To Beat Wal-Mart We Need to Shed Our Consumer Identity

Citizens groups are waging a growing number of successful campaigns against big-box retailers. They are winning victories in places as far-flung as Damariscotta, Maine, a coastal village where two stay-at-home moms ignited an uprising this past spring that not only blocked a Wal-Mart supercenter but led several towns to adopt store size cap laws that effectively ban big boxes region-wide, and Inglewood, California, a working class city near Los Angeles where voters handed Wal-Mart a stunning upset two years ago even though the chain spent over $1 million on a massive public relations blitz.

Despite differences in circumstances and demographics, all of these successful campaigns -- and there have been dozens in the last two years -- have one striking commonality: a core part of their strategy involves getting people to see themselves not just as consumers, but as workers, producers, business owners, citizens, and stewards of their community. When people walk into a voting booth or city council meeting with this vastly expanded sense of their own economic and political identity, they are far more likely to reject big-box development projects and to endorse measures that force these companies to adhere to higher standards. This is a crucial lesson as we work to knit these local efforts together into a broader movement to counter the power of global corporations.

In contrast, when the big chains win, they do so by getting people to assume the familiar and narrow role of consumer and to view their relentless expansion and radical restructuring of the economy as simply a matter of shopping options.

Although pervasive in its influence today, this consumer identity is a relatively recent invention. It only became a powerful force in U.S. politics in the years after World War II. To a large degree, it was created and propagated by the first generation of chain retailers-companies like A&P, Kroger, and Woolworth-which encountered such strong public opposition in the 1920s and 30s as to call into doubt their continued existence. The chains responded with a massive PR campaign that managed to transform American citizens into consumers-a sharply circumscribed identity that corporations have used to augment their power ever since.

Chain stores first began to multiply in large numbers in the years following World War I. During the 1920s, the number of chain stores climbed from about 30,000 to 150,000. By the end of the decade, they were capturing 22 percent of all retail sales nationally. Leading the pack was A&P, with some 15,000, mostly small, outlets that accounted for 11 percent of the country's grocery sales and generated over $1 billion in annual revenue. A&P was the Wal-Mart of its day-although it was, in relative terms, significantly smaller, accounting for 2.5 percent of all retail sales, compared to Wal-Mart's 10 percent share today.

As the chains expanded, so too did opposition to their presence. It was a cause embraced by populists, progressives, unions concerned about wage pressures, farmers fearful chain store buying power, wholesalers, and of course local business owners. By the late 1920s, more than 400 local organizations had sprung up around the country to counter the chains. These "home defense leagues" and "better business associations" were varied in their approaches. Some, like the Community Builders in Danville, Virginia, never mentioned the chains, but instead promoted the idea, through billboards and radio programs, that money that stayed in town helped to build the community and its institutions. Other groups attacked the chains directly and exhorted people to boycott them. A campaign in Springfield, Missouri, urged, "Keep Ozark Dollars in the Ozarks," and ran newspaper ads describing chain store managers as "mechanical operators" whose duty was to "get Springfield's money and to send it to the Home Office."

The anti-chain cause was the focus of at least forty newspapers and a dozen radio programs, including a broadcast by W.K. Henderson, the popular and foul-mouthed forerunner of today's shockjocks, whose show, out of KWKH in Shreveport, Louisiana, was heard throughout the South and West. In 1930, the Reverend J.M. Gates, a prolific African-American preacher who sold tens of thousands of records of his sermons, including such hits as "Are You Bound for Heaven or Hell?" and "Kinky Hair is No Disgrace," recorded one calling on people to "stay out of the chain stores."

By 1930, "the chain store problem" had entered the national political debate in full force. The Nation ran a four-part series entitled, "Chains Versus Independents," while The New Republic asked, "Chain Stores: Menace or Promise?" That year, the nation's high school and college debate teams argued the proposition, "Resolved: that chain stores are detrimental to the best interests of the American public." Several U.S. Senators and Congressmen ran on anti-chain platforms, while Progressive gubernatorial candidates in Wisconsin and Minnesota made the chains a central issue in their campaigns. An ex-governor of Texas reportedly "received a revelation from God to get back into politics and save his people from the chain-store dragon."

