Week of 2.1.08
Transcript: Middle Class Insecurity
This Week: Middle Class Insecurity | Quiz: The Middle Class Squeeze | Helping the Middle Class | Feedback Forum | TranscriptBRANCACCIO: Millions of Americans don't need headlines out of Wall Street or the Federal Reserve to know that we're living in economically dangerous times. The Bush administration, Congress and the presidential candidates have been talking about the fastest way to boost the economy, given the market turmoil sparked by the meltdown in mortgages. But there's new data showing that all too many middle class Americans have been coping with deep economic insecurity not for the last couple of accounting quarters but for years. We've been poking around Illinois, a Super Tuesday state with a lot of delegates up for grabs. And what we're hearing about this insecurity is something all the candidates need to take on board. Mary Olive Smith produced our report.
Got to love the Illinois winter. If the chill doesn't get you, the price of heating oil will in these $91 dollar-a-barrel days. But economic insecurity goes way beyond energy prices, as we're about to see.
At the city's Winter Preparedness Fair, Elisa Melendez tells folks how to get financial help with their heating bills. She's a social worker for the Community Economic and Development Association of Cook County.
But she isn't just helping people to cope with economic insecurity. Elisa is middle class, educated, and hard-working—she herself is stuck in a horribly insecure position. We're talking in a neighborhood restaurant because Elisa is just now losing her house to foreclosure.
She and her husband had thought their fixer-upper house was a good deal and would make a good home for their three kids. Then the house started to fall apart.
A big chunk of roof fell off your house.
MELENDEZ: Big chunk of the roof just fell in the middle of the street.
And then two months after that the plumbing went out. And then we're like why did we have an inspection? And why, you know. Little by little everything just kept crumbling down and, you know, and toilets weren't working. And so we wound up having to do a full-blown rehab on the property.
They had savings and a fixed-rate mortgage, not one of those volatile ones that exploded for so many others during the sub prime mortgage mess. But Elisa had lost her job at the time, and their home repair debts kept climbing.
MELENDEZ: We had our six months savings in place. We had the knowledge. We were prepared. We thought we were prepared.
With one income and a looming mortgage crisis making banks stingier about lending, credit dried up for Elisa's family. She looked for help, but, here's one irony about middle-class insecurity: she was considered too well-off to get it.
I found out about all these different organizations that were available to low income families. And it turned out that our family did not qualify for any of the programs that they had. Because the income guidelines that they had were way below our income. Elisa and her family could not stop the foreclosure and have to be out of the house by this very weekend. She's not alone.
Illinois ranks among the top ten states with the most homes foreclosed. Manufacturing jobs have been fleeing the state for decades, and often the jobs that are replacing them are paying less.
One in eight Illinois residents has no health insurance. Politically, the state as a whole leans strongly toward the democrats, but there wide swaths of deep, Republican red. In a state with so many delegates to send to the political conventions in late summer, what does the insecurity of so many Illinois residents mean for the choices voters make, their participation in politics, and for candidates?
BRANCACCIO: What would you say is the top issue for you, personally, when trying to figure out who to vote for?
MELENDEZ: Our economy, and, of course, what's going on with the war. But our economy as a whole.
BRANCACCIO: Who did you vote for in the last presidential election?
MELENDEZ: You really want to know? (laughter)
BRANCACCIO: Sure, I do.
MELENDEZ: George Bush.
BRANCACCIO: So you voted for George W. Bush.
MELENDEZ: Yes. (Laughter)
BRANCACCIO: Does that make you a Republican.
MELENDEZ: Yes, actually, well, yes. (laughter) I thought I was. Oh, I did. I know I'm laughing.
BRANCACCIO: Why are you looking embarrassed? I just asked. (Laughter)
MELENDEZ: Because I think our country is a mess, and I hate to admit to that.
Presidential candidates are working to make the case that they [feel] the pain of Elisa and other middle class people like her.
