This economy is much better than you think
We are in a far nicer world today than we could have dreamed of a few decades ago.
Comedian Louis C.K. does a great skit showing how oblivious we can be when complaining about our lives.
We get frustrated when our cell phone reception goes out for 30 seconds without realizing how amazing cell phone technology is. "Can you give it a second?" Louis asks. "It's going to space. Can you give a second to get back from space?"
He adds: "The worst cell phone in the world is a miracle. Why are you so mad at it?"
It's a wise question to ask. When something doesn't work perfectly but is still much better than it used to be, you are better off. Our perceptions and emotions play an evil trick by convincing us otherwise.
"Everything is amazing and nobody is happy," he says.
This could apply to the U.S. economy, too. Everywhere you go these days, gloom wins.
"Jump in percentage of those saying things not going well," reads one headline.
"Americans see more doom and gloom in the economy," writes another.
"Americans are pessimistic, miserable and completely fed up," warns another.
Americans are in bad shape. Their problems are worse than bad cell phone service. They're unemployed, uninsured, underpaid, under-appreciated, over-medicated, and over-promised.
But this is nothing new. It has always been true. And by most measures, most Americans live in a better, safer, more prosperous world today than they could have dreamed of a few decades ago.
These are the good ol' days
Take income. You've probably read about how average household incomes have declined since 2000, adjusted for inflation. It's a scary statistic. But it needs perspective.
2000 was a fantasyland bubble where dynastic wealth could be created with fake dot-com companies in your parents' basements. Same with the ensuing years, when teenagers became overnight real estate tycoons. Those were the aberrations, not today. Benchmarking success to bubble years gives an inflated sense of reality.
If I say the average family earns less today than it did in 2000, it sounds depressing. If I say the average family earns more today than it did in 1995, you get a much different view.
Source: Bureau of Labor Statistics
Do you remember 1995? It was awesome. We were in awe of how prosperous the country was. Consumer confidence was near a multi-decade high. "Our economy is the healthiest it has been in three decades," President Clinton said in his State of the Union address that year.
"We have the lowest combined rates of unemployment and inflation in 27 years. We have created nearly 8 million new jobs. America is selling more cars than Japan for the first time since the 1970s. And for three years in a row, we have had a record number of new businesses started in our country."
And folks, the average American family earns more today than it did back then, adjusted for inflation.
Go ahead, argue that 18 years of near-stagnant real incomes is a failure. I hear you. Just realize that 2.8 billion people around the world earn less than $2 a day, and you're upset that we aren't richer than we were when we were already rich and felt like kings. "First-world problems," as they say.
And it's misleading to say the average household only earns a little more than it did in the 1990s. It actually earned quite a bit more in total compensation; it's just that more of its compensation comes from employers paying for ever-growing health insurance premiums. Total compensation per hour -- which includes things like health insurance and 401k matches -- has done great over the last 40 years:
Source: Bureau of Labor Statistics
What are we getting in return for rising health insurance costs?
"Americans have come to view death as optional"
The average American born in 1950 could expect to live to age 68. The average American born in 2010 can expect to live to almost 79.
Source: Centers for Disease Controls actuary tables
Think about that: In two generations, the average American gained a decade of life expectancy.
Do you know what can happen in a decade? A little more than 10 years ago, AOL dominated the Internet, oil cost $13 a barrel, Fortune magazine named Enron one of America's "most admired corporations," and Apple was a joke. Everything can change, in other words. You get an extra one of those now.
Minorities have made even greater progress. African Americans have gained 15 years of life expectancy since 1950.
Odds are this will continue. Biomedical gerontologist Aubrey de Grey thinks the first person to live to see their 150th birthday is already alive. As San Francisco Chronicle columnist Jon Carroll joked, "Americans have come to view death as optional."
The biggest reason life expectancy has gone up is because childhood mortality has plunged, from 32 per 1,000 in 1950, to 19 in 1970, all the way down to six in 2012.
How often do we have BREAKING NEWS when stocks fall half a percent? Several times a week. But no one ever says, "Breaking news: Far Fewer Children are Dying Than Used To." We ignore the really important news because it happens slowly, but we obsess over trivial news because it happens all day long. This is another evil trick our minds (and media) play on us.
Not only are fewer children dying, but older Americans are experiencing something they couldn't dream about a few decades ago: retirement.
You get to do anything you want
We constantly worry about the looming "retirement funding crisis" in America without realizing that the entire concept of retirement is unique to the last five decades.
It wasn't long ago that the average American man had two stages of life: work and death.
Even in the nostalgic 1960s, more than 40% of men age 65 and over were still working or looking for work:
Source: Economic History Association, Bureau of Labor Statistics.
