Parts to Wholes: the Socionomic Systems Nexus

Re-building on a Rock

News Analysis: Obama Stands Firm on a Sweeping Agenda AS he spoke about the economy on Tuesday, President Obama invoked the parable in the Sermon on the Mount about two houses, one built on sand only to be blown away in a storm and another built on rock impervious to the swirling winds. Mr. Obama was trying to explain why he wants not only to revive the sagging economy but to virtually reinvent it with sweeping changes in health care, energy and education. Without deeper reform, he argued, the economy would only topple again later. But as he confronted critics in a wide-ranging hourlong speech to students and faculty members at Georgetown University, he also sought to shift his expansive economic program off the political sands onto a firmer foundation. As Mr. Obama acknowledged, many Americans think he is taking on too much at once, or, conversely, not doing enough at all, or just wondering how all the pieces of his agenda fit together. A flurry of government action has yet to reverse the nation’s economic calamity, and while Mr. Obama said again that he detects “glimmers of hope,” he pleaded for patience from an instant-gratification society that usually responds to crisis with “a lurch from shock to trance.” “It’s more than most Congresses and most presidents have to deal with in a lifetime,” Mr. Obama said. “But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility to ourselves, to the men and women who sent us here, to the many generations whose lives will be affected for good or for ill because of what we do here.” Mr. Obama used the address to link those disparate issues and present an integrated vision for the future of American capitalism when the recession eventually ends. He defended himself against those who accuse him of bankrupting the nation and those who argue that he should be more aggressive about taking over banks and spending even more money. “I know there’s a criticism out there that my administration has been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children’s future,” Mr. Obama said. But he rejected that characterization and said it was time to make difficult decisions. “There’s been a tendency to spend a lot of time scoring political points instead of rolling up sleeves to solve real problems.”

5 reasons Obama sounds optimistic President Barack Obama and his economic team are changing their tone on the economy. Gone are Obama’s bleak descriptions of crisis and catastrophe. In their place are “glimmers of hope” of a turnaround. The question is: why now? It’s a tricky balance. The White House doesn’t want to hang a premature “Mission Accomplished” banner on the economy ala President Bush’s speech about Iraq. Obama’s recovery talk Tuesday was couched with warnings of “more job loss, more foreclosures, and more pain before it ends.”  But through all that, Obama is highlighting an economy on the mend. Here are five reasons for Obama to make that rhetorical pivot now: 1. Real “glimmers of hope” There are a few in the economic data, as the president has noted twice in the past week. 3. They’ve done it all. There’s also a practical reality facing the Obama Administration, which is that they have largely done everything they set out to do to fix the economy. Obama ticked through a list of items in his speech -- the $787 billion stimulus bill, the Wall Street and auto bailout programs, a housing recovery plan, a boost to non-bank credit markets and even his efforts to get the G-20 nations to do more. All, he said, have “been necessary pieces of the recovery puzzle.”

