Our economic woes have their sweet side

Ripped from the wires ... Normally, I would not go back to Froma Harrop so soon after posting her other piece, but when she's right, she's right. Here, she discusses the positive aspects of our economic slowdown.

By FROMA HARROP

The morning after overdoing it, some of us take pleasure in the cleansing process. The carrot juice goes down smoothly, and a simple walk feels virtuous. One vows to exert more self-control and give yoga another try.

The current economic downturn creates its own kind of a hangover and also a potential learning experience. For many consumers, it has tolled closing time on too much borrowing, too much spending, too much sweet talk about real estate. The game is over. But while the dawn may seem cruel, it sheds light on certain truths that had been suppressed. Enrolling one's finances into a 12-step program is a healthy thing to do.

As American consumers can no longer mask rising prices and stagnant wages with borrowed money, they will demand greater discipline from Washington -- on budgeting as well as the energy policy. The sessions in rehab can also include expressions of regret over the lost opportunities of recent years.

For example, the 50-cent-a-gallon gasoline tax proposed by maverick presidential candidate Ross Perot in 1992 would have created an earlier incentive to use less foreign oil. Consumers would have long ago demanded more economical cars, and Detroit would have secured more of the market for them.

We now have the higher prices needed to encourage conservation, but the money isn't filling the U.S. Treasury -- as Perot's 50-cent tax would have done. Instead, it's going to various foreign autocrats and terrorists. (Too bad we didn't follow the European model and use gas taxes to fund health care.)

Collapsing house prices are bad for people who paid their bills by riding the real-estate rocket. But it's good for first-time buyers who wanted to buy a house but weren't willing to borrow up to their eyeballs. There's finally a reward for prudence.

Case in point: Ilda and Manuel Mendes, parents of two, thought they could never afford a home in the expensive Boston housing market. Now they can. According to The Boston Globe, they've just bought a place in a working-class neighborhood for $50,000 below the original asking price of $430,000.

Slowdowns can advance the environmental cause. The high cost of gas has fueled a surge in mass transit ridership. In car-dependent Southern California, drivers see some lightening of traffic. For example, the morning commute from Simi Valley to Los Angeles has reportedly fallen by six minutes over the last year, state officials report.

The housing slump helps environmentalists who were struggling to protect landscapes. Real-estate mania had prompted developers to snap up desirable land. Thanks to a lousy market and terrified lenders, many of these developers are now unloading their properties to land trusts at favorable prices.

In one small victory, conservationists bought a 27-acre parcel in Portland, Ore., that was about to be covered with 65 houses. And there's a potentially big win in Hawaii, where lenders have pulled the plug from a developer's plan to build a mega-resort on Oahu's still lovely North Shore. Environmentalists are now negotiating for that choice piece of beachfront.

The nurses don't like this, I'm sure, but harder economic times are forcing many of them to postpone retirement or go back into the profession -- and that has somewhat eased the nursing shortage. In some cases, a spouse was laid off. And job insecurity in other parts of the economy has goosed the number of nursing school enrollments. So much for selling real estate.

Hey, there's serenity in living within one's means and being happy about it. And if this new sobriety moves America even a few inches away from abject dependence on debt and foreign oil, we'll all feel so much better in the morning.

Harrop is a syndicated columnist.

Comments?

Comments

[policywonk]

I believe that American families are finally realizing that they cannot continue to leverage credit card debt as a way to increase their household income.

Unfortunately, government doesn't doesn't care about increased costs since they will just raise taxes or fees to offset such silly concerns.

Have you ever noticed that all the police departments whether in a small town or large city always want the police types to ride the streets in the big cruiser-type vehicles. They do not want their cousins on the Highway Patrol to have a leg up on them with their 140-mph vehicles. Just look at what the small town of Aynor uses as an example.

Lastly, you cannot take $2 billion a day (DOD budget of $500 billion and $200 plus billion plus budget for wars in Iraq and Afghanistan) out of our national economy and not expect an economic disaster.

No economy can manage this daily outflow without economic suffering. You will not find any of the oil-rich Middle-Eastern countries piling on their cash to help the poor Americans.

[Denney Clements]

Wonk: Good point about squad cars. One reason I always liked the Baltimore-based crime drama "Homicide: Life in the Streets" is that the detectives were always under budget constraints, driving Chevy Cavaliers to crime scenes. Yet they still managed to solve crimes.

It may be my Calvinist upbringing speaking here, but I think re-learning to live within our means, in all respects, is good for us as individuals and good for the nation as well. But that's just me.

Cheers, dc

[Denney Clements]

Additional note to wonk: You won't find any oil-rich Mideast monarchies helping Egypt with its food shortage, either. Biggest contributor toward easing their crisis by far: The good ol' USA. Is this a great country or what?

dc

[Richard L. Wolfe]

Froma is right. However, she doesn't seem to see the conflict between slowing development and her desire to allow millions of our friends from south of the border to flood into our country. They have to live somewhere.

[PREFAB SPROUT]

I could rip this post all day long but I will confine myself to her "good news" about housing prices. She writes about the couple who "just bought a place in a working-class neighborhood for $50K below the original asking price of $430K"

Lets do the math shall we? A $380K house (430-50) with 20% down using the old-and now new again-formulas would mean a payment of $2200 A MONTH after they dropped $76K on the down payment. What "working class" couple can make those numbers work? And what "working class" neighborhood has $430K starter homes?

[Denney Clements]

Richard: When did Harrop say that? I don't recall seeing it. Forgetfully yours, dc

[Denney Clements]

Sprout: Obviously you don't know the Boston housing market. It's pricey. We're spoiled here. Ridiculous prices are the reality faced by working folks in many U.S. communities.

dc

[PREFAB SPROUT]

As an ex resident of Los Angeles I do happen to know a thing or two about pricey real estate! To afford the house in the post the couple would need an annual income of around $130K combined in addition to the $76K down payment. Since we know per the US Census that the avg annual income in the Boston area is $43K they are NOT "working class". In point of fact, much of the real estate meltdown in this country is due to "average" income earners attempting to buy houses they couldn't afford except for the "no money down -110% LTV loans and 3 year interest only terms" they were given by greedy lenders/brokers.

[Richard L. Wolfe]

Denny, You posted an article from her where she said that we were xenophobic because we didn't want the illegals here and I objedted to her use of the xenophobic card.