Robert Manning comes to the door of a small cottage-style house in Pittsford, his hair whirling in every direction. The RIT research professor and director of the Center for Consumer Financial Services is in a rush to prepare for a week of meetings and interviews about the economy, including one with Good Morning America. He bears a resemblance to a young Richard Dreyfus, looking every bit the obsessed UFO tracker in Close Encounters of the Third Kind.

But Manning's obsession has to do with the country's reckless attitude toward debt. His best-selling book "Credit Card Nation: America's Dangerous Addiction to Credit" is a rebuke of a society living beyond its means.

Manning embarked on his crusade long before the current recession. Though he is frequently asked to testify before the US House and Senate committees on consumer bankruptcy, financial services, and credit card policies, Manning's concerns have not always been well-received in banking industry board rooms. When "In Debt We Trust: America Before the Bubble Bursts," a 2006 documentary based on Manning's research was about to open in theaters, Manning says that he was pressured by the banking industry to tone down the part in the film that warns about an imminenthousing market collapse.

"When people ask me: ‘Didn't anyone see it coming?' Sure, anyone with half a brain saw it coming. But we didn't know exactly when," he says.

Income for the average US worker has not risen in nearly a decade, he says. So millions of Americans created a false sense of wealth by substituting easy credit which could be borrowed from virtually unregulated lenders, he says.

Everyone acted on the false assumption that real estate values would continue in a pattern of wild appreciation - in some areas, as much as 20 percent annually, Manning says. So increasing credit card debt didn't seem so threatening.

"You used to be able to pull the equity out of your home to pay off credit card debt," he says. "But not any more."

Not only did the real estate bubble burst in 2008, but many Americans have thousands of dollars in credit card debt, too. And personal bankruptcies are soaring.

Three years ago, Manning was advising major lenders not to risk expanding their debt and to rapidly increase their collections efforts instead.

He has since come up with a formula for responsible debt relief to help banks and credit card companies estimate how much consumers canafford to repay. But creditors had to be willing to absorb some loss. He says that he soured on plans to bail out the so-called "too big to fall" banks when it became increasingly apparent that they were unwilling to take losses created by their own bad decisions.

The way out, Manning says, will mean a painful fall in the standard of living for the middle class, and we've already seen trillions of dollars in stock values, 401Ks, and other retirement plans evaporate. Things could get so bad that we shouldn't be surprised to see civil unrest, says Manning. It's already happening in parts of Europe and Asia, where our economic downturn is impacting their economies.

A stimulus package could help to end the recession, but only if targeted investments are made into emerging industries like renewable energies, Manning says. A massive spending program could make matters worse, he says.

City interviewed Manning as he fielded calls in preparation for his trip. The following is an edited version of that interview.

CITY: One of the public dialogues taking place, considering the auto industry bailout and proposed stimulus package, is what will all of this debt mean to the country? When is debt good and when is it bad?

Manning: This is a really important issue as we talk about the economic stimulus plan. After World War II, we had some of the most important social investment programs in our history, and they were possible because of debt. These investments were used to help create things like the GI bill, the Veterans Administration mortgage programs, student loan programs, and some infrastructure programs.

We also had subsidies in higher education. City College in New York was tuition-free until about 20 years ago.

So we have clear evidence of when we mobilize social resources and when they are good investments. The real issue, when we're talking about the differences between good versus bad debt, is what is the expected outcome?

So is it fair to say that debt is good when it represents an investment that yields some type of return? Doesn't it have to because how else can you pay it back?

If we're investing in higher education, for example, it always concerns me that in a capitalist society we reduce it to personal monetary improvement.

I was on a local radio program and a bunch of us were giving advice about what the future is going to look like. And one person said that this will be the first time in our recent history that children will make less money than their parents. And I said that's not necessarily a bad thing. It's not how much money you make; it's how well you invest it. So people in college who use their credit cards to pay for their education expense, that's good debt. Paying for a booze cruise in Cancun over spring break - that's probably not good debt.

A lot of people on a personal level, in business, and all the way up through government have come to regard debt as a part of the capitalist system. But our grandparents had a completely different set of values. What changed?

What we've seen over the last decade is this mass marketing campaign that has dramatically and profoundly changed our core values of acceptable behavior. One of my points about deregulation of the banking system is that our local bank president basically represented the core values of the community. They didn't loan money only to make money. They had a balance. They were more risk averse. You didn't overextend yourself.

I remember interviewing someone who was still ticked off 35 years later because he really wanted to buy this Buick. He went to a loan officer and the officer said you probably could afford the payments on that Buick, but we're only going to approve you for a less expensive model. Of course those days are over. Is that a bad thing or a good thing?

Now that we have a global recession, China, Japan and these other countries can't continue to lend their money to us. They need it to try to save their own economies.

So when people say to me, "Well, if everybody saved we would slip into a deeper recession." That's not necessarily true. We've bought into a sector of Wall Street and corporate America that profited from impulsive spending. We could actually spend wiser, earn less money, and live much better. That's what is missing. That's what went away from our grandfathers' era. And that's why if you look at the underlying message behind credit cards, they're telling you to have fun. The more money you spend the more fun you're going to have. That's how our society started to spin out of control.

