attorneys, sounded the alarm to the corporate community that anti-business sentiment in Washington had reached a dangerous new high, and was threatening to “fatally weaken or destroy” America’s free enterprise system. Smith argues that the Powell memorandum, circulated privately by top corporate executives, generated “broad tremors of change” in corporate America and set off a seismic transformation of our political system. Shortly after it was circulated, 150 corporations came together and formed the Business Roundtable, the most powerful commercial lobbying force in America. In 1971, Smith writes, there were only 175 companies with lobbying offices in Washington. Today, there are 25,000 corporate lobbyists, compared to 400 for labor, and 200 for consumers.
Corporate lobbying, argues Smith, ushered in a major power shift away from the middle class to the wealthy. He writes that an unequal distribution of wealth and its influence on politics has stolen the American Dream from the middle class over the last 40 years. He documents the massive transfer of $6 trillion in middle class wealth from homeowners to banks — even before the housing boom went bust, and illustrates how U.S. policy favors the rich and stunts America’s economic growth.
Smith’s central thesis is that the American Dream has been dismantled over the last four decades by policy changes set in motion by President Jimmy Carter and followed by successive administrations — both Republican and Democratic — that have slowly eroded middle class wealth. According to Smith, we have moved from a society of shared prosperity and bipartisan politics to a nation of highly concentrated wealth and political gridlock.
“The New Economy laissez-faire philosophy of the past three decades promised that deregulation, lower taxes and free trade would lift all boats,” writes Smith, rebuking the “New Economy,” which he claims has created a long legacy of destructive policies.
Today, all middle class workers are paying the price for the shift described by Smith.
But all is not lost, argues Smith. He ends the book on a positive note. In one of the last chapters titled, “Reclaiming the Dream,” he outlines an 8-step strategy to unleash what he calls a “Domestic Marshall Plan,” which includes tax reform, a manufacturing renaissance, housing reform and combating China’s unfair trade policies.
“We are at a defining moment for America,” writes Smith. “We can’t allow the slow poisonous polarization and disintegration of our great democracy to continue. We come together and take action to rejuvenate our nation and to restore fairness and hope in our way of life.”