The American Interest
Essays & Longer Thoughts
Published on June 2, 2011
The Death of the American Dream I

The news from the housing market this week is bad.  Really bad.  House prices today are lower in most of the country than they were in the dismal month of April 2009; we are now in the second dip of the double dip housing downturn.

This doesn’t just mean that President Obama’s re-election is in trouble.  It doesn’t just mean that stocks and the dollar may fall.  It doesn’t just mean that unemployment will stay high for a while and that whole economy may follow the housing market back into the tank for a second recession.

It means something bigger.  For eighty years we have defined the American dream as an owner occupied family home, preferably with a nice swathe of crabgrass-free lawn around it.  The home mortgage was the centerpiece of a society of consumers based on debt-financed living.  It was life on the installment plan.  The latest downturn in the housing market is one more grim signal that in its current form, the American Dream is going the way of the dodo.

A home of your own increasingly means a home of the bank’s.  Today some 86 million Americans live in homes that are ‘under water’ where the amount owed on the mortgage is greater than the value of the house.  Since the financial crisis began in 2008, over one million consumer mortgages have gone into foreclosure. Sales of bank-owned properties are now 34.5 percent of the housing market;  homes in foreclosure waiting for resale now account for a three years-supply on the sluggish housing market.

The damage is heavy.  For most Americans, their single biggest asset is the equity in their home.  At the peak of the boom, total net home equity in the US (the value of owner occupied homes minus the remaining mortgage debt) stood at 13 trillion.  Today it is down to $6.5 trillion. America’s home equity losses are greater than the GDP of Japan.

The bad news has come at a bad time.  The Baby Boomers, the least provident and most demanding generation in American history, are beginning to hit retirement.  For decades, many Boomers comforted themselves with the illusion owning a home would provide them with the savings they would need in retirement.  Now many of them haven’t paid off their mortgages and they not only don’t have a lot of equity left; in some cases they cannot afford to sell their depreciated homes.

American housing policy has reached a dead end.  We can no longer stimulate the economy successfully by encouraging more and more people to assume higher levels of debt.  Decades of public policy aimed at subsidizing home ownership created conditions that spewed toxic mortgages into the financial markets, costing taxpayers hundreds of billions in bailouts and trillions more in lost wealth and lost jobs in the economic downturn, and created a ruinous housing bubble.

It was not, by any means, a complete flop.  Tens of millions of American families enjoyed the benefits of living in a home of their own.  Prudent borrowers who bought only the house they needed and fought off the temptation to use their home equity to finance their lifestyles have mostly not done too badly.  Many homeowners can and will hang on until the inevitable market correction pares their losses to a manageable level.  Those lucky or far sighted enough to buy at the right time are still sitting on sizable profits.

But something has, I think, changed.  Something big.  Humpty Dumpty has fallen off the wall.  A social ideal has received an irrecoverable blow and the era of consuming our way to prosperity is drawing to a close.  The country has maxed out its credit cards, and we are going to have to live within our means.

This isn’t the first time the American Dream has died.  The old dream — your own farm rather than your own home — once dominated American culture, politics and family life as much as the family home ever did.  The slow and painful death of that dream was one of the country’s core preoccupations in the first half of the twentieth century.  The death of the new dream is likely to be a big deal as well.

The ideal of the family farm was once even more deeply rooted in American life than the ideal of the owner-occupied home.  In the 18th and 19th centuries, the average American family owned and farmed a small piece of land.  Cheap land on the frontier made the original American dream accessible to just about anybody.  New immigrants and young people would work for a few years to save up money for basic tools and equipment, head west and start up a farm.

From the Revolution (caused in part by George III’s attempt to stop the colonists from opening the land beyond the Appalachians to settlement) through the Great Depression one of the federal government’s main concerns was to make life easier for family farms.  American governments worked to make land and loans cheap.  Politicians also promoted the construction of railroads that allowed inland farms to ship their products to distant markets and then worked to regulate railroad rates so that farmers could make a living.

The old dream died from a combination of reasons.  The closing of the frontier dried up the supply of free land and the mechanization of agriculture made small farms uneconomic.  Federal subsidies lured too many people onto the land; many homesteads in parts of the west were in climates unsuited to smaller holdings.  A vast expansion in global acreage under the plow in the late 19th and early 20th centuries exposed small family farmers to tough global competition.  The terms of trade between farm goods and town goods changed over the years; farmers’ incomes steadily fell in comparison to urban dwellers.  The more complex and expensive farm techniques needed to meet the competition required farmers to spend more on equipment and education than their small farms could really support.  Young people craved the excitement and the opportunity of urban life.

The age of the family farm slowly and painfully drew to a close.  In 1900 41 percent of Americans worked on farms.  Today fewer than 2 percent do.

Non-metro farming dependent counties in the United States, 1950 & 2000 (USDA Economic Research Service)

Then came the Dream 2.o: home ownership in the suburbs accompanied by a consumer lifestyle based on credit card debt and the installment plan, anchored by a white or blue collar ‘good’ job.  Once again federal policy aimed to make the American dream open to any white male: jobs were to be plentiful and mortgages cheap. Over time, we’ve extended the concept: you don’t have to be white or male to qualify for a good job but American social policy as a whole is recognizably an adaptation of our family farming heritage to the age of manufacturing.

Now the 2.o Dream is on the skids — and, as was the case with the death of the family farm, more than one force is at work.

Part of it is the breakup of the blue social model.  In the heyday of the old economy, the average American job was long term — lifetime employment in the car factory, working for the phone company or the local bank, or working for the government.  A thirty year mortgage with steady payments made a lot of sense in a world of lifetime employment.  Today’s careers are more volatile — even when things go well there are ups and downs and, often, spells of unemployment between gigs.  Income growth is also unpredictable; unions are negotiating givebacks rather than the steady raises of past generations, and the downsizing of whole industries and the decline in manufacturing employment means that millions of Americans must adjust to falling incomes as life goes on.  A mortgage payment that seemed reasonable when father worked at the Chrysler plant becomes an unmanageable burden when the plant shuts down and he gets a job at the 7-11.

Family structure is also changing.  Divorce was rare in the American middle class fifty years ago.  A nation of kaleidoscopic family arrangements doesn’t fit the thirty year mortgage pattern quite as well as we used to.  Divorce creates two new households at a lower income than the original one, forces the split up of assets and changes the nature of real estate markets.  A nation with a high divorce rate, all things being equal, is a nation of worse credit risks than a nation which marries for life.

The American household is also getting smaller.  More people are remaining unmarried; many married couples are having fewer children.  While the shift to smaller households propped up house prices for a while (smaller households mean more households are in the housing market) it tends to reduce credit quality and slowly alters the nature of the housing market.  Single parent households have lower incomes and are more exposed to unemployment, and single young people tend to be more mobile than their married counterparts.  Single parent, single person and smaller households generally also tend to prefer smaller and more easily maintained residences.

The banking system is also less well organized to offer low rate thirty year mortgages than in the past.  Fifty years ago, interest rates were essentially regulated by the government, and the government worked to keep those rates stable for mortgage oriented banks and savings and loans.  The inflation of the 1970s, the rise of global financial markets and the deregulation of interest rates that followed on these developments changed the way banks work and the environment they work in.  The rise of instruments like mortgage-backed securities did not take place in a vacuum; if cheap long term mortgage financing was going to be available to American consumers at reasonable rates, banks would have to find ways of spreading the risk.  With encouragement and support from government, they shifted from being mortgage-holding institutions to being mortgage making institutions.  Banks made their money from originating the loan and then passed it along.

Diminishing returns were also a factor.  The housing-industrial complex wanted to keep growing; that meant expanding the market.  The government, the housing industry and the financial service industry have all worked together to increase the percentage of American families who own their own homes — even though that meant making sketchier loans to more vulnerable borrowers as financial markets were becoming more volatile.

The increasingly debt-oriented lifestyle of the last eighty years saw consumer debt steadily rise — for cars, vacations and college education as well as for homes.  Rapidly rising levels of consumer debt — topped off by federal and state debt — were seen as necessary for economic growth.  Unsustainable debt wasn’t a bug in this system; it was a feature. Massive trade deficits subsidized by mercantilist foreign governments bent on exporting increasing volumes of goods to decreasingly credit-worthy American consumers kept the merry-go-round spinning.

A falling dollar, massive shortfalls in pension programs, a collapsed market in securitized loan products ranging from home mortgages to credit card debt, young people crushed under the burden of student loans for college educations that did not pay off as advertised: these are related signs that a social model is wearing down.  The age of big blue was an age of big debt; we are going to have to try something new.

Everyone is to blame for what happened — and nobody is entirely at fault.  Borrowers over borrowed and over bought.  Speculators danced on the precipice with other people’s money.  Banks knowingly made bad loans and passed them along to a complicit and compliant Fannie Mae and Freddie Mac.  Politicians turned these watchdogs into lapdogs and used the agencies as patronage playgrounds rather than filling them with serious and competent leaders.  Investment banks in the US and abroad developed complicated financial instruments that exploited the weaknesses in the system — and paid outrageous bonuses to the executives who figured out new and even crazier forms of financial razzle dazzle.  Meanwhile, back at the ranch house, taxpayers asked no questions about the combination of market distorting subsidies and implicit taxpayer guarantees that underwrote the whole dizzy boom. And they gladly overspent on their credit cards, telling themselves that their rising home equity would bail them out in the end.

So everybody did something wrong — but in another way, everybody is at least partly innocent.  The concept that the owner occupied house is the natural and only home for the standard American family, and that the financial system can and will provide fixed rate thirty year mortgages as if it was still 1959 is almost certainly wrong.  The concept that massive consumer debt plus massive government debt is the road to stable prosperity looks increasingly delusional — but the great weight of conventional wisdom and the habits of many decades give these idea such an air of inevitable truth that even today most people have a hard time imagining life after Levittown and regular credit card fueled sprees at the mall.

The diversion of trillions of dollars into uneconomic and unsustainable uses has cost this country in ways that can scarcely be imagined.  The creation of vast unfunded liabilities and unsustainable entitlement liabilities will haunt us for decades as we struggle with the consequences. The costs are likely to rise as Americans individually and collectively continue to shore up a dying dream.

Slowly and reluctantly, the country will have to move on.  Unwinding the consequences of our distorted housing market will probably not be quite as painful as unwinding the farm bubble of one hundred years ago.  But it’s going to hurt, and it’s going to deepen the sense among many Americans that something has gone terribly wrong.

This Great Recession, the greatest economic meltdown since the 1930s, was touched off by a housing crisis that is intimately linked to the breakdown of the American social model of the 2oth century and the system of home ownership that is so deeply intertwined with it.  The recession will end at some point, but the glory days of the old model will not return.  The politics and economics of nostalgia will not bring us back to the kind of steady growth and rising living standards that Americans enjoyed when both versions of the Dream were in their prime.

We are going to have to rethink the Dream going forward — this is part of the vast process of American reconstruction that urgently needs to get started — a process too many of our nostalgic intellectuals seem unable to face.

Our existing housing stock is not going away.  Home ownership is likely to continue to be more common in the US than in other countries.  But the idea that the average American family will make a killing on the average American home, painlessly acquiring the savings for retirement through government-subsidized fixed rate thirty year mortgages, has passed its sell by date.  Americans are going to have to save more and consume less, and the returns on home ownership are likely to stay low.

The transformation of Americans from a nation of savers and entrepreneurs in the era of the family farm to a nation of consumers in the last eighty years was a fateful one.  Our ancestors thought that debt was shameful and a burden; we’ve come to think of cheap debt as part of our birthright.  The American Dream as we’ve known it entailed a lifestyle based on permanent debt.  The growth of the American economy depended on growing debt at every level from federal Keynesian stimulus to credit card and mortgage debt.