Obama's 'House Upon a Rock' Speeches pop up in Washington like dandelions in the spring, and often are no more useful. But occasionally there comes a speech that is revealing, and worth pausing to absorb. Such a speech came this week when the White House created an audience at Georgetown University so President Barack Obama could deliver a long address (exactly 45 minutes) designed to explain the thinking behind the many economic policies he has poured out over the last 87 days. Tuesday's speech actually broke no news; not a single new policy decision was revealed. Yet talks with White House officials about the speech and its origins suggest it's the best look yet into how the president thinks he's both fixing and reshaping the American economy. It wasn't long in the making. The plan for the speech arose only in the last week or two, White House aides say, principally out of conversations between the president, strategist David Axelrod and chief speechwriter Jon Favreau. They saw a need to explain, in simple terms and metaphors, how the seemingly disjointed pieces of the administration's economic rescue package -- the bank bailout, the economic stimulus package, the attempt to get more cooperation from other countries at the Group of 20 summit in Europe, the new budget with big chunks of money for health, environment and education -- are supposed to fit together. Like other presidents, Mr. Obama decided he needed to do that by telling a story: This is where we were, this is where we are, this is where we're going. Mr. Obama's instruction to his staff, one senior aide says, was: "Think fireside chat." What the White House needed, then, was to present a unified theory of economics. Enter the speech. In it, Mr. Obama describes a nation that has developed in the last decade or so what he called a "bubble and bust economy," in which 40% of corporate profits have come from the financial sector, while the sectors that actually make things are increasingly held back by spiraling health-care costs that weigh down existing companies and their workers. So the speech portrays the economy as a house in trouble. Mr. Obama is, in essence, using bank bailouts and stimulus spending (which now is called "the recovery plan") as a kind of fire extinguisher to douse financial flames on the top floor of the house, while simultaneously dispatching work crews to put new education, health and energy stones in place to rebuild the foundation down below. The idea is that once the flames are out, the country will discover that the house's foundation has been made stronger by using federal dollars to create a whole raft of new jobs in an alternative energy industry, while saving old jobs by lightening the burden of health costs on existing industries. The metaphor President Obama used in the speech is, in fact, that of a house -- a Biblical house. He refers to the story from the Sermon on the Mount about how houses built on sand fall, while those built on rock remain standing. As for deficits that accumulate during the work -- well, they are the construction debris that will have to be cleared out, with the help of stronger economic growth, after the project is finished. That's the theory, at least. "Axis of evil" was just a line in a speech, but it came to define the last president's foreign policy. Time will tell whether "our house upon a rock" will, as the White House hopes, define this president's economic strategy. Pres. Obama on Goals for Recovery Speaking at Georgetown Univ., Pres. Obama outlined plans to turn around the financial crisis, which included enacting new financial regulations. He said that much more work needs to be done.

Policies and Changes

A Smarter Way to Set CEO Pay The opening sentence of Alexis de Tocqueville's Democracy in America, the social philosopher's magisterial epic investigation into early 19th century America, highlights how central the idea of equality has been in society: "No novelty in the United States struck me more vividly during my stay there than the equality of conditions." But a visit to 21st century America might give de Tocqueville pause. The era that the French author chronicled and the periods that followed were indeed a time of unparalleled opportunity. Immigrants swarmed to the U.S. to make a better life for themselves and their families. Americans looked at themselves as middle class, neither aristocrats nor working class, just common folk trying to get ahead, making a better life for their children. Nevertheless, the American economy was more egalitarian and open to talent than anywhere else. Horatio Alger's working boy heroes and Charles Foster Kane are fictional characters, but for Daniel Boone and Andrew Carnegie the climb from rags to riches was very real. Indeed, it's striking that Americans have long tolerated greater income inequality than other major industrialized nations. One reason is the powerful belief in equality of opportunity, that society rewards merit, pluck, risk-taking, and luck. Another factor is that for long periods of time the economic gains of rising productivity and increased innovation were widely shared. A less savory influence on the acceptance of greater inequality is a cottage industry of consultants, lobbyists, and think-tank entrepreneurs that justified the extraordinary gains at the top of the income spectrum as the just rewards for brains and merit. Problem is, none of these arguments hold anymore. Corporate America's productivity gains of the past three decades or so have largely gone to a relatively small number of executives. The ominous combination of recession and credit crunch makes it hard to argue that the gains have been the returns to "talent" in the 2000s. Perhaps most disturbing, Corporate America is becoming a pay-for-failure economy for its top executives and a Darwinian existence for everyone else. "Too often, executive compensation in the U.S. is ridiculously out of line with performance," says Warren Buffett, the legendary investor. "The upshot is that a mediocre-or-worse CEO -- aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet, and Bingo -- all too often receives gobs of money from an ill-designed compensation arrangement." Peter Drucker, the late management philosopher, couldn't stand exorbitant executive salaries. The average CEO of the Standard & Poor's 500 companies gets about 400 times the average pay of an American worker. Drucker believed a gap like that damaged corporate productivity, reduced employee innovation, and tore at society's fabric. He argued for a ratio around 20 or 25 to 1. It's a safe forecast that it won't happen. It's also safe to say that there will be angry calls for reform, demands that the board of directors be transparent with CEO compensation and that consultants design improved benchmarks for judging pay for performance. This has been the mantra since the earlier debacles of Enron and Worldcom. We all know that not much has changed. Here's the rub: If corporate directors don't bring the CEO risk-to-reward ratio in line with other employees and the American entrepreneur, the danger is that Congress will do it for them. That would be a huge mistake. But at that point the big brains that inhabit America's boardrooms will have no one to blame but themselves.

