Morality, Values, and Priorities


The Great Seduction
New York Times Op-Ed, 2008-06-10

[Paragraph numbers and emphasis are added.]

The people who created this country built a moral structure around money.
The Puritan legacy inhibited luxury and self-indulgence.
Benjamin Franklin spread a practical gospel that emphasized
hard work, temperance and frugality.
Millions of parents, preachers, newspaper editors and teachers
expounded the message.
The result was quite remarkable.

The United States has been an affluent nation since its founding.
But the country was, by and large, not corrupted by wealth.
For centuries, it remained industrious, ambitious and frugal.

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.
The country’s moral guardians are forever looking for decadence
out of Hollywood and reality TV.
But the most rampant decadence today is financial decadence,
the trampling of decent norms about how to use and harness money.

Sixty-two scholars have signed on to a report by
the Institute for American Values and other think tanks called,
For a New Thrift: Confronting the Debt Culture,”
examining the results of all this.
This may be damning with faint praise,
but it’s one of the most important think-tank reports you’ll read this year.

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.

Second, the transformation has led to a stark financial polarization.
On the one hand, there is what the report calls the investor class.
It has tax-deferred savings plans,
as well as an army of financial advisers.
On the other hand, there is the lottery class,
people with little access to 401(k)’s or financial planning
but plenty of access to payday lenders, credit cards and lottery agents.

The loosening of financial inhibition has meant
more options for the well-educated
but more temptation and chaos for the most vulnerable.
Social norms, the invisible threads that guide behavior, have deteriorated.
Over the past years, Americans have been more socially conscious about
protecting the environment and inhaling tobacco.
They have become less socially conscious about money and debt.

The agents of destruction are many.
State governments have played a role.
They aggressively hawk their lottery products,
which some people call a tax on stupidity.
Twenty percent of Americans are frequent players,
spending about $60 billion a year.
The spending is starkly regressive.
A household with income under $13,000 spends, on average,
$645 a year on lottery tickets, about 9 percent of all income.
Aside from the financial toll, the moral toll is comprehensive.
Here is the government, the guardian of order,
telling people that they don’t have to work to build for the future.
They can strike it rich for nothing.

Payday lenders have also played a role.
They seductively offer fast cash — at absurd interest rates —
to 15 million people every month.

Credit card companies have played a role.
Instead of targeting the financially astute, who pay off their debts,
they’ve found that they can make money off the young and vulnerable.
Fifty-six percent of students in their final year of college
carry four or more credit cards.

Congress and the White House have played a role.
The nation’s leaders have always had an incentive
to shove costs for current promises
onto the backs of future generations.
It’s only now become respectable to do so.

Wall Street has played a role.
Bill Gates built a socially useful product to make his fortune.
what message do
the compensation packages that hedge fund managers get
send across the country?

The list could go on.
But the report,
which is nicely summarized by Barbara Dafoe Whitehead
in The American Interest (available free online),
also has some recommendations.
First, raise public consciousness about debt
the way the anti-smoking activists did with their campaign.
Second, create institutions that encourage thrift.

Foundations and churches
could issue short-term loans to cut into the payday lenders’ business.
Public and private programs
could give the poor and middle class access to financial planners.
Usury laws could be enforced and strengthened.
Colleges could reduce credit card advertising on campus.
KidSave accounts would encourage savings from a young age.
The tax code should tax consumption, not income,
and in the meantime,
it should do more to encourage savings up and down the income ladder.

There are dozens of things that could be done.
But the most important is to shift values.
Franklin made it prestigious to embrace certain bourgeois virtues.
Now it’s socially acceptable to undermine those virtues.
It’s considered normal to play the debt game
and imagine that decisions made today
will have no consequences for the future.


Stumbling on Their Sense of Entitlement
By Steven Pearlstein
Washington Post, 2009-02-04

Tom Daschle still doesn’t get it.

John Thain never did.

Barack Obama gets it sometimes,
Nancy Pelosi and John Boehner not so much.

Corporate executives think they get it but aren’t even close.

College presidents, governors and union leaders, for the most part,
don’t have a clue.

“It” is an understanding of how fundamentally the political and economic environment has been transformed with the bursting of the bubble economy and how that has jeopardized basic assumptions and expectations and the way we do what we do.

Tom Daschle’s problem wasn’t that he didn’t pay his taxes. It was that he -- along with those who vetted his nomination as health and human services secretary and many of his colleagues in the Senate -- found it perfectly ordinary and acceptable that he would be able to cash in on his time in the Senate by earning more than $5 million over two years as a law-firm rainmaker, equity fundraiser, corporate director and luncheon speaker, all the while being driven around town in a chauffeured town car. Not exactly Cincinnatus returning to the plow.

