The longer the recession goes on, the more people are catching on to incredible fictions we’ve been told for five years. The political class and its allies said that they could make all things better if they created more debt, spent more money, printed trillions in phony money, made credit as cheap as possible, and rescued failing institutions.
How was this to happen, really? The theories were pretty far-flung, but in the end, it came down to the claim that if the public would sacrifice to save the well-connected elites, the elites would repay the favor by making economic recovery happen.
All these years later, the grind continues and grows more intense. The middle class is ramping down its living standards year by year, growing ever more financially and personally insecure. The evidence is all around us.
The other day, I became distracted by an online quiz (I should know better), the subject of which was to discover whether you are a nerd. It came to the question of what you do when you get out of college. It was multiple choice.
One of the answers was not “take a high-paying job in a field for which you have been trained.” The only options (from memory) were move back with Mom and Dad, take a minimum wage job, re-enroll in school to avoid student loans, or go on a long trip at your parents’ expense.
The structure of the question was not ironic. It was not seeking to make a point. It was just realistic. This is what new graduates face. It has gotten worse each year since the recession began and “ended.”
The unemployment data, as bad as they are, completely disguise the far-grimmer reality underneath. Despite living amidst an amazing techno-revolution that should be spreading new levels of prosperity far and wide, people are suffering terribly.
The new jobs people do find tend to pay less than the ones before. And new people coming on the market are taking positions that have no relationship to their life plans.
As Money News (source) summarizes: “Only 56% of Americans laid off from January 2009-December 2011 had found jobs by the start of this year, the Labor Department said Friday. More than half of them took jobs with lower pay. One-third took pay cuts of 20% or more.”
And check out the results of a new study from Pew (source). It combines several sources of data to decisively declare a lost decade:
- Median income data for the middle class shows a drop over 10 years from $72,956 in 2001 to $69,487 in 2010, the first time in the postwar years when income ended a 10-year period lower than when it started
- Median wealth, which means assets minus debt, fell 28% in the same time frame.
- A broad poll shows that 84% of people say it is more difficult than 10 years ago just to maintain the previous standard of living.
The bleak summary: “Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some — but by no means all — of its characteristic faith in the future.”
Meanwhile, Sentier Research, headed by former U.S. Census Officials, has come out with its own awful report of living standards. The Washington Post (source) summarizes: “Median income is 7.2% below its December 2007 level and 8.1% below where it stood in January 2000, when it was $55,470, according to the report.”
Catch that? Income has fallen more since the “end” of recession than it did during the recession. Has there ever been a more-devastating indictment of official data? It turns out that in general, life is better in recession than in recovery. In fact, recovery is the new name for recession.
If you can stand more, another report from a partisan group called Generation Opportunity, which uses reputable polling firms and techniques, paints a grim picture for young people (source):
- “89% of young people ages 18-29 say the current state of the economy is impacting their day-to-day lives (Accepted multiple responses) (Randomized):
- 51% reduced their entertainment budget
- 43% reduced their grocery/food budget
- 43% cut back on gifts for friends and family
- 40% skipped a vacation
- 38% driven less
- 36% taken active steps to reduce home energy costs
- 32% tried to find an additional job
- 27% sold personal items or property (cars, electronic appliances, or other possessions)
- 26% changed their living situation (moved in with family, taken extra roommates, downgraded apartment or home)
- 17% skipped a wedding, family reunion, or other significant social event.”
Now, someone might respond by pulling out their violins in mock sympathy for what people call these “first-world problems.” Even given all this, this generation with its smartphones and endless opportunities for entertainment indulgence is the luckiest in human history. But keep in mind that what matters here is not the actual living standards, but the direction of change.
The human mind is profoundly affected by that essential question: Is life getting better or worse? The answer for most of American history, save war and depression, has been very clear: It’s getting better. We are headed toward the light. Generation by generation. The trend now is clearly the opposite: We are headed away from light toward dark. The upcoming generation of workers is sure of it.
There are profound cultural consequences of this shift. Pessimism produces a drearier life. Nonessentials are cut back as people stop giving less to the local church and symphony just to pay the bills. The pool of wealth shrinks and people become more grasping and desperate to get theirs. The sense that we were lied to for years — you mean government can’t actually make recovery happen as if by magic? — contributes to growing cynicism.
To the extent that anyone in the mainstream media is seriously discussing the lost decade and the grim prospects ahead, it is usually in the political context. Will this help or hurt the GOP or the Democrats? This is a concern that speaks to the great American pastime of watching the political horse race, but it has little or nothing to do with fixing the problem.
There are politics and there is reality, and they are increasingly disconnected from each other. The policies that drive us to this grim fate were imposed by both parties and combine with political cruft dating back decades and even more than a century. Neither party has a serious interest in repealing the problem, or even talking much about it.
What changes would make a difference? There are too many to list, and it is impossible to prioritize. Here are a few ideas. Reduce employment costs, but by untying health care from employment, as John Goodman has called for. The dollar needs to be bound to gold to break the moral hazard of the financial system and reign in government expansion. People need to be free to innovate new currencies. The regulatory state that gums up the market process needs to be gutted.
That would be a beginning. The fastest-growing economies in the world today are the ones pulling themselves out of poverty through free enterprise, deregulation, and open innovation. The stagnating economies like the U.S. are going the opposite way, and the results are on display.
Folks, it’s brutal out there and getting worse, and it will continue this way until we see that the present path is not working. Clarification: It is working for the powerful, but not for the rest of us.
But to be hopeless and victimized is not an option for any civilized person. Economic corrections and hard times can provide the best opportunity for self-education, the forming of networks and communities, and the building of liberty-loving social infrastructure. This is the idea behind the Laissez Faire Club: not to give in or give up, but to show determination even in hard times.