How the American Dream Turned Into a Mirage

By MARC McDONALD

Although it's difficult for many Americans to admit it, the "American Dream" was always a lie in many ways, dating back to the nation's founding. It was a lie when slave-holder Thomas Jefferson included the words, "All men are created equal" in the Declaration of Independence. The Founding Fathers believed in equality---as long as the discussion was limited to white, wealthy, male property owners.

But the phrase, "the American Dream" always sounded good. And that was enough to make it seem real in a nation where the often-juvenile culture has often had a difficult time facing up to cold, hard reality, unlike the cynical, world-weary Europeans.

After all, Americans not only tolerate it when our leaders lie to us, we want to be lied to.

Hence, Jimmy Carter got grief when he served up a dose of bitter, but honest medicine to the American people in his so-called "malaise" speech in 1979.

By contrast, Ronald Reagan told us not to worry and assured us that America was still great---and millions of Americans loved him for it.

And speaking of Reagan, if there is a date when the American Dream started turning into a mirage, it would have to be traced back to Jan. 20, 1981, the date Reagan was sworn in.

The "American Dream" was already on life-support when Reagan swaggered into Washington. At the end of his eight years in office, it was all but dead.

Before Reagan, the "American Dream" at least existed on some level in American life. Ordinary citizens could in many cases find prosperity through diligence and hard work. In many ways, America was a land of opportunity. Class mobility was higher in the U.S. than in many other nations (although that's clearly no longer the case).

But even in those pre-Reagan years, much of the "American Dream" was smoke and mirrors. By the time Reagan was finished with America, it was pretty much all smoke and mirrors.

First of all, take a look at the so-called "prosperity" that emerged during the Reagan years. As was the case with Reagan's ideological British soulmate, Margaret Thatcher, much of this "prosperity" was attributed by free-market economists to Reagan's deregulation of the economy and cutting of taxes.

"I will cut taxes and balance the budget," Reagan told America. In other words, we Americans were going to get something for nothing---and that's something we've always been suckers for.

At the time, serious economists scoffed at Reagan's supply-side economics---and they were later vindicated. The only thing Reagan's tax cuts for the rich resulted in were the towering budget deficits which haunt America to this day.

And even the "prosperity" supposedly created on Reagan's watch was all a lie. The only reason Reagan was even able to run giant deficits and fund his massive military build-up was the fact that the Japanese were quietly persuaded to loan the U.S. Treasury the billions that made it all possible. (In this sense, the U.S. author and East Asia expert Chalmers Johnson was correct when he wrote that it was Japan, not the U.S., that won the Cold War).

Similarly, Thatcher's "economic boom" in Britain had little to do with her slashing of taxes, her deregulation and her union busting. Rather it was the massive new discoveries of North Sea oil on her watch that fueled a boom in the U.K. economy.

But back to the death of the "American Dream." The core feature of the latter has always been a strong, prosperous and resilient Great America Middle Class. And the U.S. middle class never really recovered from the Reagan years.

The reasons are many---and they can all be traced back to Reagan's policies. They included the crushing of unions, the weakening of U.S. labor laws, the exporting of manufacturing jobs, and the gutting of America's already-meager welfare state. These are all policies that were carried on by Reagan's successors (including Bill Clinton).

So what's the net result today? A vastly shrunken U.S. middle class. A soaring prison population that is the biggest in the world. The fact that it is in increasingly difficult for most Americans to afford even the basics of a good life (from a college education to decent health care).

Whatever "prosperity" that exists in America is nothing more than a mirage these days. It's a mirage fueled by credit card debt and by the hundreds of billions of dollars from East Asian central banks that prop up the U.S. dollar.

It's an illusion that is clearly unsustainable. The time will come when the likes of China and Japan will no longer choose to bankroll our Ponzi scheme economy.

However, not everyone has suffered in the years since Reagan first took office. America's Top One Percent, for example, have done very well. In fact, since 1980, the Top One Percent has seen its share of the national wealth more than double, from 20 percent to 42 percent.