Opponents argued that the chains threatened democracy by undermining local economic independence and community self-determination. As they drove out the local merchant -- a "loyal and energetic type of citizen"-- the chains replaced him with a manager, a "transient," who was discouraged from independent thought and community involvement, and who served as "merely a representative of a non-resident group of stockholders who pay him according to his ability to line their pockets with silver."

Many believe, wrote Supreme Court Justice Louis Brandeis, author of Curse of Bigness and a strong advocate of vesting both economic and political power in local communities, that "the chain store, by furthering the concentration of wealth and of power and by promoting absentee ownership, is thwarting American ideals; that it is making impossible equality of opportunity; that it is converting independent tradesmen into clerks; and that it is sapping the resources, the vigor and the hope of the smaller cities and towns." Chain stores drained money from communities, drove down wages, and squeezed producers. In a study of 45 chain and independent grocers in ten cities, two writers for The Nation found that prices at the chains were seven percent lower, but their wages were 20 percent less.

At a time when Americans had not yet defined their role in economic and political life as primarily that of a consumer, but still thought of themselves as independent producers, workers, citizens, and custodians of local communities, these arguments found widespread support. The chains' overall market share stagnated, hovering at just over 20 percent through the 1930s and well into the 1940s.

Those opposed to chains sought not only to change people's shopping habits, but to implement legislation that would retard their growth. In the mid 1920s, several state legislatures debated bills that would impose a special tax on chains. In 1929, Indiana became the first state to adopt such a tax. It was a graduated business license fee that increased according to the number of outlets a retailer operated, ranging from $3 a year for a single store up to $25 per store for chains with 20 or more outlets. The law was immediately challenged as a violation of the equal protection clause of the U.S. Constitution. Two years later, it was upheld by the Supreme Court in a 5-4 ruling that concluded that the distinction between chains and independents was reasonable enough to justify different tax rates.

Between 1931 and 1937, twenty-six states adopted chain store taxes. Dozens of cities did as well, led by Portland, Oregon, in 1931. Others, including Cleveland, Louisville, and Phoenix, soon followed. Some of these taxes, such as Indiana's, were nominal enough to have little impact on the chains. Others were more severe. Texas assessed a $750 per store tax on chains with 50 or more outlets; Pennsylvania collected $500 on stores in chains exceeding 500 units. To put this in perspective, the grocery chain Kroger, which had 4,000 outlets in 1938, posted profits of about $1,000 per store, while Walgreen with 1,900 units earned about $4,000 per store. When figuring the tax, most states counted only the number of outlets within their borders, but Louisiana based its levy on the total number of stores the chain had nationally.

Although the U.S. Supreme Court upheld these taxes in several cases, including one challenging Louisiana's law in 1937, it defined the scope of state authority very narrowly and somewhat arbitrarily. Variations on the standard chain store tax-the graduated license fee-were struck down by the Court, including laws in Kentucky and Iowa that taxed a retailer's revenue, increasing the rate according to the volume of sales. The majority concluded-with Brandeis and two other Justices dissenting-that these laws treated national retailers differently from other retailers, violating their rights under the 14th Amendment, which was adopted after the Civil War to ensure all people equal treatment under the law.

The decision was built on rulings going back to the 1880s, when the Supreme Court had greatly expanded the power of corporations by extending to them the same protections granted to citizens under the Bill of Rights. It was a radical departure from the first century of U.S. history. Where once corporations had been subordinate to the public will, now they were given equal footing and potent legal rights. This expansive notion of corporate "rights" hindered states' ability to regulate chains. It endures to this day and explains why mega-retailers have been allowed to initiate ballot referenda and engage in political campaigns: despite their superior financial resources, they are deemed to have the same rights as citizens to free speech and participation in the political process.

As cities and states continued to test the reach of their authority to regulate chain stores, Congress took up the issue, passing the Robinson-Patman Act, which barred large retailers from using their market power to coerce suppliers into giving them special deals not made available to independents.

