Pinched

W
HAT LIES ON THE OTHER SIDE OF THE
G
REAT
R
ECESSION?
Nearly three years after the crash of 2008, the American economy has partly recovered, the market has long since rallied, and Wall Street is back from the dead and newly flush. In many of the nation’s most affluent suburbs and in the centers of its most dynamic cities, life has gone back to something like normal. Yet outside these islands of affluence, jobs remain scarce and the housing market devastated. Millions of families have fallen out of the middle class, and millions of young adults have found themselves unable to climb up into it. Throughout much of the country, debilitating weakness lingers on.

This book is about the enduring impact that the Great Recession will have on American life. What we know from three comparable economic calamities—the panic of the 1890s, the Great Depression, and the oil-shock recessions of the 1970s—is that periods like this one deepen society’s fissures and eventually transform the culture. The social changes that occurred in the midst of these other major downturns lasted decades beyond the end of the crises themselves. The Great Recession will prove no different. The crash has already shifted the course of the U.S. economy, and its continuing reverberations have changed the places we live, the work we do, our family ties, and even who we are. But the recession’s most significant and far-reaching ramifications still lie in the future.

“If something cannot go on forever,” the late economist Herbert Stein famously said, “it will stop.” The Great Recession put an end to many unsustainable habits, most notably a decade-long mania for
credit spending, fueled by a national housing bubble of epic proportions. But by deflating that bubble—and halting all the optimistic spending that had gone along with it—the recession also laid bare other, much deeper economic trends: the growing concentration of wealth among a tiny sliver of Americans; the thinning of the middle class; the diverging fortunes of different regions, cities, and communities. Indeed, as periods like this one usually do, the recession has accelerated these trends.

When, and for that matter
how
, will the United States fully recover? These are urgent and complex questions, and in this book I will do my best to answer them. But in truth, societies never just “recover” from downturns this severe. They emerge from them different than they were before—stronger in some ways, weaker in others, and in many respects simply transformed.

Across American society, old, familiar patterns of work, family, and everyday life have been disrupted and remade since the crash. Intense economic forces are remolding the American experience and redefining the American Dream.

• The economic rift between rich Americans and all other Americans is gaping wider as the former recover and the latter do not. And in the recession’s aftermath, a cultural rift has grown, too: for the very rich, in particular, global affinities and global ambitions are quickly supplanting national ties and national concerns. Increasingly, the very rich see themselves as members of a global elite with whom they have more in common than with other classes of Americans. Politically influential and economically powerful, they are becoming a separate nation with its own distinct goals.

• The fortunes of different places also are diverging quickly. High-powered areas like New York, Silicon Valley, and Washington, DC, are putting the recession behind them. Former oases for aspiring middle-class Americans—Phoenix, Tampa, Las Vegas—have been exposed as mirages. Nationwide, newer suburbs on the exurban fringe appear to be in irreversible decline, and the families living in
them are stuck and struggling. As a result, middle-class mores and lifestyles are being transformed—and so are the futures of middle-class children.

• Women are fast becoming the essential breadwinners and authority figures in many working-class families—a historic role reversal that is fundamentally changing the nature of marriage, sex, and parenthood. Working-class men, meanwhile, are losing their careers, their families, and their way. A large, white underclass, predominantly male, is forming—along with a new politics of grievance. Both will shape the nation’s character long after the recession is fully over.

• The Millennial Generation, the largest generation in American history and perhaps the most audacious, is sinking. Many twentysomethings will emerge from the Great Recession with their earning power permanently reduced, their confidence dimmed, and their ideals profoundly changed.

Some of the transformations under way are direct results of the recession’s severity. When jobs are scarce, incomes flat, and debts heavy for protracted periods, people, communities, and even whole generations can be left permanently scarred. And some of these changes are products of economic forces that predate the recession but have been strengthened by it. In the end, the crisis cannot be separated from the technological revolution that was under way in the United States for years beforehand: it was in some respects the denouement of that revolution, and the related revolution in global trade. The global economy is evolving at an unprecedented pace, and while some Americans and many U.S. businesses have adapted well, the country as a whole has not. It will remain economically vulnerable and socially divided until it does.