I will have more to say about the ever-changing American Dream in posts to come; while painful, change is not only unavoidable.  It can lead us to better, richer, more truly human lives.  It is a new century, and America, the land of the future, must once again find the frontier.

[Note: this post has been edited since first publication.]

  • sdn6yt9gvytgfo2ik

    The dream was failing before the housing crash. Then prices were sky high and people had to struggle to afford them hence interest only loans etc. Now that prices are down houses are more affordable and it is easier to achieve the dream.

    The fact that houses continue to fall means that the dream is becoming more possible not less. If auto prices were falling you would write that the dream of car ownership is becoming possible to more people. The same is true for housing. If house prices are falling home ownership becomes possible for more people.

  • Richard Helms

    Mr. Mead,
    Incredible article as always. One typo though, fifth paragraph from bottom, beginning of second sentence.
    RWH

    • Walter Russell Mead

      Thanks; fixed now. We’ve taken the coffee machine out of the intern break room to teach them the importance of careful proofreading; senior management will go for a four day retreat to Aruba to reflect on how such problems can best be avoided in future. (As always, Via Meadia follows best corporate practices in dealing with issues like this.)

  • http://poisonyourmind.com reflectionephemeral

    “Banks knowingly made bad loans and passed them along to a complicit and compliant Fannie Mae and Freddie Mac.”

    This falsely implicates Fannie and Freddie.

    See, e.g.: http://www.ritholtz.com/blog/2010/09/fannie-freddie-acquitted/ “In short, attempting to subsidize the American dream for low and moderate income families may be a fundamentally bad policy. However, it does not appear to be either the origin of the housing bubble or the source of Fannie and Freddie’s trouble.” Fannie and Freddie *lost* market share in the bubble years to banks making bad loans.

    See also: See also: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
    Federal Reserve Board data show that:
    •More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
    •Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year
    •Only one of the top 25 subprime lenders in 2006 was directly subject to the [CRA]

    It is a fiction that the government was responsible for the housing bubble and resulting financial crisis.

    • Walter Russell Mead

      I don’t say they were the ONLY responsible actors. Are you saying they had no role at all? They must have understood the mortgage market pretty well. Did they blow the whistle on hanky panky and try aggressively to block robosigning and junk collateralization? Were their officials out barnstorming the Congress and warning that the secondary mortgage market had gone off the rails?

      Nobody is responsible for everything that went wrong — but nobody has totally clean hands.

  • Jack

    I think the motivation for political support for housing ownership and manipulation of the market to increase housing prices was to collect real estate taxes.

    As home values decline, the tax base shrinks, and politicians hate that. Most home owners would, I am sure, prefer to pay 50% of their current property tax bill.

  • John Rylander

    Fannie and Freddie in fact appear to have been major causal contributors to the housing bubble and financial crisis. Scholarship is now confirming the common sense take on this (that flooding the market with cheap, low-documentation loans would artificially increase both demand and supply, leading to a bubble).

    See, e.g.:

    http://www.washingtonpost.com/entertainment/books/reckless-endangerment-by-gretchen-morgenson-and-joshua-rosner/2011/05/11/AGs4cqCH_print.html

    http://www.npr.org/templates/transcript/transcript.php?storyId=136496032

  • stef

    One point to consider: for many today, a house is basically a giant anchor tethering people to a particular geographic location. More often than not, that location may be where the jobs are *not.* It’s far more difficult to move when houses aren’t selling, and a person has to, for work.

    We need a wide swath of “new” housing options, besides single people renting apartments. People used to live in boarding houses, for instance, where they rented furnished rooms and had two meals a day in the common dining room. This allowed those with large houses to make money off their property, while working people were able to live relatively cheaply (and often close to work) without the startup costs of their own housing.

    Communities passed laws against boarding houses and other SRO facilities because they feared “housing prices would go down.” Well, that excuse is history. Maybe suburban McMansions need to become boarding houses.

  • LeGrand

    Next to last paragraph, “we’ve come to think of cheap debt as part of our birthrate”. As written, this doesn’t make much sense — I suspect “birthright” was meant. (I would have sent this by e-mail rather than posting it if there were an e-mail option.)

  • CatoRenasci

    Astute essay. As always in cases like this, the enemy is us – that is no one actor is to blame.

    I think your essay would be strengthened if you added attention to the other debt bubble that is beginning to mature and the impending collapse it presages in another major aspect of the American Dream: the education bubble.

    Our three century long fascination with public education, and encouraging ever more people to obtain more and more formal education has been transmogrified into a credentialism reminiscent of the Chinese Imperial Examination system. Students, and often their parents, take on utterly absurd amounts of nondischargeable debt in order to go to the ‘best’ schools, or even to schools at all. It is almost as if they were selling themselves into a form of slavery that will influence their life choices for decades, even if they are successful in getting good jobs.

    As society claims to be becoming more meritocratic, the divide between those who have the money to afford excellent educations and those who do not has become starker than it ever was fifty or even a hundred years ago.

  • Anonymous Coward

    Since when did the American Dream become renting a house from the bank and hoping it would appreciate as a savings plan? I thought that home ownership being the foundation of the American dream was in fact, home ownership. As in paying off the mortgage, owning the thing free and clear so that you could put your income to more productive uses. And that when you retired, you’d have a place to live on a substantially reduced income.

  • CS

    So let’s take a few more steps back and squint harder. Do we see the 1930′s as having a primary cause not of trade barriers or excessive leverage, but of the collapse of Dream 1.0? Are Steinbeck and Agee the real scribes of that period after all? If so, which elements of recovery 1932-1952 are useful in defining Dream 3.0? (If one sees statism and national or international socialism as essentially demographically drive by urbanization, what kind of world war should we expect from de-suburbanization?)

  • Feanor

    reflectionephemeral, how much do you know about the mortgage market?

    Not listed in your comment is this from your first link:

    “Fact Three: The major losses to Fannie and Freddie came through their expansion into guaranteeing non-traditional loans, not through their portfolio.”

    Sure, it’s true that the majority of non-traditional and subprime loans were issued by private entities, but they wouldn’t have issued those loans if Fannie and Freddie hadn’t guaranteed them, making them so-called ‘conforming loans’. Without that guarantee, those loans would have been difficult to sell in secondary markets and most of the issuers had no intention of actually living with these loans. They sold off the risk through securitization and could only do that because of the Fannie/Freddie guarantee.

    Fannie and Freddie distorted the mortgage market for two reasons: One, well-intentioned but misguided government policies supporting home ownership and Two, the desire of greedy and incompetent managers within Frannie and Freddie to line their own pockets.

  • http://poisonyourmind.com reflectionephemeral

    Thanks very much for your reply.

    I commented because in my view, your sentence conveyed a false equivalence. To sum up the housing bubble in a sentence that gives equal weight to banks and F&F is not borne out by the facts. F&F were a small, late-entering player in mortgages that went bad.

    As we know from the data, from first link above:

    1) Private banks were the underwriters of Alt-A and subprime. You can see a list of 384 of them that blew up because of it at Mortgage Implode.
    2) No, F&F were not buying everything. From 2000 to 2005 they were not allowed to buy nonconforming loans — no sub-prime, no jumbos, no alt-As.
    3) They petitioned OFHEO do allow them to get into the Sub-prime, Alt-A space because they were losing market share to Wall Street. This was not a policy decision, it was a market decision. Approval was granted, and by late 2005 F&F charged in.

    I’m sure you’re already well aware of the arguments of Andrew Bacevich, but for others reading, I think that his article from a few years back on our transition from a nation of savers to a nation of indebted consumers is a fine accompanying perspective to yours: http://www.amconmag.com/article/2008/sep/08/00018/

    One difference between your essays: you write of our transition “in the last eighty years”. This is a different focus, in cause and in time, from Bacevich, who writes, “The U.S. had long touted its status as a creditor nation as a symbol of overall economic strength. That, too, ended during the Reagan era. Even as the United States began accumulating trillions of dollars of debt, the inclination of individual Americans to save began to disappear. For most of the postwar era, personal savings had averaged a robust 8-10 percent of disposable income. In 1985, that figure began a slide toward zero.”

  • Luke Lea

    I guess parent will have to move back in with their children, delay retirement, and forget about dying in a nursing home. Time for Dream 3.0.

  • Darren

    Good article, did you mean to say birthrate in the last paragraph or birthright?

  • Georgiaboy61

    Re: “The transformation of Americans from a nation of savers and entrepreneurs in the era of the family farm to a nation of consumers in the last eighty years was a fateful one. Our ancestors thought that debt was shameful and a burden…”

    This passage summarizes the most fateful shift in the American ethos these past eighty years. America used to be a nation of producers, inventors, manufacturers and savers. Our manufacturing was the envy of the world, and our ingenuity second to none.
    Today, American no longer design, manufacture or build things – except perhaps lawsuits and complaints. We used to save money and recognize the value of thrift; today we are spendthrifts who save less than any developed nation on Earth. Our grandparents and great-grandparents valued liberty over security, and didn’t look to government to solve their problems. Today, it is the reverse.

    We must return to our forebearer’s ways of living if we are to regain our greatness.

    The author neglects one critical factor in his analysis of why Americans have changed from savers to consummers, however – the debasement of our currency by the Federal Reserve. Until this institution is abolished or radically reformed, we have no hope of regaining control of our economy. Allowing a private cartel of banks to control our money supply, and inflate away our prosperity is a recipe for disaster. Inflation is theft, pure and simple, and we’ve been letting them get away with it.

  • Joe Y

    reflectionephemeral, your research is admirable, but incomplete. I was a consultant at Fanny (at Freddy, but to a much lesser extent) and the focus–no, the frantic obsession–was to meet the Congress’s affordable housing goals. F&F worked with banks to make the mortgages, then packaged and bought them. The struggle was to get underwriters to classify mortgages that, to put it into layman’s terms, should have been subprime to prime, which is why my colleagues and I were brought in.

    We were all too good at our jobs, alas. The forced overvaluing of housing, wherein mortgages were issued at rates not commensurate with their value is what caused the housing crisis. The exact phenomenon is currently seen in the European debt crisis, where for several years the adoption of the Euro allowed Greece to borrow as if it were Germany.

    There were many players responsible for the exacerbation of the housing crisis, but the crisis itself was a massive, artificial increase in housing values, that was strictly a creation of the US Congress, and anybody who says otherwise doesn’t know what they are talking about.

  • steve smith

    There seems to be some desire of many to explain our cultural evolution over the past one hundred years in terms of the market/economy. It seems that this market view is in vogue because other measures of human endeavor seem so 19th century. Evidence: “its the economy stupid” has become the mantra for big wigs and egg-heads everywhere. I guess people forget that economics is no new endeavor. It still fails in all the same ways to justify, explain or mitigate human failing.

    Human failing is good for humanity. It is much easier to understand for most people than terms like “demand destruction” and “inelasticity.” We all know human failing intimately. We all know what happens when parents cheat, divorce, fail to commit, children/bastards move away to Timbuktu or San Francisco, grandma gets put in a home, we try a little oxycontin, etc. Life dies. It becomes less worth living. Suddenly, the IRA isn’t so important. Who gives a damn about equity of redemption when life is no longer redeeming.

    That is where America is. There is no shared hope for redemption. The “I’ll get mine attitude” of the corporate world has spilled into the lives of the rest of us and nothing of value is left when all that we value is what we can wrap our hands or our Quicken software around. There is still a market and there are still prices but who really gives a damn if the mortgage is paid or the bank forecloses or Donald Trump declares bankruptcy one more time. Lady Gaga is playing at the Qualcomm/Tyco/Enron arena.

    In danger of sounding like some simpleton moralist, I’m going to simply moralize. Like some fat banker we have mortgaged our integrity. Instead of refusing to do business with crooks, we rationalize crookedness in terms of what is good for the goose is good for the gander.

