Economic Paradox

The paradox of the current U.S. Economy – as noted by countless others – is that it is driven by consumption, which is a linear system, which like all linear systems, can't be sustained for an indefinite period of time. Consume, discard, repeat can only go on so long, and I think we may be seeing the end of the line for that 60-year-old method. The more that people consume, the less they save, and the more vulnerable they become when things like unemployment happen. So right now, many Americans across a fairly wide economic range are deciding it's time to save, and I'm not so sure that the economy is going to rebound simply by giving Americans more money, and especially more credit. We as a society are already up to our ears in student loans, credit cards, and mortgages. The average person has more than $9,000 in credit card debt alone. The LAST thing we need is to have to make more payments to banks. However, every news and government report seems to be championing that very solution for the current problems in the banking industry. The primary purpose of the $700 billion in bailout funds given to Wall Street was to encourage banks to reopen lines of credit for Americans who were then supposed to start buying homes and cars again.

However, I think a lot of Americans are recognizing that the homes, cars, iPods, cell phones, televisions and other major purchases we've been making just aren't worth their cost. Over the past 25 years, the cost of big ticket items has more than doubled. My parents paid a little over $4,000 for Chevette in 1984. You can't buy a car that's 10 years old for $4,000 today, and yet many Americans are working for similar wages that they made in the mid-late 80s, said parents included. Likewise, the cost of a college education has gone up 50 percent in the last decade alone, but entry-level wages are down. So we have less money to spend, but have had more credit available to us at younger and younger ages, and while we were so busy spending and keeping the economy riding high, we didn't notice that bank fees and interest rates more than quadrupled since 1995, trapping us in debt by age 25 that we have no hope of ever getting out of. The end result is that we've finally stopped consuming, which made companies stop producing, so jobs have been lost, so loans have been defaulted on, so banks go belly up, and the cycle continues.

While I don't disagree with the recently-passed stimulus package (because I think the general population needs at least as much help as the corporations), I'm not convinced it's going to be a cure-all. Perhaps it may sound radical right now, but I think the era of excess may be permanently slowing down. Jobs based on production and consumption may not bounce back because, when forced by the recession to make do with less, people are may very well realize how much they can do without. The biggest mistake our government is making right now is trying to get us back to where we were: with an economy that was trapping people in endless cycles of debt. We're realizing that it's hypocritical and unconscionable that we live in a society in which government and corporations team up to tell us that we are solely responsible for knowing our own financial limits, then tell us that the reason people are losing jobs is because we aren't spending enough money. Every personal economic indicator – from record low savings accounts to sky-rocketing personal debt – tells us the last thing we need is to take on more $200,000 mortgages, $18,000 car loans, and even $40,000 student loans. Likewise, the weekly jaunts to Wal-Mart to drop $100, the $150 monthly cell phone plans, the $100 cable/satellite TV bills, and the $200 monthly restaurant tabs are slowly starting to go by the wayside.

People are cutting back, and if the recession last long enough, we may even come to realize how much happier we are spending less money. While I have no idea what that will mean for the structure of our economy, I know that we cannot continue on the path we're on. Our economy hasn't always been based on consumption, so maybe it's time we begin exploring ways to stay afloat that don't put the burden of making more Wall Street millionaires on the backs of those who can least afford it.