Louisiana, a Test Case in Federal Aid Years before Washington spent $787 billion on a national stimulus bill, it staged an unintended trial run in Louisiana, a huge injection of some $51 billion for which historians find few, if any, precedents in a single state. The experiment is still playing out, but some indicators suggest that what occurred in Louisiana — dumping a large amount of reconstruction money into a confined space in the three and a half years since Hurricane Katrina — has had a positive outcome. The state’s unemployment rate of 5.7 percent in February was considerably below the national average of 8.1 percent, and it was the only state to see a drop in unemployment from December to January. It was also the only state with an increase in non-farm employment in February. State economists specifically mention what one called “the ongoing building boom” from federal dollars as a main reason for the numbers. Largely a result of the damage caused by Hurricane Katrina, construction projects have not dried up as they have elsewhere, and a few can even be seen in downtown New Orleans. However, the state’s Republican governor, Bobby Jindal, has positioned himself as a leading voice against the new stimulus bill, objecting to federal intervention in a state’s economy. He has threatened to reject $98 million in stimulus money intended to help Louisiana’s unemployed, echoing other Southern and Western governors who have turned such rejections into a conservative rallying cry. But even as Mr. Jindal has criticized the stimulus bill, his own subordinates have continued to request money from Washington, notably in replacing Charity Hospital, which for generations served the poor in downtown New Orleans. In Louisiana, however, the consequences have hardly been dire — just the opposite, in fact. One of the governor’s leading aides, the state’s recovery director, Paul Rainwater, praised the federal relief effort in Louisiana in recent remarks to Congress, the day after his boss scorned federal help on national television in the Republican Party’s response to President Obama’s first address to Congress. “No other state in the nation has been blessed with such generosity from Congress and the American people,” Mr. Rainwater said. Referring to the Federal Emergency Management Agency, a principal conduit for the aid that has flowed here, he said that “Louisiana is FEMA’s biggest ‘customer,’ so to speak, and the state’s Office of Facility Planning and Control is the largest single public-assistance applicant in American history.”

Reverse Vicious Economic Circles The Obama administration's top economic voice said Wednesday the U.S. needs to respond aggressively to put an end self-perpetuating economic difficulties in order to begin the recovery process. "These vicious cycles are the central threat and why a strong policy response is so essential," Lawrence Summers, director of the National Economic Council, said in a speech to the American Bankers Association in Washington. Summers, who served as Treasury Secretary during the Clinton administration, said the U.S. cannot rely on the financial markets to stabilize themselves. This is in part because the banking system and capital markets became too interconnected, preventing one from taking up the slack when the other falters. "Those two pillars have become increasingly intertwined, and the consequences of that intertwining is that in the current downturn we have seen very substantial problems in both," Summers said. He said the same vicious cycles that have helped create greater instability in the U.S. economy provide an opportunity to policy makers; reversing the cycle can quickly build growth. Increasing the flow of credit can increase the level of demand, Summers said, which will in turn lead to higher levels of employment and even more demand. "They hold out the prospect that if we can reverse these vicious cycles we can engage the same engines for growth," Summers said. One key to moving toward recovery will be repairing the financial system. Overhauling the regulation of the financial services industry, stabilizing financial institutions and restoring confidence are all necessary. "It is our responsibility to create a healthier financial system that is less a source of instability in the lives of others over the next generation," Summers said.

