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.
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