On my flight home this week by coincidence I was seated by a young single black woman about 30 years old who worked for a big retail bank (which isn't going under) and whose job is still secure. She did not have a Masters degree but was obviously intelligent and ambitious (she was quite deliberately networking me and trying to set me up as a future contact that might work to her advantage). In a moment of candor that she might have regretted later, she revealed to me that she had recently purchased her first home and gave me a few more details than I would have normally expected. It was an 1800 square foot starter place in a nice new suburban sub-division for about $150k. She had put down about 20% and had a fixed rate mortgage at about 6.3%. With taxes and insurance, that made the payment about $1000 per month and that was apparently just a little more than her salary would justify. But she was making it ok.
It turns out that she was revealing this to me because she had two things on her mind and somehow she thought I might have some answers.
The first thing was whether I thought we were going into a depression? She was clearly frightened by the economic meltdown and the uncertainty that it is causing. So far she was ok, but she works for a bank and the failures had really rattled her. I told her that I thought we would be ok, that too many people had overextended themselves in all sorts of ways (mortgages, credit card debt, excessive spending, lack of savings, etc.) and that we're paying the piper now, but eventually, as we work our way out of this, it will make us stronger and healthier.
The second thing was more surprising. She described the situation in her neighborhood. A good number of her neighbors were in trouble, hopelessly behind in mortgage & credit card payments, holding property worth less than their mortgages because they put nothing down, facing bankruptcy and foreclosure. But what bothered her most was that many of her neighbors were re-negotiating or expecting bailouts that would effectively lower their costs by enough for them to afford to stay in their homes. Her question to me was; "Why is that fair? I did everything right, saved, invested in a home, worked hard, etc. and now my neighbors who didn't do any of that get rescued and I get nothing."
Here's what I said to her. Life is fair in the long run. You did the right thing and you should be proud of it. If you keep doing what you're doing you will come out way ahead of your neighbors in the long run. In the short run, you are better off subsidizing those who haven't been as prudent as you because a complete economic meltdown would drag everyone into the dumpster. It wasn't Bush's fault that all this happened and it won't be Obama that fixes it. It's people like your neighbors that made bad decisions who got us into this. Sure others exploited their greed but there will always be those who take advantage of their fellow man. It's people like you that made the right decisions that will get us out of this mess, and your neighbors could have too if they had been as responsible as you.
What we have to avoid now is permanently creating a class of people who think they can always count on a bailout or a handout and don't have to work hard and save and make good decisions like you did. Fairness doesn't come from redistributing wealth, it comes from people like you succeeding with what they have fairly earned and deserve to keep. Fairness comes from those of us who have succeeded giving generously to those who are needy and less fortunate out of charity, compassion, and a sense of personal responsibility, and not from some utopian illusion of fairness enforced by totally impersonal payroll deductions that are really about political power, and elitist central government control of who deserves what.
It turns out that she was revealing this to me because she had two things on her mind and somehow she thought I might have some answers.
The first thing was whether I thought we were going into a depression? She was clearly frightened by the economic meltdown and the uncertainty that it is causing. So far she was ok, but she works for a bank and the failures had really rattled her. I told her that I thought we would be ok, that too many people had overextended themselves in all sorts of ways (mortgages, credit card debt, excessive spending, lack of savings, etc.) and that we're paying the piper now, but eventually, as we work our way out of this, it will make us stronger and healthier.
The second thing was more surprising. She described the situation in her neighborhood. A good number of her neighbors were in trouble, hopelessly behind in mortgage & credit card payments, holding property worth less than their mortgages because they put nothing down, facing bankruptcy and foreclosure. But what bothered her most was that many of her neighbors were re-negotiating or expecting bailouts that would effectively lower their costs by enough for them to afford to stay in their homes. Her question to me was; "Why is that fair? I did everything right, saved, invested in a home, worked hard, etc. and now my neighbors who didn't do any of that get rescued and I get nothing."
Here's what I said to her. Life is fair in the long run. You did the right thing and you should be proud of it. If you keep doing what you're doing you will come out way ahead of your neighbors in the long run. In the short run, you are better off subsidizing those who haven't been as prudent as you because a complete economic meltdown would drag everyone into the dumpster. It wasn't Bush's fault that all this happened and it won't be Obama that fixes it. It's people like your neighbors that made bad decisions who got us into this. Sure others exploited their greed but there will always be those who take advantage of their fellow man. It's people like you that made the right decisions that will get us out of this mess, and your neighbors could have too if they had been as responsible as you.
What we have to avoid now is permanently creating a class of people who think they can always count on a bailout or a handout and don't have to work hard and save and make good decisions like you did. Fairness doesn't come from redistributing wealth, it comes from people like you succeeding with what they have fairly earned and deserve to keep. Fairness comes from those of us who have succeeded giving generously to those who are needy and less fortunate out of charity, compassion, and a sense of personal responsibility, and not from some utopian illusion of fairness enforced by totally impersonal payroll deductions that are really about political power, and elitist central government control of who deserves what.
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