Restore Order and Win a Financial War In the bubble era, even sophisticated people deluded themselves into believing that home prices would soar indefinitely and that lending risks were minimal. On those weak foundations, a huge house of cards was built. Wall Streeters designed a hideously complex financial system to enrich themselves. Financial institutions took on far too much debt. People signed mortgages they could ill afford and did not understand. Regulators, the Bush administration and Congress looked the other way. The bubble grew until it burst. Much of this shouldn’t have happened. But we are where we are, and the urgent priority is to extricate ourselves from this mess as quickly as possible, with minimal damage. Here’s how I conceptualize the master plan. American policy makers are fighting a two-front war. On the eastern front, they are battling a shortage of demand, as traumatized households and businesses pull in their horns. Less spending by some people means fewer jobs for others who, in turn, curtail their own spending. Keynes diagnosed this vicious recessionary spiral in the 1930s, and we are now in the midst of the worst one since then.Fortunately, we know how to fight a demand shortage — with more government spending, tax cuts and lower interest rates. That is why Congress enacted a huge fiscal stimulus in February and why the Federal Reserve has cut interest rates to virtually zero. But the cure takes time, and we are still sliding downhill. Depending on how long and deep the recession gets, we may need more firepower. But at least policy makers know what to do — and are doing it. The western front is vastly more complex. All economies run on credit, and ours developed an extreme dependency. Largely through their own failings, banks have been seriously damaged. Bankers are paralyzed by fear of further loan losses and shrinking capital that might subject them to regulatory penalties — or worse. One way or another, the banks must be restored to health and emboldened to lend.

The Big Fix In the aftermath of the stock market crash of 1987, reformers moved to remake America’s regulatory structure. Some experts proposed tinkering with the oversight agencies, merging the Securities and Exchange Commission with the Commodity Futures Trading Commission, for instance. Others recommended regulating derivatives, which were in their infancy. George Soros, not yet the bête noire of right-wingers, took to the editorial page of the Wall Street Journal to warn that nobody was thinking big enough: “The longer markets function without supervision explicitly aimed at maintaining stability, the greater the danger of an accident like October 19, 1987.” Anyone remember the landmark 1987 Securities Act? It never materialized. And did anything happen in 1998, after Long-Term Capital Management nearly went under and a similar dance took place? Many of the same players strutted on the same stage, and Soros again predicted that without sweeping international regulatory reform, we risked “the breakdown of the gigantic circulatory system which goes under the name of global capitalism.” Again, no ’98 Securities Act—perhaps not surprising, given that what followed was a market recovery that we now know was a massive equity bubble. This time, the calamity in the markets is more devastating than any of the previous crises since the Great Depression. Luckily, it’s looking like history won’t repeat itself. One of the enduring legacies of this economic collapse will be that the government finally had to embark on a wholesale financial rethinking. Right now, finding a way to end the crisis and reinvigorate the economy is the most pressing issue. But in a few months, after the Obama administration settles in—assuming we aren’t all eating cat food under a bridge—we are going to have the debate we need about how to rebuild the regulatory system.  The pressure to put off this debate will be enormous. The financial industry is bound to resist. But Wall Street is at its weakest point in decades; the new administration has to strike while the public temper is at its hottest. But surprisingly enough, given the dubious way it began, a Paulson-like framework is a good place to start. It was influenced by what is known in regulatory circles as the Twin Peaks approach, used in Australia and the Netherlands. The idea is to create two financial regulators that are given separate responsibilities not based on financial firms’ lines of business. The second peak will be more familiar. It would focus on business conduct and investor protection, otherwise known as lying, cheating, inadequate disclosure, and manipulation. This would encompass much of what the S.E.C. is currently supposed to be doing. It would go after big targets and not monkey around with dinky companies and small-time ­insider-trading issues. The Twin Peaks model has good-cop, bad-cop appeal. The safety-and-soundness regulator can work with firms to make sure they are solid or else the enforcer will come in. And we should consider a third peak as well: one with responsibility for surveying systemic risk. It would monitor the safety and soundness of the entire financial system, rather than assess it on a company-by-company basis. 

