Thinking further about an aspect the topic that I raised this morning — namely, things that prevent Americans from forging their own way in this economy — many additional factors came to mind. A huge one is debt.
On my short lunch break, I don’t have time to go in search of the link, but I read recently that personal debt in the United States greatly exceeds government debt, which is a compounded problem beyond forcing future generations broadly to finance today’s public spending. Even within a couple of generations, the typical family would have needed much less money just to survive because it would have lived within its means on an annual basis.
My in-laws bought their modest cape in Portsmouth for $15,000. For the sake of ease, assume the interest payments amount to a doubling of the ultimate cost of the house; that means they would havce wound up paying roughly $1,000 per year over the life of a thirty-year mortgage. A similar house now would cost somewhere around three-quarters-of-a-million dollars, with the same interest assumption, or $25,000 per year. Somebody who decided to go out on his or her own to start a business could live on just about that amount of money while ramping up, and somebody with a mortgage of that size will surely be significantly more reluctant to take on greater debt in order to invest in a business venture.
I’m simplifying, of course. Wages have inflated, as well, and the price of real estate has something to do with demand, and so on. But part of the reason that the market has borne a 2,000% increase in the price of a house is that our toleration for debt has grown immensely. It’s not just mortgages, either. Consider college debt (which has arguably only inflated the amount of education that one needs for the same exact sort of work). Cars. Equity loans. Credit cards.
Speaking from personal experience, that all means that I would be insane to commit to business loans for, say, Anchor Rising. Given all of my existing debt, I need to make so much money just to pay each month’s bills that I’d quickly eat up my investment in personal salary. And if the full-time writing activity didn’t result in an adequate revenue stream, I’d wind up needing to earn even more money per month to pay off the loan.
Of course, Americans used to have more room in their personal finances for a host of other reasons. When the marketplace was calibrated to the idea of one-income households, a spouse was spare capacity. Whether the working man’s wife found part-time work outside the home, helped her husband with business paperwork, or worked as a partner in a storefront, that was all extra income tacked onto basic priorities.
As with regulations, both the tolerance of debt and shifts in the culture have had justifications, but it may be that they’ve finally all added up to a society that so differs from its prime that decline is inevitable.