Tom Friedman's Bizarre Fantasy

By Livia Gershon, Salon

30 August 13

The Times pundit's vision of the U.S. economy is narrow and frightening. He should meet people like Karl Tiedemann

f you are self-motivated, wow, this world is tailored for you. The boundaries are all gone … There will be fewer limits, but also fewer guarantees. Your specific contribution will define your specific benefits much more. Just showing up will not cut it."

Regular New York Times readers may recognize this passage, with its gee-whiz enthusiasm for unbridled "individual aspiration and persistence," as the product of flat-world enthusiast Thomas Friedman. This particular column, from April, starts with Friedman's admonition that, "we now live in a 401(k) world … where everyone needs to pass the bar exam and no one can escape the most e-mailed list."

It's easy (and fun!) to mock Friedman for his bizarre mixed metaphors, his apparent reliance on the taxi drivers of the world for insights into foreign relations and, yes, his silly, silly mustache. But his vision of the U.S. economy is authentically frightening because at bottom it reflects conventional wisdom that's accepted uncritically by many of the nation's agenda-setting pundits and politicians.

The central premise of much of Friedman's writing is that technological forces beyond our control have created a world where we all have to work harder, learn more and be more creative, but if we do, we can achieve things unimaginable to previous generations. That's a pretty attractive thought, particularly for anyone who hasn't had to work too hard to achieve things so far. For a lot of working-class people, though, the Friedman worldview represents a fun-house mirror version of a much more depressing daily reality.

Like Friedman, Karl Tiedemann, who lives down the street from me in Nashua, N.H., sees the next generation inheriting a very different economy from the one he grew up in. He sees it up close. He and his wife now have three of their kids and two other 20-somethings living with them because they don't have the money to get their own places.

Karl moved out of his parents' house at 17. For a while, he painted houses. Sometimes he'd get in an argument with a boss at a worksite and just walk away.

"Back then, I used to go job to job," he said. "I would quit and I'd have a job the same day, or the next morning."

Then, in 1988, when he was 22, he got a job in the maintenance department at St. Joseph Hospital in Nashua. At first, he said, he didn't know much about the hospital's mechanical systems, but he learned on the job and took classes. Today, he tests emergency systems, works with contractors and sits in on meetings with higher-ups to talk about the physical plant.

"I have a boss but he leaves me alone," he said. "I know what I need to get done."

Friedman says that today everyone needs to "find their extra - their unique value contribution that makes them stand out in whatever is their field of employment." Karl said that's a fair way to describe what's expected of new hires in his department. On the rare occasions that someone leaves one of the coveted jobs, he said, "They're looking for people that are more qualified than what they need for that job."

Karl's job has paid enough for his wife to be a stay-at-home mom, and to support his three stepkids and his biological daughter. But when the kids left home in their late teens, their story was different. Over the years that followed, several of them, along with their own children and significant others, ended up moving back in with Karl and his wife. At one point, they had eight adults and three kids packed into a three-bedroom apartment with one bathroom.

These days, Karl owns a six-bedroom house on a tiny dead-end street that he and his brother renovated from a duplex to a single unit. Some of the young people have moved out, but others have moved in. He has two daughters, a son, a grandson, a young woman who's a close family friend and her boyfriend and daughter living in the house with him and his wife. On most summer afternoons, some of the group gather outside the front door, along with various friends and family members who stop by. On chairs arranged on the tiny front porch and in the narrow street in front of it, they chat, smoke and tease each other mercilessly.

One recent afternoon, one of the young women living in the house told Karl he wouldn't know what to do once all his temporary housemates move out. "I'm going to remove bedrooms so you can't come back," he answered with a grin.

Karl does worry they'll keep coming back, because, for the most part, the work young people in his family have found is low-paid service-sector jobs. And here's where Karl's view of the world really diverges from Friedman's. The columnist basically defines these jobs out of existence.

"There is increasingly no such thing as a high-wage, middle-skilled job - the thing that sustained the middle class in the last generation," Friedman writes. "Now there is only a high-wage, high-skilled job. Every middle-class job today is being pulled up, out or down faster than ever. That is, it either requires more skill or can be done by more people around the world or is being buried - made obsolete - faster than ever."

