Tyler Cowen Is So Right It Hurts
Tyler Cowen took all of the emotion out of the current economic situation in a brilliant piece in yesterday's New York Times and in so doing set up the discussion in a way that few others have done.
For me, this was the money quote:
The fundamental problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings. The thinking went something like this: As long as your home’s value rose every year, you didn’t have to set aside so much from your paycheck. If your stocks went up, too, so much the better; don’t forget that the Dow Jones industrial average stood in the 800 range in 1982 and seemed to rise almost nonstop for many years.
I've said this same thing somewhat differently and far less eloquently: buying a home isn't the American dream; making a great deal of money from selling a home is what most people really want. The homeowner anger is not because they will be living on the street; it's because they won't earn the same profits they saw others make.
Couple with this what has become an almost undeniable entitlement mentality, that is, the very clear sentiment that a homeowner somehow is entitled to having their home appreciate by ridiculous amounts and that someone else is to blame when that doesn't happen, and it's not hard to see why the policy choices have all turned to bailouts. No one is suggesting, for example, that the government build more rental housing or provide Katrina-like trailers for homeowners who lose their homes. Instead, it's all about finding ways for them to stay in their home that they can't afford.