That could have been the title of a post justifying the Concord Coalition’s general outlook on life, but no (plenty of time for that in the future)…
Today the Washington Post ran this Neil Irwin story on its front page. (The Post’s title: “Why We’re Gloomier Than The Economy”.) Neil’s point: Consumer confidence is at its lowest level in 30 years, yet the reality exposed in the economic data show the economy is not the worst its been in 30 years. Neil goes on to speculate as to why folks are being unusually pessimistic in the current slowdown: he cites rising fuel prices that American families feel daily–not just when we fill up our tanks but when we buy our food; and the falling value of our homes, which for many of us represent our largest stock of wealth (whether we originally viewed our home purchase as an “investment” or as “consumption”). He also speculates that it could be the 24-hours-a-day, negative emphasis in media coverage these days, or just the fact that we’re not used to facing negative economic news–that the current climate is such stark contrast to the economic exuberance (rational or not) we lived through in the late 1990s.
I have a different theory. I think the excessive gloominess in the current ”cyclical downturn” is because Americans are feeling as if a good part of the economic downturn might not just be cyclical (temporary)–that much of what we’re seeing in the short-run economy is symptomatic of longer-run challenges that aren’t going to go away within the next few months or even years.
As we fill up our gas tanks each day, do we really think gasoline prices are going to go back to $2/gallon in a few months? As we see our home values–and the equity we can tap into–falling, do we expect to get back to relying on that “wealth” to help pay for our kids’ college educations or our own retirements? As our family budgets are squeezed by rising health care bills and wages that can’t keep up with even general inflation, do we have faith that the government will get that health care inflation under control soon? As my auto-engineer sister and brother-in-law in the Detroit area worry about their job security, do they expect that on the other side of the current downturn, the layoffs will stop? As we hear the bad news about this year’s federal budget deficit, are we comforted by what the presidential candidates are proposing?
I think there is this feeling of much more permanent unsustainability that we are seeing repeatedly in our daily economy–little doses of daily evidence that we have been living beyond our means, as the Post’s Steven Pearlstein had pointed out a few weeks ago, calling it the “fading of the mirage economy”, and as I referred to here as the “super subprime problem.”
We’re so gloomy because as we ride over this immediate “rough patch,” we notice the bumps keep coming, and we sense we’re slowly rolling downhill at the same time–about to veer off this crumbling road and crash into a ravine if we don’t somehow change course. Right now it doesn’t feel like just a temporary “bump in the road.”
And speaking of this longer-run “crumbling,” note that if you have access to today’s print version of the Washington Post, you will find that right next to Neil Irwin’s front page (left column) story about why we’re so gloomy on the economy, is this front-and-center gloomy story (with gloomy photo) on how the infrastructure of the National Mall is falling apart.
Hate to be such a downer today… I’ll try to make up for it in the next few days, for the good news about the more lasting challenges we face is that it’s in some ways easier (and wiser) for policy to affect those longer-run trends, if we have the will to do so, than to counter the truly shorter-run movements in the business cycle.