    Its time for it to stop. Its time for times to get hard. Hardship builds character. And boy are we in short supply. That is not to say I’m a pessimist. I think things will eventually get better. I just have a different lens through which I identify what better means. I don’t think blue model 4.9 or QE3 or whatever resort to macroeconomics can make “better.” I think hunger will. Tough times will separate those of us willing to steal food from those willing to work for it. Bring it on.

  • vanderleun

    A fascinating and instructive essay. One might almost think that “our rulers” are busy getting Americans to accept their dream of Americans content to lead a smaller life on all levels. But since we know we have no “rulers” it’s all pretty much happenstance after all.

  • David Metz

    The Federal government and Fannie and Freddie had everything to do with the mortgage crisis:
    See, for example, Wallison – http://spectator.org/archives/2011/05/13/the-true-story-of-the-financia/1

    Hre is a piece:
    “From the beginning, Fannie and Freddie’s congressional charters required them to buy only mortgages that would be acceptable to institutional investors — in other words, prime mortgages. . . . Fannie and Freddie operated under these standards until 1992.

    The 1992 affordable housing goals required that, of all mortgages Fannie and Freddie bought in any year, at least 30 percent had to be loans made to borrowers who were at or below the median income in the places where they lived. Over succeeding years, the Department of Housing and Urban Development (HUD) increased this requirement, first to 42 percent in 1995, to 50 percent in 2000, and finally to 55 percent in 2007. . . .At the 50 percent level, Fannie and Freddie had to acquire at least one goal-eligible loan for every prime loan that they acquired, and since not all subprime loans were goals-eligible Fannie and Freddie were in effect required to buy many more subprime loans than prime loans to meet the goals. As a result of this process, by 2008, Fannie and Freddie held the credit risk of 12 million subprime or otherwise risky loans — almost 40 percent of their single-family book of business.”

    Laid out in more detai then some of you will wnat to see.

  • Mike C

    IMHO, the entrepreneurial ideals of our great-grandparents still have life left in them. My personal story: I have 22 years of experience in the pharmaceutical industry at various levels, most recently in clinical research. Yet, at age 47, to most hiring managers in this industry, I’m too old. I elected to leverage my experience by starting my own business doing contract medical writing work, and so far, I’m doing OK, with plenty of room to grow. The downside is that I’m paying medical insurance out of my pocket, which has eaten into beer money; the upside is that my income is limited only by the number of hours I’m willing to work.

    Face it: we’re all in business for ourselves now.

  • Independent George

    “We’ve taken the coffee machine out of the intern break room to teach them the importance of careful proofreading”

    I would think the correct remedy is the installation of additional coffee machines.

  • Richard

    As usual, a most insightful article. I would only make a brief comment. I believe the older dream, the dream of my mother, to own her own modest home will live on and will revive. The dream of some of my contemporaries of becoming a real estate millionaire by owning a home is dead. I live in Southern California and the craziness here was unbelievable. Accounts of the “Madness of Crowds” were tame by comparison. Although I’m not a regular listener, Dave Ramsey’s radio program sounds a lot like both the past and the future to me. My mother could do his radio program if she were alive.

  • S P Dudley

    A fascinating article, you bring out several good points. I’d like to address not what happened but where we’re headed. If the long-term job is history and if the home as retirement fund is equally so, the best alternative left to us will be self-employment.

    I think Tom Peters had brought this up a decade or two ago that in a very dynamic workplace there wasn’t going to be such a thing as constant employment. Today’s workers had to think of themselves as self-employed, even if they were getting paid by someone else. That was especially going to be true if you were middle aged and at risk of being laid off in favor of cheaper (and often off-shore) labor.

    Ultimately to provide stability in their lives people need to stop thinking about who is going to provide for them and start thinking about how they are going to provide for themselves. To some extent this is a throw-back to what WRM calls “Dream 1.0″ where you’ve got everyone with their own plot of land. In the 21st century, however, the “land” is your domain or URL or your file host, and your “crops” are what business (goods or services) that you are selling or providing over the web. Home is not just your resting place but your base of operations (and that means that in the end everyone’s home will be a commercial center. This will effect zoning laws and tax policy among many other things.). Your retirement income (if anyone actually retires in this new world) is the cash in your portfolio you get from your home/shop business and not just your mortgage.

    This is not necessarily a new model: look at overseas Chinese culture, especially in places like Hong Kong, Taiwan, and Singapore and you can see the method at work. Compare that to China or Japan, which both function on something that looks more like the Blue Social Model with lifetime employment and large institutions providing everything and then see which society is more vibrant and better to facilitate freedom and stability for their citizens.

  • Francisco Donaldson

    When people stop expecting their house to go up in value and instead treat it as shelter and something to be utilized much like we do our cars and other consumer goods, then and only then, will the housing market correct. Far too many people are unwilling or unable to recognize that they bought is now worth less than what they paid for it. It’s time they grow up.

  • Bart Hall (Kansas, USA)

    Mr Mead understates the magnitude of the problem. I farm for a living. It’s often difficult, but more often good. The “2 million farmers” number, however, is a crock.

    Well over half a million of those “farms” have GROSS farm sales under $10,000 and their operating profit margin is profoundly negative.

    Another 1.2 million of these folks have gross sales under $50,000 and a net operating margin of negative 36%. Roughly speaking it means they’re coughing up 15-grand every year to support their farming habit.

    What I’m saying is that over three-quarters of all “farms” in America are not making money, especially absent Farm Program subsidies. Under Clinton there was a tentative proposal to increase the official definition of a “farm” from $1,000 in sales — where it was set in **1948** to its inflation-adjusted equivalent of $10,000. The plan fell apart when it was pointed out that well under 100 black farmers would retain their designation. Pigford is a separate story, but the charade is at least 15 years old.

    Here’s my key point: just as government types remain persistently unwilling to recognize the death of Jefferson’s yeomanic dream, they are even more reluctant to apply the same rigor to housing.

    As a place to live, a house is worth 80 to 100 times what it would garner in monthly rent. Similar houses renting for $800 per month? — yours is really worth $64 to $80 thousand. Anything else is speculative fluff. If you can get it … great.

    A farm is overwhelmingly a ‘habit.’

    A house is overwhelmingly a liability, not an ‘asset.’ Enjoy the transition.

  • carl

    The ex-urbs and suburbs are growing still, the urban model is dieing on its feet, the very rich and very poor alone will [be able] to live in them.

    I think the proper terminology to use Mr. Russell, might be; the ‘churn’ of homes will be much greater due to the legacies you’ve mentioned….

  • Tom Kinney

    Over the past several decades, the steady globalizing of the economy has been a badly needed boon for developing countries. Several times I’ve seen references in reputable sources to the “fact” that some 2 billion people worldwide rode the globalizing of the economy into the lower rungs of the middle class. It has always seemed logical to me (and that which seems logical ends up being correct less than 50% of the time, sadly) that those monies that allowed those people to upgrade their lifestyles has had to come from somewhere and that somewhere was likely the stashes of monies that first world economies had gathered over the years. If that is indeed the case–and it must be said that 2 billion people improving their lot is a good thing–then we can expect that those monies will by and large not be coming back to us first worlders. It may be that we’ll have to get accustomed to this change and live a little more humbly. However, it also may be that as the globalized economy becomes an ever more efficient work in progress, there may be more prosperity for all the world’s peoples to see an uptick in their lifestyles and well-being. Why couldn’t that also be the case?

  • tom_zeke

    Excellent! I appreciate your well-rounded approach to what is a multi-faceted issue. I have very little respect for the opinion of somebody who tries to blame one group (consumers, Wall Street, politicians, etc.) for the financial melt-down.
    I agree with the sentiment of Anonymous Coward. I believe the “American Dream,” with regard to home ownership, meant owning your own dwelling place outright. It got twisted over the years to mean living with as much stuff as possible, no matter how far into debt you had to go. So good riddance to that dream.
    Where do we go from here? Do we need a collective dream? Do we need individual dreams? I can’t say that I have a personal dream. I strive to be better at my job, I strive to be a better husband, and I strive to have the heart of a servant instead of the heart of a consumer.

  • http://pecancorner.blogspot.com/2010/04/three-forgotten-direct-causes-of-us.html Tina

    A thoughtful article, and I look forward to hearing more. Good points from the commenters, as well. Anonymous Coward, your thoughts match mine exactly.

    I think there are some overlooked points in the conversation about home ownership – not just here but within the wider national conversation.

    The problems faced right now are the direct result of a bubble caused by the boom-town of tax-free profit created by the Mortgage Cancellation Tax Relief Act of 1997. When you create a tax-free source of profit, this happens. And it happened, like all boom/bust scenarios, within a 10 year period.

    I’ve read several times over the past 4 years that as many as 1/3 of all foreclosures involved owners with multiple properties – and who defaulted on 2, 3 or more “residences”. The flippers and would-be-landlords were far more prevalent in this millieu than we are lead to believe. That false demand these multiple-property buyers generated lead in part to the inflation. I think it will take another 6 or 8 years before properties fall to their actual values.

    In the meantime, those who bought their house to live in can live there and be grateful their valuations for tax purposes mean they own less to the city/county/school board/hospital district etc and can take comfort in knowing they will still be ahead of the game 20 years from now thanks to the amazing (and also artificial) low rates of interest they have for those mortgages. They are so much better off than Texans were in the 80′s bust, when people owed twice what their homes were worth – at 12% interest on those 30 year mortgages!

    Who needs a 30 year mortgage? I’ve never had one, and I have owned 4 homes starting when I was 19. I paid off that first 20 year mortgage, and own free and clear the home I live in now.

    I received no subsidies or special treatment ever. I always had to qualify, always had to save up a down-payment, and none of my loans were FHA or VA or otherwise government-programmed. I never refinanced or took 2nd mortgages, but got 15 year or 20 year fixed rate notes and paid them down. Most people don’t realize that the difference in monthly payment between a 15 year note and a 30 year is usually less than 10% of the monthly payment, and the savings in interest is immense.

    But we are not talking mansions. I bought what we could reasonably afford to not only live in but to maintain: that means smaller, older, and less affluent. This kind of home ownership is fully available to anyone, even now.

    The American Dream can be rekindled without subsidies but we do need to return to seeing a paid-in-full home as an investment only in a stable old age: where we will no longer have to make a mortgage payment so can live better on a small retirement income.

    Aside from this kind of publicity pushing the rental economy, the other great dangers to home ownership include the erosion of the homestead exemption, and supposed “environmental” regulation that pushes handymen and small-scale contractors out of business, leaving lower-income homeowners with no one to assist them in regular maintenance.

  • Char

    What about the people who have the majority of their money in retirement accounts?

    Would those contributions be considered pre-disposable income?

    So his argument would be that we’re not saving enough out of our disposable income, but that doesn’t necessarily mean we’re not saving?

  • Char

    For most of the postwar era, personal savings had averaged a robust 8-10 percent of disposable income. In 1985, that figure began a slide toward zero.”

    For most of the post-war era, there wasn’t a 401K option which is pre-disposable income.

    When did 401Ks start taking off? The mid-80s?

    So if someone contributed the max to a 401K and at that time and for some time after, the company matched it, wouldn’t most of the overall contribution fall into the 8-10% category?

    If we’re not saving, then why has the government held more than 1 hearing on finding a way to get their greedy hands on our stash?

  • http://www.asterlingsolution.org Laura Sterling

    In response to the comment on who made the sub prime loans in 2006.

    The loans were issued by private lenders only to the extent that Fannie/Freddie agreed to purchase the loans once they were made. Hence the development of MERS.

  • Jim.

