At its core, the current crisis stems from two problems. Regulators, starting with Alan Greenspan, assumed that a real estate bubble couldn’t happen and that Wall Street could largely police itself. And households, struggling with incomes that haven’t kept up with inflation in recent years, said yes when those lightly regulated banks offered them wishful-thinking loans. No bailout can solve either problem.Leonhardt argues that a simply policy change in the tax code that rewards saving as opposed to consumption would go a long way to aid families in preparation for retirement and provide a homegrown capital base for economic growth.
Leonhardt also makes the obvious suggestion that the government needs to reduce Medicare cost to attack the long term deficit issue which is true enough, but as with everyone else who makes that observation, he offers no suggestions.