Economist Robert Schiller began his work in the New York Times Sunday morning with a chilling line: “We have to consider the possibility that the housing price downturn will eventually be as big as that of the last truly big decline, from 1925 to 1933, when prices fell by a total of 30 percent.” He then documents the big ideas to stablize the American family that came out of the Great Depression — FHA, expanded bankruptcy protection, FDIC insurance. Seventy years later, the main response to the housing meltdown has been a proposal for a super-SIV to keep money flowing to the banks that have sunk themselves in bad real estate mortgages.
Schiller advances some bold ideas (including my push for a Financial Product Safety Commission — thanks, Bob), but the “why” question lingers: Why are there so few big ideas for domestic economic change? With flat wages and the family debt load growing daily, with foreclosure estimates now moving toward three million, with half of all families worried that they couldn’t manage the financial fallout from an illness or accident, with students loading on tens of thousands of dollars of debt just to complete their educations and begin their lives, and with Americans worried that they will outlive their retirement money, why are we thinking small?
Here are some thoughts, but please add your own:
The Reagan Effect. As a nation, have we come to believe that the government really can’t help? Was the failure to manage relief for Katrina victims just one more example of government ineptitude, a confirmation that government doesn’t work? Have we lost our optimism that when we work together that we can make significant improvements?
Not-My-Problem Syndrome. Do we think we are all islands, so the foreclosures and credit card defaults won’t affect us if we are careful with our own money? Do we think that a meltdown on Wall Street won’t take down our 401(k)’s? Do we believe we can survive as a nation if half of the middle class crumbles around us?
The Happy-Days-Are-Here-Again Theme Song. Could it be that we’re all just fine? The media keep telling us that the consumer is resilient and spending will continue, and the stock market keeps rebounding, so is there no reason to think big because there is no problem?
The Fox News Impact. Has every problem become so politicized that any claim to see a problem or to propose a solution is nothing but naked politics? Must any discussion of debt or foreclosures be followed by a high-volume attack on the stupidity of people who got themselves in trouble? Are we paralyzed by the notion that one side always balances out the other, so there can be no consensus to act?
Is it all this and more? Or is there some other reason that even in the face of unprecedented risks, we keep thinking small?