    As far as homeloans go–

    After Countrywide went down but before the whole thing imploded, I went to Wells Fargo to get pre-qualified for a loan, so my wife and I could go house-hunting. The agent handed me an ARM. When I did them math, I noted that if the rate went up to its maximum potential, it would consume 100% of my wife’s and my combined pretax income.

    The loan agent said that this was OK, because FHA was insuring it!

    The Federal Government definitely has its share of blame, here.

    In any case — the trigger that finally got us to buy a house, despite the fact that we are (unwillingly) the Mobile Professional Class, was the fact that when we finally got rid of our last payment on our car loan (the only loan we had), our apartment complex decided they wanted to raise our rent — by the amount of our old car payment! (They knew when our car loan would be repaid… they had access to our financial records.)

    That rent payment would have just kept going up, and up, and up, and up.

    We now have a 30-year-fixed mortgage, at 4.875%, and a fixed housing expense that will *never go up again*… unless the jokers on Capitol Hill decide that what they really want is for the interest payment to stop being tax deductible. Which would send the markets reeling, as people tried to get out from under payments that had become *even more* unaffordable, and would try to sell them to people who had *no chance at all* of affording a payment like the seller’s without that deduction…. leading to a crash in the market of as much as 25%.

    Home ownership is a good thing, a very very good thing. Mortgages are a good thing too — how many people can’t get up some mornings to do a job that needs doing (but may not be all that glorious), because they have that mortgage to pay? It’s good discipline. You just have to be smart about it.

  • Jim.

    What needs to change — or, more accurately, stop changing — is the abandonment of traditional American values. Excessive debt IS shameful, not being able to pay IS shameful, taking on more than you can afford IS shameful. The act of lending money cannot continue unless the act of paying it back is a matter of sacred honor.

    Further problems with your analysis, Mr. Mead —

    Marriage-backed families, where a man and a woman commit to each other and take responsibility for their mutual offspring, is the ONLY basis for stable society. Our failure to live up to this goal is the only thing that’s different than in the past, and it’s unequivocally a change for the worse.

    There will be no foundation for any kind of American economy or society unless there is a Renaissance of these values. Unless everyone who understands this pulls together for it, America will falter and fall.

    Mr. Mead, in the old Catholic formulation, despair is a mortal sin for a reason. Do not despair. There is a restoring force back to what is good and right — that will cause the pendulum to swing.

    Consider this- societal mores of the last generation are very similar to that of Regency England. Did England permanently collapse under the weight of that disaster? No, some people — two in particular, whose childhoods were deeply scarred by the inevitable tragedies to which libertine ideas lead — pushed back. Victoria and Albert bucked what many then doubtless considered to be “inevitable changes” in morality, and they won.

    We can win too. American traditional ideas are the strongest set of social capital in the history of the world. All we have to do is restore them to their proper place in our educational system, and we will see this particular tragedy stopped in its tracks.

  • http://www.rdtoolengineering.com joe

    great article

  • Tom

    Great post. I’m a contrarian and this post helps convince me now is a great time to buy – especially with rates so low.

    I read the housingubbleblog for 6 years and knew the bust was coming despite all the rosy articles about home ownership everywhere else.

    Now everything is in reverse. The sky is falling. Hey 10 or 20 years from now people who bought houses in areas with jobs will be doing great!

  • teapartydoc

    Except for the predominance of family farming, which was simply the way folks existed and survived, everything mentioned in the above article is traceable to an explicit public policy. The reason things are the way they are is not because of some natural development of things, it is because almost every aspect of life has been tinkered with in some way by people who thought they knew better than, not only their fellow man, but better than nature. It is the accumulation of this artificiality in life that has been that artificiality’s undoing. Man has conquered nature only in order to be conquered, in turn, by nature. Note, I am not speaking here in terms of nature in the religious mode of the modern eco-maniac, but in terms of the classical philosopher. What we are witnessing here is not the failure of a so-called blue model, it is the failure of the modern project. There is a way of living that is natural, there is a natural form of economy, and there is a natural order to the political life. These must be sought and restored.

  • Anthony

    Relatively young country (this United States of America) thus dream 1.0 and 2.0 indicates American social policy can contend with new socio-economic forces (albeit with a push). Nevertheless, as WRM states 21st century domestic and global changes made dealing with far ranging American lifestyle changes imperative for all invested citizenry (3.0 is on our door step).

    Relative to our housing dilemma, there are no clean hands (ABS: Asset-backed securities, CDOs: Collateralized debt obligations, GSEs: Washingto-speak for FannieMae and Freddie Mac, MBS: Mortgage-backed securities, HOEPA: Homeownership and Equity Protection Act, SEC, RTC, etc.). All of the aforementioned as well as ‘quants’ and others were neck deep in abetting housing/fiscal crisis that beset economy fall 2008. Any one needing concrete affirmation may read “ALL THE DEVILS ARE HERE: THE HIDDEN HISTORY OF THE FINANCIAL CRISIS” by B. McLean and J. Nocera.

    Finally, someone once told me that a homeowner without equity was a renter with a debt; a financial consideration to say the least.

  • http://sites.google.com/site/lukelea2/introduction Luke Lea

    About that Dream 3.0, it ain’t literature but here is an exerpt:

    (the basic idea is that both parents work part-time outside the home and in their free time live more or less as family farmers did during Mead’s Dream 1.0)

    We should also consider the possibility of a return to a more traditional, three-generation form of the family — not under one roof necessarily, but perhaps under two, at opposite ends of the garden. The advantages are manifold. For one thing grandparents, once they live close by, will be in a position to help look after their grandchildren – during the period they are still infants and toddlers especially — on those occasions that inevitable arise when both parents need to be away from home at the same time. And by the same token, later on in life when the grandparents themselves have grown old and are no longer able to live by themselves, their children and grandchildren will be in a position to help look after them.

    As an alternative to daycare and nursing homes alone this old arrangement deserves our consideration. For not only does it offer a more natural and humane way to deal with these age-old problems of care, but one that is infinitely more affordable as well, at least for most working-class families.
    vi.

    Let us now turn to the issue of retirement. We have all read those stories in the newspaper about how Social Security is going to go broke and may not be there for the next generation. The aging of the baby-boom generation, as we all know by now, means that the ratio of people who are drawing money out of the Social Security system is growing to fall in relation to the number of people who are paying money in, a trend that seems destined to continue. What this portends, the experts keep telling us, is one of three things: either a reduction in Social Security benefits, a rise in the future age of retirement, or an increase in taxes on future workers’ wages. None of these is an attractive alternatives politically speaking, to say the very least.

    But under the arrangement I am proposing this dilemma largely disappears. Once work and leisure are integrated into the fabric of everyday life, people will no longer feel the same need to retire the do todayy. Instead they can gravitate towards easier kinds of work as they grow older and towards an even shorter workweek: 12 hours behind a check-out counter, for example, instead of 18-to-24 hours on the assembly line. And when they eventually do reach a point in life when they are no longer able work at all, they will not have to rely on their monthly Social Security checks alone to meet all their material needs, as we have already seen. This means that their monthly benefits could be lower without compromising the quality of their lives.

    And finally, at the very end of life, when death finally approaches as it inevitably does, instead of being carried off to a nursing home somewhere at enormous public expense the dying person can stay at home, where hospice services can be provided at a fraction of the cost, in which specially trained nurses would come to the house for an hour or two each day to assist the family with the physical and medical care of the patient. How much better to die that way, at home in one’s bed, surrounded by the voices of loved ones, than all alone in a hospital room or in a warehouse of strangers?”

  • jordan keiser

    Dear Dr. Mead,

    Reading this I am forced to wonder: Will you vote for Obama again because “America Needs a Government?”

    I turned myself in circles trying to figure out what that was supposed to mean the first time I saw it printed. Whatever it meant, is it still in force?

    In light of all the data in your current article, was it a strong choice? Could it “work” again?

    Would “America needs a government” qualify as “papering over?”

    And if so, does it paper over something factual (eg the facility and dodderingness of McCain), or something psychological (on your part)?

    Helplessly,
    j

  • m att

    Mythmaker, mythmaker, make me a myth, [vulgar characterization of a person with whom one disagrees omitted --ed], [vulgarism repeated for rhetorical effect deleted --ed], make me a bull,find me a great Republican myth, I’ll believe anything you want to sell, so make me a Republican myth.

  • David from Boston

    Thanks Walt, I feel so much better about my children’s future. Does anyone know where I put my Hemlock?

  • bsmi021

    Tell thy the government,big bankers,wall street,big business are all to blame! For one simple thing folks GREED! The feds for changing laws,the bankers for abusing rules,and wall street and big business only care about one thing MORE MONEY at any cost. So for all you trying to save one group over another please read the history books!

  • Hening

    I keep building hope that Americans will see this for what it really is, Hope and Change. The willful destruction of the backbone of American economics (the bill paying working stiffs)in order to bring forth the socialist Utopia dreamed about on Ivy League campus pot parties. Instead, I read excuses and blatant stupidity and can only imagine that the worse is yet to come. It’s the Democrats, stupid!!

  • Over50

    Mr. Mead you are wrong.

    The government and Fannie and Freddie Mac enabled the entire disaster. In the absence of their guarantees there might have been a small bubble, but investors would have refused to purchase most of the bad mortgages that were securitized. Without the federal guaranty investors would have insisted on difference diligence standards and liar loans and similar problems would have been very limited. Further, let’s not forget the Congressional hearings on “red line” areas and the implicit threats to banks and other lenders that, if they did not make loans to groups that were in reality high risk borrowers, Congress would start looking at whether laws should be enacted that hurt or killed their businesses.

    Yes, once the Government and Fannie and Freddie enabled the situation, others took advantage and are to blame, but at the very bottom of the problem, it was those three (which is really just the government). Without them, almost the entire problem would have been avoided.

  • Edward Sodaro

    The article is totally incorrect. There are finally wonderful opportunities for long term affordable housing for hard working Americans.

    Home prices were insanely and irrationally expensive for years. As the prices precipitously drop, they will become accessable to real people.

  • Chief Clayton

    Not everyone is to blame. I bought well within my limits 20 years ago. Put 30% down, have not borrowed against it…am down to 10K owed. If I share the blame, I’m not sure where..

  • Buster Bunns

    An excellent article that puts meat on the need for us all to face reality. No more should we expect the other fellow to pay. This is our problem and ours to fix. Time to get working on it seriously.

  • Rick

    What? It is government that is ENTIRELY to blame for the death of the American Dream. These politicians, Democrat and Republican alike, are merely squeezing the private economy more and more to funnel handouts to the special interests that lobby them for those handouts. This writer understands nothing. Farming? Give me a break.

  • Allan

    “For eighty years we have defined the American dream as an owner occupied family home, preferably with a nice swathe of crabgrass-free lawn around it.” Bologna. Who’s we? The American dream has nothing to do with guaranteed material possessions and everything to do with individual freedom and individual responsibility. Please spend eighty years getting that through your head.

  • Joe

    “The Baby Boomers, the least provident and most demanding generation in American history, are beginning to hit retirement.”

    I take exception to the tone of this statement. It’s been repeated so much on the internet lately that it’s beginning to sound like the class warfare struggle the socialists want to advance.

    Granted, I don’t know hundreds of thousands of people, let alone millions, but from my personal experience this is a flat out myth. I’m 62 so I’m a ‘late’ boomer. We just held our 45th high school reunion and the overwhelming majority in attendance were self sufficient and financially above water.

    My friends and neighbors of the same age and background are still working, have their places paid for, and have been saving for retirement having enough sense to see that Social Security won’t even keep the lights on and the taxes paid.

    There are nine people in my immediate family and I can tell you that the older ones are the ones that have their houses paid for, do not rent, don’t rely on government subsidies, and have saved for retirement.