Obama clip: ...Jobs that pay, health insurance that costs less.
Romney clip: We're going to have to reduce taxes on middle income America.
Clinton clip: ...to deliver on the promise that the middle class will grow and prosper again.
Huckabee: People are working harder this year than they did in years before, and they're not getting ahead.
McCain clip: I think lower and middle-income Americans need more help.
It's the job of voters to choose which candidate will turn rhetoric into reality. But often political choice is informed by personal crisis. To hear about one family's struggle, drive over to DuPage County, a suburb of Chicago where folks are doing pretty well, supposedly.
(Steve & Melanie's neighborhood)
Nice house, but what's going on inside is heartbreaking. Melanie Fugate—a mother with a part-time job working from home is packing up the family's belongings. Like Elisa, she and her husband Steve are losing their house.
In 2005 Steve and Melanie were pursuing what should have been a comfortable, secure, middle-class life. With three kids out of high school and two still at home, they'd saved enough to buy this three-bedroom house. Melanie worked as a researcher, Steve as a skilled mechanic.
Well gee, I have pretty much done everything—Ford, forklift, Bobcat, you know, diesel trucks.
Only thing is Steve had not been feeling well and doctors couldn't pin it down. He didn't know it then, but Steve had a horrendous case of chronic Hepatitis. It was wrecking his liver and leaving him disoriented.
STEVE FUGATE: I start every job off great, you know. Boom, boom, boom, busting my butt, everything's going good. Then as the stuff builds up and I don't know it, I started doing stupid stuff, you know, stupid mistakes and I'll get tired.
It would eventually make it impossible for him to come in contact with the oils and chemicals that are among the tools of his trade.
BRANCACCIO: But it must be hard without his regular paycheck. A man with his skills could probably pull down a decent paycheck if he didn't have this medical condition.
MELANIE FUGATE: Yes. Yes. It just shows you that one thing goes wrong, it's like a nightmare.
BRANCACCIO: When your savings were at the highest, about how close to, like, how many months' income would that have been? I don't know if you can figure—
MELANIE: We had about approximately two to three months' saved. We have both worked very, very hard to get to the point where we could get a single-family home.
Steve and Melanie had put 20 percent down on their house. And they managed to get Medicaid coverage when Steve got sick. But without his income, they couldn't work out a payment plan that would satisfy their mortgage lender.
BRANCACCIO: So, you found yourself in this foreclosure process those days in court. They could not have been easy.
MELANIE: Very hard. A lot of tears flowed (laughs) on my part, being in there.
BRANCACCIO: But there must be a way to get a conversation going in this country about giving families the support they need if misfortune befalls them, whatever that is.
STEVE: It seems like the American worker is getting shafted big time. He's working hard. He's doing his thing. He wants to live in his home. But, now, everything is going up except the pay. Matter of fact, the pay's probably getting lower, if you really look at it. They have people working, you know, twice as hard because they let somebody else go. And, you know, it just goes deep, man. And I'm a little bit angry at everything, you know, about losing my house, the situation. And given these fiery populist words, how do they vote...
MELANIE: Straight Republican.
BRANCACCIO: Straight Republican? Meaning serious Republican?
MELANIE: Yes. For me, it is.
STEVE: Well, yeah, pretty much.
MELANIE: Conservative. We're more on the conservative side.
BRANCACCIO: In the political science textbooks, person like yourself, hardworking man who's a mechanic, who feels that he's getting the shaft, that should drive you running toward the Democrats.
STEVE: No, no.
BRANCACCIO: How come?
MELANIE: Well, I think it goes back to me being raised in a Christian home. Most importantly, what it comes down to is the morals and values of a candidate. You know, Republicans are normally not pro-abortion. We don't feel comfortable going with the Democratic Party.
BRANCACCIO: As a worker, do either of the political parties have an answer for your anger?
