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The Central Texas Food Bank hosts a drive-through emergency food distribution event at the Austin Community College Highland Campus, March 2020.
In 1991, people lined up for blocks at The Philadelphia Inquirer’s downtown headquarters to buy a copy of the newspaper’s series “America: What Went Wrong?” Using 100,000 pages of documents and stories of American workers’ hardships, it was an indictment of the Washington deal making and Wall Street greed that conspired to break the back of the middle class. The reporters, Donald L. Barlett and James B. Steele, earned a Pulitzer Prize. Their work ranks 51st on New York University’s top 100 works of 20th-century journalism.
Little did the duo know at the time, but they had just scratched the surface of income inequality. Their 1992 bestselling book America: What Went Wrong?, an expanded version of the series, now has a newly published sequel, subtitled The Crisis Deepens. It catalogues the ferocious economic decline that Americans have suffered in the intervening decades, now made far harsher by the COVID-19 outbreak and a wealthy Republican cabal that insists that economic security comes to those who resist government handouts and just work harder.
Steele spoke with me about the pandemic crisis and middle-class distress, the role of the business press, and what the choice between Donald Trump and Joe Biden really means.
This interview has been condensed and edited for clarity.
Gabrielle Gurley: What is the pandemic recession doing to the middle class?
James Steele: COVID-19 laid bare how drastic income inequality is in this country. In the ’90s, income inequality was a controversial subject. People said, “Oh no, there is a recession going on; we’ll get through that and then the American economy will blossom.” A lot of those people were confusing the stock market with average people [who] have totally different needs and are not dependent on dividends and stock holdings to take care of their families.
I can’t get out of my mind the images after the virus struck and companies began laying off people: these long lines of cars and trucks of people waiting for boxes of food. Many people who had insurance are now losing that insurance because they have lost their jobs. All of these things just exposed exactly how fragile things are for working people in this country. This is a cascading crisis.
Gurley: Let's define our terms: Who exactly is the middle class in 2020?
Steele: We define it nationally [as] roughly $40,000 to $100,000 [for a household] for the middle class, depending on where you live. Obviously, $100,000 in New York is probably not the upper end of the middle class. But if you are making $75,000 to $80,000 and you are living in the middle of Missouri, Iowa, Kansas, Illinois, or Pennsylvania, that’s a pretty good amount of money. You can take care of your housing, your family, [but] you are probably going to have trouble [sending] your child to college. But all the other significant things you can take care of on that salary.
Gurley: Unfortunately, the business media mostly ignored the issues you identified in the 1990s, like income inequality. How much of a role does the media play in this information deficit today?
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Steele: They focus too much on the macroeconomic numbers, like what the unemployment rate is. Look at the numbers right before we got plunged into this desperate situation. [The business press] was trumpeting the Trump people, that we had a 3.5 percent unemployment rate, a great example of this soaring American economy. Nobody argues with that.
However, when you look at those numbers very carefully, you find out that a lot of people were actually working two jobs just to make ends meet, or one job but the pay wasn’t that good. The median family income has not kept pace with inflation. This tells you that [a great economy] is a mirage for a great majority of people.
Health care is a perfect example of where the business press has failed. It’s not a matter that people are just not able to afford insurance: Even before COVID you had people [who had] those costs being shifted to them from their companies or from the insurers. Even folks with insurance in many cases are not able to pay out-of-pocket expenses for things that are not being covered.
Gurley: How can business reporters do a better job of covering these issues?
Steele: Too many people at the top, including a lot of the business press, are looking at those big numbers and are talking to Wall Street analysts and economists. The business press really needs to spend more time on the ground level, looking at how people are living their lives, what their actual costs are; and how are they dealing with the stresses of the [income] categories that they are in.
Student loans were not an issue when we wrote the original book—this is a gigantic issue today. But as this [problem] was building, there was not a lot of discussion about the factors that caused this. The business press and the press, in general, was very negligent in explaining why [student loans] became the problem that it did.
The New York Federal Reserve, not exactly a wild-eyed leftist institution, has studied what happened to money that came back from the offshore accounts: It’s gone into stock buybacks and increased dividend payments.
Gurley: So how will tax code changes exacerbate the recession?
Steele: The tax code has been the prime driver of income inequality in America. As recently as 1980, one of the top rates was 70 percent. Today, one of the top income tax rates is 37 percent. The estate tax, of course, is a joke. We’ve created this financial aristocracy and it can just pass [wealth] on with very low taxes. As a result of that, there’s been less money to invest in the country.