And thanks to tax loopholes, America's super wealthy often pay less of their income into taxes than the working class does. Even mega-billionaire Warren Buffett has admitted that he pays less of his income into tax than does his secretary, who makes $60,000 a year. (This, despite the fact that Buffett said he didn't even try to avoid paying higher taxes).

Many Americans still have a difficult time accepting that the "American Dream" is over. But as the U.S. economy continues to deteriorate, as the foreclosures continue to mount, and as the good-paying jobs continue to vanish, it is only a matter of time before cold, hard reality sets in.

And when that day comes, American society could undergo a violent upheaval. The only question is: who will ordinary Americans blame? Will they focus their anger on the real culprits (the out-of-control corporations, the bought-and-paid-for politicians, and the Wall Street gangsters?) Or will they succumb to the dangerous Pied Piper's song of the deranged Tea Baggers? Time will tell.

How the American Economy Became a Sleazy Carnival Freak Show

By MARC McDONALD

Whatever happened to the once-mighty American economy?

The United States once had the mightiest economic juggernaut of any nation in history. Our "Arsenal of Democracy" played a big role in winning World War II. During that conflict, we overwhelmed our enemies with a tidal wave of efficient industrial production of everything from bombers to jeeps to battleships.

During the 1950s, America's industrial might was at its peak. We were the richest, most prosperous nation in history. U.S. workers earned the highest wages in the world. We enjoyed the most generous benefits and vacation time of any First World nation. American products, from planes to cars to televisions, were second to none in quality and were in demand worldwide. The Great American Middle Class was a prosperous and growing club that saw its fortunes improve, year after year.

Today, all of this seems like a distant memory. America's economy today is a joke. "Made in the U.S.A." is no longer a symbol of quality. In fact, our nation doesn't make much of anything these days. Our trade deficits are at nightmarish levels. And in three short decades, we've gone from being the world's biggest creditor nation to its biggest debtor nation.

Since we don't manufacture anything these days, all we Americans do these days is buy stuff made in other nations. And we really don't even have the money to do that, so we borrow trillions of dollars from prosperous nations in East Asia.

In fact, the U.S. economy today resembles a sleazy carnival midway. Rather than producing useful goods and services, our Carnival Freak Show Economy these days spends more and more time running scams and swindling people (think Wall Street). We've exported most of the good-paying jobs that sustained our once-mighty middle class. And the gulf between the haves and have-nots has grown to its widest since the infamous Gilded Age of the late 19th century.

A half-century ago, General Motors was the nation's biggest employer. Today it's Wal-Mart, a company that offers such paltry wages and benefits that many of its workers have to file for public assistance just to make ends meet.

And that's just one of the ways that Wal-Mart, and other Fortune 500 companies, pocket corporate welfare. In fact, corporate welfare plays a big role in today's Carnival Freak Show Economy.

Not only have the good middle-class jobs disappeared from the U.S. economy, but ordinary workers who do still have jobs have seen their wages stagnate for the past 30 years. Meanwhile, the richest 1 percent now garner the largest share of the national income since 1929.

One might ask: if the once-great American economy no longer produces anything useful, what exactly does it do these days?

Good question.

Decades ago, America's great corporations were widely admired. Most Americans back then felt they were a positive force in American society. Back then, corporations created good jobs and produced things of value. They also paid taxes (back in the 1950s, for example, corporations paid half of all taxes---today, it's less than 10 percent).

Contrast that to today. Today's biggest corporations, from ExxonMobil to Wal-Mart, are increasingly feared and hated. Many Americans regard them as greedy money-grubbing entities that can't be trusted.

The same could be said of today's CEOs in general. As recently as 1982, the average CEO made around 42 times what the average worker earned. By 2005, CEOs made around 431 times what the average worker earned.

And what, exactly, have CEOs done to earn this phenomenal increase in pay? It's hard to say. In fact, in recent years, there has been an increasingly disconnect between soaring CEO pay and the performance of U.S. corporations.

