Although the economy appears to be improving, we have to wonder whether we can sustain economic growth. I believe that you cannot extrapolate from the last 25 years of experience to project future economic growth. And if that is true, then we have to reevaluate some of our most basic financial and personal assumptions and expectations.
Disappearing Icons
McMansions – With reduced income prospects, rising energy costs, smaller projected family size, restriction on credit, higher down payments, and rising taxes, McMansions will become difficult to maintain or altogether unaffordable.
High Salaries - America has been a high wage economy. With global competition and improved expert software, high paying jobs in law, finance, medicine and accounting will become scarce.
Regular Public Services – Garbage and trash pickup two or three times a week, six day per week mail delivery, and extended library hours are all possible future relics. Furloughs due to state budget cuts will presage these cutbacks. There is also cognitive recognition that perhaps many of these service levels were unnecessary in the first place.
Guaranteed Public Sector Job Security, Wage Increases and Pensions - Shrinking municipal budgets (Harrisburg PA, Oakland CA, Detroit MI and others near bankruptcy) coupled with declining household incomes imperil the automatic public sector union collective bargaining escalator. More likely, these jobs will be privatized and outsourced as property and income taxpayers who pay for these jobs will revolt.
Cheap Travel –The conquering of space (not the extraterrestrial kind) always seemed to be an American right. Work commutes of fifty miles and more remind us that we are used to traveling for what we want, be it a home or job. The current Gulf of Mexico oil rig explosion is one more reminder that oil extraction is costly and environmentally dangerous. We are facing Peak Oil with cheap gasoline a distant memory. Our transportation options are bound to be affected.
Medicine on Demand – Current health care reform merely highlights an existing trend: medical care rationing. We have created great demand for medical services. At the same time young people are waking up to the prohibitive cost of medical education and the meager lifetime income return on this massive personal investment. Today there is a lengthy wait to see medical specialists. The wait will only get longer.
Vacation Homes for the Masses – The economic problems associated with McMansions, falling incomes, rising taxes, insurance and maintenance and constricted credit have an even greater effect on the second home sales market. When Americans are having a difficult time affording one home, a second home is rapidly becoming pure fantasy for most. See Vacation Homes – Not the Investment to Have When You are Having More than One.
Four Year College Educations – The four year college degree not only seemed to be an American birthright, but also a ticket to the good life. But now these costs are rising faster than the CPI, and job prospects are unsure for graduates no matter where they go or what they study. Perhaps the whole paradigm of formal study after high school should return to the world of the privileged or the extraordinarily talented.
Shopping Malls – Shopping malls have proliferated. But malls were not developed to be discount centers. And they presuppose cheap gas, easy credit and lots of disposable income for their ideal customer. Current economics favor the opposite on all these counts.
The Welfare State – European sovereign debt is in crisis. This is not an abstract economic battle between government and evil short sellers. Rather it is a wakeup call that the European social welfare state model is unsustainable. The Obama administration’s efforts to emulate this crumbling model will fail in a new world order of falling national income, declining tax receipts and loss of credit.
At the Moment the Trend is Not Your Friend
Keynesian attempts to inject public funds into the private sector through large deficits will ultimately founder. These efforts are fighting dominant trends: globalization with the impact of wage competition, Peak Oil, profligate public sector wages and pensions, and declining incomes. Maybe it would be better to be realistic, adjust expectations and steer clear of these endangered species. How did that old song go? The best things in life are free? And that is probably a good thing.
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Related posts:
- The Meal Was Great…Part II
- It is All a Derivative of Productive Enterprise
- The Barbell Economy
- The Tragedy of the Commons Part II: Modern Finance and BP
- The Economy at Street Level
Tags: cheap travel, four year college education, McMansion, medicine, public sector compensation, vacation homes