Pearlstein: Reinventing Regulation  That said, it is probably useful to begin thinking about what the new architecture for financial regulation should look like. Step one is to consolidate day-to-day "safety and soundness" regulation of all financial firms -- banks, investment banks, bank holding companies, insurance companies, hedge funds, housing finance agencies-- in a single entity. In the past, each type of institution was regulated by a different agency. But over time, firms became adept at getting around regulation by finding the cracks between the agencies and playing one regulator off another. But which of the existing bank regulators should get the assignment as prudential regulator? My vote is to build it around the Federal Deposit Insurance Corp. As an independent agency, the FDIC is a bit more insulated from the political influence wielded by banks and Wall Street firms. In addition to the prudential regulator, there will be a need for a separate agency to protect investors and supervise the markets in which stocks, bonds and futures are traded. There is absolutely no credible rationale for dividing the investor-protection responsibility, as we do now, between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Nor, as we've learned from the AIG debacle, is there any reason to continue to exempt credit-default swaps and other derivative instruments from all regulation. The recent troubles also suggest the need for yet a third regulator, whose sole mission is to prevent breakdowns of the entire financial system. This uber-regulator would have broad powers to gather whatever information it needs -- from other regulators or directly from any financial institution. It would need the power to order those other regulators to take steps to reduce those risks. And if all else fails, it would need the ability to provide liquidity to financial markets and take over major financial institutions that are about to fail. This sounds like a natural role for the Federal Reserve. Getting all this right would be useful in preventing future financial crises, but don't confuse it with a panacea. Much of the current crisis could have been prevented if the existing patchwork of agencies, using their existing powers, had simply done their jobs. Congress can create a better regulatory structure and can expand regulatory powers, but in the end, the one thing it can't legislate is the good judgment of the regulators.

Gates Takes Aim at Military Pork Gates has been saying for months that the time has come for a "strategic reshaping" of the way the U.S. military is spending $600 billion a year — a tab that doesn't even include the cost of the wars in Afghanistan and Iraq. Now he's going public with the 2010 budget proposal he drafted in secret before formally sending it to the White House and the Office of Management and Budget. It's a ploy designed to build momentum for Gates' plan before it can be sabotaged by defense contractors and lawmakers (who often come from districts that benefit from building particular big-ticket items), with behind-the-scenes help from the military. "If even a few of the Gates cuts are serious, a pork-crazed Congress will go nuts," says Winslow Wheeler, who spent 30 years working on defense issues for members of both parties on Capitol Hill. "The big challenge will then become making any serious decisions stick."  Gates' aides say his budget is being presented as a single holistic proposal — rather than being leaked in dribs and drabs, which could build resistance to specific changes — and therefore it stands a better chance of winning approval from Congress. Resistance will be fierce on the Hill, where some view any retooling of the military budget as a recipe for a weaker America and others simply want to keep defense-contractor jobs in their districts — a combination that could yet trump a highly-regarded Defense Secretary and President.

• Gates' Battle Plan for the Defense Budget
• See the top 10 outrageous earmarks of 2008

Obama: Wants suggestions to cut spending waste Families are making tough decisions about their money and so too will their government, President Barack Obama said Saturday, promising that spending cuts are coming -- and soon. At a Cabinet meeting Monday, the president will ask department and agency heads for specific proposals for trimming their budgets. "If we're going to rebuild our economy on a solid foundation, we need to change the way we do business in Washington. We need to restore the American people's confidence in their government -- that it is on their side, spending their money wisely, to meet their families' needs," Obama said in his weekly radio and Internet address, released while he attended the Summit of the Americans in Trinidad. To help achieve his goal of an efficient government, Obama announced the appointment of Jeffrey Zients, a founder and managing partner of the investment firm Portfolio Logic, as chief performance officer. Zients, who also will serve as deputy director for management of the Office of Management and Budget, will work to streamline processes and cut costs. On that front, Obama gave notice he wants to act quickly."In the coming weeks, I will be announcing the elimination of dozens of government programs shown to be wasteful or ineffective," he said. "In this effort, there will be no sacred cows and no pet projects. All across America, families are making hard choices, and it's time their government did the same." Obama said he's determined to try to cut costs. "That is why I have assembled a team of management, technology and budget experts to guide us in this work," he said, "leaders who will help us revamp government operations from top to bottom and ensure that the federal government is truly working for the American people."

