Wednesday, July 02, 2008

Demanding Dependency

I used to sort of like U.S. News & World Report when I was younger. My Dad has subscribed to it for at least three decades. Like all weekly news magazines, it was filled with lots of crap, but it also had some interesting articles. I eventually stopped my occasional reading of the magazine with the advent of the Internet and the ability to gather information from a broad variety of sources.

Yesterday Mom sent me home with her most recently received edition of U.S. News because she has little interest in reading it. I thought I’d flip through the pages before tossing it into the recycling bin. I came upon this whiny article about Gen-Xers being unable to maintain their parents’ standard of living.

In the article, Author Kimberly Palmer interviews Nan Mooney, the author of the book (Not) Keeping Up With Our Parents. The book’s subtitle is “The Decline of the Professional Middle Class.” Mooney makes some important observations about Americans’ financial habits. Increasing tuition costs means that it takes longer to recoup the cost of college (if it is ever recouped) and that people spend more years repaying their student loans. But the real problem is where our money is going. Palmer writes:
“The share of family income devoted to fixed expenses like rent, [Mooney] notes, has increased from 53 to 75 percent in the past two decades. Housing prices in most major metropolitan areas have risen six times faster than household incomes, and household debt has ballooned to over 130 percent of disposable income.”
Mooney whines, “I certainly thought I'd be in a financial position to consider having children. Instead, at 36, I was living with a roommate in New York, barely able to cover even the basics.” She has been forced to move back in with her parents in Seattle to make ends meet. Later in the interview Mooney slides in the fact that she is a single mother.

It is very hard to be a single parent. I would not wish this condition on anyone. Statistics show that this is more of a sure path to poverty than almost any other single factor. We are not privy to the reasons Mooney ended up being a single parent or why (or whether) her child’s father contributes materially.

On average, housing costs per family have increased substantially over the past two decades. But Mooney’s focus on metropolitan areas skews the facts. Housing costs far more in densely populated areas than anywhere else due to demand and due to stifling regulations that try to impose rent fairness via bureaucracy. Mooney should not whine about the cost of her decision to live and work in downtown New York — one of the most expensive spots on earth. Other options are available.

In terms of constant dollars, housing generally costs about as much per square foot as it did three decades ago. But Americans have significantly increased the number of square feet of dwelling space per person. We all seem to want to live in much larger houses than our parents did. But another major contributing factor is the increase in rates of divorce and single parent households. The average houshold consists of far fewer occupants than a generation ago. The upshot is that we spend a greater portion of our income on housing than our parents did.

Mooney contends that “Consumer spending hasn't risen since the 1970s,” but that fixed expenses have risen dramatically. But not all of those fixed expenses go to housing and medical costs. Mooney completely ignores the substantial rise over the past two decades in the percentage of household income that goes to taxes (at all levels). Mooney also hammers on the myth of stagnant incomes, which U.S. News itself has debunked.

We are not told what kind of degree Mooney has. But it would not be unreasonable to assume that it is an English Lit degree. Over the span of a career, the average English Lit grad barely garners enough income over that of the average high school grad to cover the cost of college. It seems more than likely that Mooney’s economic situation stems chiefly from her own choices about education, career, marriage, child bearing, and location.

Fortunately, Mooney offers some good advice that all of us should follow. “Understand your financial obligations, from mortgages to credit card payments. Opt for the simplest financing options. Take steps to [make] your children financially literate.” Too many kids hit the age where they begin receiving credit card offers without having any clear understanding of how to manage their personal finances.

Mooney also suggests that we separate ourselves from materialism. “Most important, don't buy into the "you are what you make" value system.” Unfortunately, for Mooney this does not appear to mean working to become more self-reliant, but rather, sponging off of others.

The final solutions Mooney offers show that she was educated as a writer, not as an economist. “As intelligent, articulate members of the political system, we are in a position to demand more federal support for education, housing, child care, healthcare, and retirement.” Implementing these suggestions would exacerbate rather than reduce the problems she discusses. Increased taxes would further increase fixed expenses.

With all of the poor professionals that Mooney writes about, who does she think is going to foot the bill for all of the federal largesse that she says we should demand? The people that didn’t attend college? Oh, of course not. Mooney must be talking about “the rich,” which likely includes people like her parents and anyone that has more than $20K in their 401k plan.

So, let’s reword that last sentence I quoted from Mooney to say what she really means. “As people with political power, we are in a position to forcibly take money from other Americans that we classify as rich to pay for our education, housing, child care, healthcare, and retirement.” Mooney seems to truly believe that we can tax ourselves into prosperity and that stealing from others to pay for our wants is completely justifiable. Indeed she calls it “a moral issue about the shifting values of a country where a staggering number of people cannot manage to get by.”

