TOPICS > Economy

Some Find Silver Lining in Dark Economic Cloud

February 20, 2009 at 6:25 PM EDT
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The economic downturn isn't all bad for everyone. Paul Solman reports on some Americans who have seen their quality of life increase.

JIM LEHRER: But here now is our economics correspondent, Paul Solman, with a report on the bright side. It’s part of his special series on making sense of the downturn.

PAUL SOLMAN, NewsHour economics correspondent: You could say Steven Taylor’s world was turned upside-down in more ways than one when he lost his software job last summer.

STEVE TAYLOR: I wasn’t on much of a time crunch, and it allowed me to open up my normal gym habits.

PAUL SOLMAN: Taylor shed some 30 pounds — before, after — and has now been hired as a personal trainer. For months, though, he was just another sobering statistic: one of some 3.5 million net jobs gone since 2007, nearly 600,000 last month alone, grim, but at least trim.

And Steve Taylor isn’t the only person out there trying to positively reframe the catastrophe these days. Consider this movie short that’s played at film festivals all over the world and has more than a million hits on the Internet, where we found it.

BUSINESS OWNER: I need two certified public accountants?

PAUL SOLMAN: The humor, of course, is that many feel Wall Street’s pain as pleasure.

BUSINESS OWNER: One chief financial officer? That’s it for today. Gracias.

Transfer of wealth

PAUL SOLMAN: Economist Sara Solnick, in San Francisco recently for the annual economics convention, has researched relative income.

SARA SOLNICK, University of Vermont: We asked people if they earned $100,000 and other people earned $50,000 versus if they earned $200,000 and other people earned $400,000.

PAUL SOLMAN: Which would they rather make? Nearly 50 percent chose the lower figure, $100,000, when it was more than their neighbors, instead of twice as much buying power; $200,000, all else equal, when it was less than the neighbors.

SARA SOLNICK: We were pretty surprised, because, as economists, we like to believe that more is better and that people would rather have more money than less.

PAUL SOLMAN: How do Solnick's research findings relate to this post-boom tableau?

SARA SOLNICK: I think that our work shows that relative position really matters. The disparity between your position and that of the people above you has been diminished, so that's definitely what people feel more comfortable with.

PAUL SOLMAN: People who haven't been crushed by the crisis, that is. And for those who haven't, there's another possible silver lining, says Dean Baker, who was also in San Francisco. Those who still have jobs can now buy what they couldn't when so many were so wealthy.

DEAN BAKER, Center for Economic and Policy Research: Now that that wealth has gone, those people have cut back their consumption. There's less demand. We see really big sales. So if we're lucky enough to be unaffected -- we didn't have a lot of money in the stock market, we didn't lose a lot of money on our house, and most importantly we still have a job -- we actually could buy more with our money.

PAUL SOLMAN: There's been a transfer, in some sense, from those who had wealth to those who didn't.

Now, that I would wear. And this is Gravati. I believe these are hand-sewn Italian shoes, $500, and now $250.

DEAN BAKER: Now $250. So, you know, it's still an expensive shoe, but not something that's totally out of sight.

PAUL SOLMAN: And not just high-end consumer goods are on sale.

DEAN BAKER: People are going to be able to buy assets, stock, houses at a much lower price than they would have paid a year, a year-and-a-half ago.

Younger generations benefit

PAUL SOLMAN: So in that sense, the younger people are the people who are gaining and the older people are the ones who are losing?

DEAN BAKER: Yes, previously, you had a situation where a lot of people were feeling very wealthy. Older people who'd been in their homes, say, 15, 20 years, they'd seen them double, triple, quadruple in price, they felt very wealthy, and they might have owned houses that their kids never would have been able to afford.

Now they've seen much of that wealth disappear, they feel much poorer. On the other hand, the plus side of that is their kids would be able to buy the house.

PAUL SOLMAN: Twenty-four-year old Anna Cordner and her husband might well be those kids. At its peak three years ago, this townhouse in Virginia, 28 miles from Washington, fetched $375,000. Then came foreclosure; then came the Cordners. The price?

ANNA CORDNER: $171,500.

PAUL SOLMAN: For a $375,000 item?

ANNA CORDNER: Yes, I think that's quite a deal.

PAUL SOLMAN: Cordner had invited two friends over for a play date and a talk with us. Shalane Brower, 23, and Alanna Smith, 29, both from Utah, had also just bought first homes in the neighborhood.

