Too Much Month Left at the End of the Money

Sound familiar? Here is a comment that evokes just those feelings in me and did in my Political Psychology class as well. It shouldn't have, but it did.

Here's Robert Reich in his new book, Aftershock.

Treasury Secretary Tim Geithner, assessing what had happened to the United States in the years leading up to the Great Recession, repeated the conventional view that "for too long, Americans were buying too much and saving too little." He went on to say that this was "no longer an option for us or for the rest of the world. And already in the united States you can see the first signs of an important transformation here as Americans save more and we borrow substantially less from the rest of the world." He called for a "rebalanced" global economy in which Americans consume less and China consumes more.

Geithner was correct about the transformation. But he misstated the underlying problem, of which the Great Recession was a symptom. The problem was not that Americans spent beyond their means but that their means had not kept up with what the larger economy could and should have been able toprovide them.

I highlighted the "hard to swallow" part. I simply could not get myself to take it seriously.
Reich goes on to say--this is the remainder of that paragraph:

The American economy had been growing briskly, and America's middle class naturally expected to share in that growth. But it didn't. A larger and larger portion of the economy's winnings had gone to people at the top.

I look at Reich's point at it characterizes the economy as a whole. The output of the economy has been redirected so that more has gone to the most wealthy and less to everyone else. I knew that. The economic inequality of our society is now at its highest levels since--a chilling date in this context--1928. I knew that. We can not expect to sustain aggregate demand without paying American workers enough money to allow them to buy things. I knew that.

But when it comes right down to it, you have to say that there is too much month left at the end of the money, and I just can't get myself to take that seriously. All my life, the only people who were characterized that way were ridiculed. Women especially. The family income just doesn't seem to keep up with the way I am spending. Oh dear! I guess we need more income.

In the macroeconomy, the situation is entirely different but my ears hear it the same way. The emotional revulsion I feel comes whether I understand it to be appropriate to the national economic picture or not. Thank God you can choose to vote what you think, rather than what you feel.

This is complicated for a lot of people by the fact that a lot of people they trust--members of the media and of Congress--are telling them that they ought to feel just this way--and that they should call this "feeling," thinking. I don't have that particular difficulty. When I hear those people, I say, "Oh...them again." I am not confusing what they call thinking with what I call "feeling." But I still have to fight the feelings.

Two chapters later, Reich tells the oft-told story of Henry Ford who paid workers at his Highland Park, Michigan assembly plant three times what the typical factory employee earned at the time. The Wall Street Journal called it "an economic crime." Ford thought that if he paid his employees enough money that they could afford to buy the Model T they were building, they would buy them and Ford would make a lot of money. Which he did.

It's a well-known story. I feel the sense of it in my body as well as in my mind. I feel it in just the same way I feel the shame of thinking there is too much month left at the end of the money, although the implications for policy go in exactly the opposite direction. What a mess.

Reich says that people bought what they could as long as they could afford it. When they ran out of money, they took on extra jobs. When that didn't do it, they maxed out their credit cards. When that came to its predictable end, they borrowed on the eternally rising value of their homes. Then the housing market crashed. There really isn't anything to do except to do what Henry Ford did. What we call the "economic crises of our time" are only symptoms of our inability to buy what we make.

I really hope I don't enjoy my disparagement of overspenders so much that I can't really feel the truth Reich is preaching. I can think it now, but I really believe that until we can feel it, it won't do us any good.