• Capitalism After the Fall
• Free-Market Flaws, Exposed

10 ideas that are changing the world right now 1. Jobs Are The New Assets 2. Recycling the Suburbs 3. The New Calvinism 4. Reinstating the Interstate 6. Africa, Business Destination 7. The Rent-A-Country 9. Survival Stores 10. Ecological Intelligence It's a question that most of us are ill equipped to answer, even as the debate over what is and isn't green becomes all-important in a hot and crowded world. That's because as the global economy has grown, our ability to make complex products with complex supply chains has outpaced our ability to comprehend the consequences — for ourselves and the planet. We evolved to respond to threats that were clear and present. That's why, when we eat spoiled food, we get nauseated and when we see a bright light, we shut our eyes. But nothing in evolution has prepared us to understand the cumulative impact that imperceptible amounts of industrial chemicals may have on our children's health or the slow-moving, long-term danger of climate change. But ecological intelligence is ultimately about more than what we buy. It's also about our ability to accept that we live in an infinitely connected world with finite resources. Goleman highlights the Tibetan community of Sher, where for millenniums, villagers have survived harsh conditions by carefully conserving every resource available to them. The Tibetans think ecologically because they have no other choice. Neither do we. "We once had the luxury to ignore our impacts," says Goleman. "Not anymore."

Back to the Future: Rocks and Values

When Two Boys Made the Midwest Proud  I put in a DVD the other day and watched that 1979 NCAA championship game -- Michigan State vs. Indiana State, Magic Johnson vs. Larry Bird, still one of the most-watched games ever, college or pro. I knew how it would turn out. Michigan State, stronger and deeper than the Sycamores, would go ahead early, then hold off a second-half challenge to win by 11. But at the opening jump I could still feel the charge so many people felt that day. There they were, those two sublime athletes, long-haired boys again on the screen, slender in the old short trunks, yet commanding. They were why so many watched. They were still beautiful. But as a Midwesterner, I turned off the set feeling a little sad. Somehow the meeting of those two boys struck me as the high point of a certain stretch of time that we took for granted until we realized -- just now, really -- that it was over. In the Midwest, history happened in tiny increments, each one a family's decision to pack and try for a new life. It happened in two broad waves. The first started when Revolutionary War veterans crossed the Appalachians to plant farms that made the states of Ohio, Indiana, Illinois, Michigan and Wisconsin. The second began around World War I, when black sharecroppers left the South for city jobs in Cincinnati, Cleveland, Detroit, Chicago, Gary and Milwaukee. By World War II, the journalist John Gunther wrote, the upper Midwest had become the region "where industry and agriculture both reach their highest American development and coalesce." In the decades after the war, the Midwest was two realms, two ways of life -- farm and factory, small town and city, white and black. But in both, lots of kids grew up crazy about basketball. By 1979, in that final game in Salt Lake City, the two boys, both famous by then, made a matched set, each of them straining for the ball, twisting, running, staring downcourt for the open man. Both were smart and unselfish on the court. Both had the good luck to grow to 6-foot-9. Otherwise, by their own admission, they were not the players most blessed with physical gifts. Their blessings were the parents, the towns, the schools, the neighborhoods that put up the rims and painted the lines on the pavement, the coaches who came in early. History and human infrastructures lifted and held those boys up. Now, if you stand on the corner where Magic Johnson sang on summer nights, you look down the street to Lansing's biggest vacant lot. The Cutlass plant is gone, the site paved over. Near Sexton High, the big, beat-up sign at UAW Local 602 says only: "Pension and Insurance. Substance Abuse. Community Services." On the business strips you see all the franchise places, but about the only homegrown businesses are barbershops and hair salons. It looks like the only thing growing in Michigan is hair. French Lick has had a little more luck -- not much. The Kimball piano plant is long gone. They fixed up the big French Lick Springs Hotel and put in a new casino, and up on the steep hill there are still fine, frowning bungalows with tidy lawns and Easter decorations. But down in the town, the signs on stores say "We Have Moved" and "This Location For Sale," one store after another. Even "Gotta Have It Sports" is for rent.

