CHARLES OSGOOD, host: For quite a few Americans, the economy's Reversal of Fortune over the last year or s--two--not to mention the past week--has mostly on paper. Day-to-day life continues pretty much as before. But for far too many families, the decline has been very real, and there's no one who can tell them how or when things will start to get better. Our cover story is reported by Rita Braver.
(Footage of Jim Baker; bill from Dairyland Insurance Company)
RITA BRAVER reporting: For Jim Baker, every day is filled with anxiety about how he'll pay his bills. Mr. JIM BAKER: Late fees--tough to pay with no income.
(Photograph of protesters)
BRAVER: (Voiceover) The company where he worked as a machinist for 30 years went bankrupt, forcing him into an under-funded and unwanted retirement. Where were you left when your company went under?
Mr. BAKER: Well, I was left with about a third of my pension. It was $1,675 a month, and now it's $522.50 a month before taxes. I lost all my health benefits.
(Photographs of Baker's children)
Mr. BAKER: I have a son in college, I have a daughter going into college, I have a mortgage, and--and I need a job bad.
(Footage of Baker doing job search on computer)
BRAVER: (Voiceover) But for 50-year-old Baker, finding a job around his home town of Kenosha, Wisconsin, has been a futile, 19-month struggle.
Mr. BAKER: There's not a lot of good work out there. There's a lot of these manufacturing jobs that have left the area for low-paying service jobs. I can't really accept a low-paying service job because it--it doesn't--it doesn't pay the bills.
BRAVER: And Jim Baker is just one of the casualties of the current economy. Each day seems to bring more bad news. Just think about these statistics. Unemployment, which fell to 3.9 percent in 2000, is now 5.7 percent. The number of Americans living in poverty increased by 1.3 million last year, while incomes of middle-class households dropped for the first time in 11 years.
(Footage NYSE trading floor)
BRAVER: (Voiceover) What's more, the stock market has come tumbling down. This past week, the Dow Jones average fell to its lowest point in four years.
Mr. PAUL KRUGMAN (Princeton): This is not your father's recession. This is your grandfather's recession.
(Footage of Paul Krugman)
BRAVER: (Voiceover) Paul Krugman is a Princeton University economist and a columnist for The New York Times.
Mr. KRUGMAN: This is the most troublesome slowdown--not the worst, but the most troublesome that we've had, really, since World War II, because it's not clear how we get out.
(Footage Sharon Wilcox; the Wilcox house)
BRAVER: And that's what troubles 46-year-old Sharon Wilcox of Glendale, Wisconsin. So this is sort of the one big extravagance, huh?
Ms. SHARON WILCOX: Yes, this is it. We've planned it since we moved into the house 10 years ago, and then we actually accomplished the addition two years ago.
(Footage of Sharon Wilcox and Braver; Jeff Wilcox)
BRAVER: (Voiceover) Wilcox, who works in human resources for a small company, and her husband, Jeff, who does high-tech computer assembly, thought they'd be able to pay their addition off quickly.
Ms. WILCOX: Some day we're going to have rugs, and someday we'll...
BRAVER: You thought by now...
Ms. WILCOX: Yes.
BRAVER: ...you'd have the rugs on the floor, too.
Ms. WILCOX: Thought we'd have rugs. It took a year before we actually had furniture.
BRAVER: (Voiceover) But when the stock market tanked, it took their investments and their dreams, including early retirement, along with it.
(Footage of the Wilcoxes)
Mr. JEFF WILCOX: We have a 401(k) through my employer, and we have lost a significant amount of money in that. That was certainly intended to be our retirement. So...
Ms. WILCOX: And then we have mutual funds that he had set up for some other investments, one for college, one for s--you know, some retirement vacation property.
BRAVER: Do you think that you could have done it differently if--if you had it to do over again now?
Ms. WILCOX: We knew that we probably didn't have the right mix of having some safer investments along with the different levels of mutual funds that we had.
(Footage of stock ticker)
Mr. KRUGMAN: (Voiceover) We shifted to an economy in which everyone was taking a lot of risks, not really realizing that they were taking a lot of risks. I think we probably need to go a substantial part of the way back. I think we got sold a--an excessively optimistic vision.
(Footage gold ingots)
BRAVER: (Voiceover) Remember those days?
(Excerpts from news reports)
Unidentified Reporter #1: (Voiceover) On the eve of a new century, America is creating fortunes like never before.
(Visual of 1997 Nasdaq chart)
Unidentified Reporter #2: (Voiceover) Today for the 10th straight day, it's closed at a record high.
Unidentified Man #1: We're in a new era. It's the second industrial revolution.
Unidentified Reporter #1: How hot is Nasdaq right now?
Unidentified Man #2: Smoking, red-hot.
Mr. KRUGMAN: Those of us who were kind of sour pessimists during the--during the years of exuberance are--are--you know, getting some vindication, but are not feeling too good about it.
Ms. JANE BRYANT QUINN (Newsweek): You have to regroup yourself about the assets you have left and say 'What am I going to do now?'
(Footage magazine article; US savings bonds)
BRAVER: (Voiceover) The answer, says Newsweek financial columnist Jane Bryant Quinn, is to diversify. Along with those stocks, start saving the old-fashioned way.
Ms. QUINN: US savings bonds are paying about 4 percent. That sounds low, but, you know, the principal is guaranteed. You know, you don't lose money. What a wonderful concept.
