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Transcript:

August 22, 2008

BILL MOYERS: Welcome to the JOURNAL.

Working Americans, and that's most people, are experiencing the "big squeeze." In fact, they're trying to survive one of the most profound social and economic changes in our history. The middle class is disappearing, facing a decline in standards of living. So you'd hope that the Democrats in Denver next week and the Republicans in St. Paul the following week would confront this crisis head on and not just serenade struggling families with a chorus of sympathetic but meaningless sound bites.

As wages stagnate, prices are soaring. Economists call this pain the "misery index." It's a combination of the unemployment and inflation rates, and it's what politicians have in mind when they ask, "Are you better off than you were four years ago?" Well, the misery index is the highest it's been since George Bush's father became president, seventeen years ago.

When it comes to feeling the misery index, however, you don't go to the economists or the politicians. You go to where regular people live. And that's what we have been doing on this broadcast for months now. We've seen how the mortgage crisis has devastated neighborhoods in Cleveland, how workers in Los Angeles are scrambling for a living wage, and how gas and food prices are choking the ability of food pantries to stave off hunger here in metropolitan New York.

TOM MCGARRY: For a while I was very cynical and I looked down my nose at a lot of people, but now I am one of those people that I looked down on.

BILL MOYERS: This week, we go to the city of the hour - Denver, the site of the Democratic National Convention. Nearly 75,000 people will gather in the Mile High City as Barack Obama makes history by becoming the first African American to be nominated by a major party for president.

But outside the convention center doors, history of a different, more prosaic sort is being made. This year oil hit a record high - $147 a barrel when last year, it was less than half that - around $68. A loaf of bread is up 14% from last year, a dozen eggs is up 33%, and pizza makers have seen the cost of their cheese soar from $1.30 to $1.76. Flour used to make the dough has tripled in price. As these prices soar, the value of homes is sinking. One in three home buyers since 2003 now owe more than their property's estimated worth. Not only has home equity plummeted, so has the value of other holdings, like stocks and bonds and pensions, the investments families count on as a cushion during hard times.

So America's middle class, our "fearful families" as some people call them, is taking it on the chin. The history-making nominations aside, all the rhetoric from all the speakers at next week's Democratic Convention will be so much hot air above the Rockies unless the party comes to grip with how people are living and hurting today.

Just imagine what might happen if instead of going to all the shindigs being paid for by all the wealthy donors and corporations next week, the Democratic faithful - and their candidates - spread out across Denver's neighbors, and listened to people caught in the big squeeze. That's what our producer Betsy Rate and correspondent Rick Karr did just the other day.

RICK KARR: The line started early in the morning, outside a school in a middle-class suburb of Denver. Parents and their kids queued up for a little help, something to tide them over in tough economic times. Within a few hours, there were scores of people in line - not for free food, or clothes, or vouchers to take the sting out of gas prices - but for free school supplies. A local aid agency has been doing this for ten years, but this year, far more families showed up than ever before. Jolene Montoya picked up things for her three kids at the event. She says she was laid off a few months ago, so she simply can't afford to buy everything that her kids need for school.

JOLENE MONTOYA: I have a high schooler, a middle schooler, and one just starting school. I, last year, I think it cost me over $200 to buy for just to the two.

RICK KARR: Montoya says she never thought of herself as someone who'd need handouts. She has two college degrees - she even worked as a college recruiter for a few years and just a few months ago, she was working for a big telecom firm and on track to earn about eighty thousand dollars this year. But her firm decided to downsize and Montoya joined the ranks of unemployed Coloradans, about one in twenty people in the state, the highest rate in three years.

JOLENE MONTOYA: At first I thought, "Oh, it's not going to be a problem for me to find a job, because I've never had a problem finding a job before." I mean, I'm going on interviews, probably four a week. And they're just not turning out. They want to pay you $10 an hour. And I can't support a four people family with $10 an hour.

RICK KARR: Now, after three months without a paycheck, the bills are piling up, collection agencies are calling and there's no relief in sight. The week before we sat down to talk to her, she tapped into her retirement account. And she decided to sell off some of her possessions.

JOLENE MONTOYA: I have a TV and, you know, an iPod that I want to get rid of. And, you know I have some child support. I've been saving to pay my rent, but my rent is due, my public service due, my phone is going to get shut off pretty soon. But phone is really important for me to have. As long as I keep my home phone and not my cell phone, that's fine. 'Cause I need a way for a potential employer to be able to get in t in touch with me.

MAG STRITTMATTER: You know, that could be any of us. And really, truly: we look at people coming through our doors as our neighbors, because they could be our neighbors. It could be us.

RICK KARR: Mag Strittmatter runs the JeffCo Action Center - a social-services agency that serves Jefferson County, just west of Denver and ran the school-supplies program.

MAG STRITTMATTER: It takes just one of those situations those lifetime occurrences that could just a curveball is served up. You have no way of recovering from it. And as a result, the downward spiral is quick and quicker than you would like to think in a country like the United States.