Cannot? Cannot get by doing what? Spending more than they make? Expecting a far more opulent lifestyle than their incomes warrant? There are plenty of ways to live providently and frugally. Even the fixed expenses Mooney discusses are far more flexible than she implies. It just requires a goodly portion of self discipline — something that seems in short supply in our society.

Ms. Mooney seems to be pretty sour about her lot in life. Apparently she totally discounts her own choices with respect to her current fate. She offers some good advice about personal finances, although, it would appear that she hasn’t followed much of it. But her contention that we can achieve happiness by taking from others and increasing dependency is more than farcical; it’s diabolical.


Charles D said...

I haven't read the article, but it is patently obvious that the decline in living standards of the American middle class is not some coincidence or fluke or business cycles. We got into this situation because we consistently elected right-wing politicians who are diametrically opposed to any and all programs that help people, any and all regulations on business, and just plain don't give a rat's behind whether the ordinary American makes it or not. Their answer is always - blame the victim.

You would think we would learn something from this. Simply compare living standards from the late 1970's to those today. This is an unavoidable and foreseeable consequence of conservative economic policy.

Tom said...

Consistently elected right-wing politicians? I've just started reading "Perfectly Legal", (it's about the tax code)--there, the author asserts some of these changes have been building since at least the 70s, under both Dems and Repubs both in Congress and the White House.

I'm not sure what I think of the author's conclusions yet (I'm only on chap 3), but it does frame the issue in a way I hadn't considered as fully.

For example, the author asserts that the mortgage interest tax deduction led to huge inflation in the price of homes and is a major reason starter homes are beyond the reach of a growing umber of families.

y-intercept said...

DL is wrong, as usual.

The article was about Generation Xers. Originally, the term Generation X referred to the folks on the downside of the baby boom. The people on the heels of the baby boom, keep getting the shaft from demographic trends.

For example, there was a massive increase in tuition and drop in tuition assistance when they entered college.

There was a massive influx of workers just prior to generation x entering the work force. Generation X competed for entry level jobs.

Far fewer Generation Xers got cushy government jobs than either the generation before or after them.

There was a major increase in housing prices just before the gen-Xers entered the market.

Generation Xers are the ones who will retire when senior services are pushed to the maximum. The last social security reform actually assured enough money for the baby boomers retirement. Generation X hits retirement as Social Security and Medicare go insolvent.

Since the baby boomers grabbed the unionized jobs and big government jobs, the only place where generation x excelled was the free market.

BTW, the ultimate shaft for Generation X came when the group younger than Generation X stole the name "Generation X."

Douglas Coupland coined the term to say that the people on the up side and down side of the baby boom had completely different experiences. The upsiders saw a tremendous increase in living standards. The downside saw a decrease in social services.

Coupland use the term for people born between 1958-1965. Demographers decided to give the name to the group from 1965-1980.

This group will receive substantially less in the way of social services than the group before and after.

The whine of generation X is that because of demographic cycles, they, as a group, received substantially reduced social services. There is a legion of dimwits who use this to support their belief in Marxism, when in truth the story shows that social services systems designed to redistribute income from one generation to the next actually have the affect of hurting entire generations.

Lucy Stern said...

Housing prices are the way they are because people continue to pay for something they can't afford. I wouldn't live on the West coast or the East Coast because of the housing costs there.

We should all learn to live within our means....My husband and I started out in a small starter home that was 1200 square feet. We could afford the payments and it worked for us. We fixed it up and stayed there for 7 years. When we could afford to pay more, we moved into a larger house of 1800 square feet and raised our family there. The house we live in now, is 2200 square feet and we moved into it when we could afford to move up. We plan to be in this house till we meet our maker or decide to move back into a smaller home for our retirement.

We have not lived beyond our means and have taken years to get to this point. We are debt free except for the house. My husband is not a college graduate, he is a retired police officer and now makes a living as a locksmith.

I happen to believe that too many people "want" too many things. There are people who took out ARM loans to buy houses they could not afford and now are way over their heads in debt and can not pay their morgages. If you buy a house that you can't afford, don't blame the government.

College: Don't even get me started on that one....I paid my own way thru college with hard work and parents who let me live at home and so I could go to the local college. I had no student loans and no debt to repay. I was of the "pay as you go" generation.

I do believe that their are some people that need out help, BUT there are far too many who just want a hand out....