Our value system of needs, wants, and desires became manipulated between good and bad debt. We no longer did what we knew was socially responsible. We did what mass marketing encouraged us to do.

You've referred to the period between 2001 and 2006 as the first time in American history when the laws of financial gravity were suspended. What do you mean?

In 2001 I wrote an op-ed in the Baltimore Sun and I said the US economy is like an athlete on steroids. It's not nearly as strong as it looks. I was doing enough research to see that people could not take on more debt. But as housing prices appreciated, the financial laws of gravity were suspended because people were lent money not based on their income, but on their income and a hypothetical value of their homes.

I testified before the Senate Banking Committee in January 2007 and I said that the net wealth of average Americans would be devastated as housing and 401k plans fell in value. And people scoffed at me. I was simply trying to say that the longer you postpone imposing financial reality on the economy, the bigger the collapse will be. The tendency of people in this casino society where they simply buy the biggest home they qualify for is that they never want to admit there is an end. They borrowed off their homes and bought second homes and things like that.

I have been emphasizing since 2003 that we have to be very, very careful. I thought the recession would hit in 2005. I didn't realize that the banking regulators would allow option-only mortgages, no money down, interest only, no verification - all of these different ways of borrowing. That's significant because it added one more year to the housing market bubble. And people went even more in debt because they figured as their homes went up in value they could pay off their credit cards and toys and all the rest of it. Instead they got caught holding the bag. That one extra year made the problem three times as bad. This is why I've been making the point that our dependence on cheap credit will dwarf our dependence on cheap oil.

So the housing bubble bursts and there's not only all of this bad mortgage debt out there, but there's also all of this credit card and unsecured debt; what you've been calling a double financial bubble. You've been talking to the banks. What have you been telling them?

I've been meeting with all of the credit card companies, basically telling them we have to have consumer debt relief or it will further prolong the recession. Their question is how do we estimate how much debt relief people deserve? And I tell them, "You guys lent people money that was not based on their income. Now the housing market is locked down, they've tapped out their equity, and they're upside down in many of those mortgages. You can't expect them to borrow any more money on their homes. You have to take a hit." And they're kicking and screaming about it.

These guys are coming out of an environment where people could always borrow on the equity of their homes to pay off their credit card debt. The sky was the limit. But now they have to deal with this incredibly complicated environment where they don't know how much their customers can afford to repay because they have no idea of what assets they may have, no one can sell or refinance their home, and repayment would be based on just their income - that's assuming they still have a job.

How receptive are these institutions?

Not very. And keep in mind that I've been meeting with these guys for three to three-and-a-half years.

You also advised Congress on the bailout.

I initially bought into it. But I had to take a step back, and now I believe what we should be doing is letting those big banks collapse. I'm realizing now that they really haven't accepted that it was their own fault. It's like facilitating alcoholism with these guys.

What should be the main focus of the stimulus package?

What really scares me is that we really haven't had an in-depth discussion about the whole idea that we need to spend our way out of this recession. And it goes back to the argument about good versus bad debt.

Where's the biggest financial weakness in American society? We know it's the trillions of dollars we've exported in energy. After the 1973 oil embargo, we should have been investing that money in the renewable energy sector. That would have generated thousands and thousands of jobs, and put us in a more competitive position in the global economy. That was a horrible policy mistake and basically the lobbyists in Washington got control of the energy policy.

We can't have a stimulus plan that is not targeted. We should be looking at those areas where we could be more globally competitive that are contributing the most to our trade deficit and say that's where we are going to spend money. That's where we're going to get the biggest bang for the buck. This is where we're going to get good jobs and it's going to have a multiplier effect because we're going to need the infrastructure, which creates more jobs.

We're trying to minimize the recession and reinvigorate the economy, but we already have all of this debt.

That's really our big, big dilemma. President Obama is going to have to tell the American people that like an athlete on steroids, that economy, that lifestyle is no longer attainable. It was attainable only because our peers lent us the money to sustain it. Now we really have to decide how much of a reduction in our standard of living are we going to have to accept? That ultimately is the debate that needs to be concretely articulated. It's been implicit in some of the statements Obama has made, but it is the conversation that we really have not had yet.

But you're right; we've lost our margin of error, if you will. And now we can't afford to be wrong. And that's a tough burden because if we are wrong, we're going to fall behind the rest of the world. Just like the war in Iraq shattered America's image of military invincibility, the subprime lending crisis has shattered America's image of economic invincibility.

So debt ultimately helped us create a society that is unsustainable and now this new president has the job of telling that to the American public?

No other president has had all of these issues at the same time. Keep in mind we have been fighting two very expensive wars and we never raised taxes.

I think the other issue we have to examine that helped facilitate this situation we're in is how did we get to become an entitlement society? We can't possibly go back to where we were, but is that necessarily a bad thing? It may help us to raise more questions about lifestyle and sustainability. I mean, what happened to mass transit in Rochester?

But if we agree with this argument that we've got to spend our way out of this, then we haven't learned a thing.