It's a subtle sleight of-hand that draws on things we all know - lots of decent working-class jobs have left the country or been automated out of existence. The twist is that he acts like this is true of all low- to middle-skilled jobs. Factories are increasingly automated, iPhones are made in China, a table-side console could replace waiters, and, voilà, the only work remaining in the country is being a super-innovative techie of some sort.

This is not an oversight. Friedman doesn't ignore low-wage jobs just because they're beneath his notice. Pretending that they simply don't exist is the product of a worldview that treats corporate decisions, and government support for corporate needs, as a fact of nature: Decent jobs that demand little formal training haven't been transformed into bad jobs by the erosion of the minimum wage, the decline of unions and the upward redistribution of companies' budgets. They've simply disappeared in a puff of technology.

In reality, of course, there are lots of low- and middle-skilled jobs. According to the Bureau of Labor Statistics, four of the five projected fastest-growing jobs between 2010 and 2020 - retail salespersons, home health aides, personal care aides and general office clerks - don't demand a college degree. (Friedman might be surprised to hear that the exception is not high-tech start-up founders but registered nurses.)

These kinds of jobs - varied, hands-on work dealing with live human customers - are probably some of the things advanced technology is least equipped to deal with. But the typical annual wages for those four fast-growing jobs are all below $27,000. Three of them pay less than $21,000.

As Karl and his family could tell you, that's not enough.

Sarahann Gorham moved into Karl's place in April with her boyfriend and 4-year-old daughter. She said living there has been a "kind of grace period" for the family. She's grateful to Karl, whom she thinks of as an uncle although they aren't blood relatives, for taking them in, giving them a room with low rent where they've been able to save some money.

Sarahann's work history is the polar opposite of Friedman's vision of the economy in some ways: low-tech work running cash registers, cleaning hotel rooms and moving furniture, among other things. She started working at 16, taking shifts at the Dollar Tree for as much as 20 hours a week after school and on the weekends.

At 28, Sarahann has had at least nine jobs (more on her story can be read here). That's the part that fits with Friedman's narrative - a world where no one can count on a long-term relationship with an employer. In fact, one of Sarahann's favorite jobs was the sort of thing he delights in describing, a call center that took drive-through customers' orders from Wendy's restaurants all over the country. Having never had a chance to travel, she liked hearing customers' different accents.

"It almost made you feel like you were there," she said.

She said she liked her co-workers too. "I would probably still be there, but they ended up packing up and moving to Delaware," she said. "We come in one day, and they said at the end of the week you can find new employment or move with us."

That job notwithstanding, most of the time Sarahann hasn't left her jobs because they went offshore or were taken by robots. She has never been paid enough to afford a car, so whenever she's moved she's had to find a job she can walk or take a bus to. She left one position, as a housekeeper at a Holiday Inn, when she was eight and a half months pregnant and the walking, bus riding and physical work got to be too much.

In any case, for workers like Sarahann, staying in a job long-term isn't a particularly good strategy for getting by. "You could be in customer service your whole life, but you're still going to make the minimum," she said.

"Finding your extra" and being self-motivated look a lot different to Sarahann than to Friedman. The best way she's found to differentiate herself is working night shifts. By skipping sleep, she's sometimes been able to make $13 an hour instead of $7.25. Other kinds of advancement have been elusive. Getting to a management position at the jobs she's held means a supervisor has to leave, and that doesn't happen often.

"It kind of makes you feel crappy, especially if you try to put in 110 percent and it goes unnoticed," she said.

Today, Sarahann is receiving disability benefits after being diagnosed with bipolar disorder, depression and anxiety. She's glad she worked for so many years, and paid into the Social Security system so she can get the benefits now, but she thinks the night shifts and the instability created by not having enough money exacerbated her mental illness.

