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Transcript:

January 25, 2008

Bill Moyers talks with Katherine Newman

BILL MOYERS: As Congress and the White House on Thursday were announcing the proposed stimulus plan, the Chicago based company, Methode Electronics, announced that it's cutting 700 jobs in its Illinois plants. Meanwhile, it's opened a new plant in Shanghai, China. Talk about a slap in the face for working Americans. So with news like that, and after a week of wild gyrations on Wall Street, fears of a deep economic meltdown, the Feds rate cut, more falling home prices, and the bursting of dreams as well as bubbles, it's time to welcome back Katherine Newman. She was here some weeks again to discuss her new book, The Missing Class, just one of several she's written about how regular people live their lives and cope from paycheck to paycheck. She teaches at Princeton University, where she also directions the Institute for International and Regional Studies. Good to see you again.

KATHERINE NEWMAN: Good to be back.

BILL MOYERS: What do you make of all this bad news?

KATHERINE NEWMAN: Well, it's a bad news situation out there for millions of Americans who are really going to worry about their futures and their children's futures. I think the world's looking like a shakier place, and the country's looking like it's not in control of its destiny in ways that people had hoped would be true. And I think they'll be pleased to hear that Congress and the president have found some way to cooperate with one another. But I think a lot of people will be left out and left in the cold, especially in-- in places like the Midwest.

BILL MOYERS: What do you think of this new stimulus plan? I mean, the fine print is still out. But are you encouraged, or are you skeptical?

KATHERINE NEWMAN: I'm more encouraged than I thought I would be, because it provides rebates for people lower down the income spectrum that I thought it would. But I am very concerned about the long term unemployed, which is rising, not only in general, but as a proportion of the unemployed. And that's one of the disappointments of the stimulus package, because not only do those people really need the money, but they would spend it quickly if they had it. And so, the stimulus effect is going to be absent for that group of people.

BILL MOYERS: Do you think we're forgetting in this country, what work really means to people? I mean, yes, it means a paycheck, but it means more than that, doesn't it?

KATHERINE NEWMAN: I think that we need to remember that work anchors people in the social world we live in. It is a lot more than a paycheck. It's their identity; it's their sense of purpose. And that's been true, you know, more or less from the birth of the country. And since the great depression, we've recognized how important it is for people to be able to do for themselves. They do sometimes need the support of government to make that possible. And that's why I think if we could invest more in public employment, and if some of the stimulus package ends up creating jobs to help create the sort of infrastructure that we need to repair the roads, repair the schools-- we've got a lot of unfinished business out there. And the American people are willing to go to work and finish that business, if given a chance.

BILL MOYERS: Michael Huckabee, the Republican candidate, was quoted this morning as saying, look, if we borrow all this money, this $150 billion for the stimulus, from China, people will spend it on things that are made in China, sneakers and gadgets and things like that. But if we borrow the money from China to build highways in Florida, where he's campaigning, then the money will stay here. It will be spent on things in Florida. What do you think about that?

KATHERINE NEWMAN: Well, I think people would probably still spend money on things produced in China. But I think if we built more infrastructure, we would see a greater long term benefit from the money we're investing, because we will improve our roads, our schools. And you know, that's exactly what Franklin Roosevelt thought. And that's why he put millions of Americans to work pretty quickly, actually, building the early precursors to the federal highway system, building Penn Station and all the beautiful railroad stations that we have in between. So I think putting people back to work in-- and producing things that we can make use of here in the U.S., is a very valuable thing to do. And that's why, actually, candidates on both sides, John Edwards on the Democratic side, Huckabee on the Republican side, have talked a little bit about public employment and public investment in infrastructure as one solution. The problem with it is, it takes time to ramp that up. And I think what the economists are calling for is a quick shot in the arm. And it takes a little while to ramp those things up.

BILL MOYERS: Even as we speak, the U.S. Conference of Mayors is meeting, holding its regular meeting in Washington, D.C. And I saw a report that the mayors estimate that 1.4 million homes will be foreclosed in this year. What's the effect of this?

KATHERINE NEWMAN: The effect is devastating, of course, to the families who lose their one most valuable asset, their home. It's also devastating for millions more who are now sitting in homes that are a lot less valuable than they were before, because they don't really—it’s like, their bank accounts have been emptied by about a third, because the equity they had is falling as the value of their homes has declined. And that means they won't have as much that they can borrow for all these purposes, like medical insurance, like college education, like protecting themselves in old age. Because that asset isn't worth what it was worth before.

BILL MOYERS: Now, what does it mean when you're-- the mortgage on your house is worth more than the value of your house?

KATHERINE NEWMAN: It means you are in deep trouble. And if the houses around you go into foreclosure, and your neighborhood starts to look seedy because nobody's living in those houses-- if the banks won't lend so that people can move through the housing market-- it's like paralysis out there. And it will be years before we recover from this, years.

