Death By a Thousand Cuts

After being deserted by industry, a Southern mill town now finds itself abandoned by government. Welcome to Henderson, North Carolina, where Bush economics is hitting home.

Up an unpaved driveway, inside an antebellum house turned job-training center in Soul City, North Carolina, Sam Jefferson is tapping a white-sneakered foot on the floor. He is fidgeting his way through this morning's "spirit up" seminar, led by an impeccably dressed evangelical woman who is here to elevate the self-esteem of a dozen or so unemployed workers.

Jefferson, 48, was laid off in March from Harriet & Henderson Yarns, a large family-owned textile company in nearby Henderson that filed for bankruptcy this summer. He had worked there for 30 years, having started while in high school to help put food on his family's table. A single parent ever since his 14-year-old son was a baby, Jefferson had seen hundreds of his colleagues at the mill pink-slipped over the past two years. But he always figured a company that had come through the Depression would survive this recession -- at least long enough for him to put his two teenagers through college. "This is the first time I've ever been on unemployment in my life," says Jefferson. "It doesn't feel good at all."

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A counselor with the unemployment office suggested Jefferson attend classes at the job-training center -- if only to keep his morale up. Yesterday's presentations included a seminar on truck-driving schools and a recruiting talk from a guard at the local prison, one of the area's largest remaining employers. But Jefferson, a stocky, gregarious, and exceedingly polite man with a mustache and wide smile, doesn't think jailhouse work is for him: "Those prisoners got 24/7 to think about how to hurt you."

So now he listens as the "spirit up" presenter, Linda Smith, reads affirmations and encourages the audience to set goals for themselves -- any goals (her own: getting laser eye surgery). Smith tells people to find their hidden talents, like poetry, or to meditate in nature. "We all know where the economy is right now," she calls out, "so we need to tap into our skills to have a rich self-worth. Amen?" Jefferson and his fellow students answer with an embarrassed silence.

The lackluster response suggests that, however well-meaning, Smith and the state unemployment officials who invited her here have little but moral encouragement to offer people facing the region's dismal economic landscape. Only an hour away from the high-tech Raleigh-Durham area, Henderson and surrounding Vance County boast North Carolina's highest unemployment rate -- 15.5 percent as of last June, double the rate of 1999. The rest of the state is suffering as well. North Carolina lost 111,000 jobs between January 2001 and February 2003; and in the next seven months, an additional 29,000 layoffs were announced, all part of the 3 million jobs lost nationwide since President George W. Bush took office. So many people have applied for jobless benefits that the North Carolina unemployment trust fund went broke twice this year; in September, the fund was facing a $75 million deficit and had to be bailed out with emergency loans from the federal government.

"I saw President Bush on TV the other night," says Jefferson, "and he was saying the economy was getting better. I thought, 'He must not have been to Henderson, North Carolina.'"

WHEN GEORGE W. BUSH ran for president in 2000, he positioned himself as a new breed of conservative, one who believed in the soft side of government and in compassion for those less fortunate. "As president, I will be committed to the advancement of all Americans," he said in April 2000, "including those who struggle." Aware that Republicans of the Newt Gingrich mold were viewed as too harsh and coldhearted, Bush promised to rally the "armies of compassion" to combat poverty and other social ills.

But for all the campaign talk about compassion, Bush has shown little interest in the plight of workers like Jefferson. Last year, as more than a million workers were on the verge of losing their unemployment checks, Bush ignored calls to extend benefits for additional weeks. (He finally relented in the face of pressure from congressional Demo- crats and supported the extension late in 2002.) And throughout the past three years, the president has pursued an agenda of limiting government assistance for lower-income Americans -- through a combination of massive tax cuts, frozen appropriations, and wholesale restructuring of the way programs are financed.

The policies haven't been the stuff of headlines -- largely because the administration has worked hard to avoid the kind of negative publicity that plagued Gingrich and Ronald Reagan when they attempted to slash social spending. Nonetheless, the likely outcome is much the same. "The administration's proposals have probably gotten less attention both because the details are seen as technical and the language used is often reassuring," says Mark Greenberg, policy director at the nonprofit Center for Law and Social Policy. "Instead of making cuts now, it's laying the groundwork for future cuts."

