Sunday, September 07, 2008

Asking All The Wrong Questions

George Will criticizes John McCain today, for daring to ask people if they are better off now than they were four years ago. Will is correct that "McCain recasts Reagan's question as an assertion in order to pander to the public's dyspepsia and distance himself from George Bush." But from his perch in the upper echelons of wealth, Will is somewhat out of touch with the realities facing voters.
If you are young, since 2004 you might have found romance, had children, learned to fly-fish and become a Tampa Bay Rays fan. In which case you emphatically are better off, even if since 2004 there has been only a 0.6 percent increase - yes, increase - in the median value of single-family homes.
Oh, wow. A 0.6 percent increase over four years. How can people not be relishing that 0.6% gain Will describes loss in home values after adjustment for inflation.

But where Will really misses the boat is in his failure to acknowledge certain trends among homeowners. Homeowners have been actively encouraged to view their increases in home equity as the equivalent of "savings". The have been assured that home prices "only go up". They have been offered easy credit, "secured" by their homes, resulting in their refinancing or using home equity loans to "withdraw" equity in order to support their standard of living. So you may well have a family that had a $170,000 loan on a $200,000 home back in 2004, that now owes $250,000 on the same home. Ask that family, "How can you think you're not better off, if your home is now worth $201,200," and they're likely to see you as the out-of-touch rich guy that you are. And that's assuming that their financial situation has been otherwise stable - a big assumption.

Oh, there's something to Will's larger point, that the question focuses on economics and not on "delight, serenity and gratitude". But when you're economic circumstances are in a downward slide, it's hard to find that "delight, serenity and gratitude ". You can spare me the McCain-style clich├ęs about how money doesn't buy happiness, or that some rich people are unhappy. People who worry about job stability, access to health care, being able to make the car and mortgage payments, the cost of back-to-school supplies and clothes? They can legitimately answer McCain's inquiry, "No, we're not better off," even if they recently learned to fly-fish.

1 comment:

  1. Someone else wrote something along the lines of, "People understand the question to be about economics." In a sense that's true, for the reasons you give, but in another sense if people truly are happy the economic issues recede to the background when they answer questions like that. They're not calculating that 0.15%/year capital gain in their head - they just know that they're better off.