The stories of other people in Karl's house echo Sarahann's experiences. Karl's daughter, Ashleigh Tiedemann, is 23 and has a 3-year-old son. Last year, she was working three jobs: 40 hours a week at Home Depot, 20 at Honey Baked Ham, "and then whatever I could pick up at Shaws," she said

Many days she worked from 6 a.m. to 11 p.m., didn't sleep much, and saw her son even less. Eventually, she reduced her schedule to just working the full-time job at Home Depot. At a starting rate of $9.30 an hour, it paid better than either of the others.

Like her father, she made a point of learning on the job. "Home Depot wants people with experience," she said. "I walked in and I wanted to learn everything … The more you know, the more secure you are."

Still, even paying just $300 a month to her father for rent, and despite the fact that her son's dad takes care of him three days a week, she spends everything she makes on the basics. "As soon as I get my paycheck, it's gone," she said.

I asked Ashleigh what she thinks when someone says that poor people just need to work harder, or get better training.

"I think that they're ignorant," she said. "I think they're very ignorant. A lot of those people are people that were just handed things."

Among them, she said, is her grandmother, who worked for years at a Massachusetts Air Force base. "She's slowly coming to the realization that it's not that easy for us," Ashleigh said. "I don't know one person that wouldn't switch places with my dad in a second."

Like Friedman, Sarahann and Ashleigh believe in education as a way to a better life. They plan on insisting their kids go to college, though they don't know how they'll pay for it. They're also both thinking of going back to school themselves when their kids are a little older, but they're struggling with the cost-benefit analysis. College would mean a lot of debt, and no guarantee of a job.

A best-case scenario might be represented by Sarahann's friend Julie, who stopped by Karl's porch one day recently and delivered a profanity-laced rant about her job.

"I wipe butt for a living," she explained to me, cleaning up her language a bit.

Julie started working at a nursing home eight years ago, making $10.50 an hour. She took a training course and got her license as a nursing aide, and her pay is now up to $11.69. She's considering taking an eight-week, $1,400 class to take the next step up her career ladder. Her time and money are both limited, but, between car payment, gas and childcare, what she's making now is barely enough for her and her two kids. And she doesn't pay rent.

"I'm 28 years old, and I live with my mother," she said.

And Julie's job is one of the fastest-growing kinds in the economy.

For individuals, it's true that getting better educated is usually a reasonably good plan for better wages. Unemployment is far lower for college graduates than the less-educated, and they make significantly more money, although real pay for young college grads is on the decline.

On a societal basis, things look a little different. The U.S. economy could probably benefit from a certain number of workers getting more education. But that can only go so far. As the workforce becomes more educated, the wage premium that a degree offers tends to fall thanks to good old-fashioned supply and demand.

There's also no real reason to think that high-skilled jobs are more stable than any others. Lawyers' work can probably be automated as easily as waiters'. And robots will have a hard time replacing the aides in a nursing home. If higher education becomes universal, maybe it will be MBAs wiping butts.

The really easy thing to do about low-wage jobs is blame people for having them - for not going to college, for having a child while poor, for just not having enough individual aspiration and persistence. The hard thing is to wrap our minds around the idea that low wages aren't the natural product of a (mythical) free market but of business and government decisions.

Talking about expensive colleges and tight-fisted employers, Sarahann sighed and said she worries maybe she's being paranoid. But, she said, "Sometimes I feel like they make it hard on purpose."

Given his inclination to treat powerful interests as a force of nature, that's a statement Friedman might not understand. But when it comes to treating their workers decently, maybe there's an argument to be made that corporations need to find their extra.

Elizabeth Warren's Secret

By David Dayen, Salon

29 August 13

The senator tells Salon how one senator can wield tremendous power - and (kind of) addresses those '16 rumors

t's been well-documented that the 113th Congress specializes in getting nothing consequential done. While the nation's supply of named post offices is apparently well-stocked, anything more critical has generally stalled out, with little hope to break the gridlock.

So let's say you're a high-profile freshman senator walking into this den of inertia, and you want to make your large following proud and advance your agenda, but you're in no position to do that legislatively? How do you, Elizabeth Warren, find your way through this minefield, and even chalk up successes?