Many of the administration's changes in social policy are subtle, coming in the form of regulatory adjustments that make it harder for people in need to get assistance. This spring, for example, the Education Department changed the rules for Pell Grants -- college funds designed to help students from lower-income working families -- so fewer people can qualify. The Internal Revenue Service has moved to create new requirements for workers eligible for the Earned Income Tax Credit, a credit for low-income workers that is so effective at keeping people off welfare that even many conservative groups praise it. Parents seeking the credit would have to provide extensive documentation -- such as two years' worth of school records, to prove that their children actually live with them -- and would be audited at a substantially higher rate than the country's millionaires. In yet another proposal, the administration seeks to create more stringent verification procedures for families applying for school lunches, to make sure they are poor enough to receive subsidized food. Research conducted by the Reagan administration found that rather than prevent fraud, such measures tend to force eligible children to drop out of the program because of language barriers and bureaucratic hurdles.

Changes like these don't stand to save the government a lot of money -- and, critics say, fiscal responsibility may not be the administration's chief motive. "Just in terms of domestic spending, Bush has been pretty loose," says Max Sawicky, an economist with the Economic Policy Institute, pointing out that government spending -- even without counting homeland security and defense -- has increased faster under Bush than it did under President Clinton. What the administration wants, Sawicky and other critics say, is to reduce the federal government's role in helping the needy, but without attracting attention. Like previous Republican administrations, notes David Bradley of the National Community Action Foundation, the Bush White House is committed to rolling back the legacy of the New Deal and the Great Society. "But they realize they've got to take different steps to do it," he says. "They do it with a smile."

One way Bush has avoided scrutiny of his social policies has been to make public commitments to "compassion" initiatives, only to abandon them when it comes to providing funding. Bush pushed hard for Congress to pass the No Child Left Behind education act, highlighting it as a signature accomplishment in this year's State of the Union address. Yet in his 2003 budget request, he left the program underfunded by $8 billion. Similarly, Bush pledged to create new tax incentives to encourage more donations to charity. "It's not sufficient to praise charities and community groups," he said in May 2001. "We must support them...both [as] a public obligation and a personal responsibility." Yet neither of his tax-cut packages, in 2001 and 2003, included any incentives for charitable donations. "The language used [by the administration] has consistently communicated a commitment that one doesn't find in the funding proposals," says Greenberg of the Center for Law and Social Policy.

In perhaps one of the most notable contrasts between rhetoric and reality, Bush issued a call to young people to serve the country after the September 11 attacks. He urged them to participate in AmeriCorps, which provides college aid in return for a year or two of community service, pledging to expand the program and to recruit more than 25,000 new volunteers. Young people flocked to AmeriCorps in record numbers; when the program ran out of funds, Bush sat on the sidelines as Congress refused to authorize $100 million in emergency funding and volunteers were turned away by the thousands. (He has since asked Congress for a $159 million budget increase for AmeriCorps.)

Where the administration has sought outright cuts, they have often had political overtones, eliminating programs perceived as mushy liberal legacies. For instance, even as unemployment has soared, the White House has proposed cutting $11 billion from the budget of the U.S. Department of Labor -- the same department that has helped bail out state unemployment funds battered by mass layoffs, including North Carolina's. The only part of the agency slated to get a boost is the one that investigates union corruption.

When it's politically useful, however, the administration has not been afraid to take credit for "big government" programs -- even those it intends to slash. In the run-up to the 2002 midterm election, for instance, Housing and Urban Development Secretary Mel Martinez appeared in New Hampshire with GOP Senate candidate John Sununu to announce more than $1.6 million worth of grants to cities in the state from the Community Development Block Grant program, which he called "one of the most successful ways the federal government provides funding for...communities across the nation." At the time, Bush was proposing that $1.3 billion be chopped from the program, which provides money for everything from housing rehabs to Meals on Wheels for the elderly. Likewise, in August of last year, a HUD official joined Republican Senate candidate John Thune, who was challenging the incumbent, Democrat Tim Johnson, in a tight race in South Dakota, to announce $8.5 million in grants for the state from the Rural Housing and Economic Development program. The 2003 Bush budget proposed eliminating that program entirely.