Take Peter Cartwright of Calpine, a maker of gas-fired power plants, for example. In 2005, Forbes reported that Calpine's average annual return to shareholders over the past six years had been minus 7 percent. During the same period, Cartwright pocketed an average annual $13 million. So much for the wisdom of the "free market."

In fact, the "free market" has nothing to do with it. It's a rigged game---just like the crooked games one encounters at a sleazy carnival midway.

When you go to a carnival midway, it's wise to keep an eye on your wallet. And America's Carnival Freak Show economy is no different these days.

The Military-Industrial Complex: A Profiteering Monster

As an example, take a look at America's military-industrial complex, a major pillar of the modern U.S. economy.

Today's military-industrial complex has turned into the very threat to democracy that Dwight D. Eisenhower warned us about in 1961.

It's a bloated, inefficient, tax dollar-devouring, profiteering monster that is out of control. And for all the trillions of dollars it consumes, it's difficult to really see how the nation benefits from it. After all, for all the ocean of dollars our nation has sunk into the Pentagon, it wasn't able to prevent 19 young men armed with nothing more than box cutters from inflicting on our nation the worst terrorist attack in history.

Curiously, for such a major, and costly, part of our economy, the military-industrial complex gets little scrutiny from our politicians these days. They're happy to continue feeding the monster, with little oversight, as long as the big defense contractors are generous with their campaign contributions.

And although Halliburton has garnered the most headlines as the biggest piglet at the trough, it's hardly the only defense contractor reaping fat, no-bid, "cost-plus" contracts, year after year.

In fact, the Center for Public Integrity revealed in 2005 that some $900 billion in defense contracts since 1998 had been awarded without competitive bidding or effective oversight. It's crony "capitalism" at its finest. And the suckers on the carnival midway are We The People: the taxpayers who fund the whole racket.

Wall Street: Crony Capitalism

Continuing our tour of America's Freak Show economy, lets take a look at a second major pillar of the modern U.S. economy: Wall Street.

While never universally loved, Wall Street has captured the American imagination over the decades as a symbol of U.S. economic might. But these days, most Americans fear and detest Wall Street---and for good reason.

Wall Street once played an indispensable role in the U.S. economy. But it's increasingly difficult to determine what, exactly, Wall Street does that is useful these days. Wall Street's idea of "innovation" these days is to create ever-increasingly complex financial instruments that no one can figure out. It's all a scam that is becoming unglued as investors become increasingly wary of what they're putting their money into.

And like the military-industrial complex, it seems Wall Street can only function these days with a hefty dose of billions of U.S. taxpayer dollars. (Take, for example, the Fed's recent bailout of investment bank, Bear Stearns). Although U.S. Treasury Secretary, Henry Paulson defended the bailout as necessary, ordinary American saw it as yet another example of rigged crony, "capitalism."

The Great American Prison Industry

Continuing our tour of America's Carnival Freak Show Economy, let's not leave out what has emerged in recent decades as the fastest-growing sector of our economy: the Great American Prison Industry.

America, the "land of the free," now has the world's biggest prison population, with a staggering 2.3 million people behind bars. Not surprisingly, the prison industry has become one of America's leading employers. And towns with bleak economic prospects now court new prisons the way they once courted new factories. Increasingly, Americans are either in prison, or working for a prison (a strange trend for a nation likes to think of itself as a beacon of freedom).

In past decades, Americans used industry and manufacturing to build our nation into the greatest superpower the world had ever seen. Today, we've "outsourced" our manufacturing and made shopping (with borrowed dollars) the main pillar of our nation's Carnival Freak Show economy.

Of course, it's all a big Ponzi scheme that is unsustainable. The nations that hold our increasingly worthless currency are likely to eventually get spooked and start off-loading their dollars. When that day comes, Americans will finally realize that whatever "prosperity" our economy has seen over the past three decades has been nothing more than a credit-fueled mirage.

When that day comes, we Americans will finally realize that we've been swindled like suckers at a sleazy carnival midway. P.T. Barnum would be proud.