ECONOMICS

Book review: 'Rebound: Why America Will Emerge Stronger From the Financial Crisis' by Stephen J. Rose

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By Michael A. Fletcher
Sunday, May 9, 2010

REBOUND

Why America Will Emerge Stronger From the Financial Crisis

By Stephen J. Rose

St. Martin's. 278 pp. $24.99

For the uninitiated, it is no doubt tempting to be dismissive of economist Stephen J. Rose as he lays out his case for the continuing march of American prosperity in his new book, "Rebound." For one thing, Rose offers what can only be called an optimistic reading of the last three decades of American economic life. That leads him to conclude that once the fog from the financial meltdown lifts, the nation will continue on its prosperous path -- a surprising assertion to many economists, particularly Rose's fellow liberals, who saw the nation's economy veering off track long before the Great Recession took hold.

But Rose does not adhere to convention, and for that reason alone his book is worth reading even if you are likely to disagree with his conclusions. And he marshals an impressive array of data and arguments to support his provocative case.

For almost every seemingly troubling economic trend, he sees a sunny counterpoint. Where many analysts saw a time of flattening wages, increasing debt and greater insecurity for the nation's vast middle class in the decades leading up to the crash, Rose saw impressive increases in American living standards. "Rather than being a cause for alarm," he writes, "the disappearing middle class is a good sign for America because more people have higher incomes and provide the demand to keep our economy moving forward."

Worried about the shrinking number of workers covered by pensions? Rose is not. While fewer workers are covered by defined benefit plans now than several decades ago, he argues that fewer workers than expected ever really benefited from those plans. He cites statistics showing that just 20 percent of retirees collect 80 percent of pension payments, which he attributes to most people not staying in jobs long enough to fully benefit from pensions. The newer 401(k) and other defined contribution plans, while riskier, are a better deal for today's highly mobile workers, he says -- assuming they take advantage of them and don't spend the money down before retirement.

Americans sinking in debt? Rose calls this another misunderstood trend. First, he argues, much of the debt is tied to rising home mortgages -- granted, not a good thing given the sharp real estate downturn, but still an asset. Moreover, he says, nearly a quarter of Americans -- 23 percent -- had no debt whatsoever in 2007. When it comes to credit cards, more than half of Americans pay off their balances in full every month.

Others may roll their eyes, but I take Rose seriously, even if it is hard to be as sanguine as he is about the direction of the U.S. economy. Although he cut his teeth as a liberal who once served as a senior advisor to former Labor Secretary Robert Reich, he is mostly an economic iconoclast. I have quoted him in several news stories over the years largely because of his independent views. While many of his fellow liberals were decrying the decline of the middle class, he has struggled to reconcile apparently troubling statistics with the evidence before his very eyes: airliners crowded with vacationing families, long waiting times at chain restaurants, crowded mall parking lots, and larger homes stocked with an ever-expanding array of electronic gadgets. To him, those are all unmistakable signs of increasing American prosperity that can be documented with a careful reading of the economic data. The middle class may be shrinking, but that is because more Americans are moving up the economic ladder.

Despite his upbeat view, Rose acknowledges that not all is well in the American economy. But he argues that the bulk of the problem is confined to those with the poorest education, worst jobs and least wealth -- roughly the bottom 20 percent of Americans, who he says are in real trouble. He believes that health care reform and President Obama's investments in education should help, but he also thinks more must be done to create opportunities.

"Rebound" is not a stylish book. Rose makes his case for what has happened to Main Street in workmanlike prose punctuated by the occasional chart. Yet he succeeds in providing an easy-to-understand view of American economic trends and clear explanations of some of the alphabet soup of financial instruments that helped sink the economy that he says will rise again.

Michael A. Fletcher is a White House correspondent for The Washington Post and co-author of "Supreme Discomfort: The Divided Soul of Clarence Thomas."


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