"It's all about learning to use the new tools," Warren told Salon in an interview this week. "In the Senate, there are more tools in the toolbox than are obvious." Warren, now the senior senator from Massachusetts (Ed Markey, with a 37-year congressional career, is the junior member), has employed those more unconventional tools effectively, doing her part to both change the conversation around the financial industry inside and outside Washington, and change the sharpness of the regulatory response to financial misdeeds.

Warren sits on the Senate Banking Committee, which has marked up all of two bills so far this year (she played a role in both, passing an amendment to a national insurance licensing bill and working closely with the committee leadership on reforming the Federal Housing Administration). But she has really shone in oversight hearings, where she has gained a reputation for offering uncomfortable questions to regulatory officials about their lack of prosecuting criminal activity on Wall Street. "Too big to fail has become too big for trial," she said at a hearing in February. "How big do the biggest banks have to get before we consider breaking them up?" she asked Treasury Secretary Jack Lew in May. And she's used the bully pulpit outside the hearing room, too, schooling CNBC anchors so badly on the history of financial regulation that the network forced the clip to be removed from YouTube.

This creates a consequence for the regulators for lax enforcement. Nobody wants to end up on the business end of an Elizabeth Warren viral video, and the hope is that the prodding will spur the regulators into action, or at least keep them alert. "There's a lot that banking regulators can do to make the system safer without Congress passing any new laws," Warren told Salon. "But only if they do their jobs. It's about accountability in both directions. The largest financial institutions should be held accountable, and so should the regulators."

She added, "They are not there to serve the banks, they are there to serve the public. I'm reminded of that when we have public hearings. I try to ask questions that the public wants to hear."

This extends beyond the occasional badgering of witnesses ("I beg your pardon," said Warren when I termed it that way, though she misunderstood, as I have a great affection for badgering). In one of her first major actions, Warren opened an investigation into the Independent Foreclosure Review, which was supposed to review every foreclosure from 2009-2010 for errors, but ended up so botched (the banks picked their own reviewers) that regulators shut it down and gave wronged homeowners a seemingly random amount of cash compensation, typically around $300. Warren demanded information on how the aborted reviews were conducted, what they found and how regulators arrived at the final penalties. After a series of embarrassing hearings on the subject, last month Federal Reserve chairman Ben Bernanke promised the release of some details, though none have yet come out.

Other agencies have come to expect Warren's queries. Just yesterday, she asked the Justice Department about why it settled with five large banks who submitted fraudulent mortgage insurance claims to the FHA for $225 million, when based on the number of claims made public in a government report, the damages could have been as high as $37 billion. That comes out to a settlement for 0.6 percent of potential damages.

Warren has had more luck with the Securities and Exchange Commission, which she previously criticized for generating settlements with giant financial institutions on securities fraud and other violations without making the guilty party admit wrongdoing. Corporations can't stand this because they expose themselves to future litigation, could suffer reputational risk and even lose their banking licenses. But putting this price on misconduct could have a tremendous deterrent effect (in addition, fines in cases where the defendant admits wrongdoing are not tax deductible).

The Massachusetts senator used both hearings and a series of letters to new SEC chairwoman Mary Jo White to question the policy. This has borne fruit: White announced a new settlement policy that will require admissions of guilt in more cases. "I'm very optimistic about the direction Mary Jo White is taking the SEC," Warren said. "She didn't make a generalized 'we're going to get tough' statement, she identified a class of cases in which the agency would take a different position, with harsher consequences for companies that don't cooperate."

"Commissioner White is showing some real spirit," Warren added. "She has come in and made it clear that it's a new day in town."

Just this week, hedge fund manager Philip Falcone admitted wrongdoing in a settlement over improper use of funds at Harbinger Capital, the first individual to do so since White announced the new policy. While Falcone didn't admit to liability on specific violations of law, Warren called it a "step in the right direction," and an indication that "the SEC is a watchdog that's starting to show some teeth."

So while critics call Warren's verbal jabs mere showboating, combined with her persistence they have had a tangible impact, both exposing some bank-friendly regulators and spurring others to better alternatives. "Those who criticize her for being all talk and no achievements don't understand the Senate," said Jeff Connaughton, a former chief of staff to Sen. Ted Kaufman who wrote an appreciation of Warren earlier this year. "I think she and others have made regulators think twice about how kid glove treatment of the banks will look in a harsh Senate spotlight."