(Footage of bank sign; money being counted out)
Ms. QUINN: (Voiceover) You know, bank accounts are 1 1/2 percent. That doesn't look pretty good, and so what you have them for is simply to say, 'There's a certain amount of money that no matter what happens, I do not want to lose.' That's what these are for.
(Footage of Walter and Nicole Lanier and their children)
BRAVER: (Voiceover) Of course, it's not just those who've invested in the stock market who worry about the economy. It is also younger Americans like Walter and Nicole Lanier, 30-something parents of three young children.
Ms. NICOLE LANIER: My biggest concern as a mother is, you know, can I--can we afford to provide everything that our children will need providing for--an education, tuition for college or private schools, classes, ballet--whatever you want your children to have.
(Footage of Nicole Lanier and children; Walter Lanier)
Ms. LANIER: Take your seat belt off.
BRAVER: (Voiceover) She runs a day care center. He has just started his own law firm, so money for savings is hard to come by, but...
Mr. WALTER LANIER: If I had some disposable income right now, which unfortunately I don't, I would be comfortable putting it in the market with the drop that it's taken. I'd--I'd look at the market and think that maybe this is a good time to--to buy.
BRAVER: She doesn't agree with that?
Ms. LANIER: No. Well, you know, I trust his judgement. For me, the stock market is just a little risky. We were watching TV one day, and the stock market had just--you know, hit a really low, bad low, and he said, 'You know, this is a good time for us to be poor,' because we just didn't have much money in the market, so we didn't lose much money.
(Footage of the Laniers)
BRAVER: (Voiceover) What's the best advice for somebody who's just starting out and wants to save a little bit and really wants it to be safe? Is the stock market a place to go?
Ms. QUINN: If you're young and starting out and you have the option of having a 401(k) or an IRA, a retirement fund, I would put it into stock-owning mutual funds without hesitation. I would not buy individual stocks, because people have learned, I hope, from this recent market break that you may think you know something about a stock, and suddenly it's WorldCom and you are out of business. And then I would put the rest of my money in bonds or a bond fund or somewhere safe.
Ms. LANIER: We are hard workers.
(Footage of the Laniers; Sharon Wilcox and Braver; photographs of the Wilcox children)
BRAVER: (Voiceover) As for the Laniers, with three children to educate...
Ms. WILCOX: Erin is a college freshman.
BRAVER: (Voiceover) ...and the Wilcoxes, with a freshman in college and another daughter still in high school, Quinn has some very firm advice: If your child is within five years of college, take education money out of stocks or mutual funds.
Ms. QUINN: And I don't care that the interest rates are low. Wouldn't you like not to have lost money over the past three years and make a, you know, tiny piddling little 3 percent on it? Boy, I know a lot of people who would settle for that on their tuition money right now.
(Footage of houses)
BRAVER: (Voiceover) As for the rest of us, are there some things people can do right now to improve their financial situation?
Ms. QUINN: Refinancing a house is a great idea. Interest rates, mortgage rates are way down. Lower your monthly payment, but don't borrow more money out. If ever--if I have any kind of a message right now, it's to lower your debt, lower your expenses. This is a time that you really have to get your life in order, because we don't know how long this is going to last.
(Footage of various scenes around Washington, DC)
BRAVER: (Voiceover) In fact, Americans are feeling cautious right now. Consumer confidence is at a 10-month low, driven in part by fears of terrorism at home and looming conflict in Iraq.
(Footage of President Bush; people walking down city sidewalks)
BRAVER: (Voiceover) Still, President Bush says, the ingredients for recovery are there: low interest rates and low inflation, an eager American work force. But how soon can things turn around? Economist Paul Krugman.
(Footage of stock ticker)
Mr. KRUGMAN: There's a lot of good stuff still in our economy. I mean, you don't want to say that it was all a mirage. I would be very surprised if the economy is still in the doldrums five years from now, to give you a kind of outer limit. I think we can get through that. Is it possible that we would still be in the doldrums two years from now? Unfortunately, yes.
(Footage of Baker and Braver)
BRAVER: (Voiceover) What does that mean for folks like Jim Baker, 50 and forced into retirement with a small pension and no health care coverage? What happens if you have to go to the doctor?
Mr. BAKER: Well, I've been treated for bladder cancer for four or five years, and for the last--well, since I lost my job, nothing. I--I don't go. I can't.
BRAVER: You don't go?
Mr. BAKER: No, I can't.
BRAVER: Do you know how you're doing, or...
Mr. BAKER: No. No, I don't.
Mr. KRUGMAN: I wish I had answers. Nobody's going to come--there--there isn't going to be any magic pot of money for--for--for those people.
(Footage of Lanier family; Sharon Wilcox and Braver; Baker and Braver)
BRAVER: (Voiceover) In the end, the answers may come from the old-fashioned virtues of saving and living more modestly, but that's small comfort for those who have already lost so much.
Mr. BAKER: It's not much that a guy asks for out of life. I'm not looking to live in a big mansion here. I've worked all my life. All I'm asking for is a--a home and a--and some food on the table.
(Footage of classified ads)
Mr. BAKER: I'm going to work for a long time again now. I tell the people, I'm back in the system for another 30 years. I got it in me, I can do it, but I'll tell you what--it's tough. It really is.
(Visual of SUNDAY MORNING sun logo)
(Photo of woman on motorcycle; footage of gondola; man building gondola)
OSGOOD: (Voiceover) Still ahead on SUNDAY MORNING, sex and the city--the museum. But first, going, going--gondola: an American boatbuilder in Venice.
Originally published, 9.29.02