Barbara Ehrenreich:

So thoroughly is the economy decoupled from ordinary experience that according to a CNN poll, 57 percent of Americans thought we were already in a recession a month ago. Economists may complain that this is only because the public is ignorant of the technical definition of a recession, which specifies at least two consecutive quarters of negative growth. But most of the public employs the more colloquial definition of a recession, which is hard times. And — far removed from whatever happens on Wall Street, the Nikkei, Dax, or the curiously named FTSE — most Americans have been living in their own personal recession for years.

I could see this when I was doing research for a book on white-collar unemployment in 2004. Although the economy was officially on an upturn, I met laid-off people who’d been searching for a job for more than a year and often ended up — after selling their homes and borrowing from relatives — taking low-wage work as big-box sales clerks or even janitors.

In the months ahead, we can expect the hard times to spread. Citigroup has announced plans to eliminate 21,000 jobs; investment banks in general will shed 40,000. The mortgage industry is in a meltdown; Business Wire predicts a 37 percent increase in the number of companies planning layoffs this year. This is what a stimulus package needs to address: the persistent and growing struggles of the middle class and the working class, which is increasingly conterminous with the working poor.

There are reasons for doing so other than compassion. The chronically poor and the battered middle class have become a tripwire in the American economy — generating defaults on debts, depressed consumption and global market turmoil.

Consider how we got into the current credit crisis in the first place, through defaults on subprime mortgages. These went to plenty of affluent folks and have wreaked havoc in gated communities. But overall, subprime loans were designed for, and snapped up by, the poor. According to a recent study from United for a Fair Economy, 55 percent of subprime loans went to African Americans and 17 percent to whites. Among whites, they went far more frequently to low-income people than to the wealthy — 39 percent compared with 24 percent. Hence the subprime industry’s noble boasts about providing the opportunity for home ownership to people who might otherwise have been excluded from it.

And why were so many Americans poor enough to turn to subprime mortgages and other dodgy credit schemes? The chief reasons are low wages and job insecurity. Chronically low wages afflict about 25 to 30 percent of the population — more than twice the 12 percent the federal government counts as “poor.” And even earnings in the six-figure range can be canceled overnight when an employer downsizes or outsources, leaving a family without income or health insurance.

For years now, we’ve had a solution, or at least a substitute, for low wages and unreliable jobs: easy credit. Payday loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May cover story on “The Poverty Business,” BusinessWeek documented the stampede to lend money to the people who could least afford to pay the interest on it: Buy your dream home! Refinance your house! Financiamos a todos! It wasn’t just the bottom-feeders that joined the unseemly frenzy to lend to the poor; big companies, such as Wells Fargo and Countrywide Financial, plunged right in. But somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were borrowing.