I have been on this planet for 60-years. Over that time, I’ve watched the life in the United States degrade for most people. I want to quote a few statistics that may shock some Millennials and those in Generation Z.
In 1960, the median home cost $11,900, while the median income was $5,600, indicating a price-to-income ratio of 2.1. In 2023, the median home price is $416,100 with a median income of $74,580, a price to income ratio of 5.6.
The average age of a first home buyer in 1960 was 24. The average age of a first-time home buyer in 2022 is 36.
The cost of college tuition in 1977 was $20,000. Had this cost increased with the same inflation as other goods and services, the cost in 2023 for this same education would be $100,000. The actual cost of college tuition is now $317,000. This is more than 3X the cost in 1977.
In 1950 5% of children were born to unwed mothers. In 2020, 40% of children are born to unwed mothers. In 1970, 90% of 30-year adults would earn more than their parents. In 2010, 50% of 30-year adults will earn more than their parents.
In 1960, 72% of households relied on the income of one bread winner. In 2023, 61% of married couples must have both partners working to make ends meet.
The marriage rate in 1970 was at 76.5%, and in 2023, the marriage rate is 31%.
The likelihood of a married couple getting divorced in the 1950’s is 20% whereas the likelihood of a married couple getting a divorce today is 50%.
In 1960 25% of the U.S. Gross Domestic Product (GDP) was paid as taxes to local, state, and federal government. In 2023, government tax revenue is expected to be 36% of GDP.
In 1970, the national debt was 40% of GDP. In 2023, the national debt is 120% of GDP and growing.
In 1960, 5% of the U.S. GDP was spent on entitlement programs to help the poor, elderly, and infirmed. In 2023, 25% of the U.S. GDP is spent on these entitlement programs.
I could list similar statistics that would fill multiple pages. I think you get the point. By several economic measures, the “average” lifestyle in the United States of America is degrading. Families are getting less value and are working harder than they have worked to get that value. This is not happening with every class of people.
In 1980, the top one percent net worth individuals owned 25% of the wealth in the United States. In the 2020’s, the top one percent owns close to 40% of the wealth in the United States.
It’s important to understand that this statistic can be misleading. The wealth of individuals can fluctuate over time. A person who was poor in the 1980’s could be rich in the 2000’s. Likewise, a person who was rich in the 1980’s could have lost their wealth in the 2000’s. In addition, it is important to understand that in a capitalistic economy, the rich own the source of capital. Most of the net worth stated in the above numbers is captive in assets owned by the rich. If we were a communistic society, these assets would be owned by the state. A communist economy may make you feel like we are more equal, however, the poor in communist societies are much poorer than the poor or middle class in capitalistic economies.
This post is NOT a treatise on income inequality. Instead, I want to highlight the foundation of the degradation of our life in the United States.
The Government Tug-of-War
There is a story that plays out every year in our government. It goes like this. We want our government to do _____ . A politician stands at a podium and promises that, if elected, he/she will pass a bill that will get the government to do ______. In the same speech, that politician will promise they won’t raise taxes. What a great world! We get more government services, and we don’t have to pay for them. Aren’t we lucky?
Most people don’t understand how an economy works. Frankly, most economists don’t understand how an economy works. The examples I’ve illustrated over the past 60-years is evidence of how our economy works.
As the saying goes, “you can’t get something for nothing.”
Green Energy Investments
I want to explain one of the things that our government is doing as I write this blog post that is an example of the “something for nothing” ideal that will further gut the middle class.
The Biden Administration is aggressive on investing in “green energy”. They are doing this to prevent climate change. At this same time, they want to enforce the principle of “equity”. They know that green energy will increase the price of energy regardless of how much government money they give green energy companies. This increase will burden the poor with energy bills they cannot afford to pay. This means that in the future, the government will increase entitlement programs to pay energy bills for those who cannot afford to pay their newer, and higher energy bill. The rich don’t care about any of this because they are invested in green energy companies and are earning dividends on profits and will sell stock in these companies as their investments pay off. The poor don’t care because the government will pay their way. This same analogy is at play in transportation, healthcare, food, housing, and any other industry the government insists on affecting.
The middle class will struggle to stay in a middle-class financial bracket. Maybe they will cut back on their own expenses to pay their higher energy bill. Maybe they will get a high paying green energy job. On a macro-economic basis, the middle class will either join the ranks of the poor and get help from the government to pay their bills; or a few will get rich off the government investments. Either way, the middle class will become smaller.
The statistics that I quoted indicate that the middle class is working harder then they ever have as government debt increases, inflation destroys the buying power of their money; and they watch as the poor can somehow afford better things then they can with government payments. Statistically speaking more middle-class in the U.S. are joining the ranks of the poor… not the ranks of the rich.
The Lie of Modern Money Theory
We left the true gold standard in 1932 and then left our modified gold standard in 1972. After this time, we lost all financial discipline in our government. We now have an economic philosophy called Modern Money Theory or MMT. In MMT, deficits are not a problem. MMT says we can print as much money as we want and get into as much debt as we want. There will be no adverse economic consequences. I argue that the past 60-years are an example of the negative consequences of easy money.
We have witnessed firsthand the inflation that comes with easy money in 2021 and 2022. As you’ve seen by the list I gave at the first part of this article, this inflation has been destroying value for 60-years.
What can we do?
We gave MMT a try, and it doesn’t work. The first step is admitting our mistake. The next step is plotting a pathway back to financial security. We need to elect politicians who advocate financial responsibility, and not “something for nothing”. For those of you who think you can’t make it without government assistance, I guarantee you that you can. If we don’t change course in the next few decades, our government will run out of money that you thought you couldn’t live without. Social Security and Medicare are expected to be insolvent by 2035. Other government programs are on equally tenuous footing.
There is no one solution. We have to make multiple changes at the same time in order to get our financial house in order. Here are a few ideas for starters:
Pass a Balanced Budget Amendment.
Get government out of private sector industries.
Tax increases to pay for government services we need.
Sunsetting Social Security & Medicare.
Cut spending.
Limit the size of government.
Stop our involvement in every foreign conflict.
These ideas will reduce the size of government relative to the rest of our economy. I know that these sound like fiscally conservative concepts; and they are. For those on the left that are concerned about the poor and disadvantaged, I share your concern. However, the way that we have attempted to help these folks has not worked and is not working. It’s time we genuinely care about all classes of people; and help the poor and middle class live their best lives. The ideas in the bullets above have been proven to accomplish our best life styles in the past; and they will do the same in our future.
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