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Sheila Bair, who stepped down last week as chairman of the FDIC (Federal Deposit Insurance Corporation), wrote yesterday in the Washington Post:
The common thread running through all the causes of our economic tumult is a pervasive and persistent insistence on favoring the short term over the long term, impulse over patience. We overvalue the quick return on investment and unduly discount the long-term consequences of that decision-making.
Favoring the short term over the long term is a curse on the country right now. We can’t recover our role as the world’s leading “aspiration nation,” where the sky’s the limit and people’s deepest hopes are realized, until we learn again how to take the long view and recover the virtues and habits necessary to go after long-term goals. The problem is pervasive.
- It’s at the heart of our entitlement problem. It’s much easier to scare grandma into thinking we’re going to push her off a cliff, than to convince a large enough voting bloc under 55 that it’s in their interest to reform Medicare and Social Security.
- It’s at the heart of America’s “other fiscal crisis,” the budget fiasco that many of our states face. Unfunded pensions, using debt to pay for operations, and other unwise choices by state leaders have been rooted for some time in a desire for short-term gains at the expense of long-term solvency.
- It’s at the heart of the sluggishness that characterizes many of our schools. We’re making progress on education reform at the state level, but it’s been a slow-moving effort spanning a couple of decades now. For too long now, we've counted inputs in our education system instead of embracing strategies that benefit students in the long run.
- It's at the heart of our failed stimulus efforts. From payroll tax holidays to porkish spending projects to tax rebates, we've had our fill of expensive injections of cash back into the economy with little to show for them. The political class on both sides of the aisle has found it easier to be an addict who wants the high today than the doctor who aims at healing tomorrow.
- And, of course, short-termism has been at its worst in the financial sector about which Bair writes.
She says that while it was necessary for the feds to step in and prevent financial institutions from collapsing, “we still have not addressed the No. 1 cause of both the crisis and the subpar recovery we are in: a stubborn refusal to deal head-on with past-due and underwater mortgages.”
Nicole Gelinas made the same point in a very good post at The Corner yesterday. After trillions in bailout dollars, the feds and the banks have not done what most Americans probably assume is being done: eliminating all those bad mortgages that were the wellspring of our economic tumult. Gelinas writes:
But many of those toxic assets are still there — and they’re poisoning the recovery. How? Treasury, the Fed, and the Obama White House continue to pretend that much of the bubble’s toxic mortgage debt is still good — when it’s not.
As a result, she says, the financial sector hasn’t been shedding jobs as fast as other areas of the economy that were growing during the bubble years (construction, state government jobs).
As it turns out, it was easy for banks to pile up billions upon billions in compensation based on bad debt, and it’s now very hard to get rid of all that junk they piled up along the way – all because we have lived for too long with a system that favors the short term over the long term. Plenty of people got very rich as a result and, as Bair points out, were long gone and onto their next job before the economy tanked and left the rest of us to clean up the mess.
This topic – that we haven’t yet fixed our addiction to the short term goals that got us into our financial mess – is something you don’t hear any political candidates talk much about in any constructive way.
It’s time to change that. The best candidate in 2012 will be the candidate who makes aspiration – namely that it’s still worth shooting for your dreams and working to them over the long haul - his or her main underlying theme. And cleaning up the banks and financial sector, along with entitlement reforms, is a big part of that.
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