Is anyone else tired of the “we’re all to blame for this mess” meme that has been deployed by the people principally responsible for the ongoing financial meltdown? Here’s an especially cutesy version of it by Joel Stein–don’t blame the immediate past President of the U.S., don’t blame the bankers, blame people who bought “tasting menus and backyard bouncy castles”–that is, Jane and Joe Q. Middle-Class Public.
It’s terribly fashionable these days to ridicule people for being “upside-down” in mortgages for houses that can’t be sold at any price these days. I know that my flabber was regularly gasted by stories of people who make about what I do getting mortgages for $300,00 and $400,000 homes. But we hear very little about why residential real estate went up so much in the 2000s, and why homes that could be had in the $150,000-$200,000 range in some neighborhoods nearly doubled in price in less than a decade (and make that “nearly tripled” in some places in California.)
The key here is that it was only some neighborhoods that went through the roof, and my guess is that much of the speculation was driven by the parental frenzy to live in a “good” school district. I think this analysis of Connecticut real estate prices and school test scores is a tale that can be told about a lot of American cities, towns, and neighborhoods in the 2000s. I’ve always thought that the “No Child Left Behind” was a huge racket and a right-wing twofer of privatization and attacks on unions (unions that disproportionately serve women workers, too, so make that a threefer): NCLB funneled public money to private testing companies in return for clubs with which to beat teachers and the teacher’s unions. Now it appears that it may also have contributed to the absurd runup in real estate prices that have buried the middle class. Great idea! It all makes so much sense if you want to turn public schools into tools designed to destabilize people’s faith in government, rather than to, you know, educate children. If public education were adequately funded everywhere, instead of in just some school districts, then maybe we’d not only have better schools for everyone, the cost of housing wouldn’t drive working- and middle-class people into a ditch.
Now, to return to those “tasting menus and backyard bouncy castles:” does Stein really think that that’s where most American consumer debt is? Because everything I’ve read recently–and if you’re a sentient being who’s been in a retail establishment lately–says that buying stuff is not the problem for most of us. Consumer goods are embarrassingly inexpensive these days, because most of them are made in developing countries by workers who may not even be free, let alone paid a decent wage to work in a safe environment. Medical debt is a large part of the problem in the U.S., where access to health care is not a civil right People who are uninsured or badly or unscrupulously insured have to pay those bills somehow, and hospitals loves them the Visa and the old MC. (By the way, everythink I learned about this–not much, I admit–I learned at the knee of Elizabeth Warren. Check her out.)
There are some things government doesn’t do well–like, for example, waging bullcrap wars on “drugs” and on “terror.” (Can we have a War on Euphemism next, please?) There are other things that make sense to do collectively and democratically, like health care and K-12 education. We’ve tried privatization and “accountability” for third-grade teachers making $35,000 a year but not for Wall Street bankers making $35 million, and more–tell me again: how’s that working out for us?
Historiann 
I just had to Youtube “backyard bouncy castle” to see what was causing the problem. Now I almost feel sorry they sent Bernie Madoff up yesterday–if it was all these narcissistic parents overdosing their kids on kinetic fun! There should have been a “czar” with this issue in hir portfolio, I guess. Now that you think about it, all those long elaborate birthday parties at Chuck E. Cheese must have contributed to the collapse as well. The NY Times has a piece today about how people selfishly putting off elective medical procedures are forcing hospital corporations to groan under the weight of all of the underpriced medical care they’re doleing out to poor people. Or something like that.
When everything was going up analysts were talking about how we had somehow “repealed” the “laws” of “economic gravity.” Now I guess it’s like the Restoration Parliament: we’re putting them back in force under different names and sovereignty claims.
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I love the pic!
The key here is that it was only some neighborhoods that went through the roof, and my guess is that much of the speculation was driven by the parental frenzy to live in a “good” school district.