STEVE: I don't think so because I think everything revolves around money. (laughs) And that's the bottom line. It's all about money. All until the workers start, you know, start thinking, hey man, you know, we're working pretty hard, we want to live the American dream, too.
On the day of our conversation, the bank's auction of the house was just weeks away and the family's belongings mostly packed in boxes.
STEVE: We'll see what happens between then and then. And we still got other options. And we're going to see what's going there, maybe we can stall it. I don't know yet.
MELANIE: And we trust that God's working it all out. There's that faith. And there is also faith that God's creatures can make public policies to help hard-working people when they need a lift.
Tamara Draut is Director of the Economic Opportunity Program at Demos, a non-partisan public policy research and advocacy group. She contends that America's strong middle class of the old days didn't just happen, it was nurtured.
DRAUT: You know, one of the problems today, is that we really let our safety-net fracture. It's become antiquated. If you think about it, we built the middle class with a whole range of public policies, investments and the GI Bill that allowed people to go to college. Low cost mortgages. Suburban development.
All of these things really ushered in a huge wave of middle class expansion. But flash forward six decades later and we've let all of those structures fossilize.
(Cover of Demos report, "By a Thread")
Draut's group, Demos, along with Brandeis University, has a new report that uses hard demographic data to paint a shocking portrait of America's middle class. One definition of "middle class" is a family of four making between $40,000 and $120,000 a year. Of the roughly 150 million Americans that fall into this bracket, four out of five families don't have savings worth even three months of income, and one in four lives right on the edge—a step away from falling into poverty.
DRAUT: They're at risk on three or more categories, meaning, they spend too much on housing, they don't have health insurance coverage, or they have a level of education that makes them not as competitive as they could be in this economy. The cost of housing, health insurance and higher education has been rising faster than wages for the past three decades, even during periods of economic expansion, leaving fewer dollars for anything beyond the essentials or for putting away as savings.
BRANCACCIO: So if one big thing goes wrong to a middle-class family, chances are, [it] could be devastating.
DRAUT: That's right. A lot of households have a very precarious perch on middle-class security. If somebody loses a job in the household, if there's a major medical illness, if, all of a sudden, there's a new expense. Let's say it's the first year you're sending the kid to college. All of those things can very quickly crumble what had been a pretty secure way of life.
We're talking here of economic vulnerability that has been on the rise for decades. In theory, insecurity of this magnitude should prompt people to call for sweeping change and for some people, it has. Amy Tauchman—middle class, married, with three kids in college—is making waves at the local level in DuPage, the same county where Steve the mechanic and his wife Melanie live. It is a red county with only one elected Democrat in office.
TAUCHMAN: You know, when I first got here, I would go to vote, and I'd ask for a Democratic primary ballot, and they'd say, "Oh—you're only the second person who's come in here today."
So Tauchman co-founded a grassroots organization called Operation Turn DuPage Blue with a group of like-minded Democrats who want a better focus on helping working and middle class families. She's organizing, getting others aboard to, in a sense, multiply her own impulse to fix what's wrong in her own county and the nation.
And I know in DuPage County, it's no different than anywhere else. You may not see the suffering quite as distinctly. But I know there are people here who have lost their homes.
Top priority on Amy's agenda - to get a conversation going in her community about issues and, yes, politics—a conversation that is sometimes hard-going.
TAUCHMAN: When I talk to people there about politics, they're often immediately put off, because they have a litany of things that are going on in their lives that they need to get done.
And I think they have to appreciate that everything that they do in life is political. And if they want power, and they want things to be the way they want them to be, they're going to have to get involved in whatever political entities are around them to make things happen. So, when you choose not to do that, somebody else is voting on your future.
But why does Tauchman even have to make the case for this? You'd think economic insecurity would pull people toward political without an activist like Amy having to push so hard?
Based on data she's been working with, Tamara Draut offers an answer. It's called debt, a kind of economic safety valve for families, and until now, a political safety valve for the existing political order. Over the last 7 years, American turned their home equity into 1 point 2 trillion dollars in cash. In this political year 2008, that cushion is essentially gone.
