The social contract has been destroyed, and it has been destroyed on many
I suppose, one might say, that the housing aspect of the social contract was exploded from below when people who really couldn't afford their mortgages bought into them anyway. But, of course, many Americans were literally stampeded into this behavior by banks and other mortgage sellers--and then, as real estate values went up, were stampeded into getting some of their equity out and refinance with the assumption that the price of their house was permanently on the rise. Besides, these were not honest transactions since everyone pushed the mortgagees to lie about assets and income, no proof required.
Of course, the sub-prime calamity has hit almost all of the counting houses in the world. Some bankers actually understood the fraud they were promoting, and these are the ones who farmed out their mortgages to other financial institutions in an almost endless sequence like the unborn eggs in laying hens. Which is why the disaster is near-universal. It's hard to know how much of it spread because of a vast and sustained absence of mind.
No institution seems to be immune to this contagion. And no medium of exchange.
Everybody who had any investments has lost money. Sales are down in virtually every sector of the economy. Unemployment is rising. Education both public and private is being squeezed like a lemon from which a few drops emerge. Health care, well, we know about health care. Taxes may not be going up absolutely everywhere. But service fees are, and these are class-skewed against the middle class and the poor. Sales taxes are a mixture of both, regressive, as we used to say.
But, frankly, what I find most repulsive is the emerging collapse of the pension system. Yes, some people will sustain themselves with their pensions intact. And some will even sustain themselves with their pensions cut in half. But that is not what most retirees and future retirees can expect.
There is a fascinatingly detailed, dreadfully detailed story, "Plight of Carmakers Could Upset All Pension Plans," by Mary Williams Walsh on the first page of the business section in Friday's New York Times. There go decades of securing economic guarantees to retirees, right out the window. Right down the shaft. Right into the garbage. And it's not just with workers who were represented by the United Auto Workers at plants of the big three--GM, Ford, Chrysler--any one of which could go bankrupt within days or weeks. It's also with non-union workers in the southern plants of foreign auto workers. With one plan of part-way rescue, this plan will collapse. Another plan, that one will collapse. Then will come the employees of manufacturers of auto parts. And on and on.
It once was that American workers would be guaranteed a certain annuity. They knew what that annuity would be. There is a pension protection agency in the U.S. government. It has few financial resources (laughingly few), little leeway, less muscle. Pensions are last in the line for government help. Behind the bondholders and the bankers, the stockholders and the executives. They had nothing materially to do with the disasters visited on their employers. Their contribution was that, as the old union song has it, "without our brain and muscle/not a single wheel can turn."