NPR helped a blackmail effort, as it was accurately described by MIT economist Simon Johnson, by telling us that we will have to pay huge amounts of money to rescue the banks. While it gave Johnson a brief chance to make his case, the piece concluded by telling listeners that "the problem is us," that we had borrowed too much and therefore we have to pay the cost in the form of big taxpayer bailouts. Okay, this is wrong, wrong, and wrong. First, the excessive borrowing wasn't just shear frivolity, it was attributable to something that got very little notice from NPR at the time and unfortunately still gets very little notice from NPR: an $8 trillion housing bubble. People borrowed against this bubble wealth because the experts that NPR and other media outlets present to the public all said that this run-up in house prices was real and would persist. Economists who warned about the housing bubble were almost completely excluded from NPR. Because NPR and the media more generally led homeowners to believe that the run-up in house prices would persist, people acting in a way that was entirely reasonable given this view. If the price of their home had gone from $200,000 to $400,000, many homeowners opted to borrow some of this equity to take vacations, buy a car, pay for their children's education or engage in other spending. They may also have stopped contributing to retirement accounts because their home was saving for them. The problem was not "us," the problem was the experts who run our economy were unable to see an $8 trillion housing bubble and the reporters who cover the economy largely refused to talk to any of the experts who could have pointed this out. These reporters now want the taxpayers rather than the bankers, who profited from the bubble, to pay for this failure. This NPR piece is identified as being "Planet Money." That may be appropriate because most listeners probably would not think it belongs on Planet Earth.
--Dean Baker