Pinched
begins with some history, explaining why the Great Recession stands apart from the downturns that immediately preceded it, and detailing what we can learn from the aftermath of other crashes, further back in America’s history, that more closely
recall this one. The heart of the book describes how this period has changed the character and future prospects of different people and communities throughout the country: striving middle-class families, inner-city youth, newly minted college graduates, blue-collar men, affluent professionals, elite financiers. When they linger long enough, hard times and deep uncertainty can greatly alter people’s values, social relationships, and even personal identity. Around the nation, some of those changes are just now becoming visible.

The final section of the book describes how our politics and national character are changing as a result of economic weakness—and how we can recover from this period and build a stronger, more resilient economy and society. Part of the answer lies in smarter, more creative, and more decisive government actions. And part lies in a renewed private commitment to civic responsibility and community life. This period of globalization and disruptive technological change, distilled and made toxic by the Great Recession, has left our social fabric tattered. We can restore it, both through public action and through our own daily choices.

We sit today between two eras, buffeted, anxious, and uncertain of the future. But the United States has endured periods like this in the past, and has emerged from them all the stronger. Indeed, America’s capacity for adaptation and reinvention is perhaps the country’s best historic trait. The time is ripe for another such reinvention. I hope that this book, by describing and connecting the problems our society faces and by suggesting some potential remedies, might help inform the pressing question of how we can pull it off.

T
HE
G
REAT
R
ECESSION ENDED, ANY STUDENT OF THE BUSINESS
cycle will tell you, in June 2009, a year and a half after it began.
It was the decade’s second and more severe recession; the economy shrank by more than 4 percent and more than 8 million people lost their job.
The average house fell 30 percent in value, and the typical household lost roughly a quarter of its net worth.
The Dow, from peak to trough, shed more than 7,000 points.
One hundred and sixty-five commercial banks failed in 2008 and 2009, and the investment banks Bear Stearns and Lehman Brothers ceased to exist.

Even these summary figures are bracing. But this clinical accounting does not capture the recession’s impact on American society—a heavy trauma that has changed the culture and altered the course of innumerable people’s lives. And of course, for many Americans, the recession has not really ended. As of this writing, while parts of the economy are recovering, the unemployment rate is still nearly twice its pre-recession level, housing values are still testing new lows, and millions of families who’d thought of themselves as upwardly mobile or comfortably middle-class are struggling with a new and bitter reality.

The Great Recession will not be remembered as a mere turning of the business cycle. “
I think the unemployment rate will be permanently higher, or at least higher for the foreseeable future,” said Mark Zandi, the chief economist at Moody’s Analytics, in 2009. “The collective psyche has changed as a result of what we’ve been
through. And we’re going to be different as a result.” By early 2011, mass layoffs had ceased, by and large, but job growth remained anemic.
What few jobs have been created since the recession ended pay much less, on average, than those that were destroyed.

In its origins, its severity, its breadth, and its social consequences, the current period resembles only a few others in American history—the 1890s, the 1930s, and in more limited respects the 1970s. As with each of those historic downturns, the Great Recession and its aftermath will ultimately be remembered as a time of both economic disruption and cultural flux—and as the marker between the end of one chapter in American life and the beginning of another.

Inevitably, the rhythm of life changes in countless ways during economic downturns. People drive less, and as a result, both traffic fatalities and total mortality usually decline. They also date less, sleep more, and spend more time at home.
Pop songs become more earnest, complex, and romantic. In nearly all aspects of life, even those unrelated to budgets and paychecks, caution prevails.

Some of these changes are mere curiosities, and most are ephemeral, vanishing as soon as boom times return and the national mood brightens. But extended downturns yield larger and more long-lasting changes as well, ones that can be felt for decades.
Fewer weddings have been celebrated since the crash, and fewer babies born. More young children have spent formative years in material poverty, and a greater number still in a state of emotional impoverishment brought on by the stresses and distractions of parental unemployment or household foreclosure. Many young adults have found themselves unable to step onto a good career track, and are slowly acquiring a stigma of underachievement that will be hard to shed. Many communities, haunted by foreclosure, have tipped into decline.