    The baby boomers are taking the blame for their younger siblings and their age group. The people I see in the most financial trouble were the ones who didn’t get out of high school til the mid 70′s. They’re the ‘me’ generation in my opinion. Drugs, lazy work habits, dumbed down educations, and parental controls being abdicated by courts and social workers being some of the main reasons for their ineptitude. Most of them can’t balance a checkbook, do their simple short form taxes, plan for the next day’s needs, or understand credit card interest/minimum payment terms.

    I know 5 people within 2 miles of me that are on SSI disability. None of them are baby boomers. Most are less than 30 years old. All of them are druggies/alcoholics. None of them have worked for more than a year at the same place, never saved a penny, couldn’t make it from one payday to the next without borrowing or stealing.

    So I’m not too convinced on this greedy boomer crap.

  • James

    Left out of this article is the strong-arming of lenders by the federal government (spearheaded by Barney Frank while the ranking Democrat on the Financial Services Committee) to make loans to families and individuals who were bad credit risks for the express purpose of increasing (non-Asian) minority home ownership. This is what precipitated the meltdown more than any other factor. Indeed, from the latter half of the 20th Century to today, most major social and fiscal calamities are or have been at least indirectly caused by misguided government policies enacted for racial reasons.

  • JDubya

    Your sixth paragraphs sums up the entire crisis very well: the Baby Boomer Generation.
    This group is solely responsible for the entire crash. They are the ones demanding all the entitlements, for themselves and those they feel their White Guilt must save.
    I am the first year of GenX and have always disliked the Boomers. They have always been the whiners, the ones who would say to “question authority”. Well, they now feel that they are the “authority” and it is time to question their motives.
    Most of these people are the drop out, tune out group of wannabe hippies or where the losers themselves.
    This crisis will be solved by the GenX’ers. We listtened to our grandparents, many of them were from Greatest Generation- the ones that unfortunately sprung the Baby Boomers from their loins. Only to have their offspring lash out at the hands that fed and saved the world.

  • Peter Verkooijen

    Owning a home is NOT the American Dream!

    The American Dream is that you can come here with nothing and get the opportunity to build a live for yourself and your children, without governments or class/caste systems holding you down.

    Yes, owning a home is part of that dream, but government subsidized homeownership is NOT. In fact the Fannie/Freddie-fueled housing bubble only put home ownership out of reach to newcomers, immigrants, younger generations.

    Collapsing house prices are good for the American Dream!

    It won’t happen though, because under Obama America has turned into another socialist sh%thole, where everybody wants their social security and bailouts and blames bankers and immigrants.

    So yes, the American Dream is dead, but not for reasons you name.

  • vnohara

    While I agree the article is very well written I feel it, like all articles addressing the housing problem, is either missing or ignoring two equally significant causes of the problem: the buyers / homeowners and and the immigrant buyers / homeowners. The buyers bid and bid and bid up, stretching far beyond their long term earning capability, not just their means. The homeowners either sold higher and higher to fund their bigger and fancier houses, luxury cars, exotic vacations, life style that used to be for the rich and famous. Immigrants did these two deeds more aggressively as many came from countries without mortgage, car loan, buying on credit, with banking system and financial market primitive, if not nonexistent. They either did not / do not comprehend the US’s system–the most sophisticated one in the world.

    It appears to me that not only politicians are avoiding addressing this lest losing votes from the new Americans whose number is rising incredibly and whose minds are easier to manipulate given their lack of understanding American history and politics, but the journalists, political bloggers avoid touching it too. I do not believe for one minute that they are ignorant of these causes as both — the politicians and the media — have sold themselves as better than us hence could respectively mandate and influence our lives.

    Immigrants are abound in every corner of the US, and everyone knows at least one person who bid on high priced home and/or getting adjustable loan fully aware rates will go up.

    Can’t blame all on banks and RE brokers.

  • Pete

    I want someone to address the people like me who bought a house they could afford, never carries credit card debt or other installment loans, yet has been tied to an anchor (aka the house) by the falling housing market. Here in Phoenix, my home is worth 50% of what I paid for it. And since I’ve been a “good”, “responsible” consumer over the years there are no options for me but grin and bear it. In order to get the bank to speak to me regarding short sales, or become eligible for other relief programs, for the first time in my life I have to become an “irresponsible” consumer and stop making payments I can otherwise afford. I have to take the additional punishment of credit damage (credit score was nearly 800… now?). The bank entered into an agreement with me where a loan was backed by the property and I had skin in the game. Well, I’m willing to give the property back and lose my equity. Why do I have to suffer the additional collateral damage when they’re the ones who forced me to make that decision just to get some attention?

  • Shrewsbury

    Shrewsbury is really, really sick of reading about how the utterly contemptible “Baby Boom” generation has mucked up the nearly perfect world bequeathed to it by the magnificent “Greatest Generation.” I have no idea what the motive for this mythos is, and I hope I don’t even believe in anything so retarded as categorizing people by generation;–what, do homo sapiens breed once every 17 years like cicadas?–but as long as we’re playing this game, can we deal with a few facts for once? Vietnam. Who fought it? Who threw it away? More than 50,000 “baby boomers” died in that swamp, while the D.C. pols and military brass of the “Greatest Generation” conducted the war like girls playing Stratego, and the “Greatest Generation” “journalists” feigned that the Tet Offensive, heroically crushed by sheer American grit, was a disastrous defeat. So who lost that war–or rather, who threw away the victory in that war? Was that great mustachioed vacuum Walter Krankheit, er, Cronkite a “boomer?” Excuse me, maybe I just hallucinated that nearly all the cannon fodder were born after 1945. If I didn’t, why don’t we ever hear about them when we’re being instructed how utterly worthless “boomers” are? (Also, by the way, one can’t help noticing that although 50,000 “boomers” died in ‘Nam, the people who are now writing about and despising them, didn’t.) Who invented the modern disease of left-liberalism? Not a single “boomer” was eligible to vote in the 1964 election when the flagitious “LBJ” squashed the noble Goldwater in the largest landslide in history. And prithee, what did “boomers” have to do with the nation-busting 1965 Immigration Act, when the oldest of them was 20 years of age? Who was it who decided to replace the historic population of the United States with hordes of illiterate Third Worlders–even as they sent their sons off to be slaughtered in an unsupported war? It was the GG which did all this, which wrecked the country, which took the greatest patrimony that any generation had ever inherited and did everything it could to piss it away; it was the GG which enthroned the cankered king Liberalism who henceforth would sap away the nation’s lifeblood. Why did they do it? I don’t know the reason. Maybe the problem was in part that the best half-million men of the GG died in World War II, and what you had left was to some extent sort of the dregs, and dregs did what dregs do–muck everything up. I know not. But what cannot be disputed is that post WWII, the GG made a hash of nearly everything it touched, including their families–from whence the supremely repulsive spectacle of “The Sixties.” But then, as I say, I hope I don’t even believe in anything so retarded as categorizing people by generation.

    • Walter Russell Mead

      Possibly the apple doesn’t fall far from the tree.

  • http://www.linkedin.com/in/danielctopping Daniel Topping

    I am 55 and do not have an “entitlement mentality”. I have been paying into SocSec, Medicare, etc., since I began working at age 15. That is my money which has been squandered by liberal socialist policies over the years. The Lyndon Johnson administration raided and decimated the SocSec fund to pay for the Vietnam war none of us wanted. You can take your “baby boomer” blame and stuff it. I built my own house in 1991 and then took a $60K loss in selling because of a job change in concert with the real estate collapse in 2007. We’ve had to start over again financially in buying a new house but we aren’t asking for anyone else to do it for us. We continue to work hard and live within our means.

  • John Hardy

    Excellent, well-thought-out post. I’m a Gen X’er too, and as such share no lost love for the Boomer generation. I grew up a latch-key kid mostly without parental supervision as my Boomer parents chased after money “for me” and for things I never really saw or benefitted from in the end. (I didn’t starve, so that was a plus.) That said, I’m not comfortable painting the entire generation that way. There are good responsible Boomers, and there are onion-heads like Nancy Pelosi, where all dreams are good dreams as long as someone else is footing the bill. The good Boomers are self-sufficient and have no problem with things like means-testing for SSI and Medicare. The ‘typical’ Boomers – like my parents – shout down such notions by saying “I paid into it my whole life, I DESERVE this.” Never mind the fact that -

    A. – the money is gone. Stolen by your Boomer congress critters for other purposes.

    B. – the moral response to this fact ISN’T to demand future generations pay for the theft, but to punish the thieves and get on with plan B. After all, if someone steals your car, you don’t say ‘well, that’s okay as long as the neighbor gives me HIS car.’

    The beauty of the whole situation from the Gen X perspective? Our world has been rather dystopian and dysfunctional our whole lives. We were born to parents who didn’t really want us, and largely left to fend for ourselves while they pursued their version of materialistic hedonism. We’re comfortable here, largely conservative and self-sufficient. For the Boomers that created the situation? Not so much, and its all over but the crying now. Wait until Harry and Nancy find out the very healthcare law they passed is the one we’ll use to solve alot of this entitlement insolvency by doing away with them en masse. Quality of life you know… Should take about a weekend. (And let me be specific: For the aforementioned self-sufficient Boomers – not much of a problem. They too know how and have the money and means to take care of themselves. For the ex-hippies living their lives on the public dime while screaming about their rights? Ouch babe.)

    That’s the problem with boomerangs – in this case – an entitlement minded, non-judgemental, amoral, I-got-mind worldview. Throw them as hard as you want. Better be able to catch them when they come back, because they WILL come back. I think I hear one whistling now in fact…

  • John Hardy

    You may not like what I’m saying Walt, but you’re silly if you doubt that this is how it will play out. I’m 40, own my house, don’t have a mortgage, and have a pretty diversified savings portfolio. I also have 3 kids, I’m active in their lives and in my community, and still happily married to their mother. I couldn’t be more dissimilar to my parents by design. And in fact, it has been by design. Churlish cheap shots may make you feel better after digesting unpleasant news, but they aren’t going to change the facts on the ground. Keep up the good work though…Like I said, an excellent post.

  • tbrynteson

    Excellent essay. What disappoints me is the rush for our political system to find easy scapegoats and delusional solutions to a “new normal.” Everyone seems to want to get back to life as it was from 1950 to 2007, and to listen to our political leaders, this could happen if “they” (fill in the blank with either the GOP or the Dem’s) would just do the right thing . . . well, as Mr. Mead explains, this is just a dream. We are facing a new reality, a structural shift which will take adjusted expectations and hopefully a shift away from the radical individualism which blinded both the Right and Left to the perils of their actions over the last 50 years. I am not optimistic that this change will come soon as the boomers seem mostly intent on fighting the political, economic and moral battles with language and assumptions formed in the Vietnam era. These arguments are no longer relevant.

  • http://knownofold.blogspot.com J R Yankovic

    “. . . Under Obama America has turned into another socialist [privy], where everybody wants their social security and bailouts and blames bankers and immigrants.”

    “Everybody,” that is, except bankers and immigrants, who of course wouldn’t touch bailouts or any form of social welfare/insurance with a twenty-foot pole. And why should they? They’re either so much slicker (in the case of bankers) or smarter (in the case of immigrants – and MY! are their elbows ever sharp) than the rest of us swinish native-borns. Who are getting, by the way, EXACTLY what we deserve.

    And remember, folks, it ALL started with Obama. Take a page from history if you’re confused – it fairly abounds in analogies. Think of the Great Depression: It was ALL the fault of that contemptible crypto-socialist Hebert Hoover, and had NOTHING to do with the policies of that solid citizen and perennial bull-market optimist Calvin Coolidge.

    But say, you don’t suppose there’s the outside chance that rampant bitterness, contempt, misanthropy and cynicism – seasoned with a dash of limitless bull-market optimism – might have played a small part in getting us where we are?

    I’m sorry, what on earth was I thinking . . .

