Straight Story: Bailout
Fewer jobs, less health care, pricier food and gas and dependence on the federal government to bail us out in the end. Economics editor Chris Farrell sets the story straight on the state of the economy.
Economics editor Chris Farrell (American Public Media)
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TEXT OF STRAIGHT STORY
Tess Vigeland: Our economics editor Chris Farrell is here for the audio op-ed we call The Straight Story and Chris, the bad news just does not end my friend. I mean...
Chris Farrell: No.
Vigeland: ...Bank earnings: Bad. Housing market: Bad. Economy: Bad. What's next?
Farrell: Well, I think there are more bank failures -- bad -- and you know Tess, I'm in the camp that says look, the Fed, the Treasury, they've been taking all these actions to shore up the financial system and I say bravo. I really do believe that they staved off a financial collapse.
Vigeland: But what are we doing counting on the Federal Reserve and the U.S. Treasury Department to bail us out?
Farrell: Yeah, that's worrisome. You know, I think what we're seeing is the consequence of actions that have been taken over the past three decades: the shredding of the social safety net. Now let me just tick off a few highlights: Fewer people have health insurance; Health care plans: They're a lot less generous than they used to be; Pensions: They're full of holes, so here's the straight story: Workers and their families, they're now absorbing most of the cost when money goes bad and the economy spirals down and that means we're more dependent than ever on the monetary authorities to bail us out.
Vigeland: What does that mean for us that we are now relying on the federal government, the Federal Reserve, the U.S. Treasury Department to fix all these problems?
Farrell: I don't like it. You know, we can say, "Don't take on debt and you need to save more." Well, you know what? The way our economy has evolved, you are on your own. You need to be more risk adverse. You need to be more conservative. It's not just the function of the downturn in the economy and this is disturbing that I'm fairly convinced that the risk of losing your job, the financial consequences of losing your job are greater today than they were three decades ago.
Vigeland: How did we get to the point, Chris, where we all have seemingly accepted less health insurance, health insurance that costs more, pensions that are full of holes, I mean, all that stuff that you said you know there's no big hue and cry within the American population to fix all of this?
Farrell: I think we're at a turning point, but you're absolutely right and the reason why there hasn't been a hue and cry is we've become a wealthier society and we took on a lot of debt, but what's happening now is a lot of that debt is going bad and we're not getting wage increases. We haven't been getting them for a long time but now we're not getting them and we can't borrow. And so my sense is that people are increasingly upset about the way their pension plans are being managed and the risks that we're taking. I mean, is it really good public policy that we're making decisions about how much should I be in equities? You know, how much international stock should I own? And I'm making decisions and you're making decisions that will have implications for your living standard 30 years down the road. Is that what people should be doing? And it's this downturn in the economy that's sort of ripping apart and showing how vulnerable we all are.
Vigeland: Alright, our own Chris Farrell with a little perspective on what's going on with the government bailout of this economy. Thanks so much Chris and we'll talk to you later in the show.
Farrell: OK Tess.
Comments
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From Minneapolis, MN, 07/31/2008
This is the Straight Story?
When asked specifically "how did we get to this point" Chris dodges the question and begins talking about the economy like it is an act of God or something. Like it is the weather. Like she was asking "how did this hurricane happen?"
That is faux-journalism at best. Nary a hint that our economic system is created by people and did not spring forth fully formed from the head of Zeus.
Next time save air time and simply shrug and say "That's the way it is."
From Huntington Beach, CA, 07/27/2008
I agree with Mr. Farrell's concern regarding the investments we have for retirement. IRA's and 401K's were created by the government so we could save for retirement. Unfortunately, the way they are structured we have to guess where and how much we have to invest. Congress learned during the hearings regarding investing Social Security in the stock market, that in our present system, there will be winners and losers. Some 25% of retirees will have guessed wrong and won't have much money. With IRA's we also have to guess how long we're going to live! Already, some have guessed wrong, living longer than they expected, and now have depleted IRA's. I think in the coming decades we're going to have a lot of retirees who will find it a rough road; more retirees than the 25% who were unlucky in their guesses.
I wish we had a system similar to the old company retirement plans. One where as a young worker I could invest a given monthly amount for the promise of a set amount when I retired. The more and earlier I invest, the more I would get in retirement. During my working career, as my income increases, I could invest more and thus get a higher payout. Kind of like a SS and 401K hybrid. This would allow my funds and life expectancy to be pooled with the nation.
From Silver Spring, MD, 07/27/2008
I was fascinated by this interview when I heard it on the air. It bemoans the shredding of the social safety net and also laments our dependence on the federal government to bail us out of our economic problems. Since the federal goverment is the most comprehensive and reliable source of "social safety," it makes perfect sense to me that when private sources of economic security (like private health insurance and private pensions) fail (which they have been doing since their inception immediately following World War II), citizens look to the government (the fullest expression of our responsibility for each other) as the ultimate source of aid. In fact, the puzzle for me is why Americans have continued to trust those private sources of social security when their history is one of instability and failure. Why do we not look at that history and our consistent turning to government for help when these sources founder and start building a more comprehensive social security system that relies directly and explicitly on our democratic government and stops inserting those private plans between us and the institution we all hold ultimately responsible. Inserting that intermediate private layer costs us a fortune in the case of health care and does not deliver us nearly as reliable care as our government has.
From Nashville, TN, 07/26/2008
Depend less on government? Sounds like Herbert Hoover, 1929.
What an idiot.
Ten years ago Chris was raving about the "New Economy" and how it was great for us all.
Guess I'm just too dense to realize all these benefits. Just lost my job, but quickly found another one.
But I'm not vested, so I'll loose my matching funds, one of the small loopholes everyone forgets. It will also be January before I can contribute at my new company.
And my 401k's are continually being zapped with higher and higher maintenance fees.
Thanks a lot for the advice Chris. I can't wait until your job is outsourced to India.
EHD
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