Among the many things that mystify economists these days, the biggest
might be the lingering perception, despite six years of ostensible recovery,
that the average person is getting poorer rather than richer. Lots of
culprits come in for blame, including the growing gap between the 1% and
everyone else, negative interest rates (which starve savers and retirees of
income) and the crappy nature of the new jobs being created in this recovery.
But one that doesn't get much mention is the changing nature of the bills
we're paying. It seems that Americans are spending a lot more on health care,
which leaves less for everything else. Here's an excerpt from a MarketWatch
report of a couple of weeks back, with two charts that tell the tale:
Share
of consumer spending on health hits another record
The percentage of money U.S. consumers spend on health care rose in 2014
for the third straight year to another record high, according to one
government measure.
Some 20.6% of total consumer spending in 2014 was devoted to health care,
including prescription and over-the-counter drugs, annual figures from the
Commerce Department report on personal expenditures show. That's up from
20.4% in 2013.
Health-care expenses has been rising for decades regardless of government
efforts to control costs. The percentage of consumer spending on health care
rose from 15% in 1990, topping 20% for the first time in 2009.
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With the health-care pie continuing to expand, consumers are paying the
same or less as percentage of their spending on most other goods and services
compared to 10 years ago.
Americans spend a smaller share of their money on cars and clothing, among
other things. The percentage of money they spend on housing and going out to
eat is basically unchanged over the longer run.
Not surprisingly, the only other major category to show a sustained
increase in spending over the past 25 years is education. The share of money
Americans spend on college has climbed to 1.59% from 0.9% in 1990.
---------- End of Excerpt ---------
What this means is that we're spending more on two big categories --
health care and education -- that don't make us feel richer. Health care, of
course, is just maintenance. It's like changing a car's oil or fixing a
broken transmission, which only restores the status quo rather than enhancing
it. Education, meanwhile, is just school. When we're in college, we don't
feel richer if tuition goes up. So to the extent that those things are
getting more expensive, and fun things like eating in restaurants and buying
new shoes become less frequent as a result, we feel poorer -- or at least
less free to indulge ourselves.
This is the opposite of what technology in particular and progress in
general were supposed to bring about. As a society advances, it should get
better at producing life's necessities, freeing up capital for life's joys
and making most people feel both richer and more free. As John Maynard Keynes
famously predicted in his 1930 essay "Economic
Possibilities for our Grandchildren," another century of capital
accumulation and advancing science would make it possible for most people to
satisfy their basic needs with minimal effort and then go off and have fun.
Wrote the economist/poet:
For at least another hundred years we must pretend to ourselves and to
everyone that fair is foul and foul is fair; for foul is useful and fair is
not. Avarice and usury and precaution must be our gods for a little longer
still. For only they can lead us out of the tunnel of economic necessity into
daylight.
We're fifteen years short of the century that Keynes predicted it would
take, but the goal seems to be receding rather than approaching. That's
frustrating for all the people who have to work harder than ever just to feed
their families. And if it goes on much longer the result will be a very
vigorous search for culprits -- which will be entertaining, even if it
doesn't pay the doctor's bills.