Then, in 1938, Congress turned its attention to another proposal by Rep. Wright Patman, who sought to levy a national tax on chain stores. Co-sponsored by seventy-five Congressmen from 33 states, the bill would have dealt a death blow to most national chains. For those with more than 500 outlets, the base rate was $1,000 per unit. This was then multiplied by the number of states the chain spanned. Had the tax been in place in 1938, A&P would have owed $472 million in taxes on earnings of $9 million, while Woolworth's would have been assessed $81 million on $29 million in profits. Patman's bill phased in the tax over several years; the intent was to give the chains time to sell most of their stores to local owners.

By the time Congress considered Patman's bill, however, the political terrain had begun to shift. The chains had mounted a massive public relations effort. It began in California in 1936, when the chains hired the Lord and Thomas Advertising Agency to gather signatures to force a referendum on the state's newly enacted chain store tax and to wage a campaign against the measure.

Lord and Thomas advised the chains that they had three natural allies: their employees, suppliers, and customers. Under the ad firm's counsel, the chains started calling employees by name rather than number, raised their salaries, and lessened their work load. They curried favor with farmers by absorbing a bumper crop of peaches. They tried to improve their community image by ordering store managers to join local chambers of commerce. Lord and Thomas dispatched an army of speakers, who extolled the chains' virtues before any civic group or club that would listen.

Two months before the vote, the chains unleashed a barrage of radio and newspaper advertising. They sidestepped the issues of community self-determination, jobs, and local businesses, and instead cast the debate in the narrow framework of consumption. "Vote NO and keep prices low," they urged. Early opinion polls had shown strong support for the tax, but on election day, it was trounced by a two-to-one margin.

The chains took their public relations campaign national, forming the American Retail Federation (which later became today's National Retail Federation) to carry it out. They ran advertisements touting their consumer benefits and attacking the Patman tax in every daily newspaper in the country. They won over key constituencies, notably farmers and organized labor. Support from farmers came as the chains continued to buy up surplus crops, saving citrus growers in Florida, walnut growers in Oregon, and turkey farmers in New York. In 1938 and 1939, A&P, which had previously fought unionization, permitted its stores to be organized and signed a series of collective bargaining agreements. The company's change of heart came "under the guidance of their public relations council." In meetings with the president of the American Labor Federation, they cut a deal: unionization in exchange for labor's opposition to Patman's bill.

Most significantly, the chains continued to cultivate the consumer identity. The more people saw themselves as consumers-not producers, workers, or citizens-the less concerned they were about how the chains were impacting their livelihoods and their communities, and the more inclined they were to see the chains as satisfying an essential need for "quality, price, and better buying information."

In 1939, Business Week reported that the chains had "reversed the trend against them." Patman's tax failed in 1940. The following year Utah voters rejected a chain store tax. No other chain store taxes were enacted after that point. Over the years, those on the books were either repealed or rendered irrelevant by inflation.

The post-war years saw the triumph of the consumer as the primary way in which Americans identified themselves and articulated their economic and political interests. The notion that the ownership structure of the economy ought to embody and support democratic values faded from view. Economic policy was no longer seen as an instrument for nurturing self-reliance and self-government, but for furthering efficiency and consumer welfare.

Brandeis's stance in favor of decentralizing both economic and political power disappeared as a working policy position. Liberals instead resolved the problem of concentrated economic power by embracing a strong federal government that would regulate corporate America's worst excesses and establish a social welfare system to absorb the fallout. Today, while liberals and conservatives may argue about the size and scope of the federal government, support for breaking up and dispersing economic power finds expression in neither of the major parties.

Unease about corporate power and a desire for greater community self-determination has, however, emerged once again as a potent issue at the local level. It's evident in the rising interest in locally grown food and other products, and in the many cities that are setting their own economic policies, enacting such measures as living wage laws and ordinances that restrict the expansion of Wal-Mart and other corporate retailers. Many are also actively fostering the development of a locally rooted economy. Meanwhile, in some three dozen cities, local business owners have banded together in Independent Business Alliances that are calling on people as citizens to engage in a kind of economic disobedience by withdrawing support for the chains and shopping locally owned, as well as shaking up local politics by articulating a pro-business agenda that differs markedly from what's put forth by most big business-dominated chambers of commerce.