While I hate NCLB with a passion, this just doesn’t fly for California, where housing prices skyrocketed regardless of school district (they were accompanied by skeezy residency transfer games and more charter schools though, I grant you that.)
Nope, we _still_ have multimillion 1 or 2 bedroom homes in new tract housing developments in the valley 2 or 3 hours drive from where anybody would work. And they are still selling. (Or still not price-falling.)
It is such a strange place here that you can’t help but get caught up in what’s “normal” for a house price — I was just looking at the back of my free weekly and thinking, damn, houses in the area have dropped to 780K — I gotta get in on these low low prices!
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Your last paragraph says it all. Well said.
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Indyanna–you have no idea how much money most parents would pay to put an end to the Chuck-E-Cheese kid birthday parties! And, I share your bemusement at how with every boom, somehow a critical mass of people who really should know better (or at least remember the last bust) convince themselves that the laws of economics and of history no longer apply.
Thanks, Lilian, for your compliment. And Sisyphus–real estate in the Golden State does seem to continue to defy the laws of economics, history, and gravity. I guess there are so many people who want to be there that they’ll pay almost anything for the privilege–but few states or neighborhoods have that kind of a seller’s market. Interesting intel on the yuppie residency dodge–a tony school in a district near Denver, called Cherry Creek, recently discovered that the upper-middle class parents of something like 15% of their students were using fraudulent addresses so as to enroll their kids in the hot elementary school to be in. (Funny how judgmental many of these same people are when it’s Mexican parents who want to cross a border illegally for the sake of their children.)
Honestly–at the point where you’re a rich family using a business address or a grandparent’s address to get your kid in a particular public school–isn’t sending your kids to a good private school the best thing to do? I know, I know–good liberals don’t want to “abandon the public schools,” but if what you’re doing instead is working the system to deny someone else a lawful spot, that seems scummier and more exploitative to me.
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The piece by Stein lets Greenspan off the hook way too easily. Very low interest rates coupled with lenders willing to assume that property values were going to keep on rising drove the housing bubble. That said, I don’t have a lot of sympathy for those who (like some close relatives with college degrees) decided to pull money out of this newfound equity in their California home and buy his & hers Harleys, a Mercedes coupe, etc. It’s not a myth – millions of Amercians did just that. I don’t know where Sisyphus lives, but from my contacts in Claremont and Santa Rosa I hear that sanity is returning to the real estate market, that houses can now be had for under $300k and prices are still dropping. Areas closer to the coast are the ones I still assume to be
Here in Colorado there does appear to be some correlation between school test scores and real estate values, or at least that’s what my wife says and she’s done a lot of research on the topic. It is hard to find fault with parents who want to find a stimulating educational environment for their kids. It seems that public schools ceased to seriously challenge talented students long ago, and the search for those (public, charter, or private) that still will is only logical.
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“Areas closer to the coast are the ones I still assume to be more inflated” is what the last sentence of the first paragraph should have read.
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Oh, I like you final zinger. The dismantling of any accountability for major financial institutions and investment firms in the US during the 90s and the first decade of this century was a staggering reversal of the “teachers and liberals we don’t like” should be 100% accountable for everything that seemed in the air, wasn’t it?
National health care is such a no-brainer to stabilize a society and an economy. Yet I see so many people trying to tear down Canada’s system and urging us to adopt some sort of Americanized model. Having lived under both systems, I can tell you that, even with our occasional wait-time boondoggles, nationalized is better.
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Thank you, Historiann.
Where I live in the Central Valley of California, prices are *very* depressed (Sis, if you’re looking for a cheap place to live. . . ). THis is mostly because a very high level of foreclosures. I went around with a realtor and my mother a few weeks ago to look at what’s available, and there were houses for $110,000 that two or three years ago went for $300,000. So, if you bought then — even as a sensible person saying “we can afford a mortgage on a $300,000 house” — you are way in negative equity territory. And how are you to blame? That you needed to buy a house in 2005?
