Monday, July 14, 2008


Recessions -- Mental & Otherwise

Over the weekend, former Sen. Phil Gramm's comments about America being in a "mental recession" and Americans being a "bunch of whiners" sort of got lumped in with Jesse Jackson's "nuts" statement as examples of surrogates behaving badly.

The two statements, though, were rather different -- and Gramm's arguably of more importance (especially given the rush to distance the former senator from the campaign). For one thing, Jackson's seem more arisen from personal spite and generational jealousy -- and delivered in what he thought was an off-record situation. Gramm's were in a public setting -- and he likely thought he was doing McCain a favor. Still, it's funny to hear a trained economist refer to a "mental recession," given that one could technically call a mental recession a, well, depression -- in the clinical, if not economic sense.

Gramm should realize that the difference between "objective" economic criteria and a mental/subjective reaction to those facts is extremely narrow. Appropos to the connection between "mental recession" and depression, it wasn't the collapsing Wall Street that created the Great Depression -- there weren't enough people invested in the stock market at the time.

Rather than just looking at the technical aspects of a recession -- on "This Week" on Sunday, George Will agreed with Gramm that Americans were "whining" because there was no technical "recession" -- perhaps it would make more sense to look at the sectors that are facing instability.

In particulary, we should ask what those sectors say about what has been called "the American Dream."

What was later called the "American Century" arguably began after World War II. The war had left the leader of the previous century -- Great Britain -- in no where close to its previous power of influence. The bomb gave the United States unparalleled military influence. At home, the G.I. bill launced a generation of economic opportunity for returning conquering heroes. Years later, the international highway system helped spark American infatuation with the car. This, in turn, helped create the propsperity of the Big Three and the manufacturing jobs that went with it. All told, these factors helped create the biggest middle class the world has ever seen. It also sparked moves to the suburbs -- and the fabled white picket fences. (A general westward movement was also confirmed with re-location of New York baseball teams, the Dodgers and Giants.)

But what's going on now? The general pressures in the mortgage sector has now spilled into federal guarantors, Fannie Mae and Fannie Mac. Foreclosures are increasing. The idea of the stability of the American home becomes to be questioned. Meanwhile, oil and gas prices continue to soar. And, unlike the 1970s, this isn't as connected to temporary world political situations like Arab boycotts. This seems more like a long-term systemic problem based on demographic situations like the exploding Indian and Chinese populations. But, still, this forces Americans to recognize that sky isn't the limit any longer when it comes to long, car-based, road trips. For that matter, the sky isn't the limit any longer when it comes to cross-country flights either -- as the energy sector also upends air travel as well.

In short, for a longer mental sector of the American sector, these details add up to the idea of the American Dream -- highways, suburbus, open roads, home ownership -- seeming to run in reverse.

Phil Gramm can call that a "mental recession" if he wants. Others might call it a real genuine crisis that doesn't have any obvious end point.

UPDATE: So, it's not like the taxpayer isn't saddled with enough personal and shared public debt, let's add the "covering our Fannies" bailout -- which is already termed an "unmitigated disaster." Good times.

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