Think of it this way: The average American now retires at age 62. One hundred years ago, the average American died at age 51.
Poverty among the elderly has plunged, too. More than a quarter of those over age 65 were living in poverty in the 1960s, compared with less than 10% today. Medicare has only been around since the 1960s. Before that, as one 1963 Social Security report put it, "paying for necessary health services and providing adequate insurance for non-budgetable expenses remains beyond the economic capabilities of most aged persons." As Frederick Lewis Allen wrote in his 1950 book The Big Change: "One out of every four families dependent on elderly people and two out of every three single elderly men and women had to get along in 1948 on less than $20 per week [$188 in today's dollars]."
The job market Americans are retiring from has changed dramatically, too -- largely for the better.
Perhaps you've heard about the laborforce participation rate falling over the last few years. It's true -- it's declined, though largely due to demographics.
But a higher percentage of American adults are working or looking for work today than were in the 1950s, 1960s, or 1970s. That's mostly because more women have entered the labor force. And why did they enter? Because for the first time in history, they were treated as somewhat equal to men. The economy was excellent for white males in the 1950s and 1960s, but as Stephanie Coontz recently wrote:
In most states, his wife could not have taken out a loan or a credit card in her own name. If she wanted a job, she had to turn to the "Help Wanted -- Female" section of the classifieds, where she might learn, as one 1963 ad in this newspaper put it, that "you must be really beautiful" to be hired. In 42 states, a homemaker had no legal claim on the earnings of her husband.
The workplace has become safer, too. In 1975, there were nine cases of occupational injuries or illness per 100 full-time workers per year, according to the Bureau of Labor Statistics. By 2009, it was fewer than four.
Employers now allow their workers to have a life outside of work, which not long ago was a charming but unrealistic concept. Frederick Lewis Allan described working life in the first half of the 20th century:
The average working day was in the neighborhood of 10 hours, 6 days a week. In business offices there was a growing trend toward a Saturday half holiday, but if anyone had suggested a five-day week he would have been considered demented.
According to the Dallas Federal Reserve, the average work week has declined from 61 hours in 1870, to 48 hours in 1930, to 40 hours in 1950, to 39 hours today.
We're using that extra time to have fun. The average American household now spends three times as much of its income on recreation as it did in the 1950s, according to the Consumer Expenditure Survey. The average employee with five years on the job receives 22 days paid vacation and holiday pay per year, up from 16 days in 1970, according to the Bureau of Labor Statistics.
The list goes on and on:
- In 1950, the average household spent 30% of its budget on food. Today, less than 13% of an average budget has to be devoted to food.
- High school graduation rates are at the highest level in 40 years.
- Traffic deaths per 100,000 people have fallen by half since the 1960s.
- The median new home today is 34% larger today than it was 25 years ago.
- 49% of new homes had air conditioning in 1973. Today, 89% do.
- Nearly 30% of Americans over age 25 have a bachelor's degree. In the 1960s, less than 10% did.
I'm not arguing that inefficiencies, injustices, and inequalities don't exist today. Of course, they do. But they always have, and by comparison, we are living in one of the most prosperous times in the history of this world.
We have a lot to be thankful for.
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This article reeks of Democratic (Socialist) Party collaboration.
It confuses technological advance, living standards and quality of life with job opportunity, income growth and economic viability of America. And ignores the fiscal deficit, national debt and QE funny money.
Bogus numbers !!! Obviously an Obama Supporter !!! The ECONOMY is TERRIBLE !!
Real UNEMPOYMENT is 14 % and higher and getting worse !!! Part-time jobs should not count !!
Obamacare is KILLING our ECONOMY !!! Another RECESSION is just around the corner !!
DO NOT BELIEVE ALL THE LEFT-WING MEDIA HYPE ABOUT A BETTER ECONOMY !!
NOT-NOT-NOT TRUE !!!!!!!!
It is one thing to be grateful for longer life than people born 100 years ago could reasonably expect. However, we are far worse off economically than we were even in the 1990's.
The FALLACY of this article is in taking government statistics at face value. Price inflation is NOT LOW at all. The problem is that the Commerce Dept corruptly manipulates the Consumer Price Index and the Inflation Adjuster used on the equally corrupt Gross Domestic Product. Everyday people who do their own shopping know that prices have been trending upward for decades. We're so happy that gasoline is down to $3.50 per gallon from $4.50 per gallon, but do you remember that it bottomed around 70 cents per gallon in the 1990's? And this was in Los Angeles County in California!
Why doesn't the author, Morgan Housel mention that the University of California charged $627 per year in tuition in 1976-77, but over $12,000 per year, now? How about medical insurance that cost $35 per year for a family of four in the early 1960's, with no government subsidy? The cost increase in these two sectors are FAR GREATER than the rise in wages.
