Matt Zeitlin: Impetuous Young Whippersnapper

David Brooks column on our debt culture is very good. From credit cards to home equity loans to payday loans, Americans are all sorts of indebted, and that indebtedness is having incredibly negative effects on our economic and social well being. So why has any cultural or social attachtment to thrift broken down? Brooks doesn’t quite say, and although he says that ultimately its a problem of values, he can only point to particular changes in the economic and policy landscape that have enabled people to drown themselves in debt. So, in absence of Brooks doing his own pop sociology, allow me to fill in. And, like any good speculation, what follows is entirely anecdotal.

My own theory (and I’m sure someone else has said this) is that people are going into debt because they have little experience with real deprivation and thus have the expectation that things will get better financially and that, ultimately, their debt won’t matter. In short, people feel like they can afford to live beyond their means. This is not an attitude, however, that you see in people who have lived through the last period of American mass deprivation – the Great Depression. Using only my grandparents as an example, I can say that these people consistently saved (maybe even too much) and when buying consumer goods, made a point out of being thrifty. Now, there wasn’t a real possibility that they were going to experience deprivation as during the Great Depression ever again, but the ethic of thriftiness was still there. And they passed it on to their kids – my parents. Although my parents came to be far wealthier than my grandparents, we’ve still consistently lived below our means. This means saving as much as possible, no credit card debt and all the rest. Of course, we have the advantage of being squarely in the investor class, so we have access to “tax-deferred savings plans, as well as an army of financial advisers.” But take away UBS’ personal wealth management, and we’d still be saving a lot and investing relatively conservatively.

But of course, this ethic gets diminished with every generation removed from real deprivation, and I’m considerably less conscious of spending than my parents are. For example, when we shop, I always say that small differences of prices don’t really matter (and they really don’t) but there’s that residual norm that my parents observe that there’s no good reason to pay more money for things than necessary. Since I’ve never experienced deprivation or anything remotely close to it, and am two generations removed from those who have, I probably won’t be able to pass down this ethic to my kids, or at least not as strongly as my grandparents and parents were able to.

But while my children could well see a deterioration of Zeitlin-thriftiness, we could see a Great Awakening nationally.When the young people mired in credit card debt have children whose material well being is affected by their parents poor decisions, they could very well snap back in the other direction children of those college students and young who are mired in credit card debt and then become extra careful about debt and consumer spending. But we shouldn’t have to wait for a generational mindset-shift before taking some concrete policy steps. And Brooks has some good suggestions like non profits offering loans that would compete with predatory pay-day lenders, expanding financial planning to everyone or baby bonds to encourage saving from a young age. Sure, values may ultimately be more important than any program or policy, but this is clearly a “both-and” situation, not an “either-or.”