The Foreclosure Society

Or, if you prefer, "The Owe-nership Society."

Slate's Daniel Gross reminds our MBA president that there are two sides to a balance sheet:

The major obstacle to greater ownership isn't a recalcitrant Congress or an American fear of investing. It's debt — debt that the president and his ally, Federal Reserve Chairman Alan Greenspan, have done their best to increase. President Bush, despite having an MBA, has never shown much understanding of finances, and he has failed to recognize that there are two sides to the ledger: assets and liabilities. The defining financial phenomenon of President Bush's first term has been a vast increase in the amount Americans owe — collectively and as individuals. …

Gross also provides the numbers (courtesy of the Federal Reserve:

Total debt: $22.8 trillion (up from $18.1 trillion during Bush's tenure)

Federal debt: $4.15 trillion (up 22%)

Total household debt: $9.5 trillion (up 36%)

Mortgage debt outstanding: up 43%

Consumer credit: up 20%

State & local government debt: up 33%

President Bush likes to put a positive face on some of that debt, trumpeting home-ownership statistics — the one economic measure that has continued on an upward trajectory during his presidency. Warren Vieth puts this in perspective in the Los Angeles Times:

Homeownership has increased steadily during Bush's presidency, thanks in large part to the lowest interest rates in 40 years. Yet mortgage foreclosures are near record highs, along with personal bankruptcies and auto repossessions.

Vieth also notes another statistic that indicates that all these record levels of debt will be even more difficult to pay down:

Inflation-adjusted median household income has fallen. Last week's census figures pegged the three-year decline at $1,535, with the losses concentrated in 2001 and 2002.

As Gross notes, none of this bodes well for the prospects of Bush's "ownership society":

Unlike the loan Bush took when he was on the board of Harken Energy, these debts have to be paid back. Let's say the income of individuals and governments fails to grow rapidly, as has been the case for the last few years. They will still have to service their debts. After making required interest and principal payments, there isn't likely to be enough cash left over for the government to make the necessary investments in defense and education, or for individuals to pay into 401(k)s and medical savings accounts — the kind of ownership investments the president favors. If debt continues to increase at twice the rate of economic growth, we can expect more personal bankruptcies and home foreclosures, in which case people who recently became owners lose their assets.

The administration seems to think that if you don't answer the phone when the creditors call, this is just as good as paying off your debts. The ownership society proposals — like most of President Bush's agenda and actions over the past 3 1/2 years — are based on the idea that, in Dick Cheney's phrase, "deficits don't matter." The federal budget deficit doesn't matter. Record levels of consumer debt don't matter. Trade deficits don't matter.

Problem is creditors don't tend to see it this way. And Gross reminds us who our national creditors are these days:

To a large degree … the debts of American taxpayers are now the assets of Asian governments. If the U.S. Department of the Treasury simply becomes a funnel through which American tax dollars flow to foreign central banks, President Bush's ownership society could become more of an Asian phenomenon than an American one.