John Robb on a Lost Generation (or two)

By John Ballard

John Robb first got my attention as a 4GW writer. But like so many good thinkers he is a sharp observer of many other trends, including economics. He called the collapse of the real estate market two months in advance of when the stock market and the rest of the country caught on. July 10, 2008: "The US mortgage industry effectively collapsed today."

John Robb is a man of few words, but those few words are from a very smart person.

A Lost Decade for US Households? Try a lost Generation (or two)!

This is hilarious. The Census Bureau reported that median household incomes slid over the last decade. Of course, this new figure also means that household incomes only increased ~$5k (inflation adjusted dollars) or ~11% over 35 years! All of this so called gain has to do with improvements in the household's the second income. Given that median male incomes are lower than 35 years ago, it's likely that to produce this gain households, as a unit, worked much harder (I suspect that the total number of hours worked by the family went up much more than 11%).

Worse, this so called gain occurred during a time period when the educational requirement necessary to get a middle class income in the US expanded to include a college education -- which is entirely funded out of pocket (so much for the level playing field). If you factor out the rising (at many multiples of the rate of inflation) cost of college for a family's two workers, what does this picture look like?

A lost generation (or two) doesn't even seem to cover the magnitude of this failure. That characterization implies stasis and it is much worse than that. On the income side alone (counting education), it's a glide path to failure. Add in rising household expenses (health, housing, autos, etc.) and debt (over leverage) -- the term "collapse" comes readily to mind.

Last week he was amused to see that  "Employment as a percent of the population is almost back to where it was "before" women entered the workforce en masse.  Hilarious."

The financial challenges of a dysfunctional, out of control and (I have to say it) corrupt disease management industry pale to insignificance in light of other credit, fiscal and monetary problems. Cassandra must have been somewhere in my pedigree because I feel very much alone in how I see the big picture.

The president made two points in his speech -- both of which have to do with these observations -- that have not been much noticed. 

?"...public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities." Regarding any so-called public option the main argument against it is that it would eventually destroy private insurance. If that be true, then why haven't the country's more economical state colleges and universities put private institutions out of business? For the same reason that many people in the UK never darken the door of a NHS facility: private plans. (That's the main difference between the Canadian and British systems. Private plans are illegal in Canada but not in the UK.)

?"If we do nothing to slow these skyrocketing costs, we will eventually be spending more on Medicare and Medicaid than every other government program combined. Put simply, our health care problem is our deficit problem. Nothing else even comes close."  Like the threat of global thermonuclear war and the concept of overkill this reality is so big and important that most of our little brains cannot contemplate the weight of it. When someone says it again, it sails through the conversation like "Gesundheit!" after a sneeze. Unheard. Unmentioned. Ignored.

John Robb sees it.
I see it.
The president sees it.
A few journalists and experts get it.

Let's hope enough elected representatives will catch on to do something about it before the country hits the wall and is forced to pay back the deficit with inflated dollars. That is the old-fashioned way of getting out of national financial trouble, but the toll of human misery was as unavoidable as a car crash involving alcohol. That's because those responsible for generating wealth have no such option. The only resources left to the common man are hard work and thrift which can take a generation or two to climb out of a financial hole. (If you don't believe it, just ask anyone from the South whose forebears were on the losing side of the War Between the States.)