By David K. Shipler
I am old enough to remember when there were no credit cards. Yes, children, there was such a time, in the Olden Days. Personal accounts could be arranged at some local stores, which would note your purchases in a ledger, to be paid off eventually. Then some department stores—Macy’s, Sears, and the like—issued their own cards, valid for use in their stores only. Esso (now ExxonMobil) had its card for charging gas at Esso stations.
But the only real private borrowing people did was to buy a house or a car. Even student debt was minuscule. The use-everywhere piece of plastic came along later, and with it, the ease of overspending and the boom in personal debt. Under the law, national banks’ interest rates were exempt from state restrictions on usury, and their terms weren’t exactly transparent. Add the second mortgage and the home equity loan, which allowed people to treat their houses like ATM machines, and you have a nation of folks craving what they see advertised, buying insatiably, and living beyond their means.
Now, put that phenomenon onto the tectonic shifts in the American economy as it moves from an industrial age to a digital robotic age, and you have an upheaval as uncontrollable as global warming—only marginally manageable by the will of humans to make sacrifices and alter behavior. As manufacturing declined, union membership plummeted, eroding workers’ clout in the marketplace of labor. Wages did not keep pace with consumers’ appetites. As high-tech jobs mushroomed, the skills gap grew, with more and more Americans unable to compete effectively in a global economy.
That’s where the current politics of rage enters the picture. Donald Trump tells people what they want to hear, but what they want to hear is a lie. It has two parts: First, everybody is at fault except yourself. Blame Mexicans. Blame Muslims. Blame “losers.” Blame liberal Democrats. Blame corporations that move jobs abroad.
Second, solve the problems with a sweep of the hand: Ban Mexicans. Ban Muslims. Discard “losers.” Make deals. Run Democrats out of office. Isolate the U.S. from world trade. Bar corporations from closing factories here and opening them there.
Putting aside the fact that even a President Trump would not have the dictatorial power to do any of this, the lie ignores two factors: one, financial illiteracy, which has led individuals innocently into trouble, and, two, the restructuring that is driving the economy inexorably, as from one geological era to another.
If presidential candidates were truly candid, they would tell the truth to voters who are justifiably scared, angry, and disaffected, and who no longer trust government to help erase the deepening doubts that life in the United States will be economically secure for their children. These are folks who suffer what Neil Gabler, in a searing piece in The Atlantic, calls “financial impotence,” the powerlessness of 47 percent of Americans to raise $400 to cover an emergency, the stress that 72 percent feel over finances at times, the inability of 54 percent to do more than barely keep up with ongoing expenses while saving nothing.
These are familiar syndromes of poverty, and they have now been extended upward into the middle class. You’d think that middle class whites who fell into hardship in the Great Recession that began in 2007-8 would identify sufficiently with the poor to champion government programs aimed at relieving poverty, including food stamps, housing subsidies, the Earned Income Tax Credit, expanded Medicaid, job training, and the like.
Some do, but millions go for Republicans who try to slash these programs and strive mightily to remove government from lending the helping hand that can cushion the fall. Trump is the beneficiary of this peculiar impulse of so many to vote against their own interests just to throw the bums out.
President Obama, interviewed by Andrew Ross Sorkin for The New York Times Magazine, laments the public’s failure to recognize what he’s done for the economy, noting that most Americans think that budget deficits have risen during his administration when they’ve actually plummeted by three-quarters. “I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter,” Obama said, “then we might have maintained a majority in the House or the Senate.”
Perhaps. He’s never connected well with the whites under stress who are now going for Trump. He initially had a Democratic Congress that should have expanded stimulus spending far beyond what was done to restore the nation’s infrastructure; what better time to borrow for that good cause than when interest rates were low?
But the real “truth of the matter” is what people don’t want to hear. It goes like this:
Many citizens did not sit down and do the straightforward math to reckon what debt they could afford to carry. The experience of financial trainers shows that some do not even understand what an interest rate is, much less what havoc a variable rate can impose. Reckless spending, made easy by banks’ loose lending practices, dug holes so deep that millions who lost their homes will never find their way out. Schools don’t teach basic principles of personal finance, and they should. Candidates in both parties won’t accuse their own voters of personal irresponsibility, and they should.
That said, individuals cannot be faulted for being caught in the maelstrom of economic change. But that change cannot be reversed or even alleviated significantly. The country has to ride with it, steer through it, and maneuver to make it advantageous. Building protectionist walls against trade will be met with retaliatory tariffs by other countries, a prescription for a deep economic downturn. This is what people need to hear, not fairy tales about reversing the rotation of the earth.
The automation of manufacturing, the shift to service industries, the rise of high-tech entrepreneurship all require a broad national commitment to mid-career vocational retraining and to rethinking how young people are prepared for job markets that are constantly in motion. College for all is a sweet idea, but not all go to college, not all who go finish, and not all who finish are ready for the workplace. European-style apprenticeship programs, like those being proposed by the economist Robert Lerman, are expanding slowly and deserve wide acceptance.
People need to hear that they won’t be able to do the same kind of work for all of their 40 or 50 years in the job market, that they’ll have a tough time switching careers after middle age, that ruthless global competition can’t be walled out, and that the president has limited power to alter the unhappy trends—probably more limited than ever, “as the economy continues to disperse,” Sorkin observes. Unfortunately, no candidate is willing to deliver this bad news, and so the electorate is left with fantasies.