It's too early to tell, but these initiatives-which will be the subject of the remainder of this book-may well usher in a future America that is not dominated by a handful of global corporate giants, but rather embraces a decentralized economy more conducive to democracy.

Stacy Mitchell, author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses, is a senior researcher with the New Rules Project, a program of the Institute for Local Self-Reliance. She is the author of "The Hometown Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters."

If there is one thing that most inhabitants of the late 20th century shared in common, it was a perception of rising global abundance in virtually all fields: energy, food, housing, consumer goods, fashion, mass culture, and so on. Yes, there were pockets of poverty in many areas, but most people in most places around the world were seeing a rise in their personal income and an increase in the number of things in their possession, along with the supply of energy with which to move or power their many personal goods.

At least some strata of the global population will continue to experience an increase in personal wealth in the 21st century, but the sense of abundance that characterized the late 20th century is likely to evaporate for the great majority of us. One day affordable luxuries like overseas vacations and meals out will become unattainable, and even basic necessities like energy, electricity, water, and food are likely to become less plentiful and more expensive. This global austerity will produce great hardship for the poor and will force even lower-middle class families to choose between long car trips, restaurant meals, air-conditioning in summer, and high thermostats in winter.

Less Supply, More Demand

Lying behind this historic shift in global fortunes is a fundamental reversal in the balance between resource supply and demand. For most of the 20th century, global stockpiles of vital materials like oil, natural gas, coal, and basic minerals expanded as giant multinational corporations (MNCs) poured billions of dollars into exploring every corner of the Earth in the drive to locate and exploit valuable deposits of extractible materials. This permitted consumers around the world to increase their consumption of virtually everything, safe in the knowledge that even more of these commodities would be available next year and the year after that, and so on infinitely into the future.

But this condition no longer prevails. Many of the world's most promising sources of supply have been located and exploited, and all of the additional billions spent by MNCs on exploration and discovery are producing increasingly meager results. Ever since the 1960s, the most fruitful decade in the worldwide discovery of new oilfields, there has been a steady decline in the identification of new deposits, according to a recent study by the U.S. Army Corps of Engineers. Even more worrisome, the rate of oil field discovery fell below the rate of global petroleum consumption in the 1980s, and since then has fallen to approximately half the rate of consumption. This means we are increasingly relying on deposits found in previous decades to slake our insatiable thirst for petroleum -- a pattern that cannot continue for much longer before we will begin to experience an irreversible and traumatic decline in the global supply of oil.

The same is true of other vital resources, including natural gas, uranium, copper, and many minerals. There may be adequate stocks of these materials on global markets today, but the MNCs are not finding enough new deposits of these commodities to replace what we're consuming. So future shortages are inevitable.

Water is somewhat different, in that we receive a fresh supply of it each year through evaporation from the oceans and precipitation on land -- but even this precious resource will become scarcer in the years ahead due to population growth, urbanization, industrialization, the over-exploitation of underground aquifers, and global warming (through persistent drought and the accelerated evaporation of rivers and lakes).

This contraction in the global supply of vital resources will affect our lives in myriad ways. On a personal level, it will force us to consume less -- for example, by buying smaller, more fuel-efficient cars and smaller, more energy-efficient homes. We will have to make other accommodations as well: fewer long-distance trips to the seaside or distant amusement parks; fewer long-distance airplane rides; lowered thermostats in winter; and so on. These cutbacks will be minor inconveniences for some, but significant hardships for others -- especially the poor, the elderly, and others on a fixed income. Farmers will have a particularly hard time, as the cost of virtually everything associated with modern, mechanized agriculture -- diesel fuel, pesticides, herbicides, fertilizers, food supplements -- will become far more expensive.

