Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream - Hardcover

Arianna Huffington and Mary Matalin: Author One-to-One
In this Amazon exclusive, Arianna Huffington and Mary Matalin discuss issues raised in Arianna's new book Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream. Arianna Huffington is the cofounder and editor-in-chief of the Huffington Post, a nationally syndicated columnist, and the author of 13 books. Mary Matalin is the author of Letters to My Daughters and the editor-in-chief of Threshold Editions and worked in the White House for presidents Ronald Reagan, George H.W. Bush, and George W. Bush.

Mary: In August, thirty thousand Americans stormed government offices for a chance to apply for a few hundred Section 8 housing slots. That same month, a relentlessly "get'er done" kind of guy, Mort Zuckerman, penned an Wall Street Journal op ed entitled, "The End of American Optimism." All confidence indicators are scraping rock bottom, including the all-powerful political "right track/wrong track." No one in the "ruling class" dares utter the word malaise, but they all wear it like a wet, wool mantle. And now you, my eternally optimistic friend! You and I came to Our Nation's Capital at the same time--I like to joke when you were a conservative, I was a moderate! Whatever our politics, we have always both been optimists. So when you gave me a copy of your manuscript, I was surprised by the title, Third World America. Thank goodness I was reading your manuscript side-by-side with one of my current favorite new books by Matt Ridley, The Rational Optimist, whose ten-thousand-year view gives one space for easier breathing.

Arianna: I know "Third World America" is a jarring phrase, but I wrote this book as a warning, a way of saying that if we don’t change course--and quickly--that could very well be our future. Growing up in Greece, everyone knew someone who'd left to find a better life in America. That was the phrase everyone associated with America: "a better life." When I came to live here in 1980, I knew that there was no other place I'd rather live. And I still feel that way. But something went wrong--terribly wrong--and put our country on a very dangerous path that threatens to transform us into Third World America. Wherever I looked, and in so many of the stories we covered on The Huffington Post, I kept seeing all the ways the middle class was getting the short end of the stick. It was the way that Washington rushed to the rescue of Wall Street but forgot about Main Street. It was the daily drumbeat of depressing statistics: One in five Americans unemployed or underemployed. One in eight mortgages in default or foreclosure. One in eight Americans on food stamps. Upward mobility has always been at the center of the American dream--a promise that if you work hard and play by the rules, you'll do well and your children will have the chance to do even better. But now, that promise has been broken--and America's middle class is under assault. The American Dream is becoming a nightmare--one of our own making. But the book, at its core, is, in fact, optimistic. It's partly a critique of the many ways things are broken--but it's also a practical guide for how to fix them.

Mary: Not only did we come to Washington together, we came up with the same worldview. My people escaped from (then) Yugoslavia "for a better life." Croatians (Dalmatians) and the Greeks go back to antiquity, characterized by a smart, hard work ethic and sound, ahead-of-the-curve reasoning. It is not accidental we gravitated to this country, where our hopes and dreams could be realized by not just our effort, but through the opportunities available only in the unique American system, which I will get to in a minute. For the millions of Americans like us, your sad chronicling of the dream gone bad is almost unfathomable but for all Americans even more outrageous is the failure of "the system" to anticipate it--and worse--to have tools to alleviate it. In their seminal, bestselling opus, This Time Is Different, Drs. Reinhart and Rogoff replace hundreds of years of empirical data with decades of smart-guy theories to expose the fallacy and fantasy of economic theorists who think they are smarter than their predecessors. So what we are all in shock over was eminently knowable; worse, the perps who didn’t see it coming are the least hurt by the devastation they wreaked on the middle class.

Arianna: That’s definitely a beyond left and right conclusion! What became clear while writing this book is that the decline of the middle class was no accident. It was the result of tricks and traps. Tricks in the ways we financed our homes. Traps in the ways credit card companies used hidden fees and fine print and skyrocketing interest rates to get their hands on our money, driving more and more people into debt. So, yes, the game is rigged. Our financial system has become a bad carnival game where the rich always get the grand prize and the average American walks away empty-handed. We've gone from an economy where we make things to an economy where we make things up: default credit swaps, derivatives, CDOs and the like have turned Wall Street into a casino. Actually, a casino is fairer: at least you know the odds going in. And for me, the answer to the question of how we got here has to start in Washington, where special interests run the show--and where lobbyists outnumber elected officials 26 to 1. Unfortunately, there are no lobbyists for the American Dream. Now, I know you played a lobbyist on HBO ... so I'm curious what your take on the role special interests now play in Washington. For me, this is one of those questions that is beyond the right vs. left framing the media loves to apply to every issue in Washington. I think both sides are under the influence of a small financial elite.

