The death of the American Dream birthed Trumpism

The United States is the richest country in the world. But that statistic camouflages the more complex truth that the United States has a relatively small number of rich people and a much larger number of poor and working poor people. The average income for the top twenty percent of the population in 2022 was approximately $278,000. The average family income for the bottom 20 percent of the population was approximately $16,000.

When the income data is examined on a more granular level the divides between the poor, the working class, and the wealthy become even starker. The top 5 percent of individual earners had an average income of almost $336,000 in 2021. The same year, the top 1 percent had an average income of almost $820,000. The top .1% earned an average amount of approximately 3.3 million dollars.

Wealth is a much more revealing indicator of how extreme the levels of economic and social inequality really are in the United States. The top 1 percent of income earners now control approximately 26 percent of the country’s wealth. That amount of wealth is more than that owned by the entire American middle class. The poorest Americans by income (the bottom 20 percent) control only 3 percent of the country’s wealth.

Contrary to America’s dominant cultural myths about “bootstraps," wealth and income are selectively created (and in many ways directly subsidized) by the state through tax policy and other measures. To wit, Americans in the top 20 percent of income generally receive a much larger return from the federal government in terms of subsidies, credits, and other benefits than the amount of taxes they pay. Political scientist Suzanne Mettler has compelling described these benefits as “the submerged state”, i.e. “welfare for rich people." 

America’s elites (and especially the news media) love to tout the stock market as a barometer for the country’s economic health and prosperity. But that data is misleading: The top 1 percent of richest Americans by wealth control some 54% percent of stocks and mutual funds. Here, the American financier class benefits from the tax and other economic policies that they literally write, which are in turn passed by Congress and the president (who are also members of the financial elite).

In total, there is a set of perverse incentives built into this version of late-stage American capitalism, where private actors and other predatory gangster capitalists profit from the country’s extreme levels of wealth and income inequality — and are therefore incentivized to perpetuate such an unfair and ultimately anti-democratic system.

In her new book “Poverty for Profit”, lawyer and public policy expert Anne Kim documents this system and how it disproportionately targets Black and Brown communities. She is also a contributing editor at Washington Monthly, where she was a senior writer. 

In this conversation, Kim shows how predatory capitalism is preying on under-resourced black and brown communities and documents its real human cost. At the end of this conversation Kim, warns that the country’s extreme income inequality and the death of the American Dream are directly tied to the rise of Trumpism and the country’s democracy crisis.

This is the second part of a two-part conversation.

How does your research intervene against the many organizing myths of American society such as “individualism” and “meritocracy”?

There’s a huge body of work that pushes against these myths by illuminating the structural limitations so many Americans face. I aim to add one more dimension to this argument, by showing how the corporatization of poverty helps to perpetuate systemic disadvantage.

Of course, personal choices matter. But for too many people, these “choices” are limited or non-existent, or dictated by the industries that colonize low-income communities. Many people don’t have access to affordable healthy food, for instance, because dollar stores and bodegas control the food choices available in their neighborhoods. “Willpower” can’t overcome a diet where the only available options are ultra-processed foods high in fat and sodium – like much of what’s served in school lunches to poor children. Pizza Hut, for example, offers what it calls its “A+ Pizza Program” for school cafeterias. The company says its pizza crusts are made with “51 percent white whole wheat flour” to comply with federal nutrition standards for the National School Lunch Program.

“Personal responsibility” is a myth when the poverty industry controls the choices you have.

Which of the human stories – here I will use the language of tragedies and traps – struck you the hardest in researching and writing the book?

The person whose story has stayed with me the longest is Rafiq, a young man I met in Baltimore who was literally in the wrong place at the wrong time.  He was walking past a house in the middle of a raid and got picked up on basically trumped-up charges with no evidence. His lawyer said the jury acquitted him in less than half an hour.

By all rights, he should have been able to put this ordeal behind him. Instead, he owed his bail bondsman thousands of dollars because – it turns out – the “premium” that bondsmen charge for bail is non-refundable. It doesn’t matter if you get acquitted or the charges are dropped, the bondsman gets his money. So, Rafiq was in debt for an arrest that should never have happened, and in a system that not only punishes defendants for being poor but facilitates their exploitation by a predatory industry.

The moneyed classes and the corporatocracy privatize their gains and profits and externalize their losses.