Less Stuff, More Conflict

At the national level, we can expect a significant change in foreign policy. As supplies of energy and other basic necessities become scarce, senior officials will come under enormous pressure to "solve" the problem by any means necessary, including the use of military force.

In the case of energy, this could lead to future wars over oil. Even if oil were not the only motive for the U.S. invasion of Iraq, the United States has long sought to maintain a dominant position in the oil-rich Persian Gulf area and a permanent U.S. military presence in Iraq will facilitate American efforts to seize the oil of Iran and neighboring countries if a decision were ever made to do so. The Department of Defense is also beefing up its capacity to "project" military power into the oil-producing areas of Africa and the Caspian Sea basin. No one in official circles will admit that "guarding foreign oil fields" is the ultimate objective of Pentagon war plans, but it is becoming increasingly evident that the American military is being reconfigured to accomplish exactly this task.

Nor is the United States alone in thinking along these lines. China also seeks to enhance its capacity to project power into foreign oil-producing areas. And Russia, with a surplus of energy, seeks to exploit its advantageous position in order to extract concessions from less privileged nations.

Future shortages of water are also likely to prove a source of international friction and conflict. Egypt, which relies on the Nile River for virtually all of its water, has threatened to attack Sudan and Ethiopia if they proceed with plans to dam the Nile and divert some of its waters into irrigation schemes desperately needed to feed their rapidly growing populations. Israel has also threatened to go to war with neighboring Arab states if they move ahead with plans to dam the Yarmuk River (one of the tributaries of the Jordan) or otherwise jeopardize Israel's already over-stretched water supply. Such threats -- and possibly actual outbreaks of conflict -- are likely to become more common as the demand for water rises and global supplies dwindle.

The Gestalt of Austerity

The end of abundance is not the same thing as outright scarcity. Some commodities, like oil, may become truly scarce in later decades of the 21st century, but they will not disappear altogether. Those with means will still be able to purchase gasoline and air conditioning and other soon-to-be luxury items. But the end of abundance will create a new international environment -- a new gestalt, if you will -- in which expectations are lowered and struggles over what remains become fiercer and more violent.

Ideological, political, and ethnic differences will have their place in this new environment, but increasingly these will be infused with or subordinated to resource pressures. The growing edginess evident in Sino-American relations, for example, can be traced at least in part to a perception that the United States and China are becoming bitter competitors in the global hunt for new sources of petroleum. Likewise, the growing frostiness in U.S.-Russian relations can be attributed in part to Moscow's heavy-handed use of its natural gas monopoly to browbeat neighboring countries like Ukraine and Georgia. This is exactly how we would expect international affairs to evolve in a Post-Abundance Era.

Prediction is always risky, and it is entirely possible that some unanticipated event on the scale of 9/11 or World War II will come along and redefine the current epoch. But such a calamity aside, the end of global abundance and the resulting scramble for resources is likely to prove the most conspicuous feature of the emerging international landscape.

Michael T. Klare is a professor of peace and world security studies at Hampshire College in Amherst, Mass., and the author of Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency.

The trouble began early in the year, when the housing boom that was supposed to continue forever turned into a housing bust. The rate of house price appreciation didn't just slow, as most economists predicted, nor did prices simply flatten in accordance with their revised predictions. House prices began to fall. Nationwide, house prices are now down between 1 percent and 2 percent from their levels at the same point in 2005. (The decline is between 4 percent and 5 percent, if we adjust for inflation.) The price declines in some of the most over-valued areas, like Washington, DC, and parts of Florida and California, have been considerably sharper.

In fact, the price declines are even larger than is shown in the data, because sellers now routinely make payments that are not captured in the contracted price, such as picking up some of the buyer's closing costs or making repairs to the house before the sale. Such practices were unheard of a year ago.

When the downturn in the housing market could no longer be denied, the economic forecasters assured us that the rest of the economy would remain strong. They noted the strength in non-residential construction, strong investment in equipment and software, and of course the resilience of consumers.

