Oh man. We're still in a recession, and we haven't learned a darned thing! Department of Justice Asks Banks To Reduce Lending Standards
My cheeks are bleeding I'm chewing on them so hard.
Source: GIS
The reason the mortgage crisis occurred in the first place was because of lax lending standards. Blame the government, blame the banks, blame the consumers, the result is the same; two-income families trying to survive when nearly 75% of their income goes to the (relatively) fixed costs of mortgages, car payments, insurance and tuition. When you are barely making it with two people, what in the world are you going to do when one of you loses income due to health problems, a job loss, or divorce.
Humans don't seem to be the best at avoiding long-term problems, especially if those problems don't manifest themselves for 10 years or more. Here's a good example. The relaxation of lending standards starting in 1975 caused a bidding war in housing as families jockeyed for position to get into the best schools in the safest neighborhoods. Families in the 1980s wouldn't have known that 20 years later the entire market would collapse because the costs would skyrocket by 69 percent!
We are also not the best at predicting risk. Placing two adults in the workforce necessarily opens you up to double the risk: two workers, two chances of getting fired/ill/insert catastrophe here. Worse, governments tend to treat catastrophes as single events that resolve themselves individually. In reality, an illness can lead to a job loss which can lead to divorce, a chain verified by evidence. Unfortunately, often one can find help in one area of the crisis, but that help may preclude you from qualifying for other help. For instance, in California, you are disqualified from food stamps if you are taking more than 6 units a semester. We are forcing low-income, unskilled workers to choose between filling their stomachs and improving themselves and their culture. When education is the single biggest factor in a person's success or failure, not supporting adult students in getting basic education seems like a failure in human rights.
More debt is not the answer. More tax cuts are not the answer. Neither of these actually impact struggling families in any meaningful way, and more debt sabotages any potential recovery. When will Washington quit listening to the banks, and start paying attention to the realities of the average U.S. citizen?
When we start voting. Vote for politicians who support policies that get at the root crisis of the recession - education. Education is why families have bankrupted themselves in the attempt to buy houses in safe neighborhoods with good schools. Education is the single greatest investment a country can make, because it taps humanity's greatest resource: our minds.
Vote for politicians who see that we need to curtail excessive consumption, through progressive consumption taxes. This would allow poor families to buy necessities without paying any taxes, allowing them to put their full paychecks towards improving their condition. It would turn the magnificent spending of the rich into a form of philanthropy; the rich buys her $200,000 Ferrarri, and pays an addition $140,000 which could go into the coffers of education, health care, and aid to end poverty across the world. Every time we as a country have looked at the wealthy and gone, "I can't believe they paid that much!" we have missed an opportunity to make investments in our children.
Do the research. I've taken a lot of my information from Elizabeth Warren and Amelia Warren Tyagi's book "The Two Income Trap". The ideas on progressive consumption taxes come from Robert H. Frank's economics columns, specifically his compilation book "The Economic Naturalist's Field Guide." Think for yourself; don't take my word for it. And look at the evidence. Then go get the word out, and vote accordingly.