In the context of the poverty industry, the profits businesses make exact a terrible toll on the people they purport to “serve.” The hundreds of dollars someone pays a tax preparer, for instance, means hundreds of dollars not spent on food or rent or to pay down debt. But it’s not like the tax prep industry will be held to account for the hunger a family might face because of their practices.

Ditto for bail bondsmen. In the case of Rafiq, whom I mentioned above, the debt he owes the bail bondsman was guaranteed by his mom, whose financial security was also put in jeopardy. Rafiq also has a family, which means the money going toward his unjust debt was money that wasn’t going toward diapers or baby food for his young daughter. But I doubt the bail bondsman feels any responsibility for the trauma he’s caused for Rafiq’s family.

“Poverty for Profit” is really a model of capitalism gone wrong – or is it precisely capitalism and markets and private interests working exactly as designed in the neoliberal regime and gangster capitalism?

I’m not anti-business. I respect business, and I admire the innovation and creativity of entrepreneurs. But I also think there are some realms that businesses just are not suited for, and that includes human services. I just don’t think that the motive for profit aligns very well with poverty reduction. Investing in human potential is expensive, the returns take a long time to accrue, and the results can’t always be measured in dollars. There have been some well-meaning efforts to “do well by doing good,” but as I mention in the book, those haven’t really panned out either.

How do you imagine that libertarians and other members of the right-wing (and yes, the corporate Democrats) who worship at the mantle of the “free market” and the neoliberal regime would respond to your book?

They’d dismiss it as liberal bellyaching about a problem they’d argue doesn’t exist. They’d say that government-run programs would be ten times less efficient than privatized ones, and they’d trot out extreme examples of government “waste” to prove their point, like the $600 hammer for the Pentagon that actually never existed.

They’d also argue that anti-poverty programs aren’t tough enough in demanding “personal responsibility” from poor Americans. That’s why they want draconian work requirements in every safety net program, including Medicaid, even though the research is clear that work requirements don’t do anything other than deprive people of the benefits they need. Some conservatives would be perfectly content for the government to have no role in poverty reduction – which means they’d likely applaud and even encourage the activities of the poverty industry.

Is Milton Friedman smiling or disgusted at the findings of your new book?

Actually, I think he’d be shrugging his shoulders with a big “so what?”

In a 1970 essay for the New York Times, Friedman wrote that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” I think he’d say that the companies engaged in the poverty industry are simply doing what they’re supposed to do. He does say companies should stay “within the rules of the game,” “in open and free competition without deception or fraud,” so perhaps he’d frown at some of the practices I’ve documented in the book. But I also think he'd be more likely to say the fraudsters are outliers, not a natural consequence of how the poverty market is structured.

There is the “Black and Brown tax”. There is also the “poverty tax” in America. What is the relationship between them?

They’re additive, and the cumulative result is a double disadvantage for Black and Brown people in poverty. The “Black and Brown tax” explains in part the massive racial wealth gap, which the Brookings Institution recently estimated to be more than $240,000. That’s the difference in wealth between a median white household and a median Black one, and it’s the result of systemic discrimination, lower wages, unequal access to education and a host of other factors.

The “poverty tax,” on the other hand, is the additional price poor people often pay for basic services. Many low-income Americans don’t have access to mainstream banking, for example, so they rely on check cashers, pawnshops, and other players in what the government euphemistically calls the “alternative financial services industry.” I’d argue that the tax prep fees I write about in my book are also part of this “poverty tax,” as are bail bond premiums. I’d also argue that some poverty taxes are non-monetary; rather the “price” is poorer health, substandard housing and education, greater exposure to environmental toxins, the list goes on. I have no doubt people pay the poverty tax with their lives as a result.

Please explain more about how there are dentists who are exploiting the poor. That is dystopian. 

Many mainstream dentists don’t treat patients on Medicaid, which created a market for some dentists and dental chains to specialize in these patients (mostly kids). These dentists then also realized they can make a ton of money on volume, because Medicaid pays by the procedure. The result has been a booming Medicaid dental industry that’s seen an outsized number of reported abuses by dentists and dental franchises performing unnecessary work to collect Medicaid dollars.

In one instance I wrote about, a North Carolina dentist reportedly performed 17 root canals on a three-year-old and was ordered to pay $10 million in penalties. In another case, a dental chain called Benevis agreed to pay $23.9 million to settle claims of Medicaid fraud brought by federal prosecutors. Some of these clinics have moreover been accused of using “papoose boards” to immobilize children for multiple procedures. The state of Colorado ended up banning papoose boards because of reported abuses involving Medicaid dental practices.