This picture is not panning out well either. The non-residential sector experienced a short boom earlier in the year. This should not have been a surprise. The housing boom pulled resources (workers and construction materials) away from the non-residential sector. In some of the areas with the most over-heated housing markets, it wasn't possible to get the workers needed to build stores, offices or other non-residential structures. This meant that when demand in the residential sector eased, resources could switch to meet the pent-up demand in the non-residential sector.

But, it was predictable that this boom would be short-lived. The residential sector is twice as large as the non-residential sector. And there just is not that much pent-up demand. There was serious overbuilding in the office and retail sectors in the late-90s boom, and the continued decline in manufacturing means demand for factory construction is limited. According to the most recent data, construction in the non-residential sector was already falling off by the end of the third quarter.

The boom in equipment and software investment also seems to have disappeared. The latest numbers in this sector have been negative also, suggesting that investment will be at best a very small positive in the economy in the next year.

This leaves us with our resilient consumer. The economic forecasters assure us that strong job growth, coupled with healthy wage growth and falling gas prices, will give consumers the money they need to keep spending.

Well this story does not look very good either. Job growth has actually been slowing over the course of the year, with the private sector adding less than 100,000 jobs on average for the last two months. Falling gas prices are a positive, but since no one had expected gas prices to soar to $3 a gallon, the fact that prices have fallen back to last year's levels does not give consumers that much of a boost. Finally, we are looking at modest real wage growth (at 1 percent annually), but this is not extraordinary and not enough to provide a very large boost to demand.

The more important part of the story for consumers is that they are losing the ability to borrow against their homes. Last year, consumers pulled more than $800 billion in equity out of their homes. Many people bought their homes with little or no money down, and then borrowed against their equity as quickly as their house price rose. Now that house prices have turned down, they have no further equity against which to borrow. This means that these consumers have no choice but to curtail their consumption.

The evidence for this falloff is spreading by the day. Projections of weak holiday sales and slumping car sales top the list. Throw in the reports of rapidly rising rates of mortgage delinquencies and defaults and you get a clear picture of rapidly growing distress.

Of course, with all sources of demand showing weakness, job growth will slump further, and we'll get our classic downward spiral: declining employment, falling income, falling consumption, and then further job loss. The story is not pretty, but unfortunately there is no way to prevent it. This downturn will be especially painful because it is associated with a crash of the housing bubble. This means both that many people will lose their life's savings and also that the recession is likely to be longer lasting than most.

The picture would not have been so dire if economists had been better able to do their job. Unfortunately, economic forecasters seem more interested in happy talk than economic analysis. Not one of the "Blue-Chip 50" forecasters saw the 2001 recession coming. The record seems no better this time around.

Unfortunately, no one ever holds the forecasters accountable. Even though they all missed the last recession, and just about all of them will have missed this recession, the same group will probably still be around to miss the next recession. Some workers, like dishwashers and custodians, teachers and truck drivers, have to meet performance standards. Economic forecasters apparently just have to show up to collect their paychecks.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

More than 115,000 properties across the country were in the foreclosure process in October - up 42 percent from the same month a year earlier, according to RealtyTrac, a California company that tracks foreclosures.

Foreclosures in Georgia are up a stunning 99 percent in the past year.

The state now has the nation's third-highest rate of foreclosures: One in every 449 households. In October, that meant 6,895 properties were in the foreclosure process.

Not all changed hands. Some homeowners came up with the needed payments; others couldn't afford the whole debt but lenders agreed to a delay while they worked out a payment plan. Still, hundreds were auctioned.

The taking of homes - generally because the owner hasn't been making mortgage payments - has always been brisk here because state laws are written for speed. Georgia is one of three states in which lenders can foreclose on houses in as few as 37 days.

Foreclosures ramped up in recent months as once-low introductory interest rates on adjustable mortgages edged up, making monthly payments unaffordable for some homeowners.

Qualified borrowers several years ago could get mortgages with rates below 4 percent, but at the end of the starter period, those rates could adjusted skyward by 2 or 3 percentage points. That would add more than $300 a month to a mortgage of $250,000.