I think the ways people are offloading the blame for this on “ordinary people” when they just did what was recommended by those who were supposed to know is really sleazy — just as sleazy as the uncritical promotion of those things was.
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Now see, in my town property value isn’t connected to schools because there are no longer any district schools. You have to apply to the different charter schools, have your kid tested, go to special events held in the middle of the day so that anyone who *has* to be at their job can’t be there – and it is in that way that the schools reinforce a class bias. As for property values, well, their based on your likeliness to get shot or have to swim during the hurricane season. Sadly prices haven’t gone down much since Katrina jacked everything habitable up. And if you buy something that flooded, you will pay $200/month for every 100K of value in insurance (not including the crazy taxes!) and I should note that most houses here cost between 200-800K.
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Geoff–I completely agree that parents are behaving reasonably in trying to get their child into a quality appropriate school. I’m just saying, why is that something we need to hunt for? Why are there such dramatic differences in schools in the same school district? I know you know what I’m talking about here. (I am calling out wealthy people who do this, when they could afford private school easily.)
This is the problem with the argument that what we have now is a “free market” (for whatever: banks, health care, housing, etc.) It’s not a “free market” when the government actively collaborates to make some schools bad, and others good or even great. It’s not a free market when some neighborhoods get good roads and policing, and others–not so much. That’s a rigged market, not a free market. People who are so big on “outcomes” when evaluating schools should understand that some schools require different levels of support to achieve the same “outcome.” If you teach at a school where 80% of the children have breakfast and are properly dressed in clean clothes, then you can get a lot more done for the same money and expenditure of energy than you could if only 20% of your students came to school with breakfast under their belts. Equality is not always equitable–and for some children, a classroom with 30 kids works OK, but for others, more than 12 is a problem.
Susan, about the Central Valley–yeesh. I guess it’s good for your mother, if she’s in a position to bargain-hunt now, but I think you’ve nailed the problem exactly: there are a lot of people who were entirely responsible and who acted in good faith who have been completely shanked.
Janice, I hope Canadians aren’t serious–I mean, since 90% of you live within driving distance of the U.S. border, rich people can always drive over and pay cash if that’s their style, right? And Liz2–I’ve been hearing reports about your town over the past few years, and it’s really disheartening–those little things like holding mandatory meetings in the middle of the day–well, whose interests does that serve? (See above, “rigged market.”)
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I’m in debt (mostly education- and health-related, but there were a few restaurant meals and nice haircuts in there, granted), and I’m not even 100% certain what a “tasting menu” is.
But here’s the thing: those of us who are not bankers, or real estate brokers, or ex-presidents are being excoriated not only because some of us may have bought things we couldn’t afford. No, now that we have that 20-20 hindsight and are belatedly trying to scrimp every penny, we’re being blasted by economists and commentators for *not* spending more than we feel comfortable with, thus making things worse.
So: should I go out and buy a bouncy castle, or not? I mean, I don’t actually have a backyard to put it in, but I’m tired of being blamed. Maybe I’ll get it right this time.
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You didn’t get a bouncy castle in 2006, Notorious? Sorry, man–they’re sooooo over. (I can get you a used one cheap on Craigslist, though, if you’re really committed to the concept.)
Don’t you get it? Whatever happens, it’s always our fault. Wall Street and right-wing politicians are our collective abusive husbands–no amount of tiptoeing or favorite-meal cooking or child-shushing or craven subservience will satisfy him–he’ll always have a reason to beat us pathetic $35,000/yr. schoolteachers.
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And they really did try to push people to take those mortgages. I’ve been in arguments with people before, telling them not to buy such an expensive house on their salary, but I don’t have as much clout as the bank, mortgage company and real estate agent who collectively repeat yes you can!
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I have always thought it ironic that a federal program called No Child Left Behind could coexist with a federal program called Head Start. Also, I am declaring a Police Action on Euphemism in your honor.