  • sam

    Most likely the least of the educated here. I want to know something that I still shake my head at though. I am 31 (guess that makes me an Xer). In 2003, I had a great job but unfortunately have not had a good job like that due to losing my work permit in the process. At that time, I went looking for a house because I didn’t want to rent an appartment for $650 when I could add some more cash hopefully and buy a house for maybe a payment that would be double that. The houses I was looking at were being quoted between 190-260K(2-3br). At that time, What I didn’t understand utterly was how a house could possibly appreciate in value so much, for I had had done my homework and most house prices in the 1990-97 in the area that i lived were about 110k-180K. That’s at the minimum, if i am not mistaken, a 70% increase with 10 years. I never bothered. Sorry for the long wind of this,…here is the question that bothers me the most…..
    how come the price of a house, where one resides and, is the most basic of the needs of a human,- be controlled by “market” value? what kind of rubbish is this? It’s as if the vast majority of the US and really the west never understand the intrinsic value of a lot of things and just get sheppherded into the buy-sell mentality so as to make a profit. I don’t mind people making a profit, but asking after 10 years, a 70% tab on the price that one paid for it? really? there’s other things that I have serious questions about for intellectuals but this is just something that has been gnawing at me for quite sometime.

  • oldguy

    Good riddance to the American Dream! Now maybe the resentful middle class will stop believing that sucking up to the rich and giving them everything they want will make them rich too! How’s all that trickling down working out for you? Suckers!

  • Cheryl Johnson

    Attention Gen X we the Boomers do not owe you a living. Take a look at the new multigenerational family dynamic and you will see the 20-30-ever 40 somethings have moved back in with their Boomer parents they so despise and brought along a few grandkids for us to feed and raise now. You drove cars we paid for on insurance we paid for while talking on phones we paid for and then unfriended us on Facebook because. I wish you well but stop bashing us for hocking our retirement homes to the hilt so you could live the good life.

  • in_awe

    I recall a candidate famously promising to fundamentally transform America. The dream of progressives has been to social engineer this nation into their vision of utopia. Included in that vision is the abolition of suburban single family residences and cars, to be replaced with high density housing and mass transit or bicycles. Everyone “should” live within biking or walking distance of their job, or relegate themselves to public transit. The concept of home ownership grates upon their egalitarian view of equality – we should all be equal living in stacked boxes and relaxing where we are told to in communal parks rather than our own backyards.

    Every time you hear a politician use the word “should” be clear that 99% of the time they are saying in no uncertain terms that THEY know better than US how we should live our lives, spend our time and money, and what dreams we can dream.

  • JLK

    Pretty darn good econ analysis for a Social Scientist Dr Mead.

    Econ being my field I am currently writing a paper to present to Congress (if they listen..give it a 50-1 chance) on how to revive the housing market.

    What I have discovered while slogging through reams of data is that the obvious problems (amazingly bad govt policy, bank illiquidity loan availablity etc) are accompanied by several extremely pernicious and obscurant “shadow” problems in the US debt structure.

    In a perfect (capitalist) world,the debt markets should act as arbitrators between those sectors whose purpose is to align capital with those who need it to create businesses that can grow the economy.

    Currently the most intractable problem is the interference in these markets by government and Wall Street manipulators.

    In the case of government we have the comedy of errors watching bureaucrats picking winners and losers. General Motors, AIG and Chrysler are classic examples of the Socialist tendency to trample on the sanctity of contracts while distorting credit markets. Giving ownership away to big Union contributors while giving a major haircut to bondholders who lent money in good faith (and not just Kerkorian types but lots of little old ladies who lost much of their life savings).

    Meanwhile on Wall Street many of the “arbitrators of credit” have decided to crowd out the credit markets by using cheap money from the QE’s and other sources to create a huge “Zero Sum” industry based on derivatives.(Citi admitted recycling 40% of their QE money directly to Hedge Funds) In case you aren’t familiar with the world of Futures, for every dollar some broker makes on a “naked short or long” contract, someone else loses that same dollar. Obviously this does not grow the economy but keeps it running in place. The debt-to-GDP growth ratio is now at all time lows.

    One last thing I believe was missed in the article: the dwelling/ownership ratio peaked in 2007 at 69.7%. It is now at 66.6%. The “norm” over the last 30 years has been 60-62%. Consequently the housing markets NEEDS to reduce ownership. Rents are screaming up and vacancies down so obviously there are distorions in the market compliments of Barney Frank & Co. So a drop to 60-62% is not the “Death of the Dream” but a necessary adjustment.
    JLK

  • Karen

    I pretty well tired of the boomer bashing too. I’m second half of the boom (born 1955 and on). I am retired, so is my husband, and so are most of the people I know and some of my siblings. We are all above water in our paid-for homes, not dependent on pensions though we worked for them so not afraid to take them. I also paid the max into SS for more years than I care to count, so I expect some of that back too.

    Stop whining and start innovating. That is what saved our generation after the mess the “Greatest Generation” left in the 70s.

  • David Billington

    Dr. Mead – Another thoughtful essay on perhaps the defining domestic issue of our time.

    “Part of it is the breakup of the blue social model.  In the heyday of the old economy, the average American job was long term — lifetime employment in the car factory, working for the phone company or the local bank, or working for the government.”

    We need to remember how transient this heyday was and why. The economy to which you refer was a half-century engineering moment in a self-sufficient country with no foreign economic competition. It gave rise to the idea in the 1950s that what social science modeled was an enduring reality of big and stable institutions needing only modest course corrections from time to time.

    In fact, since the 1970s, turnover in technologies coupled with foreign competition and dependence on foreign supplies of energy have undermined the previous foundations of American life. The blue social model, which reached maturity in the 1950s and 1960s, presumed that the moment would last forever. But in outliving its temporary underpinning, the model only aggravated its decline. The model wasn’t the cause of decline.

    Public debate over what to do now seems to divide into the notions that all will be well on the sinking ship if (1) we throw more second and third class people overboard and move the best and brightest into the highest cabins, or (2) throw the first class people overboard and try to squeeze everybody else into the higher cabins, or (3) keep everybody on board and devote our efforts to studying and reporting the rate of water flowing into the hold and pay the best minds on board to design better steel and methods of construction for use someday.

    There are may be two alternative courses:

    - Fix the ship if possible. A World War II-style mobilization and reconstruction would aim for us as a nation to consume only what we produce, produce it at home, employ everyone in this activity, and only then return to a free and open market. If the sacrifice and dirigism is temporary, as it was in WWII, our people might accept it as a necessary reset. But if the investment is squandered, the borrowing will crush the government and bring our system crashing down. A judgment call here.

    - Go for the lifeboats. Many in the middle and lower classes could move to depopulated areas of the country where local self-sufficiency is possible, while the rest can scramble for places in the modern economy. If self-sufficiency works, the government could reduce transfer payments in lieu of repayment of the loans needed by those who relocate to rural areas. But for those who relocate and drop out of the modern sector, this would be a drastic step justified only if government is unable to do anything else to assist them.

    The premise of the above is that real incomes for most people are falling and will continue to fall. If that premise is not correct, then things will improve despite what we try to do to make them better. But at present it seems that both parties disagree mainly over how quickly and by how much to slash consumption in the hope that the private economy will somehow rebound afterwards.

    I hope you see grounds for optimism. I think we can achieve a decent modern society and a more secure world by the end of this century, but it is hard not to see a difficult future in the immediate decades ahead if the alternatives are what they appear to be.

  • Anthony

    WRM two strains have been signal in many responses to your exposition on American socio-economic directions. As anyone can readily detect many responses incline towards unexamined prejudices vis-a-vis boomers, others (wall street, capitalism, generation conflict, etc.) rather than skeptical analysis of proferred propositions. A second strain comes across as a willingness to believe (must believe) that fault, if it must be lain, lies some other place (minorites, government, socialism, Obama, etc.). You sense an undertone inferring a need to feel good/superlative about whatever extensive group I affiliate with, we did not create this mess – the boomers, the greatest generation, Coolidge, Roosevelt, etc. did it.

    WRM, it is safe to say that our unexamined prejudices: racial, economic, religious, national-origin, personal, regional, etc. can work against making the significant distinctions you are inferring necessary and sufficient for American global and domestic public policies going forward building a 3.0 model.

    Consciously or unconsciously, we Americans remain responsive to blandishments than reason. Social/fiscal crisis seem to heighten insecurities and feelings of frustration that then release hostility disguised as points of view denigrating the other. America faces not republican/democratic, small government/big government, conservative/liberal, left/right, wall street/mainstreet problem but 1% versus 99% problem vis-a-vis resources as economically defined in America. Some responses to The Death of the American Dream I augur frankly for a dynamic configuration implying that unless public policies are somehow intelligently (??) re-assessed anything can happen.

  • http://NA MN J

    I disagree – As a front-end boomer, I was raised by depression era parents. We probably would have been classified as “lower middle class” but we were raised with some very solid ideals that got lost later:
    1 – Buy only what you can afford
    2 – A house is key but, buy only what you can afford
    3 – Your word is critical
    4 – Respect for others is key
    5 – Learn as much as you can.

    Today, I have more, have done more, have seen more than I ever dreamed. Our house is paid for because along the way we only bought what “we could afford.” See a pattern here? Never in our wildest dreams would we have considered refinancing a house to buy toys (you know, trips, jewelry, 2nd home, motorcycles, etc.) b/c we were taught to buy what we could afford.

    A few other observations:
    1 – Education has let down our kids –
    2 – Too easy “help” from a government entity (vs. family, church, community, etc.) has resulted in a mindset that everyone can have everything – no, that is a false premise.
    3 – The only person who can solve a problem is the person themselves (and the only person who can be offended is the person themselves).

    Solution:
    Cut back, drop the lattes, hamburger is still relatively cheaper than other meats and fix your situation.

    As for boomers, our son had trouble at college – he needed to stay at home – we said ok but he paid rent the entire time. Mooching from parents is foolish but parents who let their kids mooch are also foolish. In either situation, resentment is too often the result.

    I teach college part time – far too many students come to class with their lattes, mochas at $3.50/pop and then borrow money for their education. I know college costs have gone up – 3x the rate of inflation since the feds stuck their nose into the system. Think maybe there’s a correlation here?

    I, too, could go on forever – but here’s the deal: The “greatest generation” saw horrors we could never imagine – as have today’s soldiers. In their efforts to protect us, they may have given too many of us too much. But, stop blaming them.

    Our solutions is to get off our backsides, get the feds out of the way, and get back to who and what we really are – problem solvers. We have wonderful traits and it’s time we stop expecting an entity to solve our problems. Stop the whining, and find something to do.

    OK, I’m done but I hope you get the point. We’re still the best place on the planet and we can fix our problems.

  • Happy Badger

    “Stop whining and start innovating. That is what saved our generation after the mess the “Greatest Generation” left in the 70s.”

    Hilarious. Another Boomer with no ability to look in the mirror. Uh, hon? The mess left in the 70′s (when ‘The Greatest Gen’ were in their late 50′s & 60′s) was created when the Boomers blew apart every societal norm and convention they’d inherited back in the 60′s. As for ‘saving us from the mess’ – I’ll take the mess that was the 70′s compared to the mess of today all day, every day and twice on Sundays. Get over yourself, and the need to defend the most repugant, irresponsible, overly self-indulgent, whiny generation in world history. The bill is now due.

  • Happy Badger

    MN J – EXACTLY!!!!!

  • TE

    What is with all this “socialist” talk? Some of you guys sound like brain washed, talk-radio idiots. The standard for calling something socialist has really dropped lately.

    Good article – nice comparison between the family farm dream and home owning dream. Things are changing – but to what?

  • Luke Lea

    Question: if real per capita GDP is higher today than it was in 1959 (not sure how much but I bet it is a lot), why can’t we still afford Dream 2.0? It seems paradoxical on the face of it.

