In Brussels they had a word for it: Shutdownfreude. As the standoff between the President and Congress reached its fever pitch last week, officials at the European Commission were relieved that, this time at least, it wasn’t their political system at the center of a potential global meltdown. Now that the United States won’t default on its debt due to a few dozen Tea Party radicals, things are returning to normal. Or should we say the new normal in Europe—serial crisis.
It didn’t happen because nobody wanted it, and everybody grasped the horrific risks. In the event, the common European civilization was destroyed, three empires fell, 16 million people died, and 20 million were wounded. So World War I couldn’t happen because everyone knew how awful it would be.
In August 1914, virtually all leaders anticipated a short set of skirmishes, a readjustment of borders as in other recent wars, and everyone would be home for Christmas. But, you know, stuff happens.
In the election of 1952 my father voted for Dwight Eisenhower. When I asked him why he explained that “FDR’s debt” was still burdening the economy—and that I and my children and my grandchildren would be paying it down for as long as we lived.
I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks.
Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it.
The financial services industry is second to none in dreaming up ways to rip off Americans. Show me a a financial product—credit cards, mortgages, checking accounts, 401(k)s, annuities—and I'll show you a stack of consumer complaints documenting how banks and other firms have sought to bleed dry the American public.
As we celebrate Occupy Wall Street’s first birthday, the movement's pivoted from financial regulation to focus on crushing consumer debt. While reforming debt is crucial (particularly student debt), finance remains an imminent threat to the American economy. We shouldn't forget it.
There's little evidence that Wall Street's changed since 2008. The drumbeat of flagrant financial crimes has continued unabated in the year since Occupy Wall Street’s inception. As Senior Fellow Wallace Turbeville aptly illustrates, the culture of the "alpha" remains.
Yesterday afternoon at the National Press Club (the standard Washington venue for events that need a little class), the Committee for a Responsible Federal Budget—a bipartisan debt-reduction group—rolled out its “Fix the Debt” campaign, an attempt to push deficit reduction to the top of the congressional priority list. It's hard to overstate the extent to which this was an almost stereotypical gathering of Beltway deficit scolds.
In today’s New York Times, David Brooks has an extended meditation on debt that relies on one giant omission:
Recently, life has become better and more secure. But the aversion to debt has diminished amid the progress. Credit card companies seduced people into borrowing more. Politicians found that they could buy votes with borrowed money. People became more comfortable with red ink.
Today we are living in an era of indebtedness. Over the past several years, society has oscillated ever more wildly though three debt-fueled bubbles. First, there was the dot-com bubble. Then, in 2008, the mortgage-finance bubble. Now, we are living in the fiscal bubble.
For a moment last fall, it looked as if the last-minute debt-ceiling deal was all for nothing. Democrats had caved to Republicans’ demands to cut spending in order to keep the government funded. But Standard and Poor’s decided that the brinkmanship displayed by John Boehner and Republicans reflected poorly on the country’s ability to pay its bills, and decided to lower the U.S.’s credit rating anyway from AAA to AA+. Luckily, that decision was taken more as a reflection of the rating agency than a proper assessment of the country’s credit-worthiness. The U.S. continues to sell Treasury bonds at record low interest rates, a sign that investor confidence hasn’t been shaken.
In a few weeks, tens of thousands of students will graduate from college or university, and attempt to make their way in the economy. During better times, these former students would find jobs, rent apartments, and almost immediately begin to pump money into the economy. But—three years after the nadir of the economic crisis—the job market for young people is still terrible, and many have opted to live with their parents in order to save money. This, you can probably imagine, has only made the economy worse. Here’s TheWashington Post:
Early today, eurozone finance ministers finally approved the €130 billion rescue package to prevent Greece from defaulting, a move that will hopefully keep the country off the precipice before its bond repayment comes due March 20.