Though the frontrunners are becoming clear, there are several other subjects many of you have expressed interest in that we don’t want to ignore. One of these topics is the US economy. Specifically, some of you wanted us to analyze the economy in the context of George’s forecast in “The Next 100 Years”: that a major economic and social crisis revolving around the decline of the American middle class will happen sometime in the early to mid-2020s.
In truth, we had planned to dive into this subject before we even issued the survey. For all the optimism surrounding low unemployment rates and record-high real median income, there are some signs that something is rotten in the US economy. This isn’t wholly surprising – economic health tends to be cyclical, and the US is due for a recession. But when the next recession comes, there’s reason to believe it won’t be business as usual. The structural problems that led to the 2008 financial crisis haven’t been fixed. If anything, they’ve gotten worse.
In January, we forecast that the signs of just such a recession would emerge by the end of the year. And emerge they have. The yield curve between short-term and long-term US Treasuries is the flattest it has been at any point in the past 10 years. One of my colleagues, Xander Snyder, wrote an excellent piece last week on this very subject, and I encourage you to familiarize yourselves with it if you have not already done so.
A flattening yield curve, as he points out, is a problem in its own right, as is a declining prime-age labor force unable to secure adequate wages. But there are other longer-term forces at work that threaten to make what should be a minor cyclical recession a much more painful and prolonged affair. The two most consequential of these forces are increases in total household debt and the continued growth of wealth inequality within the US economy.
Household debt in the United States is now almost $13 trillion. That figure exceeds total household debt at any point during or in the recovery period after the 2008 financial crisis. Housing debt has creeped back to pre-2008 levels. Credit card debt has reached pre-2008 levels too. Student loan debt has skyrocketed by 134 percent since the first quarter of 2008 (about 9 percent on average per year).