ALANNA SMITH: My husband is a high school teacher, so we knew moving in here that we could not afford anything. A really bad condo in the worst part of town was still going to be a huge stretch for us. And then, yes, when things started dropping, we were like, "Oh, this is getting more in our price range." And we kept watching it. And as it kept falling, we're like, "OK, we should start looking now." And so, yes, we were able to buy a single-family home.

PAUL SOLMAN: They paid $210,000 for a house that once sold for $350,000.

And how much did you buy your house for?

SHALANE BROWER: We bought it for $250,000. It was appraised at $410,000 last year. So I understand that a lot of people are having a really hard time, and even people who bought houses responsibly are still having a hard time, if they're trying to sell, but for us it's been perfect.

ANNA CORDNER: Sometimes I think, yes, I feel bad for other people who aren't as good off maybe right now as we are right now, but at the same time, you know, someone's loss is someone's gain.

Realtors see trend in sales

PAUL SOLMAN: Stories like these are common in the Prince William County subdivision known as Paradise, built in the late '80s and early '90s. Realtor Mary Jane Dimino.

MARY JANE DIMINO, realtor: Right now, just from December of last year to December of this year, we've had a 40 percent reduction in prices, and we have a 46 percent increase in sales because of that.

PAUL SOLMAN: But while your young clients may be beneficiaries of the downturn, certainly you can't be, right?

MARY JANE DIMINO: No. No. The majority of realtors' incomes have dropped. Incomes have been down, I would say, probably, oh, one-third to one-half over what they were in the boom years.

PAUL SOLMAN: Back in San Francisco, economist Baker had noted another plus for Dimino's clients: their relative wages have been going up.

DEAN BAKER: Again, the big clause there is "if they still have their jobs." So you have workers who are losing their job and, obviously, they're behind, but for those who still have their job, they're coming out ahead, because prices are falling much more rapidly than wages.

PAUL SOLMAN: Again, the mothers in Virginia bore him out.

ANNA CORDNER: You get lower groceries; you get lower gas; you get lower house prices.

SHALANE BROWER: I mean, with all the day-to-day prices of things going down, it feels like my husband got a raise, which he has not, but...

PAUL SOLMAN: What are you working out here?

STEVE TAYLOR: Lower back and glutes.

Healthier lifestyles in bad times

PAUL SOLMAN: At the Y, Steve Taylor had moved to another station of the cross-training -- I mean no disrespect -- and another example of looking on the bright side.

STEVE TAYLOR: If there's not a lot of hope in other areas, there's hope in some areas, and one of the areas where that could be is fitness.

PAUL SOLMAN: Taylor's testimony comes as no surprise to economist Chris Ruhm.

CHRIS RUHM, University of North Carolina, Greensboro: So when times are bad, people live healthier in a variety of ways. They exercise more. They're less likely to be obese. They appear to have a little bit healthier diets, as best as we can tell.

PAUL SOLMAN: Ruhm has studied the data extensively, state by state. When economies fall, so do death rates.

CHRIS RUHM: So, for example, there's fewer fatal car crashes. Fewer people die of heart attacks and heart disease. Flu and pneumonia, infant mortality falls.

PAUL SOLMAN: "Because of more time for pre-natal care?" Ruhm wonders. As for heart attacks...

CHRIS RUHM: When times are bad, people don't drink as much, but they don't also don't smoke as much. Smoking is a risk for your heart, and there's less pollution, which is also a risk for heart attacks.

PAUL SOLMAN: Are you suggesting that on average we're all in some sense beneficiaries of the economic downturn?

CHRIS RUHM: No, that's not what I'm suggesting. We're physically healthier; we're not necessarily mentally healthier. One piece of evidence for that is that suicides go in the opposite direction.

PAUL SOLMAN: Yes, Ruhm says, stress is bad for us, one reason working out is beneficial, but the rat race is stressful, too.

CHRIS RUHM: Particularly if you're working very long hours, working really hard, jobs are also a source of stress, and so we might have these competing stresses.

PAUL SOLMAN: Last machine, last question.

Are you actually suggesting that, if I got laid off, God forbid, that I might actually be healthier?

STEVE TAYLOR: Yes, that is a possibility. I think you'll have -- when people work, most of the times their focus is shifted towards work and fitness becomes a secondary for most people. If you lose your job and you need something to focus on, you need something to do to get your mind off of the troubles, then fitness is a good way to go, and I think you will definitely see results.

PAUL SOLMAN: Am I doing this OK?

STEVE TAYLOR: So far, so good.