January 10, 2009

Elizabeth Warren

Elizabeth Warren, current chair of the Congressional Oversight Panel on TARP is awesome. If you haven't seen her on CNN and CNBC, you should:

For years, Warren has been on the war path for consumer lending reform - she advocates having a Financial Product Safety Commission to regulate increasingly complicated credit products.

Back in 2003 Warren studied consumer bankruptcy in The Two Income Trap. She discovered that overextended borrowers weren't being driven into bankruptcy due to unwise spending on luxuries, but in an effort to buy homes in better school districts. She says that the strongest predictor of bankruptcy is having a child and trying to educate that child.

The solution she suggested back in 2003? Improve public school districts to reduce the stark disparity between the schooling you can receive in different towns.

(It is pretty nutty that people spend all sorts of money on a house as a proxy for spending money on education. It has also occurred to me that what really ended the Great Depression was not the New Deal, but the GI Bill. Maybe we should pouring our stimulus into schools and students.)

Posted by David at January 10, 2009 06:28 AM

Good catch Mr Bau. Smart lady! I do want to differ with you on one debatable point. It is not universally accepted that the GI Bill fixed it. Even MSN asserts that it was WWII spending (see: http://encarta.msn.com/encyclopedia_761584403/great_depression_in_the_united_states.html ). I suspect there is no absolute answer here. (see: http://www.google.com/search?rlz=1C1GGLS_enUS291US304&sourceid=chrome&ie=UTF-8&q=depression+wwII+spending )

Posted by: roger at January 12, 2009 01:11 PM

It's hard for me to believe that assembling guns and bombs is the way to rebuild a productive global economy. It can't really just be about spending the dollars; it's got to be about investments with long-term payoff. The expectation of a payoff is what gets people to spend more and take risks.

But Heidi also thinks that more education can't really be the answer. Maybe what broke the back of the Depression was taking a whole generation of kids and giving them *both* military training and a college education. We trained leaders and we gave them the knowledge they needed to innovate.

Military and education - I guess that's the ancient Roman model.

Posted by: David at January 14, 2009 09:12 PM

I don't think it was the US spending on the war that caused the recovery. Henry Hazlett http://www.amazon.com/Economics-One-Lesson-50th-Anniversary/dp/0930073193 pretty much does away with that notion. Economists far greater than us still debate what caused it. My personal belief is in the infusion of foreign money into the US economy to purchase weapons during the lead up before we became involved.

But that war also left us with "The Greatest Generation" that believed in the "American way of life," hard work, and commitment to get big things done. You can still find pockets of that in today's environment, but it is far from a generational theme.

Posted by: roger at January 17, 2009 07:45 PM
Post a comment

Remember personal info?