RICK KARR: She says the center's serving about forty percent more people every day than it was just a few weeks ago. Some come looking for help from its clothing bank, and from its food pantry, which, every day, gives away two tons of food - that's about six-hundred grocery bags of kitchen staples every day. But Strittmatter says the biggest shock to her these days is who she sees walking through the center's front door.

MAG STRITTMATTER: It's remarkable how many people have, in the past, brought items to us at our loading dock. They gave us clothes, and gave us food, and said, "Here. Use these items to help people in need." They're the same people now who are coming to the building on the opposite end through the front door, and having to ask for help.

RICK KARR: Jefferson County's annual median household income is just over fifty-seven thousand dollars, which makes it part of the most affluent Congressional district in Colorado. It's got all of the familiar accouterments of suburban life - the Chili's, the SUVs, and the shopping malls. But there's something new in the suburban landscape: poverty. Poverty that wears middle-class clothes.

MAG STRITTMATTER: It has definitely arrived and is very much a part of the fabric of suburbia now. You can't escape the fact that poverty is in the suburbs.

RICK KARR: Bruce Meadows is pastor at the Northeast Church of Christ in Montbello, another Denver suburb that's feeling the pinch. The church runs a weekly food pantry and Meadows says that a year ago, about a hundred and fifty families lined up every week for help. Today, he says, up to five-hundred families come.

BRUCE MEADOWS: It was like every five to ten cents the gas goes up we get 20 more people is how we were mapping it out. And so it was amazing that fuel just starting bringing even more people. And so now we have to turn some folks away because we can't afford it.

RICK KARR: He says even when suburbanites fall on hard times, a lot of them refuse to admit that they need help.

BRUCE MEADOWS: The biggest problem that we've seen is when people come here and they really don't want the food and we say, "Oh you can give it to somebody else" and they stick around. And after the food's gone, they walk out of here and I have to, I know that they wanted the food. But the pride gets in the way.

RICK KARR: So he makes a distinction between what his church does and what welfare has traditionally done.

BRUCE MEADOWS: This is not a welfare program. This is a program to help the people survive until this economic down turns. That's what we're doing here.

RICK KARR: Marsha Brown is one of those people. A year ago, this single mother of two and member of the Northeast Church of Christ wasn't thinking about tough economic times. She had a college degree, she was working full-time for a credit reporting agency, and, she says, earning enough to support her family. She thought that she had decent health benefits, too. The trouble started when Brown was diagnosed with high blood pressure, and it turned out that her insurance wouldn't fully cover her new prescriptions.

MARSHA BROWN: So that's when I was frantic. I didn't know what I was supposed to do. I mean, you spend $300. Where you going to get it from?

RICK KARR: Then Brown got laid off when her company closed its Denver office. And yet even as her finances got tighter, she couldn't think of herself as one of "those people" who need handouts.

MARSHA BROWN: At first I thought the food bank program was for homeless people, soup kitchen kind of thing. But come to find out it's for regular people that fall on hard times. And we started participating in that. And by participating in the food bank it cut my cost for grocery, which then gave me the money to spend, on my prescriptions.

RICK KARR: Since then, she's found a new job, but it only pays about half as much as her old one did. So it's even harder to balance her family's budget at the end of the month.

MARSHA BROWN: We look at food bank first. And so once we get food bank, then we decide, okay, do we pay the light bill this month? Or maybe this month we need to pay a little on the light bill, a little on the gas bill, so I can afford to put gas in my car to make it for the next start of the month. So it is juggling. And after a while, after you've been doing this for a little while, you get a little experience at it. And you find out as long as you don't have a shut-off, you're still ahead of the game.

RICK KARR: But the rules of the game keep changing. Take the rising cost of utilities, for example: Xcel Energy - Colorado's largest utility - expects to shut off service to seventy two thousand customers this year; that's one-third more than last year. And it's part of a nationwide trend: Shutoffs are up nearly thirty percent in Chicago, and more than fifty percent in the Detroit area. A record number of Americans have fallen behind on their utility bills. Starting this fall, Coloradans will be paying up to thirty percent more for heat than they did last year. So Church of Christ Pastor Bruce Meadows says the best he can do for his needy neighbors is give them space heaters.

BRUCE MEADOWS: A lot of families coming asking for assistance for utilities. So that was our only cause of - we figured out this is the only way we can help them out. So we get space heaters and heat up one room. That's what it looks like it's going to be.

RICK KARR: Drive down the streets near the Church of Christ in Montbello, and you'll see that home ownership doesn't offer the protection against poverty that it once did. The neighborhoods pockmarked with empty houses - homes that were purchased with sub-prime loans that turned out to be more than borrowers could handle. The Denver area's like much of the country in that regard: City officials predict they'll see forty percent more foreclosures this year than they did last. The state's Foreclosure Hotline is trying to bring that number down.

FORECLOSURE HOTLINE: Hello. Foreclosure Hotline at your service...

RICK KARR: Agents at the hotline connect callers with local housing counselors who can help negotiate payment strategies with mortgage companies. Zach Urban helped get the hotline up and running in two thousand six.