By itself, none of Bush's policy changes might amount to a major shift; but in places like Vance County, the combination of layoffs, a state budget crisis, and the federal government's shrinking commitment is leaving people with a sense of mounting despair. Dale Fite, the CEO of Harriet & Henderson, says he's had to lay off 600 people at the mill in the last two years. Now he's about to lose his own job once the company wraps up bankruptcy proceedings. "We're allowing an economic crisis to develop here," Fite says. "Vance County has 15.5 percent unemployment. The social system just can't handle it. The Bush administration doesn't get it, and I voted for the man. In retrospect, that was a mistake."

Fite notes bitterly that the job losses in his state have been accelerated by Bush's trade policy, particularly in the run-up to the war with Iraq. In exchange for the use of foreign military bases and airspace, Bush used his fast-track trade-negotiating authority to allow more cheap textile imports from Turkey and Pakistan, a move that hastened the demise of North Carolina's ailing manufacturing base. Some of the workers who lost their jobs at Henderson, Fite notes, were the second or even third generation in their families to work for a company that they thought would be there for the long run. "To see the pain in their faces was hard," he says. "I feel for the Sam Jeffersons of the world."

EIGHT MILES FROM HENDERSON, Bill Owens turns his Ford Explorer down a rutted, red-dirt road into Key Estates, a development full of brand-new double-wide mobile homes. The developer's promise to pave the roads never materialized, and the county won't do it either, so the ruts just get deeper with each rainstorm. The road is so bone-jarringly bumpy that school buses won't drive into the development to pick up kids. Several of the new homes have grass growing up over the front steps; driveways remain unpaved and windows are boarded up. Throughout Vance County, home foreclosures have become epidemic in recent years, jumping from 58 in 1998 to 200 by 2001.

"This place used to boom," laments Owens as he surveys the wreckage of Key Estates. Rail-thin and energetic in a white shirt still crisp in the Southern heat, Owens is the CEO of Franklin-Vance-Warren Opportunity, the area's largest private social-service provider. He remembers when unem- ployment in the county was in the single digits -- back when companies like Burlington Industries, once the world's largest textile maker, had factories here.

Even when the mills and the tobacco plants provided a job for anyone who wanted one, Vance County wasn't a wealthy place. The average spinner at Harriet & Hen- derson made $9.05 an hour, but the benefits and the low cost of living made that a pretty good income for workers who didn't even need a high-school diploma. Today, nearly 1 in 6 of Vance County's 43,000 residents is unemployed; more than 20 percent live in poverty, as do nearly 30 percent of children. One in five people has no health insurance. Many families still live on old plantation land that has never been surveyed, making it difficult for them to sell their homes and move on -- not that they'd want to. People here tend to stick around -- including Owens, who has been at his agency since 1976.

For the past 38 years, much of the funding for community-action groups like Franklin-Vance-Warren has come from Washington. Federal money helps the organization run homeless shelters, build low-income housing, operate Head Start and after-school programs, and provide job training and weatherization assistance for low-income homeowners -- a critical service last winter, when North Carolina saw a rash of carbon-monoxide poisoning cases after people tried to heat their homes with charcoal grills. Federal programs also allow Owens to provide emergency financial assistance to the elderly and handicapped; housing placement for low-income families; and food, temporary lodging, and job-search services for homeless families.

But now, as more people than ever line up at his agency's doorstep, Owens finds himself struggling to fill the need. People who never thought they'd be asking for help are turning up at his agency -- "a lot of those people working at Wal-Mart are my clients," Owens notes. Yet the president's 2004 budget slashes funding for agencies like Franklin-Vance-Warren by nearly 25 percent. Cuts to the Section 8 program, which helps low-income families pay rent, could cause some 1,600 North Carolina families to lose their housing subsidy next year. And Low Income Home Energy Assistance, a popular program that helps the poor and elderly pay their heating bills, has been on the administration's chopping block for several years; last year, the White House was pushing an 18 percent cut, backing off only after reports that elderly people around the country were dying from the cold.

Owens is also worried about the administration's sweeping initiative to turn the federal government's largest social programs -- from Section 8 housing assistance to food stamps, Head Start, and Medicaid -- into block grants that would be handed over to the states to administer as they see fit. Supporters say block grants will give states more leeway to experiment with better ways of providing services. But, notes Sharon Parrot of the nonpartisan Center on Budget and Policy Priorities, state and local governments could also shift the money to other areas -- a particular risk at a time when states and municipalities face funding crises of their own. "Flexibility without funding," she says, "only gives you flexibility to cut."