The American mood: Is the angst bottoming out? Friday night in northern New Jersey, circa April 2009, offers clues to prove any theory about the American economic meltdown, depending on what you want to believe. Just like so many places these days. Craving optimism? Watch the tour bus emptying into the La Quinta lobby off Route 3, its occupants abuzz about their weekend sightseeing jaunt into Manhattan. Or see the hungry diners spilling out the door of Carino's Italian Grill in the Clifton Commons shopping center -- a line of customers waiting to put their money into the consumer economy. Want some economic angst? That's easy, too. Drive straight up Bloomfield Avenue into Glen Ridge, Montclair and Verona. Gaze at the empty Volvo and Jaguar dealerships and the deserted bank. Contemplate the thinned-out blocks of storefronts, defunct restaurants, abandoned shops and "For Lease" signs in one of the region's more affluent areas. More doom on the horizon? Or will happy days soon be here again? Take your pick. The confusion is enough to play havoc on a person's mood -- or an entire nation's. "Everybody is looking at it through their own personal lens," says Liza Dawson, a self-employed literary agent from Glen Ridge. In hard economic times, Americans turn to numbers to see whether things are getting better. Gauging the mood of the republic is not as quantifiable. It is not measured but sampled. Yet the human factor can be crucial. An improving outlook can increase confidence and nudge prosperity along.

The Great Recession: America Becomes Thrift Nation Now we're stripping down and starting over. A platoon of TIME reporters and pollsters fanned out to every corner of the country to measure — anecdotally and empirically — what's changed in the way we set our priorities and spend our money since the Great Recession began. Most people think the pain will be lasting and the effects permanent: only 12% expect economic recovery to begin within six months, half believe it will be another year or two, and 14% believe we are at the start of a long-term decline.  Our institutions watch for economic vital signs. But maybe, for individuals, the sickness is what came before — the hallucination that debt would never need to be repaid, that values only rise, that bubbles never burst. When the markets collapsed, that fever broke. In our assumptions and attitudes and expectations, the recovery is already well under way. Talk to people not just about how they feel but about how they're living now, and you hear more resolve than regret. Nearly half say their economic status declined this year, and 57% now think the American Dream is harder to achieve. And yet pain and promise are a package deal; even after all this, fully 56% believe that America's best days are ahead. It would be nice if it took something short of a heart attack to get us to work out, eat better and spend more time with our kids. But in the end, where we wind up matters more than how we got there. Unlike any other downturn since the 1930s, this one has affected everyone, either the fact of it or the fear of it. Even when prosperity returns, 61% predict, they'll continue to spend less than they did before. Among people earning less than $50,000 a year — roughly half of U.S. households — 34% have not gone to the doctor because of the cost, 31% have been out of work at some point, and 13% have been hungry. At the same time, 4 in 10 people earning more than $100,000 say they are buying more store brands, 36% are using coupons more, and 39% have postponed or canceled a vacation to save money.

