Arianna Huffington Says Federal Government Has Failed the American Middle Class

Huffington tells Diane Sawyer that the U.S could become a "Third World America."

September 7, 2010, 2:26 PM

Sept. 7, 2010— -- Arianna Huffington says that the Obama Administration has failed to take decisive action during the economic crisis, threatening the existence of the American middle class.

"There's no question that the Obama Administration really underestimated the economic crisis," Huffington, the creator of the Huffington Post and a liberal commentator said in an interview with ABC's Diane Sawyer set to air tonight on "World News."

"Remember, we had been told that after the stimulus passed, we would actually manage to get unemployment down to around eight percent. Well not only did that not happen, but the chances of double-digit unemployment are growing," added Huffington, who also takes aim at Republicans.

Huffington pointed to the flood of foreclosures as another massive failure by the Obama Administration. Some 2.8 million households received foreclosure notices in 2009, a record that could be matched or even surpassed this year.

"As a mother, I feel the idea of having to move your kids from your home into a motel -- or often a homeless shelter -- is so devastating," Huffington said. "And seeing the impact this is going to have on a whole generation of children as they're growing up like that makes me really disturbed about the fact that the administration did not do more to prevent foreclosure."

In her new book, "Third World America," Huffington outlines alarming statistics about the struggling middle class. The middle class is disappearing and the American dream is dying, Huffington says, but there's still time to do something about it.

Click here to learn more about "Third World America"

"The foundation of American prosperity, but also the foundation of American democracy has been the middle class," Huffington said. "Because without a middle class, we become a third world country of extremes. You know, the very rich and the very poor, which increasingly is everyone else."

Huffington argues that the trend has been going on for decades, but the middle class crisis has only gotten worse with the nation mired in recession.

Huffington Shares Alarming Statistics About Middle Class Economy

Among the most jarring statistics she cites, Huffington writes that every 30 seconds, someone declares bankruptcy in America. The average American is already $16,000 in debt.

"Is that the fault of the system, or did we all just go a little crazy and think that ... the judgment day wouldn't come?" Sawyer asked.

""We need to take personal responsibility, no question about that. It's a little bit like a culture of addiction," said Huffington. "But you know, when it comes to drug addicts, we punish the drug peddlers."

In Huffington's view, the big banks and Wall Street firms have failed to come through for the American taxpayers who bailed them out. They've continued to profit off of fees and interest rates that she sees as traps that take advantage of consumers.

"That's why one of the first steps I recommend in the book is financial literacy," Huffington said. "We need to actually take responsibility for moving our families to safe financial ground."

Huffington also suggests that Americans should be allowed to negotiate and modify the terms of their mortgages rather than go into foreclosure and lose their homes.

"This is not just good for them, it's good for the entire neighborhood," she said, noting the negative effects of foreclosure on neighborhood property values.

Huffington does not expect politicians in Washington to make her suggestions happen. Rather, she hopes that her book and accompanying website, will inspire people to take action for themselves, sharing their own stories and ideas.

"When people take action, it's the greatest antidote to despair," Huffington said.

Americans Come Forward with Ideas to Help the Middle Class

One such idea came from Gene Epstein, a self-made millionaire from Pennsylvania. He is now on a mission to get every small business to hire one employee for six months.

"I can almost guarantee you that within six months, we will be into the incredible upturn of economic prosperity," Epstein said. "Only 10 percent [of small businesses taking action] will change the entire wheels of what we have in motion by having a half million people removed from unemployment compensation and turned into being productive."

Another idea came from Seth Reams, an unemployed man from Portland, Oregon. Reams created an organization called We've Got Time to Help that allows the unemployed to volunteer, doing everything from mowing lawns to moving furniture.

Huffington's campaign earlier this year, urging Americans to "Move Your Money," spurred millions to withdraw funds from big banks and deposit them in community institutions, she said.

"We probably estimated about nine percent of Americans moved their money," Huffington said, adding that some state pension funds have also jumped on the trend.

Now, Huffington calls it her vision of "Hope 2.0" for America, with a politically active and engaged middle class bringing their needs to the forefront, instead of waiting for a politician to address the problems.

"The truth is that democracy is not a spectator sport," Huffington said. "It's always been about people in their own communities taking matters into their own hands. And both changing things and demanding change from our elected leaders."

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