The Mess Money Made

The current economic crisis, which grows more troubling by the day, seems to have largely caught economists and politicians off guard.

While politicians have found no shortage of people or institutions to blame for the crisis — former President Bush, the other party in Congress, Wall Street, banks, consumers, unfettered capitalism — no one is quite sure how to respond effectively to the problems we face.

As a result, the response has been to throw haphazardly billions of dollars at the problem in the hope that is will disappear quickly or at the very least be relegated to page two of the papers.

By all indications, the economic “fixes” tried so far have failed, and it is unlikely that any of the “solutions” currently being proposed by President Obama or congressional Republicans will lead to a quick rectification of the problem. While we do have economic problems, looking at the crisis in purely economic terms and looking for purely economic solutions is shortsighted. It masks the fact that, at its heart, what we are actually dealing with is a moral crisis made manifest in economic terms.

Cleaning up the fallout from immoral actions is never easy, nor can it be done without pain.

When someone steals and squanders your money, you may be able to obtain justice and have the culprit apprehended, but you may never recover your money. Both you and the guilty party will suffer for his actions. The same thing is true with our financial crisis — nearly everyone is suffering, whether morally culpable or not. In the case of this financial crisis though, the sheer number of culprits is making the pain much worse.

While it has become popular to blame the problem on a few greedy merchants on Wall Street, the blame needs to be cast much wider. The unbridled spirit of consumerism endemic to Main Street has as much if not more to do with this crisis than the actions of Wall Street.

During the past decade, Americans have been on a reckless spending spree, a spree sustained by massive amounts of borrowing. In fact, the only time the ratio of household debt to gross domestic product has been as high as it is now was right before the Great Depression.

For starters, we bought houses we could not afford, assuming they would continue to go up in value. New construction sprang up everywhere. The average square footage of these new homes expanded to over 2,400 square feet, nearly all had three or four bathrooms, and over 40% had four bedrooms, despite the fact that the average family size is about three and the average household size is below three.

As more people bought what they could not afford (not to mention what they did not need), home prices continued to go up, and people suddenly had more equity in their homes than they knew what to do with.

What was the response to this apparent prosperity? People took out home equity loans to buy more cars, boats, vacations, second homes, etc. It was consumerism gone rampant, fueled by what seemed to be an endless source of free money. One could have all the amenities without doing a thing. No work or sacrifice need apply.

To be sure, lenders did their part to feed this spending habit, granting loans that never should have been granted. Like pushers selling drugs, they always had more money ready to loan to the American addicts. We were hooked on buying the next big thing.

Then it all stopped. Payment for our reckless spending came due, and the bubble burst. People began to default on their loans, causing home prices to drop. The falling home prices caused more people to default, and in this vicious downward cycle, we all suffered from the excesses of consumerism, whether we overborrowed or not.

Most of us did, though. Most of us, through our desire for more creature comforts, contributed to the bubble. As David Beim, a Columbia University professor, explained, “The problem is us. The problem is not the banks, greedy though they may be, overpaid though they may be. The problem is us. We’ve been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen.”

It has always been part of the American psyche that tomorrow will be better than today. The American dream — that we can build a more prosperous future through hard work, ingenuity and dedication — still brings immigrants to our shores. That dream, though, seems to be morphing into something less heroic. While we still emphasize that tomorrow will be better than today, the hard work, ingenuity and dedication part is being eroded — and replaced by a get-rich-quick mentality.

One could see this in the Internet start-up market of the late 1990s, in which everyone wanted a piece of the over-priced Internet companies like Yahoo! or eBay. When that bubble burst, it gave way to the get-rich-quick real estate market of the 2000s.

People were caught up in buying and selling real estate, flipping properties to make a quick dollar. In both cases, ignored was the classic American ethic of hard work and sacrifice, marginalized by the prospect of instant gratification. We risked our long-term stability for overnight success.

Everyone else seemed to be making money, so, in some sense, we felt entitled to that bigger house or bank account. Our priorities were out of order. We made poor and selfish decisions — and now we are paying the price.

At its root, this problem is a moral crisis. Until we recognize this fact and deal with our selfish attitudes and our many sins, we will be hard pressed to recover. Unfortunately, the way that we as a nation are responding to the crisis shows that we have yet to recognize this reality.

Just as we felt entitled to get rich quick, we feel entitled to a fast and painless fix. Personal responsibility has taken a back seat: Someone out there better come in and just fix it.

Politicians have tried, first promising that we could spend our way out of this mess, which is ironic, given that we overspent our way into it. We were sent checks and told to keep spending recklessly — it was patriotic to be hedonistic. That failed, though, because Americans, sobered by the economic reality, displayed the good sense to use the money to pay down their debt rather than increase it.

The government then decided to mimic the irresponsible behavior that got us into this fix by agreeing to borrow and spend astronomical sums of money.

In one sense, it seems like a free ride: The government dumps exorbitant amounts of money into the economy and we all live happily ever after. This sounds good, except for the fact that it is not really the government’s money — it is our money, our borrowed money, to be precise, that we eventually have to pay back.

So we will pay later, just as we are paying now with government bailouts to save those who made the worst of the bad decisions, with reduced home prices, diminished job prospects, and dried-up retirement accounts.

We are all paying, whether we were culpable or not.

Such is the social consequence of sin. Immoral behavior is never a private matter and, if nothing else, this crisis brings that point home.

While there is no easy way out, that does not imply that we have no hope.

To see it through requires a shift in perspective. If one simply sees the current situation as an economic crisis, hope is overwhelmed quickly with pessimism. There seems to be no end in sight to the layoffs and foreclosures. However, if one sees this as a moral crisis, then the focus is not so much on economic recovery as it is on the hope that the economic hardships will lead to honest reflection regarding how we are living our lives.

The inevitable letdown of consumerism, which has been particularly dramatic in this instance, will leave many people searching for answers, direction and meaning in their lives. And it is through this suffering and searching that Christ often finds his way into the human heart.

In the words of Pope John Paul II, “Christ alone can free man from what enslaves him to evil and selfishness: from the frantic search for material possessions, from the thirst for power and control over others and over things, from the illusion of easy success, from the frenzy of consumerism and hedonism, which ultimately destroy the human being.”

If the current crisis can bring us closer to an experiential realization of this essential truth, then once again a cross can bring redemption.

Daniel Kuebler, Ph.D., is an

assistant professor of biology at

Franciscan University of Steubenville, Ohio.

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