April 16 (Bloomberg) -- Americans so far have stubbornly refused to spend their way out of this economic crisis. It’s time to acknowledge that’s about as likely to happen as actress Tara Reid is to sign up for more breast-implant surgery.

Reid’s problems started the way ours did: with buying -- not too little -- but too much. Two years after she got her implants in 2004, Reid told US magazine that her doctor gave her 34-Cs instead of the “big Bs” she says she wanted.

Her doctor may have felt his upsizing was in keeping with the spirit of the times. Between 1998 and 2007, U.S. consumers added $2.4 trillion onto our former spending level to buy overstuffed furniture for oversized houses; seasonal Coach handbags in multiple colors; timeshares in Park City, Utah, and Costa Rica; bigger, smaller and reshaped body parts; humongous flat-screen TVs.

Consumer spending over this period made up 86 percent of gross domestic product growth, which was averaging a healthy inflation-adjusted 2.8 percent a year. This was the “consumer economy,” which we lauded as a wonderful thing.

Reid was open about how she rationalized her faux façade. “I figured, I’m in Hollywood, I’m getting older,” she said.

We weren’t as savvy about how we justified this spending at a time when inflation-adjusted average wages over the decade increased only 0.6 percent a year, and the savings rate was almost zero. It made no sense to look at the GDP numbers and think, “Wow, those babies are impressive” -- but we did.

Faking It

The only way to turn “no more money” into “a lot more spending” is to fake it. Our defense -- if there is one -- for being in denial about that can be traced to the enablers who helped pump us full of the financial equivalent of silicone.

The Fed’s low interest rates and banks’ reckless lending freed up a large portion of our mortgage payments to become discretionary income; that is, fake money for us to spend. Offered multiple opportunities to pay mortgage costs someday, rather than today, we sucked them down like Jell-O shots and asked for more.

Credit-card payments are convenient in that they always are made from discretionary income. Lenders handed out plastic to everyone who could sign their names, and we gobbled them up to buy iPhones, Wii consoles and acres of crystal-encrusted bling- bling.

When all was said and done, personal indebtedness (including mortgages) increased by $8.6 trillion during the decade ended in 2007.

Better Endowed

Just like getting breast implants, buying all this stuff made us poorer in order to seem better endowed. In a warped feedback loop, our profligacy made us look richer. It increased housing prices, and made businesses seem prosperous, which inflated the values of stocks. Between 2002 and 2007, consumer household net worth swelled by $20 trillion, on paper.

U.S. borrowing and a strong dollar made the whole world look richer. Hundreds of newly minted billionaires arrived at the Forbes party between 2003 and 2008. Yet even though private yachts stretched to more than 500 feet and it became déclassé to fly commercial, the denial was cracking. By the time housing prices peaked in 2006 -- before the bubble burst -- U.S. consumer confidence had been declining for a decade.

It kept declining to a multidecade low as an estimated $11 trillion of household net worth disappeared by early 2009. Along with our net worth went the collective delusion that leveraged paper assets are real spending money.

Tara Reid had her wake-up call in 2006, after a widely Internetted wardrobe malfunction. Wisely, she decided to change doctors and downsize her assets. Afterwards, she told of her regret at how her former doctor’s over-enthusiasm for silicone left her scarred.

Doctor’s Orders

Late last month former Federal Reserve Chairman Alan Greenspan weighed in with his prescription for our woes in the Financial Times when he said that a partial stock market recovery may become the most potent force in the global economic rebound. Stocks, he wrote, have “purchasing power.”

He would say that, wouldn’t he?

Cheap credit won’t restore our collective delusion that borrowed money is a form of wealth. This recipe for reviving John Maynard Keynes’s “animal spirits” (a term that broke the speed record for useful-into-hackneyed) may work to stave off a wrist-slashing round of deflation.

But the missing element is substance: Tara Reid may have flaunted real products made by Johnson & Johnson, but not enough else that fueled the boom was manufactured here.

In search of the sobriety to do that, the U.S., like the rest of the world, has once again followed Reid, this time for a stint in rehab. So far, so good for Reid, who emerged from the Promises treatment center to return to her theatrical roots and reprise her original role in the film “American Pie 8.”

For the U.S., back-to-basics means something different: we need employment and wage growth from making and selling things that people want, so we can buy products and services they can actually afford. When the rest of us finish rehab we’ll have the opportunity to star in a drama of our own: how to grow the real American pie.

(Alice Schroeder, author of “The Snowball: Warren Buffett and the Business of Life” and a senior adviser to Morgan Stanley, is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Alice Schroeder at aliceschroeder@ymail.com.

Last Updated: April 16, 2009 00:01 EDT