What's more, turning entitlements into block grants often serves as a backdoor way of cutting funding. The current system, where funding increases with need, is actually very effective in coping with crises like North Carolina's, Parrot notes. Block grants, by contrast, expand only when Congress votes to approve increases, which it rarely does. Welfare, for example, was turned into a block grant in 1996. It has since lost 12 percent of its funding to inflation and is projected to lose 20 percent by 2007. Similarly, a block grant that funds child-care vouchers for low-income workers has been frozen since 2002, and the White House has proposed no new funding for the next five years; as a result, according to research by the Center on Budget and Policy Priorities, 27,000 children from working families will lose ac-cess to subsidized child care next year.

Grover Norquist, an influential conservative adviser to the Bush administration and head of Americans for Tax Reform, says critics are right to expect cuts. "Liberals fear that over time, block grants would be reduced," he says. "Conservatives worry that they wouldn't be."

INSIDE HIS NEAT three-bedroom brick house, with not a single unnecessary light turned on to illuminate the gathering dusk, Sam Jefferson is sitting at his dining-room table leafing through the local community-college catalog. Under a federal program to soften the blow of trade-related job losses, former textile workers like Jefferson are eligible for two years of financial assistance if they go back to school for retraining.

But school has never really been Jefferson's thing. Ever since he turned 18, he's gotten up every morning and gone to work at Harriet & Henderson in one capacity or another, most recently as warehouse manager. He'd arrive at the crack of dawn to be ready for the employees he managed; his job involved monitoring all the trucks taking cotton to the mills, deciding which truck should go where depending on the yarn to be made. His section had the plant's second-best safety record -- he still has the paperwork to prove it, along with letters of recommendation from managers who are now unemployed too. "I was the first one in and the last one out," he says. "I thought I had the best job of anybody."

Applying for unemployment, and signing his kids up for Medicaid, has been a humiliating experience. "I was the kind of person who never wanted to take help from any kind of organization -- I used to give to them, in fact," Jefferson says, pointing to receipts from Easter Seals and the Heart Fund. Now, as he ponders his options and sends out his résumé, Jefferson is cutting costs at home, from his life-insurance policy to the kids' allowances.

Part of Jefferson's problem is that with two teenagers at home, he needs a job that pays at least the $33,000 a year that he was making at the mill. He's heard that the biotech industry near Raleigh might be promising. "To tell you the truth, I don't even know what biotech is," he says, "but those are good-paying jobs." He has good reason to worry: A recent study by the North Carolina Justice and Community Development Center found that six months after being laid off, former textile workers who did manage to find jobs were making, on average, half what they earned at the mills.

Compounding the problem is the fact that North Carolina, like nearly every other state in the union, is struggling with a budget crisis. The state, whose tax code is tied to the federal one, stands to lose $434 million between 2002 and 2004 because of Bush's tax cuts. And that has meant further cuts in programs like the truck-driving school that Jefferson was hoping to attend. The local community college, suffering from state bud- get cuts, has had to eliminate classes and faculty, even as it is overwhelmed with the crush of unemployed people seeking retraining. "The economy is really being torn apart, and you can see it in terms of people's lives," says Jane Ball-Groom, the workforce-development director for a regional government agency in Henderson.

What really bothers Jefferson, though, is that his 17-year-old daughter, Tiffany, not he, was supposed to head off to college next year. All his work as a single father over the past decade and a half has been devoted to getting his kids a good education. But the $2 billion state budget deficit has resulted in a 62 percent tuition increase at state universities in the past three years. Tiffany would like to go to Winston-Salem State University, where tuition is among the state's lowest, at $7,000 a year including room and board. Financial aid might get her there -- but on May 30, Bush's Department of Education quietly changed the formula for calculating federal aid eligibility, reducing the amount of assistance available to working families and freezing funding for Pell Grants. The grants, which do not need to be repaid, now cover about 40 percent of tuition at a public university, compared with 84 percent in the 1970s.

When his daughter asks him what's going to happen, all Jefferson can tell her right now is, "It doesn't look good." He shakes his head ruefully, thinking about his kids and the future. "They're wondering what the end is going to be, and so am I."

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