132nd Edition
The American Dream revisited
According to a recent Wall Street Journal poll, 70% of our country believes the American Dream is dead. For what it’s worth, 55% of Republicans, as well as 90% of Democrats, held this negative view of future prospects and opportunities for themselves, and even more so for their children. The large gap between the two sides might be worth exploring, but I’ll save that for another day. What I’ll attempt to do in today’s blog is give a few reasons why the American Dream may be unachievable today and then offer a few suggestions for reversing that outlook.
First, the American Dream is founded on the belief that each generation will live at a higher standard of living than the previous one. This held true in our country for the better part of our nation’s history, up to and including the Baby Boom generation (people born between 1946-1964). Unfortunately for Millennials, the generation following the Baby Boomers, that amazing wealth-creating trend has come to an end. Generally speaking, on average, Millennials have a zero chance of living at a higher standard of living than their parents. Why? The answer is relatively straightforward. In a word – Inflation. Everything costs too much, especially, but certainly not limited to, food, real estate, and health care. (See this previous blog “Things that cost too much https://kayesbooks.com/inflation-remains-a-problem/ )
Why does everything cost a lot more today than it did a generation ago? Profligate government spending and over-regulation deserve a big part of the blame. Consider the fact that many large companies, like Bank of America, employ more internal compliance and regulatory people than it does salespeople. The former creates zero revenues, despite adding millions in costs. Add in the number of employees dedicated to DEI and internal IT security, and you have billions of dollars in costs that have to be covered each year while generating no revenue. Consumers pay for this bureaucratic burden through higher prices.
Moreover, as the federal government continues to spend well beyond its means, inflationary pressures work through the system. The stock market rises and this wealth effect benefits Baby Boomers disproportionately because they hold significantly more of their wealth in stocks than younger generations do.
The anger with this situation felt by so many young people today, and hence their interest in socialism, stems from a few horrendous decisions Baby Boomers made as they raised their kids. The two most character-destroying parental philosophies were equal playing time and participation trophies. In a nutshell, too many Millennials have an entitlement attitude. They expect more than reality tends to give them. With their entitlement mindset they tend to blame the system, or institutions, or some group other than themselves. Sure, there are exceptions, but generally speaking, that is society’s current predicament.
So, what should we do? There seems to be two clear philosophical strategies for dealing with economic challenges related to perpetuating the American Dream. The first proposes more government intervention and control. Socialism for some, but definitely a reliance on top-down micro-management of the economy, which includes higher minimum wage, wealth redistribution, higher taxes, and higher government spending. The alternative approach argues for less government intervention, free market capitalism, lower taxes and spending. As the political winds vacillate in either direction, so goes the economic policies back and forth between free-market capitalism and socialism. Sometimes for brief periods we seem to get the balance right. More often, we don’t. Meanwhile, the layers of compliance and regulation in the private sector continue to build, weighing heavily on corporate profitability. The signs of this strain are seen in income inequality, prolonged inflation, and ever-expanding government bureaucracy. It sure is a mess. The foundation of the American Dream simply can’t handle it all. Entrepreneurialism and American exceptionalism are dying a slow death.
It is hard to imagine all these trends reversing any time soon. Eventually, some future generation will get tired of the bureaucratic nightmare and change will occur. How long this will take and how bad will the economic decline in the U.S. be over the next few generations is difficult to predict. There are certainly enough reasons to believe the decline will be slow and gradual. Relative to most of the rest of the world we still enjoy several competitive advantages. World class universities, abundant natural resources, leading edge technologies, powerful capital markets, and the strongest economy in the world, all bode well for the future of our country.
While doom and gloom prognostications are popular within the mainstream media, a slow, gradual decline is more likely. We are the wealthiest country in the history of the world. If things don’t get better, and even if they get slightly worse, that doesn’t mean they won’t still be pretty darn good.
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Michael Kayes
*These views are my personal opinions and are not the viewpoints of any company or organization.