America’s “Bougie Broke”

Is the United States economy a “bougie” economy?

Bougie: “High-class, fancy, materialistic, snobby. Mistaken for prosperity.”

Mr. E.J. Antoni is an economist with the Heritage Foundation. From whom:

Despite inflation-adjusted incomes falling dramatically since January 2021, Americans are buying more than ever. That may sound like a contradiction, but it’s perfectly possible, at least in the short run. Americans today, especially the young, are just “bougie broke.”

That’s a fancy way of saying people have given up on saving, investing and planning for their future, so they spend every last dime in hedonistic pleasure-seeking. Ironically, the sky-high cost of living is what drives people to spend frivolously.

Thus an expanding gross domestic product does not indicate economic progress — but economic regression.

It confuses motion for direction, activity for energy.

It confuses desperation for contentment, resignation for purpose, anxiety for bliss.

It is, in brief, an economy that lives for today. It lacks all concern for the morrow.

Americans Can’t Keep Up

Mr. Antoni:

Americans have raided their savings and gone deeply into debt to try and maintain their standard of living. Credit card debt is at an all-time high, costing families over $240 billion a year just in finance charges, while hardship withdrawals from retirement plans are also setting records.

Unable to make ends meet without going into debt, many Americans have simply stopped saving altogether. Three-quarters don’t even have an emergency fund. The reasoning is sad but simple: Why save for retirement if you’ll never have enough to retire?

Why indeed? A racer is miles and miles behind the finishing tape, steamless, as the pitiless clock conspires against him.

He simply throws up the sponge… and quits. He is a man vanquished.

He will never finish. He therefore concludes he may as well dedicate his remaining wealth to his personal pleasure.

Off to the restaurant he goes. Off to the tavern he goes. Off to the airport he goes.

Eat, drink and be merry he tells himself… for tomorrow I die.

Die he will. Not by natural causes will he die — but by slow suicide.

Slow Death

Each filet mignon he munches, each Champagne bottle he guzzles, each vacation adventure he undertakes — all accelerate his progress to the grave.

To the outward observer he appears a bon vivant on a high spree.

He is instead a broken man in a deep hole.

Thus the live-for-today economy is an economy of slow suicide.

It is an economy that fails to save and fails to invest. It only spends.

It is a wastrel economics. Antoni:

One survey found 60% of Gen Z choose to buy “experiences” (spend profligately) instead of saving for retirement. They often record those experiences and flaunt them on social media, as if these occasional luxuries are a status symbol.

Of course, many Americans cannot afford what they’re buying; they can barely make the interest payments to finance their purchases with 60% of them living paycheck to paycheck.

More:

All the while, the shift from saving and investing toward consumption is hamstringing long-run economic growth. The savings rate today is less than half its pre-pandemic level and has absolutely plummeted since January 2021, dropping by more than four-fifths.

Less savings also means less investment, which translates into a lower capital stock. That’s bad news since capital is where we get machines and tools that increase worker productivity. 

Immemorial Proverbial Wisdom

“From time immemorial proverbial wisdom has taught the virtues of saving,” wrote Henry Hazlitt 75 years ago, “and warned against the consequences of prodigality and waste.”

Many Americans — evidently — have heaved this immemorial proverbial wisdom into the bonfire of their vanities.

Yet shriek the economists: “If everybody saved, the economy would collapse.”

Sales would plummet, warehouses would bulge with unpurchased wares, the virtuous cycle of spending would bang into reverse.

Thus we confront the paradox of thrift, so-called. It is the theory that:

An increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving.

Yet the old dead economists argued there is no paradox whatsoever…

What Paradox?

What applies to the individual applies to society at large, they insist. What is society but a collection of individuals — after all?

When society saves it is not canceling consumption. It is merely delaying consumption.

The demand that is supposedly lost is not lost at all… but shifted toward the future.

Today’s savings are therefore tomorrow’s spending, tomorrow’s consumption.

By lowering consumption today, society can consume more tomorrow. Hazlitt:

“‘Saving,’ in short, in the modern world, is only another form of spending.”

Thus today’s “bougie” anti-savers condemn themselves to a lean future.

Yet is the blame entirely theirs? Or are they merely victims of the economic system they inhabit?

The Real Culprit

We return to Mr. E.J. Antoni:

The culprit is actually excessive government spending. Over the last several years, Congress and the president spent trillions of dollars we didn’t have, and the Federal Reserve created the money to finance those deficits. That created 40-year-high inflation and caused the cost of living to skyrocket.

What followed were steep interest rate hikes, which in turn greatly increased borrowing costs for the American people. Those who already possessed large stores of wealth, like equities and housing, saw their portfolios appreciate in price, while those who only had some cash in the bank saw the value of that cash drop by more than a fifth in four years.

Thus, a two-tiered society quickly developed where many families now view retirement and homeownership as fantasies enjoyed only by a wealthy elite, not the average American whose financial situation is still deteriorating.

We find vast justice in this statement. Many are hopeless and helpless cogs in a lunatic economic machine.

Its easy money has yielded them hard times.

This machine was designed by lunatics, staffed by lunatics, supervised by lunatics.

What is worse, these lunatics confuse their lunacy for genius.

And there exists no greater menace than the lunatic who believes himself genius.

This is the bedlamite who presently has us all in siege.

Consolation for the “Bougie”

Perhaps, on some distant tomorrow, the United States will recall the immemorial proverbial wisdom of saving.

As its debt careens, it may face little choice. Concludes Antoni:

If the excessive government spending that caused this problem isn’t rolled back, today’s “bougie broke” phenomenon will soon be “basic broke.”

Basic broke is dead broke.

“Being broke is not a disgrace,” argued a certain Rex Stout — “it is only a catastrophe.”

Take solace, profligate Americans.

You do not confront disgrace. You merely confront catastrophe…