weekly response

It's possible that the weeks of closed-door conversation are yielding results, but neither President Obama's video address nor Friday's press conference suggest any meaningful development in budget negotiations. Rather than dignifying the familiar, self-indulgent stalemate with further attention, I'll write down a few ideas about how our economy has arrived at this pitiful juncture. For the sake of brevity, I've focused my thoughts on the housing and debt fiasco that blew up a few years ago, as well as the role of the American education system in bringing us to this moment.

Big banks certainly deserve blame for the subprime mortgage crisis of the late 2000s. By extending credit to individuals who would probably not be able to keep up with new bills, these banks put our economy on extremely shaky footing. Their morally dubious business calculations contributed to the current recession and destroyed the financial independence of millions of Americans, leaving them with a debt spiral to last a lifetime. It is frustrating to realize that wealthy, educated bankers and politicians allowed this situation to transpire in hopes of turning a profit.

The subprime mortgage crisis could have been avoided, or at least softened somewhat, had government enforced more stringent regulations and credit rating agencies issued strict credit scores. To this end, President Obama plans to name an individual in the next few days to lead the newly-created Consumer Financial Protection Bureau. (To the chagrin of her supporters, the agency's architect, Harvard Law Professor Elizabeth Warren, will not be chosen, mainly because so many conservatives in Congress despise her relentless advocacy on behalf of duped homebuyers.) If the agency manages to maintain its integrity and purpose amidst a muck of Congressional hearings, it will, perhaps, prevent a subprime mortgage crisis of such magnitude from ever again undermining our economy.

However, for all that government, banks, and credit agencies could have, should have, and can still do to protect the economy, the crisis could have been entirely avoided by one mechanism only: if individuals had not bought homes - without paying a penny up front - that they could not afford. The simple fact is that no bank strung up its clients and no hostages were claimed in the effort to corral high-risk homebuyers. Rather, just as any cheap salesperson, they spun a flashy deal, amped up their customer's confidence, and dangled the American dream for all to snatch. The rest, as they say, is history.

Why did so many fall for this sales pitch and wind up in debt?  Do these unfortunate individuals deserve a chunk of the blame for how things are today? Hard-line conservatives will argue that personal responsibility and an "all-American" spirit of rugged independence would have prevented so many from running up their credit card bills past the point of no return. More moderate voices will point out that everyone makes mistakes, and our country will be more stable once we offer help to those who have been taught their financial lessons the hard way. Thankfully, most Americans seem to understand that the millions who foreclosed on their homes have suffered enough, financially and emotionally, to drive home at least some lessons learned from their mistake, their naive trust of the powers that be.

While individual stories certainly differ, my concern lies in the similarities that provoked so many to fall into the same trap. So much media and political attention has been directed towards the evil of banks and stupidity of individual homeowners, but I believe that this problem of financial ignorance and irresponsibility originates in the basic structure of our education system. Upon graduating high school, not to mention college, my peers and I have been taught virtually nothing about financial management. What we do know is only the product and direct consequence of what our parents have passed along, along with any elective courses we might have chosen. In a world inextricably linked to complex financial markets, credit cards and scores, loans and debt, and myriad opportunities for investment miracle and catastrophe, such profound ignorance is a tremendous handicap and impediment to our independence and success, both as individuals and as a nation.

If parents would faithfully instill in their children intelligent and practical money management strategies, it might not be so important for our education system to take on this role. But the fact is that most parents are unwilling, or unable, or simply don't make time to empower their children with these lessons of survival. We witness this unfortunate reality every day as our friends, neighbors, and community struggle with poverty and debt, waiting in vain for economic revival. The cycle of mismanagement has revolved time and again, and if President Obama and members of Congress want to avoid another financial crisis, they need to address this gaping hole in our education system thoroughly and immediately.

I don't have on hand (and you probably weren't planning to read) a detailed policy proposal to overhaul our education system. I suppose that might be my next project. But I do know that a real solution will not take the form of a required high school economics course. To mend our society, we need to teach kindergarteners how to spend their allowance, and second graders how to set up (with adult supervision) a lemonade stand, and third graders how to start a savings account. Fourth graders need to know what I have barely figured out - just how a credit card functions - and seventh graders need to understand the basics of Wall Street. All that we, adults, strut around pretending to understand, we need to teach our nation's children before they are too spaced out or stoned to give a damn.

If the President and Congress want to be serious about "getting our fiscal house in order," they need to take a hard, long look at an education system that continues to churn out graduates without a nickel of financial common sense. This long-term investment would not only yield real results, but would finally eliminate the insidious root of our financial woes. Perhaps, if our nation were educated, if we had been indoctrinated with common sense in our youth, politicians would have less to gain and fewer constituents to please by trumpeting nonsensical solutions to serious economic problems.