All That Has Been Wrong with the U.S. Consumer

The Washington Post published an in-depth article following an unemployed US family day by day for months, who are "out of options", in Indiana. Thing is, it seems the family they picked made, and continues to make, a lot of horribly irresponsible financial decisions. Yet from a global perspective, they still have a pretty high standard of living relative to most people in the world, even those in pretty developed countries, given they still have two cars, a dirt bike, hunting rifles, an xbox, a blackberry, watch cable tv and buy lotto tickets regularly. Their main problem is that they never saved any money even when times were good.

He sinks into the couch, foot jiggling, his gaze traveling from his wife to the television to the darkness outside, broken now and then by the distant glow of passing headlights.

His mind settles into another round of "What if?"

As in: What if we don't have cash to buy milk, eggs, bread or diapers? What if our unemployment benefits run out? What if we never find jobs?

...Scott got a job on a paint crew at an RV plant, and by the end of 2007 his income had climbed to $53,000, more than he had ever earned. After work he was the man at the bar with the thick roll of bills, the man he had always wanted to be, buying round after round for himself and his friends. The man with "the full pocket," as he liked to say. He took his son on a fishing trip. He took his family out to eat and told them to order whatever they wanted.

To add insult to injury, even now when both husband and wife are unemployed, the wife turns down one job since it doesn't beat her unemployment check, even though their unemployment benefits are set to expire. Rather than being "Out of Options" as the story is titled, I think a lot of families in many other countries, if they read this, would say that this American family has tons of options available to it, and is far from rock bottom, if only they got their act together. I would say the same as well, obviously. Likewise, Freakonomics points out that the reaction of readers will likely break down into two camps:

I wonder in which direction most of you will be affected when you read it. There are a variety of options. Some readers will see the family as innocent victims of a brutal economy. Others will see them as entirely responsible for, or at least deeply complicit in, their economic failure.

Now I am sure there are a lot of responsible, hard-working people facing tough times as well and perhaps it was unfortunate that the Post ended up picking a family which sort of brought hard times on themselves, but at the same time there are probably a lot of similarly irresponsible stories out there given that this family's story lines up very well with US economic data of recent years, in terms of a negative savings rate and profligate consumer spending beyond one's means.

What's the conclusion? There isn't quite one for this post. I think the story is definitely worth a read and I'll let people take it from there. It is surely a sad story, even if irresponsible behavior was partly (or very much) the cause, but at the same time it speaks to the complaceny which has developed in the US after many years of good times. I doubt the generation which came out of our last depression would have been spending as profligately as the family described here. And hopefully, Americans post the current crisis will as a whole start to be more responsible as well. Already, the US savings rate, which has reversed its horrible downward trend, is a sign of hope. Some might find this post insensitive in regards to the family descibred, but I think what's most important is to be honest here about what we see, rather than polite which wouldn't help solve anything. This excellent story is a microcosm of all that has been wrong with the US consumer.

Comments

[MinAkkar20:]

Not only the US consumer but the US government as well. People didn't save a dime even when big bucks were rolling in as evidenced by the minimal (even negative) savings rate during the boom years. Likewise, government on every level in this country assumed soaring tax revenues would continue forever and created new permanent bureaucratic positions.

There are many grasshoppers and too few ants. The couple you referenced above is contributing to the slow decline of our country. I've lived in a developing country for a few months and can tell you that nobody appreciates what we have here. I saw a commercial funded by US government the other day basically warning people about the health consequences of over-eating...could you ever imagine we need to pay taxes to tell people to stop eating?

Aug 06 07:46 AM