HJ
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“The key here is that it was only some neighborhoods that went through the roof, and my guess is that much of the speculation was driven by the parental frenzy to live in a “good” school district…If public education were adequately funded everywhere, instead of in just some school districts, then maybe we’d not only have better schools for everyone, the cost of housing wouldn’t drive working- and middle-class people into a ditch.”
It is true that the subprime meltdown is concentrated in only “some neighborhoods” something like half of all home foreclosures are taking place in 35 counties. http://www.usatoday.com/money/economy/housing/2009-03-05-foreclosure_N.htm A sizable portion of our foreclosures are taking place in states where differences in education spending are not a major consideration when deciding where to buy. Many of the foreclosures are taking place in retirement states like Florida and Arizona where new home buyers are more concerned with the quality of the golf courses then the quality of the schools. Also cutting against the school-funding/foreclosure nexus is the fact that California interprets the equal protection clause of its constitution as requiring equal spending per-pupil (see Serrano v. Priest, (Serrano II ), 557 P.2d 929 (1976).
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I’ve also wondered if some of this can also be blamed on the long-term effects of repeals of property tax, like Prop 13 in CA. I wonder if anybody would have been willing to buy (because I think some of the lenders would still have pushed the loans), had they also been responsible for the sort of taxes that were normal before 1978.
I’m still of the opinion that much of the bailout should go to people stuck in bad mortgages/bad mortgage situations because they’ve since lost their jobs but just buying up the mortgages (if paid off immediately, the banks lost the interest, but the goernment would get it) and re-financing so people can stay in their homes. That and national health insurance.
The people who got crazy mortgages on second or third homes, or because they were speculating? I’m not so worried about.
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ADM–great point, and thanks for bringing up Prop 13, which (along with Ronald Reagan’s terms as governor) did more to destroy public education in California than anything else. I’m with you on trying to help people save their one and only home, and less worried about those who were speculating with second and third homes.
And Nathan–thanks for the additional data points. The situation is so complex that there are clearly no single causes, and I take your points about Arizona and Florida. But, to be clear–I wasn’t arguing that it was money spent per pupil that drove the real estate bubble, but rather test scores. It’s entirely possible to spend lots of money for not so great outcomes–and equality of money spent is not necessarily equitable. My argument here isn’t that we need to equalize funding–it’s that we need to pay what it costs to get the results we want. It will cost a lot more money per pupil to get the same result in (for example) the Denver Public Schools than it will in the tony suburb of Cherry Creek, where nearly all of the children have breakfast, proper clothing, and at least one parent who plays an active role in their children’s educations. Teachers who have to do their students’ laundry, feed them breakfast, and purchase their school supplies for them can’t just jump right in first thing in the morning with the 3 Rs.
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Don’t you get it? Whatever happens, it’s always our fault.
Sounds exactly like how people talk about mothers — and women who aren’t mothers, as well. Oh, wait!
he’ll always have a reason to beat us pathetic $35,000/yr. schoolteachers.
I wonder what gender most of those pathetic school teachers are? Ooh ooh, and which gender is more associated with consumption and irrational spending?
And someone beat me to the Prop 13 reference, which, along with our stupid stupid stupid law that says we need 66 percent to pass an annual budget, is at the root of a lot of our state’s fiscal problems.
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PS have you read Jennifer Price’s _Flight Maps_? Someone recommended it to me for my class next quarter and I’m really liking it. I may use the chapter that’s all about the passenger pigeon and early American concepts of nature, and for some reason thought of you and your blog when I was looking at it this weekend.
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I just want to point out that Prop 13 actually has a very complicated effect on the housing market in CA. It does cap property taxes, therefore making higher prices more ‘affordable’…but it also encourages people to never, ever sell their house, since property taxes are always based on your house’s original (not even, I believe, inflation-adjusted) valuation. So, to bring it back to schools, I know people who bought a house decades ago in a nice area with mediocre schools. They now have school-age kids, and want to live in a district with good schools. Instead of selling the house they own and buying one in the other district–which they would like to do, since they plan on living there for the next 12 years or so–they rent out the house they own in bad-schools-district and put that money towards the rent they pay on a different house in good-schools-district. This saves them on the order of $10,000 per year in property taxes.
