When I was a kid growing up in West Allis, there was an elderly couple living next door. On summer afternoons, retired farmers Mr. & Mrs. Harry Lawrence would sit in their front yard beneath two perfectly shaped apple trees that stood sentry on either side of the sidewalk. Their tidy little Cape Cod had an expansive backyard with more apple trees from an old orchard that had been there before our subdivision. Harry Lawrence had built a perfect white wooden picket fence around it. The neighborhood kids would stop by and visit with the Lawrences in their front yard, and Mrs. Lawrence always had hard candy for us hidden in her apron.
Fast forward to Thanksgiving Day this year. I'm at home with my parents who still live in their house next to the old Lawrence place, but all of their original neighbors are long gone. And no one lives at the Lawrences.
Just before dinner, my mother notices that there's a paper tacked on the front door over there, and she asks me to walk over and check it out. So, I trot over in the cold, gray late afternoon light and read the posting. It's an official form from a bank, stating that it appears the property has been abandoned, and that unless someone contacts them to say otherwise, they will "move to protect the property" by changing the locks, for starters.
It's pretty clear what has happened. My parents said that a rental truck showed up one day, and the neighbors just moved out without explanation. They apparently had stopped paying their mortgage, the bank was moving in, and so they moved out.
I walk around the house, its white paint peeling badly, the picket fence and old orchard trees long gone, and a chunk of the yard now taken up with an oil stained concrete pad. Just for the heck of it, I try the back door. It opens.
So, I take an unauthorized tour. Someone of limited means had made an attempt to bring new life to this house. The rooms are recently painted in bright colors. Inexpensive cabinets are installed in the kitchen. There are new vinyl windows on the first floor. In one of the tiny bedrooms, there is a Disney switch plate for the light, and I find a small plastic toy soldier on the basement stairs. Somebody had attempted to make a life here -- and failed. They had not done the right thing, the responsible thing, by just bailing on their obligations, but it's hard to feel too sorry for a bank that may have gotten them overextended in the first place.
America is in a bind, because the way our economy is currently set up, we can't dig our way out of this recession without returning to over-leveraged consumer spending. But it was exactly this kind of overreaching that got us into this mess in the first place. Our personal savings rate is abysmally low, for many years running near zero. Compare that to the 10% to 13% among most western European countries. For an interesting take on that see this article from last week's New York Times.
Why can Europeans save so much? Conservatives would say that should be impossible with their high tax rates. But it's the very system paid for by those taxes that means that most in Europe don't have to worry about paying for health insurance or other social benefits outside of their taxes. Interestingly, the citizens of the welfare state are "keeping more of their own money" (a mantra of the American right wing) than the citizens of "free market" America. We're more free to be poor, with a thinner social safety net and less savings to weather bad times.
And it's not true that high social welfare economies are doing even worse than the U.S. during this recession. To quote Paul Krugman, writing recently about Iceland's refusal to pursue a dismantling of their social policies:
Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.
In America, we bailed out the banks, and now these banks have swung their pendulum from irresponsible lending to irresponsible non-lending. The tangible result of our consumer debt-based economy with its thin safety net is a once pretty and now vacant house on South 76th Street in West Allis, Wisconsin, and in more places just like it all around our country.
The answer isn't just economic recovery based on the old model of over-heated and unsustainable consumer spending. The long-term answer is a new economy with a bigger role for personal savings made possible in part by an expanded social safety net.