  • Luke Lea

    Real per capita GDP today in the U.S. is twice what it was in 1959 according to Gapminder World. And now we are poor?

  • Doc at the Radar Station

    “Farming dependent counties”… (from the maps posted above)… Those are the areas in the country NOW that have the lowest unemployment rates. How does thee square that?

    • Walter Russell Mead

      What’s to square? Why shouldn’t agricultural counties have low unemployment during a global commodity boom?

  • Robbo

    IMO the cause is something we have been prevented from discussing, for the last 50 years.

    America was 90% white in 1965 and thanks to deliberate GeNOcidal policies, targeting White Americans, we are now less than 65%, in a nation that is rapidly becoming non-white.

    So all that is happening is America is making the transition to a colored country and ALL brown countries are poor.

    I assume that pointing out the obvious makes me a “Heretic” in your opinion and you want to silence me? Silencing me, won’t change the objective reality, that all brown countries are poor.

    • Walter Russell Mead

      I am publishing this comment partly so the author won’t continue to indulge in fantasies of persecution — and to allow readers to see for themselves what some people think. There are no calls for violence or discrimination in the post but I remind readers that I post many comments which I find distasteful. If you let a thousand flowers bloom, some of them are going to be stinkers.

  • jen

    “….The American Dream is that you can come here with nothing and get the opportunity to build a live for yourself and your children, without governments or class/caste systems holding you down….”

    Good point, and that WAS THE AMERICAN dream when it was a innovative (read: white protestant) Northern European country.

    The Civil War ended the constitutional state (the one “FOR US AND OUR POSTERITY— please read the real constitution’s preamble, and the founding documents made up overwhelmingly by Diest, Congregationalist, Huegenots, etc.— WHO FLED EUROPE, the catholics’ there and the jews, both of whose religions teach that protestant are a) heretics and b) simply existing outside god’s covenant of the chosen people (who have the only covenant with the only god).

    THE HART-CELLER act did more to change America into a Jewish-catholic state (with these groups rubbing their hands on t.v. openly gloating over the great wonders about their great, final achieivement of getting “wasps” off their precious Supreme Court.) Off t.v. and everywhere else, btw. IN NYC, a major capital, (MANY FOREIGNERS, which is to say the population don’t even realize this is not technically the american capital, of D.C., truly, they do not know this)— the wasp population (the founders) is 4%.

    Most real descendents of the founders do not know that they literally DO NOT EXIST in major cities.

    THIS BABY BOOMER BASHING (at this point they are old enough, that they themselves, grew up as “latch key kids” as an uniformed person above calls them)—- is just the latest LEG in the Catholic-Jewish Alliance of hegemony in the U.S.—- another piece of what happens when envious, greedy, people s/a those set up a WHOLE GOVERNMENT based on bashing what they saw to be the “elite” that they had to knock off its post.

    Unfortunatley, the “wasp” elite— had set up a constitutional republic. It was far superior to the theft-fest that the other envious populations came in, and made alliances with each other in order to destroy.

    Who could feel sorry for catholic people when their own priest CREATED “Liberation Theology?” Who could feel sorry when they do not atone, but reap the benefits of the deaths of wasps, as the Liberation-Theology-Indoctrinated criminals come across the border— and whoops! do in some of their own?

    Who could feel sorry in the atmosphere of growing hyped up pro-Israel/ pro-jewish propaganda (like Hannity, O’Reilly) as they try to convince a public the WARfare-Welfare that they live on is good!— really good!

    They all wanted to have what the wasps had created, but they wanted their own name on it.

    Neither judaism, nor catholicism CAN TOLERATE the success of any other poeples. Why would god bless heretics? Why would he bless people who have no covenant?

    America posed a crisis of faith for catholics and jews. They destroyed the country (taking the anglos who would sell out for them along the way)— and now they reap what they sew.

    The other people NEVER EVER WANTED THE AMERICAN DREAM.

    They don’t WANT it now.

    They want to piggy-back their ethnic groups or proxies into the country to cash in on what is left of the wasp fleecing.

    Articles s/a this are just cover-up, sound-bytes from t.v. to gloss over the reality of what has occurred since the civil war.

    The army for the “union” was not “american.” It was half foreign born, mostly catholic, and literally brought in to kill americans, so the powers could “federalize.” Marx’s “48-ers” were used (the people who were in the failed revolution in 1848 in germany) and Dana, Lincoln’s right hand man, was a personal friend of marx. Union officers were as well, and THOUSANDS of 48-ers came in to fight.

    The Catholic Jewish coalition might be a better place to look— from the civil war straight up to and including the Hart Celler Act and the Aermican dead now, down south, on the catholic border.

    They want america, the jews got Israel. And that’s the deal.

    Real Americans are a Beautiful People. One can only hope God protects them as the forces of evil who came to their country with black hearts that were only hungry, greedy, envious and the rest, continue to foment their cheesy t.v. shows degrading them, the jerry springers, the hannnity’s, the mandingos, the open south border, the hart-celler acts, the indian-killing narratives taught to young children.

    NOW THEY WANT THE BABY BOOMERS GONE , asap—BECAUSE THEY ARE THE GROUP who can call them on their B.S. (again).

    “Leave no remnant”—- that’s why evil folks want to blame them, to talk on t.v. about “how much they cost.”

    You’d like to kill them soon!— lol. Then you can get their life savings through the inheritance tax laws you are so happy to put in place to pay your bills.

    • Walter Russell Mead

      Operating a blog means you get to read a lot of outrageous and impassioned conspiracy theories. But even for me, the Catholic-Jewish plot against the Baby Boom, linked to the firm belief that Abraham Lincoln killed the real America, is a new twist. This looks like something that would have been developed by the KKK — not the original Reconstruction Klan but the Klan nouveau of the 1920s. Arguing with something like this is usually in vain; the construction is too elaborate and too deeply rooted in the emotional rather than the rational part of the brain — even though the reasoning art of the brain is so caught up in the storm that it produces a steady stream of impassioned arguments from crackpot premises. As a specimen of cracker-barrel neoConfederate thinking, this is museum quality: authentic and well worked. If this were a quilt and you brought it to Antiques Roadshow they would give you a lot of money for it as folk art. As political thought, however, it drops a few stitches. The Reagan Democrats, for example, northern ethnic Catholics who shifted away from liberal Democratic ideas, don’t have a place in this analysis. Maybe they just stopped reading those secret instructions from the Vatican.

  • jen jenson

    “….The American Dream is that you can come here with nothing and get the opportunity to build a live for yourself and your children, without governments or class/caste systems holding you down….”

    Good point, and that WAS THE AMERICAN dream when it was a innovative (read: white protestant) Northern European country.

    The Civil War ended the constitutional state (the one “FOR US AND OUR POSTERITY— please read the real constitution’s preamble, and the founding documents made up overwhelmingly by Diest, Congregationalist, Huegenots, etc.— WHO FLED EUROPE, the catholics’ there and the jews, both of whose religions teach that protestant are a) heretics and b) simply existing outside god’s covenant of the chosen people (who have the only covenant with the only god).

    THE HART-CELLER act did more to change America into a Jewish-catholic state (with these groups rubbing their hands on t.v. openly gloating over the great wonders about their great, final achieivement of getting “wasps” off their precious Supreme Court.) Off t.v. and everywhere else, btw. IN NYC, a major capital, (MANY FOREIGNERS, which is to say the population don’t even realize this is not technically the american capital, of D.C., truly, they do not know this)— the wasp population (the founders) is 4%.

    Most real descendents of the founders do not know that they literally DO NOT EXIST in major cities.

    THIS BABY BOOMER BASHING (at this point they are old enough, that they themselves, grew up as “latch key kids” as an uniformed person above calls them)—- is just the latest LEG in the Catholic-Jewish Alliance of hegemony in the U.S.—- another piece of what happens when envious, greedy, people s/a those set up a WHOLE GOVERNMENT based on bashing what they saw to be the “elite” that they had to knock off its post.

    Unfortunatley, the “wasp” elite— had set up a constitutional republic. It was far superior to the theft-fest that the other envious populations came in, and made alliances with each other in order to destroy.

    Who could feel sorry for catholic people when their own priest CREATED “Liberation Theology?” Who could feel sorry when they do not atone, but reap the benefits of the deaths of wasps, as the Liberation-Theology-Indoctrinated criminals come across the border— and whoops! do in some of their own?

    Who could feel sorry in the atmosphere of growing hyped up pro-Israel/ pro-jewish propaganda (like Hannity, O’Reilly) as they try to convince a public the WARfare-Welfare that they live on is good!— really good!

    They all wanted to have what the wasps had created, but they wanted their own name on it.

    Neither judaism, nor catholicism CAN TOLERATE the success of any other poeples. Why would god bless heretics? Why would he bless people who have no covenant?

    America posed a crisis of faith for catholics and jews. They destroyed the country (taking the anglos who would sell out for them along the way)— and now they reap what they sew.

    The other people NEVER EVER WANTED THE AMERICAN DREAM.

    They don’t WANT it now.

    They want to piggy-back their ethnic groups or proxies into the country to cash in on what is left of the wasp fleecing.

    Articles s/a this are just cover-up, sound-bytes from t.v. to gloss over the reality of what has occurred since the civil war.

    The army for the “union” was not “american.” It was half foreign born, mostly catholic, and literally brought in to kill americans, so the powers could “federalize.” Marx’s “48-ers” were used (the people who were in the failed revolution in 1848 in germany) and Dana, Lincoln’s right hand man, was a personal friend of marx. Union officers were as well, and THOUSANDS of 48-ers came in to fight.

    The Catholic Jewish coalition might be a better place to look— from the civil war straight up to and including the Hart Celler Act and the Aermican dead now, down south, on the catholic border.

    They want america, the jews got Israel. And that’s the deal.

    • Walter Russell Mead

      Another version here; note the ending where Mexican drug gangs and the Israel lobby all seem to be in it together.

  • Anthony

    Thanks WRM….

  • MinnItMan

    I agree that the post-WWII period is an extremely dubious “normal,” but it still is one many do share. At best, it’s what, 1946 to 1974 (when inflation became the national economic policy)?

    Dr. Mead makes an interesting and stunningly obvious point (in retrospect, but pointing out the obvious has more value than it is credited for) – 30 year financing for housing presumed stable career paths. Loss of employment stability – a slow train coming, but now fully normal – makes residential real estate a much riskier proposition than it used to be.

    There is a Huyandai commercial running now that suggests to me that its business model is something like a car (personal transport) by subscription.

    I don’t know if sales and marketing is now more than ever in charge, but this where most of the “solutions” seem to come from, and I don’t expect stable paradigms to emerge from that sector.

    The polical/polcy situation – the way I see it – is that free markets in real estate don’t exist, and generally are not desired, and government policy is heavy-handed while being largely ineffective at furthering stated policy goals.

  • JLK

    Dr Mead: Loved your riposte on the self-expose’ of the strange world of conspiracy theorists.

    The problem of emotions masquerading as logic has become epidemic, especially on the Left. (Many on the right as well but seemingly a lot fewer) It has been a subject of many of my conversations over the last few years and your concise description of this phenomenon has/will help me make the case in a more articulate manner.
    JLK

  • Bruce

    One of the worst things we boomers did was allow our parents to demand unlimited and unsustainable benefits from the government. We probably felt that if the government provided generously, we wouldn’t have to be bothered. Then we voted for politicians that pandered and promised the goodies. Since it apparently made us feel good that we were being compassionate and letting politicians take care of people, we stopped paying attention. While all but a small minority were looking away, the politicians bankrupted the country and encouraged the debt and spending binges that have brought us down.

    Many of us, like some of the commenters to this essay, who made decent decisions with our own lives, still bought in to the notion of government as a provider and shaper of the economy. Shame on us.