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To add to what Liz said, my understanding of Prop 13 was that it froze taxes at 1978 levels for those who owned their home in 1978…people who purchased later would be taxed at a significantly higher rate. Although I wouldn’t have voted for it had I been of voting age at the time, one of the problems Prop 13 was addressing was people on fixed incomes being saddled with quickly rising tax bills as their homes tripled in value (yes…my boyhood $23k home in 1972 to $80k several years later). California’s current budget woes have at least as much to do with the constitutional requirement of a 2/3rd legislative majority for a tax increase and an enormous prison-industrial complex as Prop 13, whose effects recede somewhat with time.
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Sisyphus–I’ll take a look at the book you recommend. I’ve been teaching more environmental and environmental-ish history in the past few years, since that’s an emerging field in my department. (I’ll never be an environmental historian, but I like to support our students’ interests in the field, especially when I teach a grad class.)
And Geoff and Liz–thanks for your further clarification on Prop 13. It still screwed at least a generation–MY generation–of public school students in California (ca. 1978-1990-something, when the prices really skyrocketed). For the record–I didn’t grow up in CA, but the “taxpayers revolt” there had implications in school districts across the country. My memory is of my school district constantly putting school levies on the ballot–like every year–and that sometimes they passed, and sometimes they didn’t. I’m not saying that California is entirely to blame–clearly there was a zeitgeist linked to stagflation and the incredibly shrinking American dollar–just saying that it was probably the most dramatic and most publicized anti-tax measure of the time.
I think some kind of tax relief is appropriate for longtime owners on fixed incomes–and in the 1970s, there weren’t as many ways to make home equity work for you as there came to be in the 1990s and 2000s. But there are an awful lot of people who enjoyed profit without paying their fair share. (Why not just adjust everyone’s tax rate downwards, if property tax valuations were going through the roof?)
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Prop. 13 has had a number of terrible consequences, not all of them foreseen even by those of us who opposed it at the time. Example: local governments can’t raise revenue from property taxes, but they can from sales taxes, which (a) are regressive in impact and (b) create bidding wars between towns to attract big box, high-volume (and oh yes, non-union) retailers by offering free water, safety, and other inducements. Another example: the civil courts, especially in fast-growing counties like Contra Costa, are completely overwhelmed, despite having imposed or increased fees for things like filing motions.
The effect on home prices is more complicated. Yes, 13 rolled back assessments to 1978 levels, but it permits re-assessments every time property is sold, so you get look-alike adjacent homes, one in the same hands since 1978, one that’s been resold a few times, paying vastly different taxes. We did foresee, 30 years ago, that because commercial property changes hands much less often than homes, 13 would mostly benefit commercial landlords and agribiz; instead of 13, we urged voters to support a measure on the same ballot that would have allowed different tax rates for commercial and residential property. But homeowner rage, very much fueled by racist notions about who pays for government and who “sponges off” it, was unstoppable, and even now, with our roads crumbling and our schools terrible etc. etc., Prop. 13 is considered untouchable, a political Third Rail.
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rootlesscosmo–it’s good to hear from you again. Thanks so much for your insider historical perspective on Prop 13. Sadly, it looks like you and the other opponents back in the day were absolutely correct.
Here in Colorado, our “third rail” is TABOR, the evil “drown the government in the bathtub” amendment that not only mandates refunds to us taxpayers (who don’t pay enough in the first place, IMHO) in bad budget years, it requires us to shrink government in bad budget years and won’t let us re-grow it to an adequate level when the good times return. So even if in FY ’11 and ’12 many states are singing “Happy Days are Here Again,” it won’t be happy times here in the Centennial State.
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