Obama vs. the culture of greed Conventional wisdom says a new president has a political honeymoon of about 100 days to define his presidency. So far, it looks as though Michelle Obama has been having a better time of it in the White House than Barack. By contrast, President Obama was immersed in the problems of the economy: a frozen banking system, soaring unemployment, a sagging housing market, and a struggling stock market. But what broadsided the president unexpectedly was the fury of public anger over executive compensation, specifically the $165 million in taxpayers' money as bonuses to executives of the American International Group (AIG). The real target of all this anger should be the culture of greed that has corrupted elements of our society, particularly in financial and banking circles. But in recent years, newly minted MBAs have been drawn to Wall Street, where they work 80-hour weeks and weekends, make millions for themselves and others by manipulating investments and currencies, yet produce nothing that can be perceived as of tangible value; utility; or even artistic, humanitarian, or spiritual inspiration to the community. It is this kind of nihilistic blindness, the rejection of customary beliefs in morality and religion, that leads the Bernard Madoffs of this world to plunder many millions of dollars from trusting investors for more luxurious homes, expensive cars, boats, and collections of bejeweled wristwatches, with no concern for the victims of their fraud. As we deplore the culture of greed in high places, we should ask whether the would-be-rich among us also are tainted. Do we commit to grander homes than our salaries justify, glamorous automobiles we do not need, exotic vacations we cannot afford? Then there are the mortgage brokers who encourage new homeowners to assume more debt than they can pay, the credit-card exploiters who press new cards upon a teenage clientele, and the payday loan merchants who offer cash at impossible rates to the unsophisticated. There is nothing evil in striving for the American dream that President Obama has so often lauded. It is best achieved by honest labor, careful saving, and prudent spending.

The real value of hard times: retrieving our ideals We hear of a "new age of responsibility," and that "we're all in this together." We sense a new willingness to address problems that have lingered for decades. We are compelled to take a sober look at past wastefulness. We detect a newfound respect for cooperation, accountability, education, hard work, compassion, honesty, rectitude: a mix of traditional "liberal" and "conservative" values. This comes as our national wealth tumbles. What is it about that perilous uncertainty that moves us back in the direction of material and moral basics? As we daily learn about the faulty foundation upon which our economy towered, we learn how far we strayed from those basics. Let's remember that economy is first about physical survival – to ensure we are fed and sheltered. Our means may be more elaborate and clever, but in that need alone, there is little to distinguish us from other creatures on earth. Once that need is met we face a choice, whether to seek purpose beyond material achievements or to simply continue solving the problem of physical survival in its higher octaves of pleasure, luxury, or status. In the latter case, we are often tempted beyond our means for the sake of "keeping up." But do we ever consider that even in tough times, we are surrounded with goods and products that in earlier periods or for other societies would represent the unimaginable height of marvel and affluence? Are we ever fully satisfied in this regard? But maybe that hierarchy also needs to be turned on its head. Maybe one of the very purposes for our daily economic exchanges is to practice perfecting our ideals. And when we drop those inner concerns as inexpedient to the goal of extra profits, it's like dropping a gem for a trinket, ironically the first step toward collective poverty. Even the words we use to categorize our ideals can suffer this inversion. Liberal and conservative both represent something real – they are foundational principles. But each has its counterfeits. It gets confusing. Does liberal mean freedom unconcerned with the distinction between the licentious and the lofty, or the development of critical faculties intended to liberate us from such entanglements? Does conservative mean unbridled consumerism, or does it include responsible environmental conservation? The litmus test is this: While the counterfeits reinforce partisan divides, the genuine parts of these perspectives complement and synergize, much like protective strength and nurturing compassion. The seriousness of the situation – and the measure of our wisdom – can be gauged by how willing we are to jettison the counterfeits. If our difficulties force us to realize we can ill afford to be petty or extravagant and if they force us to identify and value the essential over the extraneous, then maybe there is value in hard times.

GE Exec Says Economic Crisis Resetting Capitalism The top executive of General Electric Co. said Wednesday he couldn't predict when the recession would end or how bad it will be, but said the global economic crisis has "fundamentally reset" the way companies do business and capitalism itself. Speaking at GE's annual shareholder meeting in Orlando, Florida, following what has been a punishing year for the conglomerate, CEO Jeff Immelt said the downturn was the worst since the Great Depression, and that it would ultimately lead to changes such as greater government involvement in business and a restructuring of the financial services sector that was a root of the crisis. "We are living through history, and I don't mean that in a positive sense," said Immelt, who heads one of the world's largest companies that makes products like jet engines and refrigerators but also has a big financial unit. Immelt told investors "2008 was tough and 2009 is also going to be tough." He added that it was hard to predict "how bad this will be and how long" the recession will last.