Thursday, May 5, 2016

Is Anybody Else Worried About Our Future?

Posted By: George Deeb - 5/05/2016

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I am not a classically trained economist.  But, I am well-versed in common sense.  And, my spider sense is telling me something doesn't feel right about our country's economic future.  Tell me if anything below strikes a chord in your life, and if you agree.  Or, if you think I am way off.

THE FACTS

The Rising Cost of Living.  Everyday costs keep going up and up at alarmingly fast rates.  Healthcare insurance alone is growing 20% per year, not to mention the rising deductibles on those policies.  As is the cost of higher education.  I am estimating that I need to make about 50% more in income that I did ten years ago, just to maintain the exact same lifestyle.

Flat Compensation.  At the same time, salaries are not growing anywhere near that fast.  Salaries, if you are lucky, grow at the basic rate of inflation of around 3% per year.

Investments Stagnant.  And, investment returns have been pretty abysmal.  Banks pay close to zero interest.  Real estate is no longer a guaranteed grower.  And, the stock markets bump up and down within a relatively tight range over the last few years, blowing in the winds of a global economic mess.

Outsourced Staffing.  To make matters worse, corporations are biasing  part-time 1099 contractors where they can, to avoid having to pay high payroll taxes and benefits to full-time employees.  Making it harder for workers to find meaningful long term work and affordable group health insurance rates.

People Retiring Later.  And, with rising costs and limited savings, the senior work force no longer feels comfortable retiring as early as past generations did.  Which means, they are not opening up jobs for the younger generation at the bottom of the workforce funnel.

Middle Class Under Pressure.  Collectively, the issues above are starting to squeeze out the middle class, with many families no longer able to make ends meet.  With many having to consider ways of materially lowering their cost base, or taking on multiple jobs across multiple earners.

A Government Underwater.  And, the U.S. government that is drowning in $21TN in debt and huge annual budget deficits.  With no way to reasonably pay for all the crumbling infrastruture improvements needed and underfunded Medicare and Social Security liabilities.  While the people can't afford to pay higher taxes to dig us out of that hole.  Which means defaulting on our debts or printing new currency, will eventually devalue the U.S. dollar, weakening our position within the global economy.

Education Curriculum Antiquated.  All while kids are learning an antiquated curriculum built for a different generation.  There is simply not enough focus on teaching the kids the skills they need for this generation of jobs (e.g., huge demand for technology coders, as an example).

THE IMPLICATIONS

Expensive Housing is in Trouble.  I am already starting to see many of my neighbors talking about moving to cheaper markets than Chicago, or cheaper homes in other suburbs.  And, as people are running out of cash, they need the equity in their homes to cover costs, creating a big demand for rentals that are hard to find.  And, I collectively, think this trend is going to reduce the demand for owning expensive homes, and put a lot of negative pressure on those home prices.

Few Building Wealth.  This generation simply is not saving or building up wealth like past generations did.  Many are living check by check, treading as fast as they can, just to remain in the same position.  And, the parents' generation is no longer leaving a material estate to their kids, making the kids have to work that much harder to fill the gap.

Younger Workers Not Finding Work.  And, the Millennials are having a hard time getting hired, even with college degrees.  Many graduate with $50K in college debt, which you can't write-off in bankruptcy, and no income to pay it off.  Often, living with their parents into their 30's, trying to save costs.

Pending Defaults.  And, at some point, all of the debt people have incurred on their credit cards and home mortgages are at risk of default, as people won't have the means to pay it down, especially as home prices begin to fall below mortgage values.

Kids Not Employable Out of High School.  As many families won't be able to afford the $250,000 burden of sending kids to a good university, the students are going to need to be trained with the right skills to make them employable right out of high school (which they are not today).

Students Look For College Alternatives.  Or, families are now considering other college alternatives altogether, in order to save on costs.  For example, many are considering sending their kids to the best European schools (they teach in English in Germany, as an example), at a fraction of the cost of their U.S. counterparts.

Healthcare Needs Reform.  And, the health insurance companies can no longer break the world into individual versus group plan rates, where the prices are materially higher for individuals.  Too many independent contractors are getting hurt by insurance costs that are twice as high as group plan rates, at the same time corporations are shifting towards 1099 contractors to avoid paying benefits.