DRAUT: Well, the middle class is out of safety valves. I mean, that's what's happening. They've exhausted the home equity. They're running up more and more credit card debt. There's very little else they can do. They can't cut back their house payment. They can't cut back their health insurance coverage.
So, we're left with very little options for them to turn to somehow deal with the reality that their incomes are not keeping up with their costs. And that is, I think, the moment when the politics of economic security become much more important to the average voters.
Draut says a candidate, Democrat or Republican, could really run far with this understanding. Dr. Steve Saurberg is an Illinois family physician running in the Republican primary next week for the chance to take on Senator Richard Durbin for Senate in November. Like Amy Tauchman, Sauerberg's facing quite a challenge. Senator Durbin, the Democrat who's represented Illinois in Washington for nearly a quarter century, has kept a long-time focus on bread and butter issues.
He's got the clout that comes with seniority, and few are picking him to lose in November. But still some opponents see the insecurity of so many voters playing in their favor. Sauerberg is a Republican who wants to cut taxes and to make government less complicated. He sees burdens on hard-working families as producing a kind of desperation and the 40 million Americans without health insurance is a big part of the problem.
DR. SAUERBERG: Yes, it is. I think it's horrifying. You know, we have done a very poor job in health care legislation, even over the past one to two decades.
As for a remedy he starts out sounding like the pro-business Republican that he is: private-sector solutions, not government-run health care.
DR. SAUERBERG: Competition will lower the cost. Control of our legal climate controls our cost. Best practices control our cost. An honest effort to prevent fraud and abuse, controls our cost.
But then Dr. Sauerberg gets quite radical. He wants to stop insurance companies from taking away affordable health coverage just because a person is older, has been sick in the past, or has some other risk factor.
DR. SAUERBERG: We can no longer afford to say to the 55-year-old gentleman who wants to start his business and needs health insurance, that, you know, seven years ago, you were treated for depression for six months.
And although you're a wonderful and fully functional human being today, we're not going to provide you with health insurance at a reasonable price. And, you know, we can't allow that.
BRANCACCIO: Does your experience in your doctor's office and making your rounds confirm this data that we have that suggests that middle- class Americans are really in an insecure position financially?
DR. SAUERBERG: I think it's more than middle-class America. I think we've created a situation where our safety nets can kind of disappear quickly, and it's overwhelming. I mean, one of the most common words I hear in my office year after year is—overwhelmed. I feel overwhelmed.
You know, it may be odd to you that there's a Republican candidate who wants to make dramatic changes, but there is no other way.
We've just met two people—a Republican candidate and a Democratic activist who have a ground-level view of the challenges Illinois residents face and who've been prompted by that understanding to invest their time and energy into political action in 2008.
This stuff goes beyond Democrat and Republican. For some it's not a matter of party but a matter of justice. That's the view about two and a half hours away in this modest neighborhood in Champagne, Illinois.
And you talk about the man in the flesh, and there they are.
BRANCACCIO: How are you, sir?
REVEREND BARNES: How you doing?
BRANCACCIO: Community organizer Rev. Eugene Barnes is a values man and he sees values this way.
REV. BARNES: Of course, years ago, we know that everybody was talking about family values. We're looking at community values. What do we have in common? What do we share together? We're all in this together. How do we make this work collectively?—this United States, this great melting pot?
The foreclosure rate isn't just a statistic around here; it's a pervasive reality. And the predatory lending that became so much a part of the current real estate mess are a frightening twist for a man who has worked hard to stop discrimination in housing.
REV. BARNES: People have been using the equity that they have in their home. They've been using their charge cards in terms of making it. Just providing for the day to day. Sending their kids to school. Maintenance of a car.
