Experts have blamed the economic downturn of 2008 on any number of recent events, but according to Paul Ballew '88, '92, the economy's failure is not accidental, but rather results from decades of buildups and poor choices. Ballew, senior vice president of Consumer Insight & Analytics for the Nationwide Mutual Insurance Company, joined UDM Economics Professor Donald Byrne Feb. 7 on the McNichols Campus for the symposium, "The Changing Economic Landscape-2008."

Byrne and Ballew, who have co-authored economic writings, examined 2008's economic demise as well as the rapidly changing American workplace. In addition, they discussed the country's financial condition, starting from the Great Depression to the present.
In particular, Ballew, who previously served as chief sales forecaster with General Motors Corporation, emphasized America's growth in indebtedness, and the recent housing boom. Rather than savings, Americans have tended to rely on their house as their primary investment. This, Ballew contends, is foolish. "No asset appreciates 15 to 20 percent in a year," he said.

According to Ballew, the primary culprits of economic chaos were greed, irresponsibility and bad public policy. American consumers fed into the greed, he acknowledges. "I grew up in a 700 square foot house, and today the average house size is 3,500 square feet," he said. "Most people have rooms they don't use, storing items they never needed." In addition, Ballew contended that the lack of documentation needed for many current mortgages created the myth of endless financial resources available to the American public. Credit that was too easy to attain did not help matters, either. "To carry 17 credit cards is irresponsible," Ballew said.

Additionally, the national government created an aura of invincibility. "They acted like they had all the answers," Ballew added. External shocks like September 11, hurricanes and energy prices, offered a tipping point to a nation where debt often exceeds income.

The author of An Economics Newsletter for the New Millennium, Byrne has taught at UDM for more than 40 years. At the symposium, Byrne contended that the economic instability of the last 10 years was not solely due to the failure of the private sector but rather the failure of economic policy. According to Byrne, combinations of bad policies resulted in the 2000 and 2008 collapses in the American economy. "It was not simply problems from within the private sector of the economy that caused these collapses," he said. "It was also combinations of ill-advised economic policies by the anti-trust agencies, Congress, and the federal government."

The bad policy decisions, Byrne contended, resulted from the failure of policy-making authorities to comprehend the American economic and financial changes stemming from the Depression. Byrne calls the resultant situation "The New Paradigm." Fuel played a strong part in our economic downturn, as well. "The failure of the Justice Department and the Federal Trade Commission to effectively enforce the antitrust laws resulted in the re-cartelization of the American Oil Industry in the 1990s," Byrne said. "In addition, 13 of the larger oil companies merged into six."

Like Ballew, Byrne criticized poor policy choices. "The failure of fiscal policy also caused the federal budget stimulus to change from stimulus to restraint," he said.

According to Byrne, the 2008 economic distress was especially affected by rising fuel prices. These prices impeded travel, recreation, the purchase of new vehicles and the subsequent loss of discretionary income for the American public.

When asked about the American auto industry, Byrne and Ballew criticized the Big Three for unfunded liabilities and a cash flow they could not sustain. Byrne said bluntly, " The American auto industry, as we have known it, is over." Ballew, though a bit biased, expressed optimism for the future of General Motors. "If they can overcome their balance sheet issues with pensions and health care, they will do well," Ballew said.

"Unfortunately, General Motors might benefit financially from bankruptcy, but then no one would buy their products."

Both Byrne and Ballew acknowledged the soaring expenses and access of the American health care system as an imminent concern. "Is providing health care a moral imperative?" Ballew asked. "Are we obligated to provide health care for all? And if so, how?"

Byrne and Ballew agree, however, that the public has responded to the economic crisis. Currently, Americans are exercising financial restraint. Retail sales are down significantly, as the steady occurrence of job losses added to the fall of consumer confidence. However, both economists see the recession easing by decade's end, and the symposium ended with words of encouragement. "Americans have a tremendous work ethic," Byrne said. "They are not afraid to do what needs to be done." Ballew concurred. "Recovery will occur," he said. "Our kids will live good lives due to technology and ingenuity."