I’ve been thinking about life in the United States. We are a massive nation that generates $15 trillion in wealth every year. We have consolidated assets (personal, corporate, and government) of more than $200 trillion. Our natural resources are abundant. Our military power immense.
Going further, take a moment to consider the following:
- The S&P 500 and Dow Jones Industrial Average closed at a record high last week.
- America’s millionaire population is at an all time high.
- Personal debt levels are lower than they have been in generations with the household debt-service ratio, which is a measure of the relationships between debt payments and disposable income, now at a record low of 10.38%.
- College graduation levels are near all time highs.
- It is the safest time to have been alive in all of human history. The murder rate is at a 40-year low. Other violent crimes, such as rape, are also near an all-time low.
- Home affordability as measured by cost-to-own-relative-to-household-income is near an all-time best.
- The abortion rate just hit an all time low since Roe vs. Wade.
- Personal leisure time is at an all-time high.
- Life expectancy is at an all-time high.
- More than 70% to 80% of the top 1% of wealth are self-made, a reverse of patterns throughout most of history.
- Personal standards of living across the globe are higher than at any other time in history.
- Unemployment for college graduates is barely above 3%.
- Personal 401(k) account balances are at an all time high.
- Personal freedoms are rapidly expanding; e.g., women can vote, interracial couples and gays can marry.
- Gasoline cost in real inflation-adjusted terms is high but certainly not out of historical ranges; nothing particularly unusual.
- American manufacturing is just as strong as it was in the 1960’s. There has been no decline in manufacturing; it’s a myth.
So why is a significant portion of the population miserable?
Much of it has to do with media coverage. Today, we hear about things like the Boston marathon bombing in real time. In 1927, it took time for people to get news of the Bath elementary school bombing. In 1920, it took time for people to get word of the Wall Street bombing. These things are less frequent, not more. You just know about them.
Is the national debt bad? Sure. But it’s just now at the same level it was as a percentage of the economy in the 1950’s. We survived the fifties just fine.
This expansion in the nation’s balance sheet was driven by three factors:
- To prevent a spiral into deflationary liquidation, the United States Government had to replace the money that was destroyed when the credit bubble burst with a different form of money (namely, electronic credits in the form of the national debt through stimulus programs), which, while absolutely necessary (despite claims from the undereducated and the conspiracy-theorists who don’t understand the difference between the M1, M2, or M3 money supply), we have now reached a point where it’s going to far. It needs to be reigned in sooner rather than later, even if it results in several years of tepid growth and malaise.
- Financing, rather than paying, for more than 10 years of two wars. Past generations raised taxes instead of letting their children and grandchildren pickup the tab.
- A legislature that refuses to restrain its spending, using taxpayer money to bribe voters
On top of that, the trade deficit continues to transfer American wealth into the hands of foreigners.
The twin deficits would be tolerable if the average citizen believed Congress had the political resolve to do something about it. However, the social angst you see comes from one fact and one fact only: Real income, debt levels, graduation rates, economic stability, and unemployment rates for the lower members of society – those with no diploma or only a high school degree – are far behind the rest of the nation, causing significant anxiety, fear, and in some cases, envy despite being absolutely better in real terms than the 1950’s (what constitutes “poor” in government classification today includes two cars in the driveway, a house that is almost twice the size of one fifty years ago, heating, air conditioning, etc). This presents a political problem. It is the core issue behind why so many of the underclass are miserable. They wonder why the intellectual elite are out of touch. The truth is, they are living in an entirely different world.
[mainbodyad]The two Americas are growing further apart. Part of the rift is due to wounded pride. If you are in the lower 35% of society, you used to be able to go to a job that let you hold your heard up high by making stuff the world needed. You could attend a church that provided social capital to the community and united everyone. You would rally behind the young men in your community as they went off to war to save the world from Hitler. Now, the factories are automated, we’ve been at endless war for the past twelve years with soldiers doing multiple tours of duty, and the political activities of the church have caused atheism to rise to levels not seen in the United States in more than a century so the pews are filled with a sea of blue rinse old ladies. Like the South following the Civil War, you are utterly and completely irrelevant.
That has to hurt.
How does society go about fixing it?
I don’t know.
Part of it is the tax code. We have setup an incentive system where it pays, literally, to ship jobs overseas. You are penalized for bringing money back to the United States and building factories here. It’s almost a “Through the Looking Glass” level of bizarre, but it’s true. If you earn $1,000,000 equivalent profit in a subsidiary in Japan, as long as you reinvest the money in Japan, you won’t owe the IRS anything. If you decide to bring the money home to the United States, though, and build a new manufacturing plant, you’re going to get hit with massive taxes. Why would anyone bring their cash home?
I’m just thinking to myself … there isn’t a particular point to this post. I’m trying to examine the state of the world and figure out the problem of the shrinking middle class.