Pain as a Policy Choice

On average, our economy tanks every seven years or so. By now we should have a pretty good idea of why that tanking happens, how we can protect ourselves, and what the impact will be. Unfortunately, we don’t.

Recessions remain a bit like death, inevitable yet near impossible to predict. Like death, recessions also generate sadness. And the Great Recession, as a new collection of research papers from the Russell Sage Foundation shows, generated a great deal of sadness.

In 2010, one year after the official end of the recession, reported happiness hit its lowest level since researchers first started recording the measure in the mid-1970s.

This shouldn’t be too surprising. During this time, home prices tanked, unemployment skyrocketed, and retirement accounts shriveled up. And many of the hardest hit families still haven’t recovered financially, leaving millions of households now more susceptible to the next downturn, not less.

“Americans are financially worse equipped to handle unemployment now than a generation ago,” the Russell Sage researchers point out, “thanks to deteriorating household wealth and unemployment insurance benefits.”

Endurance athletes and psychologists will both tell you that humans can adeptly block out memories of pain and suffering. In the retelling of stories, we often gloss over the ugly parts and choose to remember the pleasantries. This also appears to hold true for economics, too.

In the period since the last recession, the stock market has more than tripled in value. Yet this increase has essentially only benefited those at the top. Our too-big-to-fail banks have grown even bigger, and reckless behavior has returned to the financial markets. Inequality has also been rising steadily, with nearly all the income gains of the “recovery” going to the top 1 percent.

But this growing inequality isn’t inevitable. It’s a result of policy.

The federal minimum wage still hasn’t budged from $7.25 an hour, a go-hungry wage for families. Federal tax expenditures, meanwhile — like mortgage subsidies and beyond — go overwhelmingly to the already wealthy, and do little to help low- and middle-income workers save.

That reality hurts Americans of all colors, but it hits black and Latino families particularly hard. Racist policies have blocked them from wealth-building opportunities for generations.

The researchers at Russell Sage have provided a sober reminder that the Great Recession brought with it brutal and wide reaching pain. We need to take action now to soften the blow of the next recession and prevent the suffering we know is coming.

Changing our public policies to reach these goals, the data show, will make us all happier.

Distributed by OtherWords.

Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies (