The Rising Tide of Economic Anxiety

On June 27, 2008, Peter Gosselin, L.A. Times National Economics Correspondent, offered an atypical view of the economy that faces the average American family. Rather than the usual top-down macroeconomic perspective, he talked about how the economy looks “out the front door”. He was accompanied by comments from Ellen Seidman, Director of New America’s Financial Services and Education Project, to discuss Gosselin’s new book, “High Wire: The Precarious Financial Lives of American Families.” An MP3 audio recording can be downloaded below, while video is available at right.

In his prepared remarks Gosselin established the general thesis of his book – that the Reagan policies of the 1980s produced a shift of economic risk from employers to employees – a phenomenon that Gosselin believes occurred generally unbeknownst to the working population. The crisis we find ourselves in today is a consequence of the greater burden of risk facing individuals and the availability of tools with which to mitigate that risk. Americans, Gosselin argues, have been presented with higher levels of economic risk and have less protection. Everyone but the super-rich is vulnerable to devastating financial setbacks.

Gosselin presented three cases to back up his thesis. The first, quantitative, case revolved around his use of a new “beta measure” of income volatility modeled off of the existing beta measure of stock volatility. His analysis found that income volatility has doubled across a large swath of the population – from working-class earners up to the college educated. His second case focused on the erosion of structural supports – including employer-provided benefits like health care and pensions – that individuals and families typically rely on to mitigate economic risk. Finally, he presented a narrative case, moving down to the micro-level to examine the anecdotal evidence of a greater risk burden.

During the exchange between Gosselin and Seidman, Gosselin further attacked what he viewed as a flawed system of risk distribution. He refuted the notion that individuals would simply, over time, get better at managing the benefits historically provided by employers. He also attacked the assumption that families are just like any other economic unit, arguing that households, unlike corporations, can not endlessly diversify in order to mitigate risk. The discussion touched on the nation’s current economic woes as well as clear prescriptions for reorganizing the distribution of economic risk between employer and employee, capital and labor, and individual and state.

-Nick Calluzzo, Research Intern for the American Strategy Program

Participants
Featured Speaker

• Peter Gosselin
  National Economics Correspondent, Los Angeles Times
  Author, High Wire: The Precarious Financial Lives of American Families

Comments

• Ellen Seidman
  Director, Financial Services and Education Project
  New America Foundation

Moderator

• Steven Clemons
  Director, Smart Globalization Initiative and
  Director, American Strategy Program, New America Foundation
  Publisher, www.TheWashingtonNote.com