Americans and the Economy

Strange piece in the NY Times about why Americans are not more enthusiastic about the economy, based on a bunch of focus groups. It is interesting mainly because it shows that most Americans are too wrapped up in their own lives to have any kind of long-term vision, and also that they do not understand how the government and the economy are related.

When asked what drives the economy, many Americans have a simple, single answer that comes to mind immediately: “greed.” They believe the rich and powerful have designed the economy to benefit themselves and have left others with too little or with nothing at all.

We know Americans feel this way because we asked them. . . . While national indicators may suggest that the economy is strong, the Americans we listened to are mostly not thriving. They do not see the economy as nourishing or supporting them. Instead, they tend to see it as an obstacle, a set of external forces out of their control that nonetheless seems to hold sway over their lives.

Ok, fine, I also agree that our economy is too good for the very rich and our society too accepting of outrageous greed. But that isn't why regular folks feel strapped; in terms of purchasing power, Americans in (let's say) the 20th-40th percentile of income are richer than similar people in Japan, Korea, Canada, Mexico, or most of Europe, and way richer than just about everyone in Bolivia or Nigeria. There are many reasons to want to bring down the rich, but that would not in and of itself make everybody else richer. 

The main complaint of people in the focus groups was a sense of living paycheck to paycheck, with no ability to save for a rainy day:

While a tight job market has produced historic gains for lower-income workers, many of the low-income workers we spoke with are unable to accumulate enough money to build a safety net for themselves. “I like the feeling of not living on the edge of disaster,” a special education teacher in rural Tennessee said. “[I am] at my fullest potential economically” right now, but “I’m still one doctor’s visit away from not being there, and pretty much most people I know are.”

Or this:

Well-being “is about being financially stable. It’s not about being rich, but it’s about being able to take care of your everyday needs without stressing.”

But what is an “everyday need”? For millions of Americans, the category has expanded to include many things that did not even exist 20 years ago: smartphones with unlimited data plans, multiple streaming services, etc. There is an old economic principle that applies here, known as Parkinson's law: expenditures rise to meet income. There is no obvious, absolute amount of expenditure to which everyone is entitled, some sort of basic standard that every should be able to afford.

I am not going to get on some kind of moral high horse here and complain about how other people spend money, especially since I am not particularly virtuous in this department. But there is not, in this article, a single acknowledgement that household budgeting has two sides, and maybe one might save money by spending less. In America we have a whole genre of books and videos about how to save money and retire early, and they all say the same thing: pay yourself first. That is, the way to save money is to have it moved automatically into savings and then scrimp by on whatever is left. Maybe some of the people interviewed by the Times are really in bad financial shape and can't do this, but I am certain not all of them are. I know people who live just fine on incomes most Americans would consider very small, so I know it can be done. If you want to spend less and save, stop saying that every penny you spend is an "everyday need" and do it.

And then there is the question of politics. The people in these focus groups seem to be overwhelmingly turned off by politics, sure that neither Republicans nor Democrats have anything to offer them. But one of the complaints that comes up repeatedly is this:

the threat of an accident or a surprise medical bill looms around every corner.

This is true, and I agree that this is shameful, but this is a problem that absolutely has a political solution. We know this, because all the other rich countries in the world have solved it; the US is the only rich country where medical bankruptcy is a serious problem. And one party, the Democrats, has been trying to solve it since the 1930s, while the other, the Republicans, opposes them.

This is true regardless of how you feel about government health care, or anything else about the parties. If the Democrats had had sufficient power over the past 30 years, we would have a national health system. Maybe it would suck, but it could solve the problem of the "surprise medical bill."

Here we come to one of the other long-term problems of democracy: that people don't understand how politics works, and how hard it is to enact any serious change. I can imagine some of these focus groupers saying, "Well, I voted for Bill Clinton, and he didn't do anything, and I voted for Obama and all I got was this Bronze plan that I can't afford and doesn't pay for much." (Or, on the opposite side, "I voted for George W. Bush and the Republicans held both houses of Congress and we still didn't replace Social Security with a better federal retirement program.") 

American voters regularly elect one party because they like what they are promising, but then if it hasn't materialized in two years they turn around and vote for the other party. Two years is not enough, in our system, to do much, especially when you only have a 52-48 majority. The president has no magic wand he can wave to make things better for everyone, even if his allies control both houses of Congress; but sufficient pressure exerted over decades can at least shift the economy in different directions. We saw that with the neoliberalism of the Carter-Reagan-Bush-Clinton-Bush era. 

If the issue that bugs you the most is economic insecurity, then you should vote that issue every year until it happens. But we don't seem to be like that.

My overwhelming response to this whole article was that for the people they interviewed, there is no solution. There is no solution because "everyday needs" are an ever-expandable category. Our system is based, on the one hand, on greed, but on the other on offering everyone unlimited tempting things to spend money on, unlimited ways to buy a little happiness with cash. No matter your income, you can't save for a rainy day unless you resist the pressure to buy joy.

And if you just ignore politics because nobody you vote for has a magic wand, then you are part of the problem.