A friend and I have been keeping a mental scrapbook of how grim this economy is nowadays. We drive by new car lots full of SUV behemoths that no one wants to buy. We see the lines of cars snaking around, waiting for gas at Costco. (Damn it, why do people have to stretch that hose to the other side of their cars?)
Fewer people seem to be at the malls. There is an increase in car break-ins in San Francisco tourist spots. Cranky diners seem to be less willing to cough up an extra dollar or two when they tip. Welcome to summer 2008 –the days will be hotter than ever, the gas prices will continue to rise, and so too will our collective impatience. The blunt fact is this: this condition is largely of our own making, and there is little hope that things will get better soon.
To put it plainly, we are creatures of habit. We consume too much, we drive our cars in clogged traffic, and we spend well beyond our means because we know this feels good. If there were some kind of instant gratification quotient that the average American consumer achieves each day, I’d say we were a randy, lustful bunch by now. We pile into the yellow Hummers and the black Escalades with the 22-inch rims because we can, and for a lot of us, it’s a case of reckless abandon. We don’t really react too much to what economists would call “shocks” to the system –i.e., dramatic price increases for fuel, which in turn affect just about everything in our daily lives. They help explain why the spike in food prices. Have you bought a carton of milk lately? Need a dozen eggs? How about a box of Frosted Mini-Wheats? We continue on nonetheless and many of us don’t seem all that affected, or at least we’re in some kind of denial that things are not that bad. As I write this in fact, I am watching a happy stream of people at my local Whole Foods Market as they waltz over to the deli case, ready to drop $9.99 a pound for Peruvian purple potato salad. Of course.
And yet, there may be signs of change. Americans’ disposable income rose sharply in May, according to the Labor Department, up 5.7%, due primarily to those tax rebate checks, worth $48 billion. Despite George Bush’s call to have us spend our stimulus checks of $600 or $1200 on that flat screen TV we needed, most Americans have done what they hadn’t been doing before: paying down consumer debt, and well, cooling it with all the purchases at the local Target. In turn, the personal savings rate for consumers jumped 5%, something that hasn’t happened in 13 years. This may be, as BreakingViews.com mentioned yesterday, a “one-time thing”, but why should it be so? What’s noteworthy is that we are not typically a nation of spenders, compared to, say, Japan. We have long been the tubby, overfed Americans who are eager to flaunt what they have, but we are fast becoming a country where belt tightening is something we simply need to do to survive. If not now, then we need to ask when.
Tom Friedman made this point very clear in last Sunday’s New York Times in his editorial, “Anxious in America”. He suggests that this presidential election is less about what should happen in Iraq than about what McCain or Obama plan to do about this rotten economy. Things may get worse in Iraq, or there may be a terrorist attack, but what’s on the mind of the American voter is exactly our economy, and the fact that our political leadership does not appear to have any solutions. He quotes Gerald Seib of the Wall Street Journal: “America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so.” Forget Iraq; we are the ones who need nation-building, according to Friedman.
He is right. We may not be able to spend any more because we don’t have any more. There simply has to be a point where we will desist, a point where we can affect what is before us. Do we really need to fill up the car? Not really. And look, in just one week we reduced demand 3%, which made prices fall slightly. That’s the kind of realization we need. A poll the other day revealed that for 90% of us, gas prices have affected how we live our lives. Because we have relied so much in the past, it’s difficult to say that it doesn’t hurt; it has to, and it affects everyone. The moment we ease this reliance should also be when we ask our leaders (and presidential candidates) to promote solutions that will address the gas price issue head on. This issue has affected virtually every aspect of this economy, and made us think twice about filling up when we don’t need to. Or when we decide on our own, perhaps by default, that we don’t need to consume so much either. Something has got to give.