Our Costly Blame Game

Commentary

One of the great tensions in the American spirit for the past century has been between traditional self-reliance and modern blamesmanship. Blamesmanship is winning now, and the consequences are economic, not just moral.

The first cousin of blamesmanship is the syndrome that turns grown-ups into victims, the social demand that for every bad thing there must be a victim and a villain. The American litigation system is our great monument to these most unattractive ethical postures. Lost money in the market? Sue. Suffered an untimely death in the family? Sue. Couldn't afford your credit card payments? Blame easy credit, declare bankruptcy and let someone else sue you.

Blamesmanship is rampant in our politics. This summer, for example, gas prices are high. Never mind that the price we pay to fill the tank is far lower than just about any Western country that isn't a mega-oil producer. Never mind that we prefer inefficient cars and trucks. We are the victims of high oil prices! Who is to blame? Speculators, price gougers, sheiks and imperialists.

We display the same moral infantilism toward our medicine. We want miracle drugs. There is a tremendous social demand for new medicines and treatments to prolong life and treat illness. Yet we want the pharmaceutical companies that provide our medicines to play error-free baseball. We want them to pay not just if they make a mistake, but if bad things happen to nice people. We don't want them to profit excessively. We want them to take high risks for moderate returns.

This summer, we are seeing economic blamesmanship play out on the big economic canvas. What is important here is not apportioning blame for blamesmanship, it is that blamesmanship is the enemy of learning.

The country is looking for whom to blame for the recession. Generally, the culprit is seen to be the easy credit that spawned the real estate boom. So the villains are promiscuous lenders and the Wall Street financiers who provided a secondary market for risky loans, thus shielding the big guys from risk and hanging little guys out to dry.

That narrative is broadly true. But it is only half the story.

The other half is the story of the consumers who took out the risky loans, the jumbo mortgages and the excessive credit card debt. The liberal spirit wants to excuse "the consumer" from any moral or economic responsibility because the consumer is the victim of vast economic forces and malevolent corporate predators.

Government ought to protect the little guy. Business ought not to prey on consumers. Well, yes, sure. But that, again, is only half the story.

Consumers ought not to carry debt they cannot afford. Borrowers are not exempt from being prudent or well-informed simply because loans are available. But such declarations are now considered illiberal, moralistic and unsophisticated. That means we are likely doomed to repeat our mistakes.

In the years after World War II, it was unusual for an American household to owe money. By 2004, 75 percent had consumer debt: mortgages, home equity loans, car loans and credit card debt. It is now unusual not to owe money, especially for people under 64.

The Federal Reserve tracks something called the debt service ratio (DSR), an estimate of the ratio of debt payments (monthly payments, not total debt) to disposable, after-tax income. In the first quarter of 1980, that ratio was 11.13; by the first quarter of 2008, it increased 27 percent to 14.13.

This means, of course, that household savings declined. In the early 1980s, Americans saved something around 10 percent of their incomes after taxes. In 2004, on average, Americans didn't save anything.

Americans since Ben Franklin have always looked at thrift and saving in moral and ethical terms. Saving money means taking responsibility for yourself and your future, as well as for your children and parents. It isn't that hard a concept, but it is now an endangered one.

The culture of blamesmanship will help ensure that economic behavior remains insulated from ethical strictures or learning from mistakes.

It would be natural to wonder why so many consumers abandoned saving. Yes, it has become more difficult to finance a "middle-class" lifestyle and, yes, the gap between the super-rich and the rest is higher than it has ever been, to our knowledge. Those are factors, not explanation.

It would be natural to wonder why so many consumers took out loans on grossly inflated assets at interest rates that, while initially low, could increase wildly in the future. It would be natural to wonder why so many people bought things they plainly could not afford with credit cards. It would be natural to wonder why the pleasure of buying and having stuff so often outweighs the pain of economic risk and uncertainty.

Answering such questions leads to self-knowledge and changes in behavior. It is educative. Economic education, mixed with a smidge of fire and brimstone, is no longer a part of our schools' curriculum. That's a bad call.

Our focus, however, is now on apportioning blame between the financial foxes on Wall Street and the negligent regulators in Washington. And we should be doing just that — just not to the exclusion of looking in the mirror. And growing up.

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