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FACTDROP: Americans experience steep drop in standard of living


Americans experience steep drop in standard of living

Πηγή: The Coming Depression
Oct 19 2011

“In a dynamic economy, one would expect Americans’ disposable income to be growing, but it has flattened out at a low level,” says economist Bob Brusca of Fact & Opinion Economics in New York.

Think life is not as good as it used to be, at least in terms of your wallet? You’d be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and “Occupy Wall Street” and who may take out their frustrations on incumbent politicians in next year’s election.

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth – think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people’s buying power by 3.25 percent since mid-2008. Source: (1) Christian Science Monitor

The reality is that we’re coming to the end of an economic super-cycle and no government, anywhere, has recognized it or put policy in place to manage it. From the start to the end of the baby-boomer’s working lives our economies went through an enormous growth period as the proportion of worker to non-worker (kids/oldies) soared, and a growing number of women worked. That’s over, and the shrinking ratio is going to be a major drag on growth. The boomers maxed out our federal “line of credit” (sooner than other countries thankfully so they had to start paying it back while the economy was still growing), promised themselves expensive benefits (health care with 6% increases/year), and resist electoral changes that would take away their majority voice.

This isn’t all that complicated

The share of income for the bottom 90% has stagnated over the past 30 years.
For the bottom 50%, it has actually declined.
However, asset prices have shot up.
So, if you are a member of that 90%, but own a home, you probably did quite well, despite your diminished purchasing power (you probably didn’t much notice).

Your children however, they aren’t born with assets. They have to pay their own way. And now they need to pay for things with half the income and twice the cost. Oh, and there is that lingering massive debt (which has got much, much, much worse this past few years) and the coming 2 to 1 worker to retiree ratio. Also, if they followed everyone’s advice and worked hard their entire lives and got a university degree (even a “useful one” as judged by the cranks) they still graduate with maybe a 2.5 or 3:1 debt to income ratio. What was your ratio when you graduated? 0 to something?

No, young people today don’t have it as good as their parents did. That’s a fact. Nonetheless, predictably many comments will likely be full of cranks just telling people to “get a job” and “stop whining”. Now, we’resure they’ll find their way and make it work, but I would suggest others stop treating this entire generation as if they are lazy and just didn’t work as hard as people who grew up in a time of plenty. At any rate, think of your own self interest, these people will need to take care of you when you’re older.

Baby boomer ruse

The Baby Boomer generation has more recently been a favourite target of U.S. politicians and media since the severe downturn in 2007-8. Republicans especially haven’t wanted to talk about their decades-long underfunding of Social Security and Medicare so now comes the finger-pointing to the Boomers as the “cause” of the budget deficit problem which diverts attention from their own missmanagement.

Boomers are described as a whole bunch of over-entitled people who had it too good for too long, all own their own houses, didn’t financially contribute enough to society and now want it all and more. A very great number in that bunch worked for 30+ years, lived in apartments, on farms or rented their basements to make the mortgages, many didn’t have anything like a credit card or line of credit, they had their Income Tax, Unemployment and Canada Pension automatically deducted by their employers as dictated by the Provincial and Federal governments at the time. Many now are again renting their basements out to family members so that they can save for the downpayment on a house for their family. To paint the boomers with such broad strokes as over-priviledged and over-entitled as though they as a group didn’t pay their dues is not right and plays into the hands of politicians who have for decades wanted to dismantle the programs that we all have been paying into.


(1) Christian Science Monitor

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