BILL MOYERS: The taxi driver this morning told me that houses-- two houses on his block are being foreclosed. And he's got two kids in college, you know. If he loses the ability to borrow against that house, he's going to be in trouble paying their college tuition, right?

KATHERINE NEWMAN: That's exactly right. So I think we worry about whether the nation is in control of itself internationally, we worry about whether there's anything we can do to protect ourselves individually. We worry about whether the next generation is going to have any chance to follow in our footsteps. And you add all this up, and it's a big headache out there.

BILL MOYERS: Are people going into debt merely because they're spending too much money?

KATHERINE NEWMAN: The biggest source of bankruptcy, the biggest pressure leading to bankruptcy is actually medical expenses. So this is not what we would call--

BILL MOYERS: Wait a minute.

KATHERINE NEWMAN: --out there buying Cadillacs.

BILL MOYERS: More people are going into bankruptcy because they can't afford their medical bill?

KATHERINE NEWMAN: That is the biggest push toward bankruptcy for most people who file. It's an unexpected and very high medical cost. And this is something we don't really appreciate. We often think, oh, well, they've been on a spending spree they couldn't afford. But it's a spending spree with taking care of a spouse who is ill, or, you know, a ruptured appendix. Well, that's not really a very discretionary expense. You sort of have to do that. And that is a really important reason why we're seeing a lot of people reach bankruptcy. The foreclosure crisis, of course, is not helping matters.

BILL MOYERS: I read a story just this morning from the Reuters News Service, a reporter based in Philadelphia who said that the poor in Philadelphia-- and I think this is true nationwide-- are still recovering from the recession six years ago. So he said there's something unusual about the fact that there's more poverty now as this downturn occurs, than there was at the last recession.

KATHERINE NEWMAN: That's true. There's some really unusual features to this downturn. One is that poverty remained high. The other is that the long term unemployed are a larger proportion of the people who are unemployed, than they were before.

BILL MOYERS: And aren't more of them college graduates? That's a new factor, isn't it?

KATHERINE NEWMAN: That is something that I find very worrying. So if we think of education as protective of the individual out in the labor market, which it is, of course-- if you are college educated, you 're better off than someone who isn't. But the proportion of long term unemployed who college graduates has jumped up. So it's not as protective as it once was. It's lasting longer, it's lasting longer into the business cycle, long term unemployment. And that is a real worry. Because the longer you stay out of work, the harder it is to find another job, the more devastating the consequences for your family. And that, I think, is a real worry for all of us.

BILL MOYERS: As you talk, I'm reminded of reading a story just yesterday, about five Wall Street banks that paid out record bonuses, $39 billion, five banks, three of them having just recorded record losses. And these are companies, banks that are-- have been stimulating this bubble, this speculation. They win even when they lose. Is there a moral component here? Is there a moral factor at work in what we're talking about?

KATHERINE NEWMAN: I think this issue of inequality, which sounds like an arcane concept that only people in the universities worry about, is going to hit home with people when they see those kinds of headlines. They're going to want to know why the pain isn't broadly shared, why it is that some people seem to be even profiting off the pain of others. It's not fair. And fairness is actually a concept that Americans care about. They don't mind if people at the top share in prosperity, but if we're going to hit this downturn and only the little guy suffers, yeah, we're going to hear again that in the ballot box and every other way that Americans can express themselves.

BILL MOYERS: What does it say to this-- and I know this sometimes sounds to people, naïve-- but what does this say to that old sense of, you know, we, the people, the solidarity of the country?

KATHERINE NEWMAN: Well, the question is, who's "we"? Is the "we" really the inclusive "we" that it-- that once was? You know, when prosperity was growing after World War II, when we had really a long, long period of shared prosperity, everybody was doing better. We now see these projections that kind of fan us out into haves at the top and have-nots at the bottom.

BILL MOYERS: And the gap's getting definitely bigger.

KATHERINE NEWMAN: And the gap's getting much larger than it was before. And the remedies that affect some people positively and leave others out in the cold, like the long term unemployed.

BILL MOYERS: You remain optimistic about the capacity of the American people to handle crises like this. What are you looking for that would give you the most encouragement?

KATHERINE NEWMAN: The American people have never been fond of the idea that someone else needs to rescue them. They want a chance. They don't need a guarantee. They want a chance. But if the see the chance start to slip through their hands, if they see that the next generation won't have the kind of credentials it needs because they can't go to college, or if they're heavily burdened by debt when they finish college, their ability to compete will be impeded. And so, what most of us want to see is that we have the tools. Just give us the tool, or give us the opportunity to gain the tools for ourselves, and we will try and take care of the rest. But absent those tools and absent the kind of security that we need to hold on to the assets we have, when we feel like we're falling in an elevator that's got no back stop to it, and that, I think, will be very frightening.

BILL MOYERS: Katherine Newman, thank you very much for returning to The Journal.

KATHERINE NEWMAN: It's my pleasure, Bill.



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