But, of course, with what we've seen right now with the foreclosures is that the equity has been stripped out of their home. People have cashed out. So that bank is no longer available to them. So it's been a big concern to people just how they're going to make it from day to day.
Barnes' response is a push for civil action. He's taking part in what's called the Central Illinois Organizing Project. It's a faith-based group—Protestants, Catholics, Jewish people—all are welcome to get politicians of all stripes to focus on economic justice.
BRANCACCIO: In your view, politicians really need to pay attention to what's going on here.
REV. BARNES: They need to hear the constituency and then act on it. Information in action. That will bring about the necessary change. Governance is not just for government alone. It has to be a civil response.
On behalf of that organizing project Rev. Barnes helped plan a non-partisan grassroots event called the Heartland Presidential Forum.
In December, five presidential candidates responded to the invitation to answer questions from regular folks around Iowa and Illinois.
At Rev. Barnes' urging, a busload of people from central Illinois traveled through an ice storm for the event.
Karen Dahlstrom and Bob Thompson braved that six-hour bus journey along with one of their sons, Tom, age 13.
BRANCACCIO: What drove you to make a commitment like this, to spend a good day doing this, two big bus rides and then some time there? Why go through this?
DAHLSTROM: We have an error in our thinking. It's like, born on third base and think we hit a triple. You know, we're born in the United States, which is lucky in itself.
And then if we're lucky enough to be born in the middle class and have parents who care about us and save for our education. You know, all those things put us so far ahead on the curve. And, you know, there's a duty, I think. And, you know, I think our faith tells us that there's a duty to help other people.
BRANCACCIO: So, Tom, your parents said, "You want to go with us over to this kind of convention?"
THOMPSON: I was thinking about it. And I decided that it would be an educational thing to go on and seemed a good thing.
BRANCACCIO: If I were to ask you what the biggest problems that America faces, Tom, what might come to mind for you?
THOMPSON: I think poverty really would probably be the biggest part. And the upper class tax cut, you know, that's really just adding to that.
Tom, for the record, had developed into a bit of a John Edwards man until Edwards called it quits this week. But his mom, who will actually press the button in the voting booth, is leaning toward offering a job promotion to one of her Illinois Senators.
KAREN: I'm looking for somebody that has a new vision, not the whole fighting terminology—kind of turns me off. So that's something that I find really refreshing about Obama is he talks about uniting, you know, let's not talk about the blue states and the red states. Let's talk about working together for a United States of America.
Amy Tauchman liked Dennis Kucinich for president, but as for candidates still in the race...
TAUCHMAN: Oh, I think Obama's going to take it hands down, two to one in Illinois. He's just popular all the way across the board.
DR. SAUERBERG: Well, I still believe Illinois is a moderate state. I believe moderate candidates are competitive from the Republican side. I think John McCain will run well here.
And there's Elisa Melendez, the social worker, who has to be out of her foreclosed home by this weekend.
BRANCACCIO: So Elisa, you voted for Ronald Reagan. You voted for George W. Bush twice. You voted for George W. Bush's dad. Are you leaning toward any particular presidential candidate right now, early in 2008?
MELENDEZ: Senator Hillary Clinton has been involved in making changes in our health reforms and also housing. I believe she came from the State of Illinois. To me it's more respect towards a person's achievements and accomplishments and ability to make an actual change. And she's proving it. I hate to admit it but, you know. (laughter)
BRANCACCIO: Why do you hate to admit it? Because you're a Republican?
MELENDEZ: Because I'm a Republican.
Melanie and Steve Fugate, who had faith something might happen to get them out of their foreclosure hell, may have found a buyer for their home which would mean no home but at least no foreclosure destroying what's left of their credit. They are Republicans and intend to support that Arkansas governor and Baptist minister Mike Huckabee on Tuesday. But it's clear what they are looking for is not a party label but a candidate who really gets the life they face.
STEVE: We need somebody to take care of the country who's going to run the country. I think the best person should be in there regardless of Democrat or Republican.