ZACH URBAN: When we first started, we were looking around the country to see city-wide projects and other hotlines that had been set under a similar structure. And we saw maybe five, ten, 15,000 calls a year as our expectation. And we more than doubled that in the first year. So our expectation was half of what we actually got. And we're continuing to see record number of calls, 75 to 100 calls a day.

RICK KARR: To give us an idea of how things look on the ground, Urban took us to the neighborhood where he grew up and where he used to mow this lawn for ten bucks a pop, every summer.

ZACH URBAN: If you want to see the clearest real life example of how foreclosures affect a neighborhood, you can see this line right here. That foreclosure grass, homeowner grass. And there's a big difference. And it's something that a neighbor having a neighbor that's a bank isn't as fun as having a neighbor that actually lives there.

RICK KARR: So this guy is literally the person who owns this house here, is literally paying the price for the fact that this house has been foreclosed. Because I can't imagine that his house is worth as much as it was when this grass was green. And this house was well maintained.

ZACH URBAN: There's a fallout from each foreclosure. And once you get a number of foreclosures in the same neighborhood, that fallout begins to exponentially increase.

RICK KARR: Sherry Herrington lives just a few minutes away from that neighborhood; she got help from the Foreclosure Hotline. She's a single mother of two who's lived in her house for about ten years. She went through a divorce, and even though she was working two jobs - as a bookkeeper for a publishing company, and as a flight attendant - she wasn't earning enough to make her mortgage payments. She fell two months behind.

SHERRY HERRINGTON: The payment was no longer manageable. It became much higher. Once you get behind, it's impossible to get caught up, no matter how much you work.

RICK KARR: The hotline helped her negotiate a payment plan with her mortgage lender but then the airline furloughed her as the U.S. airline industry went through yet another round of job cuts. She says, once again, she's "hanging by a thread".

SHERRY HERRINGTON: We've had nights where we just sit and cry together. And you know, some days you just think there's no hope. You know, we've sat in the home with no electricity for several days. We've been here without water, sometimes for two days at a time, just waiting for payday to come so you could pay that bill, because they're like, "Nope. You've passed the

JOLENE MONTOYA: One of the good things about being unemployed is that I get to spend time with my kids so that was cool - couldn't do that when they were younger because I was always working so hard.

RICK KARR: Jolene Montoya's three months behind on her car payments - that's fourteen hundred dollars; one month behind on her phone and utilities - that's three hundred. And there's another two hundred fifty dollars for her kids' school fees. But the number that has her worried the most is the rent. It's just over a thousand dollars, and she's a month behind. Her landlord is charging her a penalty of ten bucks a day until she settles up. And if she doesn't pay up by the deadline she'll get socked with an additional penalty of three hundred dollars. The bottom line is that by the end of the month, she'll end up paying more than half a month's rent in penalties.

JOLENE MONTOYA: It's like you're between a rock and a hard place. I mean, you're trying to do the right thing by looking for a job every day. I could very well gone and applied for welfare. But I didn't want to be that. I didn't want to do that. I went to college so I wouldn't have to do that. I went to college so I wouldn't have to go and depend on the government for that money.

RICK KARR: Montoya says a lot of her friends and relatives are just as vulnerable as she is just one calamity away from a financial meltdown. She says getting an education and working hard don't guarantee a place in the middle class anymore.

JOLENE MONTOYA: You go to school, and you're not going to have to struggle anymore. You know, this is going to improve your life. And I genuinely believed that. But then the last few years, you know, you get into a position, and it lasts for about a year. And then they lay you off, because they find somebody that will work for cheaper. And that's basically how it goes. It's like the cycle, you know.

RICK KARR: The pain reaches far beyond Denver and its suburbs: More than half of all Americans say they're "struggling" to get by today. Wages are stagnant, or falling, while wholesale inflation is higher than it's been since the early days of the Reagan Administration. Meanwhile, as home prices fall, Americans' net worth is falling, too. It's enough to make single mother Sherry Herrington think that the middle class is a thing of the past.

SHERRY HERRINGTON: I think people are parading around like there might be a middle class. But I think they're so in debt that that I don't really think that exists anymore. One paycheck, and they'd be out there on the street, you know.

RICK KARR: At the JeffCo Action Center, Mag Strittmatter has a message for the political leaders who are on their way to the Mile High City.

MAG STRITTMATTER: Take care of the middle class. Let's remember that, because that's what everyone aspires to do especially if you are in a disadvantaged place. You aspire to pull yourself to have that that place in life. And if it's eroded and gone, what's there to shoot for?

BILL MOYERS: Everyone attending the Democratic Convention next week, especially those fat cats watching Barack Obama's acceptance speech from the million dollar skyboxes at INVESCO Field would do well to heed Mag Strittmatter's words, and those of Ken Rogoff, former Chief Economist at the International Monetary Fund.

At a conference in Singapore this week, Rogoff warned, "The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say, the worst is to come."

In other words, both Strittmatter and Rogoff are saying - more politely, of course - "It's the economy, stupid."

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