Warren has also done plenty of unsung work in her freshman year. She actually has the highest attendance at Banking Committee proceedings so far this year, making 27 out of 35 hearings and executive sessions, more than chairman Tim Johnson or ranking member Mike Crapo. And in hearings, she almost always stays from start to finish, learning from her fellow members' questioning and often tailoring hers to cover a different subject area. "I learn a lot from those hearings," Warren said. "Not everyone is engaged, but there's a core of people really interested in the issues and really driving them."

The freshman senator named her Banking Committee colleagues Sherrod Brown and Jeff Merkley as part of this core group. (She even had nice words to say for Republican Bob Corker, whom she has worked with on the future of Fannie Mae and Freddie Mac "since before I was a senator.") Another reformer, Carl Levin, has made a habit of using his Permanent Subcommittee on Investigations to delve into issues of financial crimes, most recently with the "London Whale" trade by JPMorgan Chase. Levin's report was instrumental in the criminal indictments of two ex-traders at the bank for hiding losses and lying to regulators and investors. "Progress on the London Whale and admit or deny has come because of three or four determined senators and despite two captured committees," argued Jeff Connaughton.

The increased scrutiny has a cumulative effect. When one regulatory agency like the SEC changes its policy, it provokes other agencies to consider toughening theirs. When one senator points the way toward more provocative questioning of the broken regulatory response to a tsunami of financial crimes, other senators want in on the act. "She has elevated 'the game' of other senators," said Bartlett Naylor of Public Citizen. "No longer can her peers survive a committee hearing on a one-minute staff briefing before asking a question written for them, if it might be at odds with one of her positions."

Warren is hoping such momentum-building will play out in her first banking legislation, which would reinstate the Depression-era "Glass-Steagall" protections separating commercial banking (like taking deposits and making loans) from investment banking (like trading derivatives and other Wall Street casino gambling pursuits). Critics allege that the Glass-Steagall repeal had nothing to do with the financial crisis. But in a system where those duties are separated, Warren believes, regulators would have an easier time at their jobs. "They wouldn't have to develop expertise in multiple lines of business," she said. "The SEC can oversee the non-bank institutions, and bank regulators could focus on the safety of banks." While all big legislation faces a long road in a divided Washington, Warren partnered with Republican John McCain, Democrat Maria Cantwell and Independent Angus King on the Glass-Steagall bill to raise its profile, using an outside-inside approach. "We're two freshmen and two members not on the Banking Committee," Warren said, "and we got together to make this a more urgent issue."

Regardless of the eventual outcome of that bill, Warren has learned that a senator has power if he or she knows how to wield it. As for how else she can make an impact, Jeff Connaughton has a suggestion. "Run for president."

I asked if she had any reaction to that kind of buzz. The senator had a pat response. "No!"

I'm headed to Hanscom Air Force Base to talk about cybersecurity, and no, you can't know about it! Seriously, this is something in the military budget, one of the areas where we should spend more money not less, and this is why the sequester drives me crazy because across the board cutting is mindless. On the military budget, instead of thinking about whether there should be cuts where needs are not so great, and investing in things like cybersecurity, we're just cutting across the board. It's crazy.

So what do you want to talk about?

I thought we'd talk about banking. Obviously you're in a different role in the Senate than when you ran the Congressional Oversight Panel or were standing up the Consumer Financial Protection Bureau. How have you been able to use your perch in the Senate to advance your agenda? How have you adapted?

It's all about learning to use new tools. In the Senate, there are more tools in the toolbox than are obvious. That's what I like about this. For example, there's a lot that banking regulators could do to make the system safer. They could make the system a lot stronger without Congress passing any new law. But only if they do their jobs. The Banking Committee has oversight over those agencies. And so I think encouraging the regulators to do their jobs is a way to have an important impact on the banking system.

Yes, I've noticed your role is as much about badgering regulators as badgering banks.

I beg your pardon! I would use words like "encourage."

Fair enough.

