Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.
At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?
Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.
Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion — but the surge in debt had been all too real.
For this is a broad-based mess. Everyone talks about the problems of the banks, which are indeed in even worse shape than the rest of the system. But the banks aren’t the only players with too much debt and too few assets; the same description applies to the private sector as a whole.
This is why I get so frustrated at people like Bob Corker calling the economic stimulus package a “disaster” because it doesn’t address the credit crunch. What he’s really saying is we should go back to the glorious Bush years when banks handed out credit to anyone and everyone, and we all lived in a house of cards built on debt, hoping we’d never have to pay the piper. That worked so well for us.
In June 2005, Americans stopped saving. Yes, U.S. savings rate reached zero percent in 2005 and no one in our Republican-led government had a problem with that. No one thought it might be a bad idea for people to rely on the increasing value of their homes to provide a retirement “nest egg.”
No one thought the real estate market would crumble, which was inevitable when you saw who banks were giving mortgage loans to. Our current economic crisis was entirely, 100% predictable, and quite a few of us were sounding the alarm bells way back in 2005 and even earlier about this. But we were outshouted by a conservative leadership that told us to spend, spend, spend, even if we didn’t have the money, because the pie would always get higher.
And now we see how well this irresponsible behavior served the country. The answer: not very well.
So excuse me Senators Lindsey Graham and John McCain and Sen. Corker and everyone else on the right if I don’t want to hear you whining that the economic stimulus wasn’t “bipartisan.” And that goes for WTVF-Channel 5, who repeated the same lie on this morning’s local news cast.
“Bipartisan” does not mean that the majority acts like the minority party. It certainly didn’t when the Republicans were in the majority. The Republicans held together, and now they whine they want “bipartisanship”? Give me a fucking break.
Your side of the aisle fucked it up way back in 2005, and all you want to do is go back to some kind of fantasy bubble where people keep spending instead of saving and our economy is propped up on a bunch of toothpicks that crumble at the first ripple. That’s not leadership, that’s denial.
Steeped in denial is no way to run an economy.