Second Comings, Second Chances

This week US lawmakers are busy creating their own version of President Obama's budget. The news emerging from the various committee meetings is disheartening to say the least. What is most distressing is that the rewrites suggest that Washington is still home, even in the face of a crisis so severe it is compared with the Great Depression, to status quo thinking. In yesterday's New York Times an article dissecting the budget negotiation process in Congress included the following comment:

The apparent first casualty is a big one: a proposal to limit tax deductions for the wealthiest 1.2 percent of taxpayers. Mr. Obama says the plan would produce $318 billion over the next decade as a down payment for overhauling health care. But the chairmen of the House and Senate tax-writing committees, Senator Max Baucus of Montana and Representative Charles B. Rangel of New York, have objected to the proposal, citing a potential drop in tax-deductible gifts to charities.

Tax write offs are a huge loophole through which the most wealthy individuals avoid paying their fair share. The suggestion that the whole proposal be scrapped because of a possible decrease in charitable giving is ludicrous. A report by the Center on Budget and Policy Priorities suggests that the total decrease in charitable contributions will be 1.3% and that the offset in healthcare savings would surely be a significant upside for many charities and Americans in general.

Also from yesterday's Times was this article on the decline in conspicuous spending by well-to-do Americans. The article is rather disturbing when one considers that these folks continue to have absolutely no idea just how well off they are. That the thrift trend may be short-lived and that old habits will reemerge once the economy rebounds was the most insightful observation made by an interviewee. The interviewee offered that this was perhaps a cynical perspective. I'd like to reassure her that her heads in the right place - it's better to be skeptical about these sorts of things. What occurred to me when reading this article and in light of this interviewee's insightful skepticism was the fact that there should be less concern for which period of the economic cycle we currently find ourselves in and more for the system itself. From the Times:

As many economists have noted, cutting spending is the worst thing people with means can do for the economy right now. But that argument seems to have little traction, especially because even those with steady paychecks and no fear of losing their job have seen their net worth decline and their retirement savings evaporate.

Can we stop for a moment and consider that this system, the one that needs you to spend even when it is against your interest to do so, is broken? An economic system that thrives on spending for spending's sake is as dangerous as it is morally and ethically bankrupt.

The one upside to the sentiments captured in this article is that such a focus on savings and responsibility, especially among the affluent, may once again lead us back down the prudent path, propelled by reform, toward greater equality. As the Times article mentions, the Great Depression led Americans to adopt a more savings oriented mindset. Granted it didn't last forever, but during that period of sustained crisis the United States enacted substantial reforms that protected future generations of Americans from economic upheavals. These acts, FDR's New Deal, constituted a step forward and a society's commitment to provide all its members with a more even playing field and a set of basic economic rights and opportunities. The current crisis may be a new opportunity to enact monumental legislation, a second chance to create a more equitable society.

~O.M.