Government Needs Reform and Focus.  All while the Democrats and Republicans are in a stand-still in Congress.  More interested in fighting with each other and protecting their own jobs, than doing what is right for its citizens.  I think we need a complete restart here with fresh blood, or a third strong party to help break the log jam.

The Economy and Markets Not on Solid Footing.  The issues above collectively have me feeling our economy is on very shaky ground, regardless what the professional economists are telling us.  Just like we saw the mortgage crisis unexpectedly take down the economy in 2008, I have a very strange feeling that we are staring over the edge of the abyss and nobody is really talking about it.

MY PLEA

It's time to wake up and smell the coffee.  We can no longer keep kicking the can down the road for some future generation to deal with it.  We need leaders that are solving these major problems, and not simply throwing stones at each other across party lines.  We have been given a bunch of second tier candidates to choose between in this upcoming election, because the smartest talent would never want the job.  So, force the candidates to speak to solving our country's real issues at hand, with clearly detailed plans and a bi-partisan approach.  Otherwise, it is not going to be long, before our country is in an economic hole too deep to dig out of.

Please add your additional thoughts in the comments.  And, please share this with your networks.

For future posts, please follow me on Twitter at: @georgedeeb.


4 comments:

Bob Nelson said...

When an article begins, "I am not a classically trained economist. But, I am well-versed in common sense." ... BEWARE!!

A lot of economics is counterintuitive... and "common sense" is a terrible instrument for navigating the world! (Common sense says heavy objects fall faster than light ones. Common sense says... all sorts of stupid stuff!)

This article tosses out counterfactuals ("20% inflation" is wingnut-worthy!), and misunderstandings (investment returns). It is a hodge-podge of nonsense.

What kills me is that our economic problems are NOT complicated.
- We lack demand, so companies don't produce, so they don't invest, so they don't hire, so pay stays flat, so people can't buy stuff, so we lack demand, and around it goes again and again. This is SIMPLE, people!
- The rich are taking all the money. Corporate profits are at record highs. Employee salaries are stagnant. Where do you imagine the money is going?
- It is perfectly logical that the rich take all the money. Employees have no bargaining power. (See "lack of demand", above.) The rich own the companies, so they take the money. Duh.
- The future depends on one single question: "Who owns the robots?" Think about it.

Oh, and... Remember this, above all: THE RICH ARE DOING VERY, VERY WELL. HAVING THE GENERAL POPULATION NEAR DESPERATION IS A GOOD THING FOR THE RICH: DESPERATE PEOPLE ARE DOCILE PEOPLE.

George Deeb said...

Bob, thanks for your comment. I agree with the point on the rich are getting richer and corporate profits are at a high. But, that just helps the companies and their owners. It doesn't help their masses of employees or the government pay its bills, as corporations are pros at figuring out ways to lower their taxes.

As for "hodge podge nonsense", those datapoints are real-life metrics I have personally experienced. My medical costs grew 40% in one year alone, in the wake of Obamacare.

I disagree on your common sense point. Throwing out all common sense, is like throwing out the baby with the bathwater. The brick and the feather may both fall at the same rate with gravity, but common sense would correctly tell you the brick weighs more than the feather.

Love the dialog here, thanks for your contribution!

Harry said...

We have many systemic and endemic problems. Judicial corruption, blindness, state sponsored nepotism, internal budgeting cover ups, we as a people are loosing our patriotism. City, state, or federal employee growth is creating a condition of overtaxing growth, larger than private workforce. In other words state employees don't turn supervisors in, when budgets could be trimmed because they last minute frivolously spend to keep the budgets increasing! Combining problems with private sector growth almost minimally. Monster walmart has destroyed fair market access, and help promote disposable chi-com crap. Tupperware was a example of and loss produced by walmart, drops in quality have caused more loss in quality products. Fortunately locally there are signs of natural local development has been growing. Don't know if that's enough to keep America alive, but I think people are acknowledging to avoid Wal-Mart as needed. To many issues to really define exactly where to start fixing things my state example is a future I don't want to see a nation follow, but we have the highest state (city, state, federal) employee base. Its huge here and we can't stop it but I can't see Hillary, Trump, or Saunders fixing anything.

George Deeb said...

Good thoughts here, Harry. It is hard to change government, which so desperately needs changing, when smart people don't want the job and the incumbents only care about preserving their own personal interests. What a mess!

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