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David Brooks' Crusade of Denial

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Friday, 02 April 2010 05:15

To those who pay attention to the economy, it's rather evident that the basic economic problems of the last two decades are the bubble driven growth of this era and the country's broken health care system. But NYT columnist David Brooks apparently never allows the actual state of the economy to affect his pronouncements about the economy and our moral state.

Therefore he describes the rise of personal debt from 55 percent of national income in 1960 to 133 percent in 2007 as being the result of the fact that: "life has become secure. This has eroded the fear of debt, private and public."

Let's try an alternative hypothesis. Wages have stagnated for tens of millions of workers. I guess no one Brooks hangs out with caught this development. In a context of stagnating wages, many families have been forced to take on debt to maintain living standards.

The other reason that borrowing has increased is that people spent money based on their stock and housing bubble wealth. Perhaps Brooks can't be blamed for not knowing about the stock and housing wealth effects, after all you would probably need an intro econ class to know about these concepts, but perhaps he could have found an econ major who could have explained that consumption increases when wealth increases. This means that when a housing bubble creates $8 trillion of housing bubble wealth, we would expect consumption and debt to increase. After all, rich people can afford to borrow more than poor people and the wealth created by the housing bubble made many families feel richer. The same was true of the $10 trillion in bubble wealth created at the peak of the stock bubble.

If Brooks wanted to discourage excessive debt, he might have called attention to these bubbles. But, Brooks would rather use his columns to call out the moral failings of the American people. Hence his comment that: "these days, voters want low taxes — about 19 percent of G.D.P. And they want high spending — over 25 percent of G.D.P. by 2020." He later warns us that this has on a path to be paying $900 billion a year in interest by 2020.

Yes, that $900 billion is really really scary. I don't know anyone who has $900 billion. Serious people would point out that the projected interest burden is a bit more than 4.0 percent of GDP, about the same as it was in the early 90s.

More importantly, there are not many people who have advocated spending 25 percent of GDP. They have expressed support for specific programs, like Social Security and Medicare. The latter costs way more in the United States than in any other country, not because we get better care, but because our health care system is hugely corrupt and inefficient. If we paid the same amount per person for health care as people in any other country then the deficits would quickly vanish.

Furthermore, even if fixing our health care system is hard to do politically because the system is so corrupt, we could achieve enormous savings by just allowing for freer trade in health care. But Brooks is such a hard core protectionist when it comes to the interests of the health care lobby that he cannot even conceive of openings to trade that would hurt their interests.

So, we instead get a lecture about the moral failings of the American people and the need for heroic actions to save them from themselves with carefully constructed commissions of experts. This is the best that American conservatism has to offer?

Comments (3)Add Comment
Yes, but
written by J Starr, April 02, 2010 2:47
You raise some excellent points with which I agree, but the whole American obsession with instant gratification and the desire to show up the Joneses is part of the problem.

However, given that our economy depends so heavily on us buying things we don't really need, this mentality is not surprising. We seem to be manipulated in an endless circle by advertising that manufactures demand; corporations that lobby to pass regulations that protect their industry or choke off competition; credit card & pay-day loan companies who encourage us to spend, spend, spend; and the vultures who swoop in to buy our low-priced assets when the over-extended consumer finally declares bankruptcy.

Nefarious as this may be, the consumer nevertheless has the free will to resist it. Everyone has a role in the problem, that's all I'm saying.
This is the best that American conservatism has to offer?
written by Texas Aggie, April 03, 2010 8:49
Yes, it is. What did you expect?
...
written by scott, May 01, 2010 3:44
I don't disagree with your critique of Brooks, but you miss yourself. Your pointing out that healthcare and our legislative process is broken doesn't fix it. It's intractable. So, then it would seem that healthcare won't get fixed. We won't gut the Pentagon.

We are steaming toward a waterfall, in a big, slow lumbering ship of state. This thing takes a long while to turn around. Only, there is no consensus whether we should turn to the left or right.

You're talking about nearly a third of the budget that will go to the rich--not back to all Americans so it won't matter, but to pay off the rich for loaning us money we aren't willing to tax from them. That is greater than the defense budget.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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