    As you say, Dr. Mead, plenty of blame to go around.

  • Lisa

    The real core problem with our country and maybe just the world is..morale is low. Respect for other humans is gone. People do not follow rules…and it has infected the way business is conducted as well. The government can not babysit every single move..example is the financial crisis of these banks.

    We get upset when people break laws ..and yet we want the government to intervene. And then we get upset at the government for intervening. Humans are very finicky..nothing is right or good enough..and we will always want more.

    People want to blame others..because we really can not look in the mirror anymore. We are all greedy and want more. Example, read the post listed here.

    This is why divorce rates are higher, banks gave out bad loans, and wall street is doing well while the rest of the nation is not. And reality shows are the hottest thing..why? Because people are truly mean to each other. And this is the norm.

    The system is corrupt..it is infected with sadness and greed, lies and deceit. And our children are numb..out of tune and only worried about American Idol. The fact is our children do not really learn anything substantial after 12 years of education..nothing to help them in the real world is learned.

    Yet America wages war..with no money..at the cost of the taxpayer and will lie to its people about everything it does. All because politicians want a job next year.

    We would not need a drop of oil today had we allowed some greater inventions develop 30 or so years ago..but corruption and greed once again prevails.

    Educate yourself…go to youtube and search for Stan Meyers Murder see here:
    http://www.youtube.com/watch?v=PSS1ZMdt3FQ

    But..no this is how this country rolls and what you reap ..you will sow.

    And now look forward to the fruit of your labor..as America is headed for new times.

  • Todd

    Uh-Lisa go crack open a physics textbook, you need it…badly.

  • Pepyn

    Dear Walter, very interesting piece. What do you see coming as the next phase, i.e. the new ‘American dream’? As people still need a roof above their heads but don’t have the predictible income stream needed to take on a mortgage, do you reckon we’ll become a nation of renters? Houses will always retain some value as they’re a yield producing asset, right? Do you reckon that houses will be mostly owned by the haves and rented by the have nots?

  • duneguy

    Where is the mention in this article of the steady 3rd world-isation of America due to mass non-white immigration?

    Africa for the Africans,Asia for the Asians,white countries for EVERYBODY!

  • Luke Lea

    “For eighty years we have defined the American dream as an owner occupied family home, preferably with a nice swathe of crabgrass-free lawn around it. The home mortgage was the centerpiece of a society of consumers based on debt-financed living. It was life on the installment plan. The latest downturn in the housing market is one more grim signal that in its current form, the American Dream is going the way of the dodo.”

    I think you owe it to your readers to not downplay the role played by fraud and corruption in bringing down the Dream 2.0. Steve Sailer, a journlist’s journalist in my honest opinion, has an excellent analysis/review of NYT financial reporter Gretchen Morgenson’s new book on the subject: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. Reader discretion advised:

    http://www.vdare.com/sailer/110605_reckless_endangerment.htm

  • Pancho Perico

    Dear Mr. Walter Russell Mead

    What we are experiencing is not the “end of the American dream,” but the beginning of the communo-fascist nightmare you and your friends at the Council on Foreign Relations have been pushing hard for many years to implement in America. They call it the New World Order.

  • http://theculturealliance.org Mike D’Virgilio

    Dr. Mead is really a fine essayist, and his breadth of analysis is if not always spot on in my opinion, well thought out. The two pieces on the death of the American dream are great examples.

    I get the impression, although I don’t know much about him, that he is a recovering liberal (in the modern leftist sense). As such it seems he still has liberal sensibilities but knows the “blue model” isn’t sustainable. It’s refreshing that we are coming to a point in our history that more and more are realizing this.

    As a conservative I would blame the harm done to the American Dream (much larger of course than owning a home) primarily at the doorstep of liberals and progressives who believe in legalized theft in the form of taxes to transfer wealth to certain segments of the population who they deem worthy and in need.

    So part of the solution is to expand liberty by shrinking government to be more in line with what America’s Founders thought it should be. A free, or freer, market will always allocate resources more efficiently than a government, which can’t help but destroy incentives that create wealth, prosperity and stability.

    But he is right that a lifestyle built on debt, built on spending more than you make,or take in as a government, simply cannot last. There is no Tea Party to hold the Democrat Party accountable, so they and their president (yes he’s President of us all) are the chief obstacles to rebuilding prosperity that comes from a rightly ordered American Dream, the foundation of which is maximized liberty and personal responsibility.

    We have an election next year to determine who will either lead us forward or who will continue the policies under the illusion that the “blue model” still works.

  • DR Beiler

    Informative, well-communicated, deftly reasoned and succinctly near-comprehensive. So important and well-targeted, I actually read all the responses.

    Lisa (42) and Luke Lea (46) are correct that moral decline is the key missing element in the Meade analysis. Anthony (23) wisely observes most of the comments are indicative of the prevailing self-absorbtion that has poured gasoline on the flames and now snipes at the firemen. No wonder Ayn Rand has replaced Jesus as moral arbiter.

    Sadly, the structure will no doubt continue to burn and eventually collapse. Perhaps there is no other way it can be adequately replaced. But by then we may be under the heel of the Chinese.

    No, it wasn’t all because of Fannie & Freddie and their liberal benefactors. Don’t forget Gramm-Leach-Bliley was a GOP triumverate and W’s cops never left the donut shop. The corruption in DC is throughly bi-partisan.

    BTW Luke: I have also used “Luke Lea” as a nom-de-cyber (being a fan of the old publisher/soldier/pol). Perhaps people are mistaking us for one person.

  • Yellowbeard

    I enjoyed the essay and the comments. Cheers.

    However it’s too simple to say we are all to blame. I never bought a house, and I have no debt. When the market was screaming up I started to doubt if I’d made the right decision not to try and take advantage of all these easy riches. I don’t have a pension (I’m in my 30s). I’m not in a union.

    If you still believe I share blame for the mortgage collapse, then I believe I’m due some cold hard cash, i.e. to share in the upside the winners of this game took home.

    The way I see it, both left and right are holding a gun to America’s head. The left wants big spending and big taxation; the right wants low spending and low taxation. We are in gridlock because the time has not yet come to cut a deal, a time that will not come until things get really bad out there.

    Or, the 2012 election. I have the feeling voter turnout is going to be higher this time. Note that this time the Senate will also be turning over that same year. I suspect that our best hope for meaningful jobs is going to be the Republicans winning both the White House and the Senate.

  • http://eons.com Anna

    I am an artist with big dreams, I hope I can still live the simple life for the next 20 years. I do not own a home, or do I wish to now. I grow my own food in my plot with other seniors along side of our building, I eat meat once or twice a week, lot of lentils and I sprout my own greens. I love life.
    I do not have any credit it cards when I paid them off 25 years ago, Idid not want anymore. If I was going to buy something I wanted the cash to pay for it. My late partner he never ever had a credit card, he invested his money and bought gold and silver and platnum coins, he kept hidden away to fight inflation, he just kept his money hidden from everyone, people thought he was very poor, he made himself look that way. He had friends that he ate with every day. He ate simply. He never told anyone about his real self. till I met him, and then I found out his secret for success. He had never been married for 83 years he kept getting richer. . He was the disney charater of the rich uncle who loved to pay with his money in the bank vault. He had nephews. He left saome money, not much. I want to go on living the simple life myself. and build up what little money he left me., not spending it. I will not have the coins he put away for inflation. Or the oil roalties he used to live on with his meger social security. He taught me alot about the 30′s and his distrust of the government and how a depression was a bad thing.

  • Larry Johnson

    What is the American Dream? During the 16th century the American Dream was freedom from oppression. The early settlers coming from Europe were seeking a place for a new beginning. These settlers sought a place where they could live their lives in a manner of their own choosing. Residents of this newly found land struggled mightily simply to survive. Living under the oppression of the King of England for over two hundred years reinforced the dream of freedom from oppression. During the 18th century the American Dream – Freedom from Oppression – was the fuel that fed the flames of revolution. A new nation was born from the oppression that fed the American Dream.
    During the 19th century this dream continued to be a driving factor in determining the fate of this nation and her citizens as the country was split in two by civil war. Wealthy land owners primarily in the south desired to maintain their slave labor force. Other forces posited that all men were created equal and that no man shall own another as property. These issues led to a divide over whether the individual states should possess the power to decide this and other issues from within its own borders or whether the nation of states united as one shall have a common standard. The leaders of several states dreamed of freedom from the oppression of a central government which wanted a one-size-fits-all solution to the issues of slave ownership and states’ rights.
    Although the American Dream was freedom from oppression, that dream was not easily achievable. The forces who held the power (money) desired to maintain that power. To this subset of society more was better and often the ends justified the means. The industrial might of the Northern states overcame the revolt of the Southern states and slavery was abolished. The nation now had one standard – there shall be no slavery. The absolution of slavery in our nation did not bring about an end to the oppression. Jim Crow laws kept the former slaves under the oppressive “thumb” of the power holders. Black Americans and other minority races, Native Americans, women, the under-educated, and physically/emotionally restricted individuals were generally treated, at best, as second-class citizens.
    By the beginning of the 20th century the American public was beginning to be more educated than previous generations. By mid-century two world wars had developed the nation into an industrial powerhouse. A middle class was beginning to develop and grow as moderately skilled workers had high paying factory jobs. Home ownership was on the rise. The American Dream began to look more like “Keep up with the Joneses”. Everyone was urged to own as much material good as their neighbor.
    In the Presidential campaign of 1927, Herbert Hoover made a variety of optimistic statements, such as, “the slogan of progress is changing from the full dinner pail to the full garage,” and “given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this Nation,” but Hoover never promised “a chicken in every pot.”
    The vast majority of Americans had enough food in the cupboards and pantries. The American Dream began to adjust to an evolving society; more was better. Soon garages were larger than an average home of only two generations previous. The natural mutation of this dream was to “Become the Joneses”. Keeping up with the Jones and ultimately becoming the Jones satisfied the original American Dream to be free from oppression for an ever increasing segment of the American population. However, there were still several sub-sets of the American populace that were not enjoying the American Dream. Members of these sets were not motivated by the materialistic forces of the general population, but the American Dream for these people was freedom from oppression as manifested by justice and equality for all.
    Malcolm X, Martin Luther King, Jr., Rosa Parks, and many other social activists brought to the nation’s consciousness an awareness of the oppression suffered by many at the hands of the few. As a result of the efforts of these social change agents, a cultural revolution occurred. The concept of equal rights for blacks, women, disabled, and other marginalized groups was becoming the new way of life. Still there were those who opposed the changes that society was undertaking. They desired to maintain a culture of oppression of others. Even today, there are forces that desire to oppress others. Many do not actively support the human rights of minority populations.
    Before the 21st century got underway, the American Dream experienced yet another evolutionary adjustment. The dream was split by three branches of ideology: (A) the few shall hold dominion over the many, (B) own enough to become happy, and (C) E. Pluribus Unum. Each of these forces can trace their lineage back to oppression. Those who hold dominion reach the dream of freedom from being oppressed by being the oppressor; those who are oppressed dream of obtaining freedom from oppression through social change.
    So in the end, the more the American Dream changes, the more it remains the same. The American Dream, as I see it, is and always has been, to be free from oppression. However, to be free from the oppression of others, we must each have the freedom to identify how we want to achieve freedom from oppression. Some will choose to become free from oppression by becoming oppressors themselves, some will continue to struggle living under the force of oppression while dreaming of better days, and some will seek a society where there is no need for oppression.
    As long as success is measured by the accumulation of wealth and power there will always be oppression. When the forces of oppression are replaced with equality and justice for all in a land of one people united for the common good the American Dream will surely die. The American Dream to be free from oppression is alive and well in America because there are still Americans who are oppressed.