Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction.True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn't feel right, even if they couldn't quite explain why.
Now the economic tide is receding, and the undertow that was there all along is getting stronger.
Take away the easy credit and consumers are left with paychecks that, for most, haven't nearly kept pace with their need and propensity to spend.
The frustration of $3 gas and $4 milk, the worries about health care costs that have risen four times the rate of pay, become much more real. The retirement security that is only as good as the increasingly volatile stock market seems much less certain.
Americans' declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities...
[P]olls have registered...unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living.
The surprising thing about many of these readings isn't that they've recently skyrocketed. It's that in recent years they've registered consistently high levels of worry without ever seeming to ease...
Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.
Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85...
Worker optimism, which soared in the late 1990s, never fully rebounded after the last, brief recession. Although jobs again were plentiful, it became clear the new economy's opportunities came with few of the old assurances...
[T]he consumption made possible by easy credit has helped turn up the financial pressure. The number of products — from air conditioners to cell phones — that Americans say they can't live without has grown substantially in recent years, according to the Pew Research Center. About 6 in 10 working Americans polled by the group say they don't earn enough to lead the life they want...
[S]ome believe a fundamental change in behavior and mind-set is taking place. Since the early 1980s, consumers' contribution to the economy has risen from 63 percent, near where it had long hovered, to 70 percent. Baby boomers spent generously on growing families. Interest rates and inflation dropped, making homes and other assets worth more and cutting borrowing costs. The spread of easy credit promoted spending.Now, those are drying up and the population is aging. Older households don't spend as much, and often assess the economy more conservatively. Over the next generation, that could drive consumers' contribution to the economy back down to the low-60 percent range[.]
To some extent, I feel sorry for American consumers, who are about to see their faux riches vanish like smoke right in front of their eyes. Another part of me says, "Didn't you see what was going on? You just partied and ran up your debt and blindly voted for George Bush, and now you're crying because you can't get your big-screen TV?"
Well, even if people are a bunch of profligate short-sighted piglets, I signed up to be an economist to help them out of bad times like these. I guess I have to forgive them; they knew not what they were doing.
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