Everything Wrong With How We Think About the Recession, in 1 Tweet
Sorry, but multimillionaire ex-Treasury Secretary Hank Paulson did not "feel the impact" of the economic collapse more than anyone.
It's unfair to beat up on any one publication -- especially BusinessWeek, which is a great magazine, and one of the few economy-focused publications that steers clear of cheerleading for the financial sector -- since this sort of thing is pervasive, but this tweet is egregious:
Five years ago, the economy nearly collapsed -- and no one felt the impact more than Hank Paulson | http://t.co/l8ykzoDnOJ
— Businessweek (@BW) September 12, 2013
Beyond the obviously cringeworthy lack of perspective, the statement -- which epitomizes a whole view of the economic crisis -- is dangerously flawed in two ways, each of which illustrates a major public-policy problem.
First, by framing the story around and ex-banker and ex-Treasury secretary, it implies that the Great Recession was essentially about banks, so that any solution need only focus narrowly on banks to the exclusion of ancillary, related issues. Second, by claiming that Paulson "felt the impact" more than anyone, it suggests that readers should ignore the overwhelming majority of actual victims -- who, in case you were wondering, are not multimillionaire financiers. As my colleague Matt O'Brien pointed out Wednesday, the richest one percent of Americans had their fourth best year ever in 2012. Whether you think that distribution is just or unjust, it should resolve any remaining worries you had about Paulson and his peers.
Now, even if anyone had been foolish enough to do so, they couldn't have paid me enough to take Paulson's job in September 2008. A self-described reluctant Washingtonian, he was stuck with perhaps the toughest task of any Treasury secretary ever, overseeing a meltdown that was not only catastrophic but also tied up in incredibly complicated financial instruments. Even more impressively, Paulson -- a devout Christian Scientist -- forswears medicine, meaning he couldn't even rely on a trusty Tylenol to get him through.
But let's not kid ourselves. Even if the crash took a bite out of Paulson's fortune, once estimated at $700 million, he remains a fabulously wealthy retiree with a cushy eponymous institute connected to the University of Chicago. Meanwhile, millions of Americans lost homes, jobs, retirements, and life savings.
If the public and press accept a narrative in which the banks are the alpha and omega of the crash, then the nation risks policy remedies that stop when bank stocks recover -- and inadequately address, say, the appropriate role and size of the financial sector within the American economy, or how the housing sector ought to function.
And if the nation accepts a narrative in which Hank Paulson bore the brunt of the crash more than any of his fellow citizens, it means the U.S. is likely to avoid doing things to help the people who were actually hurt -- those who lost homes, jobs, retirements, and life savings. It also lets financiers absolve themselves of any responsibility or connection to the broader national well-being.
This might seem intuitive unless you've been tracking events in Washington, where both parties pay more attention -- or at least lip service -- to cutting government than to alleviating unemployment, homelessness, and long-term structural problems of the economy.
Hat tip: Choire Sicha