No doubt the vast majority of Medicaid dentists provide good quality care, so I’m not trying to tar and feather everyone. On the other hand, things have been bad enough that the U.S. senate held hearings on the damage done by  “corporate dentistry.”

There are also dialysis centers in the strip malls in poor communities where there are also dollar stores, check cashing businesses and tax return places. Again, this is like something out of the films “Idiocracy”, “Brazil” or something in a David Cronenberg film.

The “consumer” experience of living in a low-income community is nothing like the experience of people in the middle class and above. You get the feeling that everyone’s not so much a customer to be served than a potential target for exploitation. Instead of a Pottery Barn, you’ve got the rent-to-own store with crappy furniture at usurious rental rates. Instead of a Citibank, you’ve got a pawnshop.

District Heights, Maryland is one of several predominantly Black communities just across the river from D.C., minutes away from the U.S. Capitol. If you drive to the main crossroads in the area, at the intersection of Pennsylvania Ave. and Silver Hill Road, you’ll see a huge dialysis center and a drive-through liquor store, literally right next to each other facing traffic. That’s what you see sitting at the stoplight, and it tells you a lot about the quality of life for many in this community.

And if you go to Penn Station, which is one of the shopping centers nearby, you’ll find two more dialysis centers, and then a third one across the street. There are also a couple dollar stores,  a cash advance and check cashing place, another liquor store, a rent-to-own furniture outlet, and a discount clothing store. Down the road off Silver Hill, there are two pawnshops within about a block of each other.  There are, at least, several grocery stores nearby, which means the area isn’t also a “food desert.” According to the USDA, more than 39 million Americans live in low-income areas with limited access to supermarkets, many of which are disproportionately located in Black communities.

It's hard to overstate how huge the gaps have become in the amount of savings and wealth held by America’s wealthiest families versus households at the bottom. According to the Federal Reserve’s Survey of Consumer Finances, the median net worth of families in the bottom 20 percent by income was $14,000 in 2022 – compared to $2.56 million for families in the top 10 percent. People in the bottom half of the income distribution had an average of $54,700 saved up for their retirement – compared to $913,300 for those in the top 10 percent. The racial wealth gap is also appallingly vast. According to the Federal Reserve, the typical Black family’s wealth equals just 15 percent of the wealth held by a typical White household.

How do you want people to feel after reading your book? More importantly, what do you want them to do?

One of the reviews for my book called it “rage-inducing,” and more than one person has told me they’ve gotten progressively angrier with each chapter they’ve read.  The book isn’t, however, just a catalog of outrages, and I’m hoping that even if people end up angry, they also end up understanding how we got to where we are. I can’t tell people how to vote, but I think it’s pretty clear who’s responsible for the current state of public policy. I’d like people to use their voice and to use their vote.

America’s right-wing has become so odious that many people, including many progressives, are feeling practically nostalgic for Reagan-era conservatism. I totally get that – Reagan was no insurrectionist, at least!  But it’s crucial not to lose sight of just how destructive Reagan-era conservatism has been, especially for US social policy and how America treats its poor.

Reagan racialized poverty like no other politician before him. He popularized the idea of “welfare queens” sponging off government while living in luxury. His administration also presided over massive cuts to social programs while at the same time providing tax cuts to the rich that ballooned the federal deficit.  And as I write about in the book, he worked aggressively to outsource huge chunks of the government to the private sector, including social services. That’s why we have multi-billion-dollar corporations running state welfare and Medicaid programs and making enormously consequential decisions about access to benefits and people’s well-being. Reagan’s optimistic “Morning in America” image sugarcoated an ideology that was really quite cruel.

I know many progressives, and young progressives in particular, are disappointed by what the Obama and Biden presidencies failed to achieve and are thinking of sitting it out this fall. But is Trump 2.0 really what they’d prefer?  Though Trumpism is ten times more terrifying than Reaganism, they share the same DNA. That’s why Trump wanted work requirements in Medicaid and has no compassion for migrants seeking asylum. He’s beholden to billionaires and elevates white nationalists. His overtures to Black and Hispanic voters aren’t just clumsy – they’re sickeningly hypocritical.

What President Biden called the fight for the “soul of the country” has been going on for 40 years and it culminates this fall. Not to vote is to vote; let’s not lose the battle now.