David Brooks -- Bobos in Paradise and On Paradise Drive -- has written an editorial about the destructive qualities of the last 30 years of "financial decadence," that is, irresponsible amounts of debt.
Of course, the collapse of the housing bubble has this topic is on everyone's mind. This was a boom fueled almost entirely by stratospheric amounts of debt, credit both easy and weird, and also by our collective, nostalgic, frequently misplaced faith in the inherent value of "owning" one's own home.
This bubble is even worse than the stock bubble of the 90s -- when a stock bubble collapses, it leaves people broke and sometimes out of work. But when a housing finance bubble collapses it leaves people broke, homeless, deeply in debt, and eventually out of work as well. It turns neighborhoods into ghost towns of suburban blight.
But, oddly, Mr. Bobo doesn't even mention the housing bubble as a symptom of financial decadence -- perhaps because it would seem to undermine other socially conservative ideas he likes to champion? After all, how does he think his beloved Bobos (his word for the nouveau yuppie, a portmanteau of bourgeois and bohemian) got their sprawling mansions on Paradise Drive? Paying cash?
This particular op-ed piece is shilling for a new think tank press release called "For a New Thrift: Confronting the Debt Culture," by the Institute for American Values.
(The IAV web site claims they are "nonpartisan" but I'm gonna go out on a limb here and claim that when most of your articles are about the desirability of heterosexual marriage, plus a section featuring a bunch of justifications for the Iraq War written in 2002, that you're kinda sorta maybe a little bit right wing. Just a tad.)
(Another diversion: what is the deal with think tanks anyway? I mean, it sounds like a sweet deal -- get paid a lot of money to sit around and try to think of stuff! But honestly, why should I care what they have to say about anything? The whole setup has a rarified, hothouse quality that makes the academic world seem gritty and street level in comparison.)
Brooks invokes a frugality-as-morality ethic he attributes to Benjamin Franklin and the Puritans, claims it is responsible for making this a great and affluent nation, then bemoans more recent trends:
Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened.
Of course, if one is going to invoke the esteemed Mr. Franklin, one might just as well say that scientific curiosity, a puckish sense of humor, and being an unapologetic dirty old man are what made this country great.
But somebody arguing from a conservative standpoint, as Brooks tends to do, has a dilemma: 30 years ago, minus a couple of years, was the start of the Reagan era. Deregulation was the word of the day, and that deregulation included financial institutions. The explosion of easy credit was caused directly by Republican policies.
Eight years of Clinton as president didn't reverse the trend. Clinton was more fiscally prudent overall than the Republicans before or since (balanced budget? anyone? anyone?), but the whole easy consumer credit thing seemed to be working, so he kept it up.
Brooks can't blame the looming debt crisis on deregulation of financial institutions. He can't blame it on housing. He can't blame it on student loans or medical debt without sounding suspiciously liberal. So where does he fix the blame?
The deterioration of financial mores has meant two things. First, it’s meant an explosion of debt that inhibits social mobility and ruins lives. Between 1989 and 2001, credit-card debt nearly tripled, soaring from $238 billion to $692 billion. By last year, it was up to $937 billion, the report said.
Of course, credit card debt. The one kind of debt that allows him to play the conservative scold and shake his finger at individual people for foolish personal choices.
(See, in the conservative universe, every single thing that ever happens to you is simply a matter of personal choice, therefore, if anything goes wrong, it is because you made the wrong choice.)
Brooks then draws a distinction between the high "investor class" and the low "lottery class," without acknowledging even a little that the amount of money and resources people started out with might play a role in which class they end up in. Nope, if you find yourself in a world of "payday lenders, credit cards and lottery agents" it's entirely because of social norms. Note how he conflates credit card debt, which is ubiquitous in all classes, and payday lenders, who almost exclusively prey on those with very little money. Also, I'm pretty sure that everything people invest in -- real estate, stock market, startup businesses, even their own careers -- is actually a lottery. It's just that these are lotteries with a somewhat better payout. Look at the housing crisis. A lot of the people defaulting on mortgages are people who tried to join the "investor class" by purchasing their own home, but they didn't quite have the capital resources to do it. They lost the gamble.
He spends a little time fixing blame -- on state governments with their lotteries, which exact a "moral toll" by "telling people that they don’t have to work to build for the future." He blames payday lenders and credit card companies for targeting the poor, young, and vulnerable -- something where I do agree with him. He blames Congress and the president, but he claims that "It’s only now become respectable" to run a huge federal deficit, which strikes me as historically ignorant. He acknowledges the roles of Wall Street and hedge fund managers.
But his first remedy, to "raise public consciousness about debt the way the anti-smoking activists did," seems to be putting everything back on the shoulders of individual consumers. Even though his recommendations aren't necessarily bad ideas -- enforce usury laws, create non-profit foundations to directly compete with payday lenders, reform the tax code to reward savings -- he seems to be deliberately ignoring the larger picture.
Where is the recommendation for reform of financial institutions to eliminate the financial incentive for risky loan behavior? Where is the recommendation to, for example, raise local taxes so that states don't feel they need to rely on lotteries for revenue? Where is the recommendation to help balance the federal budget by -- oh, I dunno -- getting rid of the $341.4 million per day financial burden of the Iraq occupation?
Also missing in Brooks' essay is any suggestion that the middle class often gets into crushing debt for things that are either necessary (medical bills have been the number one cause of bankruptcy) or generally considered to be a social good -- housing, education, starting a business, etc.
It certainly won't hurt if we implement the suggestion to get credit card companies off college campuses. But when the average student graduates with $21,000 in loan debt, the average credit card debt of $2,200 seems a bit like a drop in the bucket.
One final thing Brooks ignores, in his paean to the virtues of frugality, is that the current United States economy is reliant on consumer spending to stay afloat. If everyone actually stopped spending money right now the result would most likely be a severe worldwide depression.
Maybe it can't be avoided. Maybe the consumer economy has simply played itself out, and debt is a symptom rather than a cause. Maybe we need to transition to a post-consumer economy and a depression-level shock is the only way to get there.
But I'm not personally looking forward to it. And I can't imagine Brooks is, either.