Dream Beats Crisis
Economic crisis is resetting the economy, evidently required, but what has it done to the American dream? Reset is evident in high unemployment (9.4%), reduced wages and asset values (off some 35%), and contracted output (essence of economic recession). Potential impairment effects on the American dream include appreciating that not everyone can have a good job at good pay, own a home, buy a new car every few years, vacation or dine out regularly or even expect basic affordable health care coverage. But these hard realities seem essentially unacceptable in America; far from dislodging them, the crisis appears to invite ways to sustain them. And that may be a good thing, too.
Banks are returning to business as usual after many government loans are repaid next week and government seeks to sustain the allure of home ownership, staple of the American dream, trying to get existing home loans refinanced and foreclosures halted. Government is bailing out the automotive sector, eager to retain related jobs and enable Americans to hold on to the car as co-star in that dream. Congress passed legislation rejuvenating the appeal to consumers of using credit card debt to fund consumerist lifestyles. Momentum builds for a revolutionary program to make health care accessible and affordable to everyone. Regulatory reform of capital markets will be modest, focused on derivatives, despite earlier exuberance for wholesale renovation.
Crisis could induce people throughout the economic ladder to downsize from past excesses. Yet, while there has recently been a modest increase in the American savings rate, a large majority of Americans say they will return to pre-crisis spending habits once the economy recovers. (CFO Magazine, May 2009.) They also expect wages and benefits to return to inflation-plus levels then. Id. Housing prices and new construction fell but, in many parts of the country, reached plateau and now point to recovery. Demand for first-class or private jet air travel and high-end vacation are down but rich people want those luxuries and look to reclaim them. The New York Yankees had to reduce prices on some high-end baseball tickets this season, but player salaries look to stay in the multi-million dollar range. The restaurant business, including the casual dining segment catering to the middle class, is rebounding.
Recession endures, no doubt, and economic pain widely felt. But the American dream does not seem likely to die. People want houses, cars, health care, education, vacations, computers, tech gadgetry, second homes and consumer durables without limit. Government appears interested in helping them get what they want. In keeping with American tradition, emphasizing boundless opportunity amid perilous risk, government and citizen responses to this crisis suggest that keeping the American dream alive is more important than combating recurring crisis.
President Obama seems to understand this. That is why he keeps reassuring people that the economic crisis will pass, is passing, and his policies are helping to make that happen. He urges optimism and wants to promote confidence and people are responding. The stock market has regained a third of its losses since its low in March. Average balances in retirement accounts plunged from September 2008 to March 2009 along with the overall stock market. But those balances, like that market, are back up dramatically since March when the President began his optimism campaign to restore confidence.
I once opposed programs and policies designed to restore confidence, whether in markets, corporate governance, or accounting, as with the Sarbanes-Oxley Act. I opposed efforts intended to lead people to believe that the future is bright and that we can have it all, homes, health, and the rest. In this season, I’m seeing reason to believe in that strategy. The dream of having it all can sustain people into working toward it so it becomes self-fulfilling. But proponents must also look at the real price, especially in budgeting and deficit spending, and not overspend financial capital when investing in psychic stimuli. President Obama seems to understand this too, insisting that commitments be paid as made. In America, plus ça change, and why not?