COVID would have been bad under any circumstances, but if we had proper safety nets it would be far less severe than it is. The 2017 tax bill? It’s possible it’s the worst ever, when you combine the individual cuts and the corporate cuts and the provision to get the offshore money to come back. That money has come back, but it hasn’t been reinvested in America. The New York Federal Reserve, not exactly a wild-eyed leftist institution, has studied what happened to money that came back from the offshore accounts: It’s gone into stock buybacks and increased dividend payments. That’s not investing in America—if you are going to get them to bring that money back, let’s get them to account to see how that money is spent and stipulate how it benefits the country as a whole.
Gurley: You say that “there is a systemic failure in schools to provide the basic technological education required for the business world of the 21st century.” But isn’t there a related problem of financial illiteracy?
Steele: I think you’re right: There is tremendous financial illiteracy in America. We teach primary mathematics; we don’t teach some of these basic [financial] things. Because of that illiteracy and other reasons, folks at the top have been able to really have their way for the last four to five decades on taxes, because there hasn’t been a lot of pushback from people below. I wish there was more teaching and maybe people would be a little bit more sophisticated about what’s happening to them.
One of the statistics in the new book that has astounded a lot of people is when you look at the Trump tax bill of 2017, if you are making a million or more, you get a tax cut in excess of $64,000 for ten years. But if you are in the heart of the middle class, $50,000 to $75,000, you are going to get $800 a year for ten years—and that’s on average. It’s not just creating income inequality by giving more money to people who don’t need more money, it’s taking money out of the system. We calculated that’s a half a trillion dollars going to people making more than a million.
Gurley: There is a surprising amount of optimism in your work centered on the ways that the federal government has stepped in to arrest decline in the past. What do you see on the horizon from a possible Biden administration? And if Trump is re-elected, will the United States sink further into failed-state territory?
COVID would have been bad under any circumstances, but if we had proper safety nets it would be far less severe than it is.
Steele: The contrast between what Trump and what Biden would like to do is like night and day and beyond it. If Trump is re-elected, all of these things are going to get dramatically worse. There are emergencies that come along every once in a while in American history that demand some really aggressive actions on the part of the national government, and we are not getting it out of this guy. I’ve tried to think in terms of my own life, if there was an election where the contrast between the candidates is any greater than it is now. I don’t think there has been.
Biden has moved from being a classic centrist and moved considerably to the left, and rightly so, because what is needed now is a really proactive federal government in a way we haven’t seen in a long time. This is the thing about Biden’s infrastructure program; he sees a whole series of ways that you can pump money into things, not just roads and bridges, but also research that provides jobs—and doing a whole range of other things that are paying attention to our people in a way that we haven’t up to now.
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The optimism at the end of the book says there are ways that we can turn this around and they’re not mysterious: Raise the minimum raise, invest in the economy, work out the health care problems that we have right now. One of the biggest challenges is retirement: 401(k)s and other devices are woefully inadequate to take care of people in their retirement. There are ways to solve these things and there are periods when the people have risen up and said, OK, this is enough; we need to take care of everybody, not just the 1 percent and the 5 percent.
Gurley: As a veteran of the Great Recession, Biden is attuned to crisis management: How would he avoid the pitfalls of the Obama stimulus program?
Steele: If Biden is elected and gets both houses, there are certain things that are going to happen right away. The conservatives are going to say this is wasted money. They’ll find an example of that here and there that you can find in any program. I am not sure that past Democratic administrations have been very good at making the point [highlighting successful public investment], bringing it down to the ground level so people understand it.
The Democrats have got to be more aggressive. In other words, fire back with the kind of aggressiveness that you are being attacked with. I don’t think that happened the first time around with the Obama stimulus, which was absolutely needed. [It was] a very, very modest program that brought all these critics out of the woodwork who didn’t know what they were talking about half the time—but a lot of the press bought it. If Biden is in that situation, the administration needs to be more aggressive in responding and tearing down those arguments.
I honestly think that the body politic is shifting and realizing for the first time in a long time that we need some really strong national action. When Roosevelt put through Social Security in 1935, the original bill said something about unemployment compensation and old-age security; it was almost as if they had to slip it in quietly.
Can you imagine what this country would have been like in the last few years without Social Security? The people who opposed the infrastructure bill and the people who are trying to tear down Obamacare, those are the grandsons and granddaughters of the people who were opposed to Social Security. In 1936, when Roosevelt went up for re-election, one of the major planks in the Republican platform was to repeal Social Security. Roosevelt was an absolute genius at beating these people into a corner.