The DIRTY LIE perpetrated by Housel with this article is hard for me to take. I am an aerospace engineer of nearly 3 decades. I make LESS now than I did 10 years ago. As a contract worker, I am forgoing health insurance despite the Obama Care law that forbids such practice. The last home I owned was sold at a LOSS, like many other Americans. I have NO PLANS TO EVER RETIRE at this time. I have likely purchased my last new car already. I have learned to eat at home more and less in restaurants. The food portions sold in markets and restaurants are getting SMALLER.
Bigger median home size?? I just moved from a 1600 sq ft apartment to a 400 sq ft apartment. Air conditioning?? I no longer have it. Spending more time and money on recreation?? I have curtailed my recreation spending by at least 75% since 2008.
This is an investor's blog visited by smart, educated people. While there is a minority fortunate enough to profit from the economic imbalance, Housel is mostly INSULTING the readership of MSN Money by telling us how much better life is now than in past years.
"This economy is much better than you think", just ignore what you are actually experiencing.
Barak H. Obama
Adjust all those charts for the 85 Billion a month and most are negative.
Obamanomics is a great failure. The moment QE III stops the stock market will collapse and we will head into a depression. Either way, we the People are screwed. We cannot afford the gigantic welfare state that democrats envision. Socialism, and state run monopolies are not the answer. Extreme taxation, regulation and government control are the answer to growth. They will hinder economic growth until the democrats are fired next November.
We're doing great? So why do the lazy uneducated retards keep complaining every single day? And let's not forget we're still spending billions in welfare and the number of people on food stamp program is at an all time high. This is an inflation based economy and will only get worse as long as they keep QE and entitlement programs running at full speed.
---22 days of paid vacation per year?? I had to have 9 years of seniority to get beyond 10 days per year. After 2 years of 15 days paid vacation, I was laid off. When the corporation started hiring again, I couldn't get back in, even when the hiring manager liked my experience. Just who gets 22 days of paid vacation after 5 years? Some government employees do!
---Morgan Housel talks about Americans spending 30% of their budget on food in 1950. The standard of living of Americans skyrocketed in the 1950's and much of the 1960's. I know I spend more of my budget on food in 2013 than I did in 2000. Standard of living is now FALLING.
---High school graduation rates are at the highest level in 40 years and 30% of Americans over 25 have a bachelor's degree?? These are probably literally true, but this is FALSE PROGRESS. Why? Because many students entering college need REMEDIAL EDUCATION. It used to be that remedial education was only done in K-12 years. American education has been DUMBED DOWN! The bachelor's degree and the high school diploma may or may not be a meaningful credential. The credential is only as good as the person! In the 1960's, job training was normal at private companies. Now, private companies often refuse to spend on training and blame the government for not doing their job for them! The no-college, but trained worker of 1960 was more valuable than many college graduates of today.
---Women joined the work force in the 1970's because President Nixon set off a then-unprecedented wave of inflation by scuttling the Gold Standard in 1971. The skyrocketing cost of living became a routine joke for comedians and TV commercials. Two incomes became necessary to maintain a high standard of living for American families. Sure, many women wanted their own careers, but some like my own mother worked out of necessity. Sexist men of that time never would have become cooperative so quickly if it were not for their own salaries becoming inadequate to pay the bills.
---Sure, today's American poor are not very poor with their home utilities, car, TV's, cell phone, computers, etc. This lifestyle is paid for by taxpayers, though. What Morgan Housel doesn't tell us is that when government spending badly needs to be cut [and this fact is too easily brushed aside today], we hear that these households are going to be sleeping in the streets, shivering and starving! When you are living a middle class lifestyle paid for by people whom you'll never meet, you should be able to get by with fewer luxuries, just as I am, now.
We are in FACT a Global Economy. All you have to do is look at the Rev statements from most companies and where their income is derived. That makes most companies dependent on what happens not just here, by abroad as well. China is a Black Hole of destruction. Japan is nearly the same. Euro-zone is bad or worse than us. All three have major Debt and Default issues.
So heck NO, the economy isn't much better than you think concerning the Foundation of which it is built on. That foundation, since the adaption of a Fiat System, has been built on Money Printing. WE have used decade after Decade of Pump Priming to arrive to where we are today. That has a major price for the Majority of Americans. Rising Stock Prices are the short term benefits. A Epic Fail on the Economy here and abroad will be the Ultimate Price. Whether that be next year or Five Years from now, it's like Gravity, we can't avoid it, no matter how hard the Global FEDS try to stop it. The Cat is literally out of the BAG.
Life is like any other game, know the rules and strive to be better than the competition. If your life's plan is to insist others take care of your sorry butt, I am afraid you are in for a tough row to hoe.
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