Instead of pay, we got loans and credit cards

November 25, 2008

(An editorial the local paper wouldn’t print.)

The mainstream media says the cause of the economic crisis is that people can’t pay their home mortgages, with the implication that the crisis is their fault. But the basic reason for this crash, the worst since 1929, is that working people in the U.S. haven’t seen a real rise in wages since the 1960’s.

Meanwhile, everything from housing to healthcare to college has risen out of sight—much of it ignored by the official inflation rate. Families have coped by both spouses working where one used to before. We borrowed to go to school. We borrowed to buy a car. We borrowed to pay our health care bills. Many of us borrowed against our houses, because the value of housing seemed to be going ever upward. So, we were told, you can always refinance and get a lower rate.

When the housing bubble burst and prices began to go down, we could no longer refinance. And when the usurious interest rates on adjustable rate mortgages jumped, we couldn’t pay those either. Surprise! The banks were dependent on us, not the other way around.

But the basic question is, why are we not paid enough on the job to obtain the requirements of life without incurring huge debt? A big part of it is that the labor movement has been hemmed in and destroyed by employer hostility and anti-worker laws. Unions—the main mechanism that allows workers to get decent pay and benefits for their work—only represent 12% of workers now, down from 35% in the 1950s. When the union movement was strong, everyone’s wages were higher because employers knew their workers could leave and get better pay elsewhere.

This suppression of unions was so successful that our employers, especially the big corporations, were rolling in cash—money they no longer had to pay in wages—and they had to find a place to lend it. I once got an offer from a mortgage company to lend me $30,000 on a falling-down shed I own. It’s worth about $2,000, generously. These companies were desperate to loan us money. But lots of cash at the top leads to a bubble economy.

The real economy is not based on complex derivatives and investment vehicles, the economy is us, working people who make things go. If we’re not paid enough to buy what we need, the system will eventually grind to a halt. Pushing credit cards and home equity loans instead of a decent paycheck only works as long as we can make payments, and there are now enough people who can’t make payments—perhaps as many as 6 million families who may face foreclosure—to make the banks freeze up.

It’s good news that the government is stepping in to buy up parts of the banks—that might help the acute, “heart-attack” phase of the disaster. But the longer-term solution must include paying working people the wages we need for a decent living. That means passing pro-worker laws like the Employee Free Choice Act so we can get more power on the job and negotiate higher wages. On top of that, our government should keep some of those banks in the public sector, so when we do borrow money, it’s not from a profit-making corporations with lying advertisements and punishing interest rates. The rest should be regulated like utilities—for the good of all.

And the leading cause of personal bankruptcy is health care bills—so we need a health care system that is publicly financed and universal, like Medicare only starting at age zero. Other advanced countries do that and get more care per dollar and better life expectancies than we have here.

Anyone at risk of losing their only home needs the chance to negotiate a workable payment. People complain “Why should someone else get a break when I made my payments on time?” But foreclosures are bad for everyone, not just the family struggling to make payments. They destroy neighborhoods and further drive down the cost of housing. And anyone could get laid off—and lots will in this “recession”—there needs to be a real safety net with unemployment insurance that doesn’t run out.

The looting of the banks has already occurred through years of big payments and bonuses to already fabulously wealthy owners and managers. Rather than rescuing the rich, who don’t need rescuing, let’s get some of that stolen wealth back by taxing the rich and raising wages, to increase the working class’s share of our national wealth. No more bubble economy, let’s build working-class power instead.

Jenny Brown is co-chair of the Alachua County Labor Party in Gainesville, Florida.