"We really haven't had any letup," said Ralph Goldberg, a Decatur attorney whose clients include many distressed homeowners. "We know, toward the end of the month, people are going to be coming in. The Friday and Monday before [monthly] Foreclosure Day are always busy."

A foreclosure dashes a person's dream of home ownership; it also tarnishes a consumer's credit and makes future borrowing more costly.

The danger for the overall economy is that a rising pool of foreclosures will overflow into other segments of an already troubled real estate market.

Most critically, foreclosures add to the number of homes for sale. They offer bargains to buyers, but dampen the prices other sellers might get.

In addition, many of those who lose their homes also are losing the largest investment of their lives, a source of both confidence and cash.

Marginally qualified

The surge of foreclosures is, in some ways, the backwash of the five-year housing wave that began washing out last year.

Homeownership, construction and sales reached unprecedented levels, partly because lenders tried so hard to get people into houses. By standards of the past, many first-time purchasers were marginally qualified, with modest incomes and little in savings.

But with creative mortgage arrangements, the buyers often were able at least to start off paying interest rates dramatically below market levels. They often avoided a down payment entirely. Atlanta has been among the nation's leaders in the percentage of borrowers taking adjustable rate or interest-only mortgages.

"They get qualified at the teaser rate," said attorney William J. Brennan Jr., director of the Home Defense Program Atlanta Legal Aid Society. "Of course, they can't afford to pay when the rate goes up."

Most foreclosures happen on mortgages held less than five years, according to a study last year by Harvard University's Joint Center for Housing Studies.

Goldberg, the Decatur attorney, said an increase in mortgage payments can be crippling.

"There are a lot of people who seem to have mortgages that are astronomically high, and they are just being eaten up," he said. "You look at the money they have, and you look at the mortgage, and you think, 'How did this happen?' "

Professionals hit, too

Lenders have a powerful incentive to find and qualify borrowers - whatever their income or past. The risks are eliminated for lenders that sell the loans to companies that package thousands of loans together. Those firms figure any defaults will be offset by the vast majority of loans that are profitable.

Buyers are willing co-conspirators. Buyers often lose their homes because they have no cushion to absorb unexpected expenses.

"We see people with the same issues over and over," Brennan said. "There's a death in the family, or someone is losing a job, or someone gets sick."

That can mean trouble even for white-collar professionals.

Phillip Newman is a mechanical designer. He bought a home in Lithonia two years ago, obtaining a mortgage that required a monthly payment of $1,260.

Four months later, his company was purchased and his job eliminated.

He was out of work for five months, then found a one-year contract job. When that ended, he scrambled for three months and in July found his current position - where he makes about 25 percent less than he had as a consultant. He fell way behind in his mortgage payments and was scheduled for foreclosure in October. He says he cut spending: He has no cable television, no cellphone, no Internet connection.

He kept talking to the mortgage company and arranged to pay a little more each month to catch up - something that the new job makes possible.

"Hope the car doesn't break down," he said.

One sign of how widespread foreclosures have become is the growing willingness of lenders to negotiate with delinquent homeowners, said Herb Heitman, an Atlanta bankruptcy attorney. "Ten years ago, they never made deals."

Local agency busy

In January, the Consumer Credit Counseling Service of Greater Atlanta assisted 450 people with financial troubles - nearly all of them dealing with the threat of foreclosure.

In October, the agency counseled more than 1,000, said Susan Hunt, director of the housing program.

"I have doubled my staff, and we still haven't met the need," she said.

In some ways, it's the same as always: People lose a paycheck or hit a sudden expense, Hunt said. But it's different, too. Millions of home buyers are just coping with their first big jump in mortgage rates.

"About 40 percent of the people we talk to have a mortgage with an adjustable rate," Hunt said. "And that is true across the board. We have people who live in Alpharetta in great big mansions. Their adjustable rate escalates, too."

By Foreclosure Day, it's too late for Consumer Credit to help, Hunt said.

"Someone will call and say, 'I am on the courthouse steps, and my house is next. What can I do?,' " she said. "And we can't do anything then."