But you know, it's about accountability in both directions. The largest financial institutions should be held accountable, and so should the regulators. They are not there to serve the banks, they're there to serve the public. I'm reminded of that when we have public hearings. I try to ask questions that the public wants to hear.

And do you feel like you've been successful in, shall we say, encouraging the banks to be more forceful in their regulatory oversight? It seems that the SEC has changed some of their policies as a result of your encouragement.

Well, I am very optimistic about the direction Mary Jo White is taking the SEC. She has come in and made it clear that it's a new day in town. She expects her agency to take an aggressive stance against those who break the law, and against those who don't cooperate in investigations. This is part of what gave me more hope, Commissioner White didn't make a generalized "we're going to get tough" statement. She identified a class of cases in which the SEC would take a different position. And she made it clear in that announcement that companies that don't cooperate with SEC will face different consequences. In other words, there will be harsher consequences if the SEC uncovers wrongdoing. So now, there's a price, not only for doing wrong but for hiding it. I'm very glad to see that. Commissioner White is showing some real spirit.

Indeed, just yesterday the SEC forced Philip Falcone to admit wrongdoing, but he did not admit liability for a specific rule or law. Is that satisfactory to you?

It's another step in the right direction. The SEC is a watchdog that's starting to show its teeth.

That's good, but I don't think I could begin to list all the criminality revealed in the financial industry just since you came into office. Is this industry at some level just too big to regulate or even detail to the public? And how do you create new structures for regulation to make meaningful oversight possible?

I want to be careful, because there are two separate points to make. By saying that I don't have to change law to make impact, I don't mean there aren't laws that could be changed. Because there are. The point is that we should be using every tool in the toolbox. The answer to your more specific question is yes and no. Changes in the structure would definitely make the financial system safer and make regulation easier, my bill on restoring Glass-Steagall is the perfect example. If commercial banks are split off from non-banking activity, the whole banking system would be safer. But also, regulators could specialize in what they do best. They wouldn't have to develop expertise in multiple lines of business. The SEC can oversee the non-bank institutions. If they're systemically important financial institutions, there are other mechanisms for oversight. But bank regulators could focus on the safety of banks. And that's simpler and more effective.

You say legislation is another tool. You've been active on the Banking Committee, in fact your office tells me you have the best attendance record there. But is the fact that there have only been two markups in eight months, does that show any reticence on the part of the committee to significant reforms?

I don't think so. Statutory change takes some lead time to get people talking about the idea, working on specific legislation. There are a lot of pieces to it. A couple big pieces we know are coming up. GSE [government-sponsored entities Fannie Mae and Freddie Mac] reform, FHA. Those are pressing problems. So it's not as if the committee is not dealing with significant issues, they are. But it's important to keep pushing. That's why Sen. McCain and I pushed forward on Glass-Steagall now, to get it back into the conversation. Sen. McCain wanted to be part of it, he and Sen. Cantwell tried to push this a few years ago. On Glass-Steagall, with Sen. King and myself, you have two freshmen, and with Sens. McCain and Cantwell, two members not on the Banking Committee. The four of us got together to make it a more urgent issue. We're trying to work together to move it up on the agenda.

How do you like working on the committee?

I like it. You mentioned attendance; not only do I go to the banking hearings, I stay. I'm very interested in the questions other senators ask. They often ask smart and thoughtful questions. I learn a lot from those hearings. I try to talk with senators afterwards, to ask follow-ups or get more information. And I often change what I'm going to ask because someone else has asked it. I feel good about the way it works in that committee. People there are interested in the issues. It shows up in questions they ask, the conversations we have in the hallways. It's a good group. Not everyone is engaged. But there's a core really engaged in issues and really driving. Sherrod Brown, for example, doing a hearing on commodities and what's happening around bank holding companies having powerful influence on the price of aluminum. What it means to the economy. I was very impressed by his work on that. Jeff Merkley, always very thoughtful. Sen. Corker, I've been talking to him about GSE reform since before I became a senator. So a lot of people on the committee are smart, they dig into the issues, and they care.

And any comment on the 2016 buzz for you?

No!