Evanovich: Hahaha! On the HBO series, K Street, I was terrible playing a lobbyist (overcoming my natural ideologue persona was impossible), but making a fool of oneself is a small price to be in the wake of Steven Soderbergh's genius (not to mention breathing the same air as George Clooney--who is beautiful on the inside, too). I used to think lobbyists provided an economy-of-scale representation for busy Americans, but when I learned how many hard working, highly productive and profitable industries connected to the oil business did NOT have lobbyists to protect them from the "arbitrary and capricious" moratorium in the aftermath of the BP spill, it was a sad, revelatory moment. These are men and women whose families had lived and prospered on the water for centuries; who turned fishing and shrimping vessels into bigger businesses, providing indispensable services and thousands of jobs in the process, all while preserving a one-of-a-kind American culture. I am still not anti-lobbyist (there are many good and necessary ones), but you and I surely agree on a couple of points: 1) there has to be a more accessible/successful way to petition the national government in a national crisis; 2) taking meetings with lobbyists at the coffee shop so they don't appear on the White House visitors' log is hardly transformational transparency; 3) as you note in Third World America, there is no transparency in the legislative process when the work is done, the cake is baked long before the floor debate begins. No transparency, no accountability. No accountability ends in tyranny.

Arianna: Exactly, the media like to pretend that something's at stake when a big bill is being debated in the House or Senate, but by then the game is often over. The real fight happens behind closed doors. And the lobbyists usually win. Let's talk financial regulation: while we may not agree on how the new rules will effect the economy moving forward, or on what the role of government should be when it comes to regulating the financial system, I think we might find some beyond left and right common ground on the role morality has to play in all this. For me, there will never be enough regulators or government regulations to make a difference if Wall Street doesn't tap back into the notion that businessmen have responsibilities above and beyond the bottom line. There is a reason Adam Smith's free-market gospel, The Wealth of Nations, was preceded by his Theory of Moral Sentiments. He understood that economic freedom could not flourish without a firm moral foundation. How do you see the balance between government regulation and a free market driven by more than the bottom line?

Mary: We agree on the shortcomings of the ridiculously heralded Financial Regulations bill ... most glaring for me: the omission of the toxic twins, Fannie and Freddie, the fertile crescent of the housing mess. I think we could also agree that financial instruments are a different free-market animal from goods and services, and therefore, institutionally subject to differing assumptions (excellently analyzed by Anatole Kaletsky in Capitalism 4.0). We also agree on regulatory capture being the provenance of both parties. But, most important, we agree--as does America--that all the rules, regulations, punishments, and penalties can never succeed in proffering prosperity for all as a sound moral foundation can and does and has. The philosophical departure of Adam Smith and David Hume from power to plenty as a governance organizing principle spoke to the natural law (or, if you will, God) imbuing each individual with the inalienable right to personal, economic, political, and moral liberty, inextricably intertwined, obviously. It took this country to truly apply--not just blather and revolt--those principles to everyman.

Arianna: Here's another thing I think we'll agree upon: the suffering we are seeing all across America is definitely bipartisan.

Mary: In his many eloquent works, Michael Novak notes, whatever its sharp and messy edges, no system has better served humanity than capitalism. It raises up the poor, it protects human rights, it is a necessary condition for democracy. It doesn't know right/left, red/blue. But it does rest absolutely on virtue. As we all know, our founders' overwhelming concern about staging a representative republic was "are we virtuous enough?" One of the silver linings of this tumultuous time is the astounding back-to-basics effort of millions of Americans: studying their own history; being shocked and awed by their own heritage; reassessing their own virtue of citizenship.

Arianna: When I was talking to and writing about the people whose stories I tell in the book, politics rarely came up. And while I think it's essential that we hold our leaders feet to the fire--and point fingers at those who are responsible for creating the policies that are killing the American Dream--I think that the way we are going to keep America from becoming a Third World country is by each of us getting more involved and reaching out to one another. We need to remember that democracy is not a spectator sport--and take action.

Mary: And this is where we always come together, girlfriend. "Decline" is a choice. An examination of conscience (in the religious or just citizenship way), a commitment to assuming proportionate responsibility to the rights we exalt, a demand for universal virtue must occur concomitant to action. Third World America offers some timely, interesting, and innovative prescriptives for action, even if a few come from left field! Your call to action is certain to get right, left, and center--who aren't already--in gear.

Arianna: In fact, writing this book ultimately did leave me feeling hopeful. And that's because I was again and again struck by the resilience, creativity, and acts of compassion that I discovered taking place all across America. That's why the last section of the book is filled with the specific steps we--as individuals, as families, and as a country--need to take to stop our free-fall. So often, our desire to take action gets derailed by our uncertainty over exactly what action to take, and how to best make a difference. I wanted to try to help bridge the gap between intention and involvement--and inspire each of us to do the things we need to do to make sure we never find ourselves living in Third World America.