[If we’re going to talk about “cashing in,” how about Bill Clinton?
Isn’t he the gold standard for such?]

For the American public, Daschle became the latest symbol of everything that is wrong with Washington -- the influence-peddling and corner-cutting and sacrifice of the public good to private interest. Now that this system has let them down, and left them poorer and anxious about the future, people are angry about it and no longer willing to accept the corruption of the public process and the whole notion of public service.

The irony, of course, is that Barack Obama understood all this and tapped into Americans’ frustration as the central message of his “change” campaign. But even he, with only four years in Washington, failed to see the depth of the problem or anticipate the ferocity of the backlash.

Obama’s first mistake was to hand the keys of the transition office over to a crew made up almost exclusively of Washington insiders who -- surprise! -- have largely succeeded in restoring to power their friends from the Clinton administration. Worse still, he has fallen for the tired old Washington “wisdom” that the only way to get anything done is to concentrate even more power in an ever larger White House full of czars and councils and chiefs of staff who ostensibly are there to “coordinate” policy but invariably wind up making it, sapping the departments and agencies of whatever importance and energy and creativity they have left.

At the other end of Pennsylvania Avenue, congressional leaders, while nodding in the direction of bipartisan cooperation, have also stuck largely to business as usual. It’s hard to know who is to blame more for the party-line vote in the House on a desperately needed economic stimulus bill -- the Republicans who cling to stale ideology and spout economic nonsense or the Democrats who shut them out of the drafting process, never bothered to articulate a compelling rationale and lost a golden opportunity to reform the programs as they were expanding them.

Not that the private sector has done any better.

For most of us, it seems inexplicable that a man as smart and sophisticated as John Thain, having been recruited to Merrill Lynch to clean up tens of billions of dollars in losses, could spend $1.2 million to redecorate his office or demand that the board of directors give him a $30 million bonus at the end of the year. Nor, when escalating losses threatened to scuttle the sale of the firm to Bank of America, did it occur to Thain that he might want to set aside his plans to fly off to the annual celebrity gabfest in Davos, Switzerland, until the Bank of America chairman finally ordered him to do so.

This goes beyond mere greed. As with Daschle, it springs from a deeply felt but rarely articulated sense of entitlement that now warps the judgment not just of those on Wall Street -- from top executives to hotshots on the trading desks -- but of those throughout the upper reaches of corporate America. And over time, it has filtered out to law firms and consulting firms, where freshly minted MBAs and legal associates came to expect starting salaries of $150,000 and partners thought it their God-given right to draw $1 million a year.

All that is history. It turns out that those inflated pay stubs weren’t really a measure of genuine economic worth but manifestations of the mirage that was the bubble economy. Economically, they are no longer sustainable; socially and politically, they are no longer acceptable.

But it’s not only the rich and powerful who are still in denial and need a bit of mental retooling.

Is it too much to ask those college presidents who are about to be the beneficiaries of big increases in student aid and tuition tax credits to use this crisis to finally embrace the productivity revolution and find a way to use technology and new teaching techniques to lower the cost of education?

And if we’re going to spend billions to upgrades roads, bridges and public transit and create jobs for unemployed construction workers, what would be so terrible about temporarily suspending the rule requiring that union wages be paid? That way, more jobs would be created and taxpayers would get a better return on their infrastructure investment.

It’s also a good thing that Congress is preparing to ship billions of dollars to state and local governments to maintain vital services and forestall layoffs of teachers, police officers, firefighters and social service providers. But in return, shouldn’t the governors receiving this temporary relief be required to come up with plans to make the necessary adjustments to balance their budgets over the long term, much as we’ve already done with aid to struggling automakers? And would it be so terrible if state employees would pitch in by accepting a two-year freeze on wages and a reduction in pension contributions?

It would be lovely if we could get out of this economic mess simply by having the government bail out the banks and spend a trillion more dollars in borrowed money. Unfortunately, it won’t be that easy. As Tom Daschle and John Thain have demonstrated, it is going to require fundamental changes in what we do, how we do it, and how the costs and benefits are allocated. It will also require a commitment to shared sacrifice and mutual responsibility that we are only beginning to understand.

[For an internet discussion of this column with Mr. Pearlstein, click here.]

The Next Culture War
New York Times, 2009-09-29

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