Saturday, October 20, 2007

Our kids are gonna be rich


That's a graph of how much "stuff" an average person created in a year, from 1790 to 2005 (measured in inflation-adjusted dollars). Our economy has been growing at somewhere between 2 and 5 percent a year.

If our economy continues growing at an average 2% per year (after-inflation) rate, then in 40 years the average family in America will make over $100,000 per year.

If our economy grows at an average 3% per year, then they'll make over $150,000 per year (again, measured in "2007 dollars").

What will our kids do with all that extra money? They'll be making between two and three times what we do! (2006 median household income is $48,000/year)

I predict that they'll be spending money on:
  • Private schooling for their kids. With more disposable income, I think people will send their kids to better schools. I really hope education policy catches up with that trend so public schools don't become a place where only poor kids go.
  • Services like housecleaning, catered parties and personal chefs will all be booming businesses.
  • Donations to charity will increase. I'm actually hopeful that we'll move from a culture of "my car is bigger than your car" to "I gave more last year than you did."
How do you think they'll spend all that extra cash? Or do you think economic growth won't continue to grow as it has for the last 50 years?

4 comments:

Joseph Steig said...

As much as I'm a great believer in American entrepreneurial creativeness, I am concerned by multiple trends: (1) we're at war and spending at near record levels of gdp (2) our personal and country debt load continues to build (3) we're restricting smart immigrants (4) climate change will have big effects (5) as one highly respected commentator said recently, when asked what inning we're in with respect to the debt crisis, he said that we haven't even finished singing the national anthem (6) peak oil is real and our whole economy is based on that--other countries can probably better adapt.dd

Gavin Andresen said...

But your blog is named "half full"...

I predict:

1. We'll be mostly out of Iraq within three years, and military spending will decerease.

2. Overall debt will grow, but the economy (and incomes) will grow faster over the next 10 years.

3. We'll continue to have a really stupid immigration policy. Japan or one of the Eurpoean countries with a demographic crisis will figure out that letting in and taxing gazillions of immigrants will solve their aging-population problem.

4. Climate change will have big effects for a relatively small number of people over a period of a couple of decades. They'll adjust.

5. The debt crisis will be over in 18 months.

6. Oil prices will be very volatile for the next 10 years. It will be painful, but our economy will adjust.

Mary E.Carey said...

You're an optimist, I see. Good for you!

Matthew Cornell said...

1. We'll be mostly out of Iraq within three years, and military spending will decerease. Ummm. No; military spending never decreases, does it?

2. Overall debt will grow, but the economy (and incomes) will grow faster over the next 10 years. Nope - the economy ain't going to pick up again. I believe GDP grown over the decades (which we've been conditioned to believe is "natural") has been solely based on cheap energy. This is going away, and we're not in for good times.

4. Climate change will have big effects for a relatively small number of people over a period of a couple of decades. They'll adjust. Again, no. It'll start with the poor, but I think we'll be impacted dramatically. By the time the ripples settle, we'll probably end up with a lot fewer humans on the planet.

5. The debt crisis will be over in 18 months. Heh heh heh. It's just the start.

6. Oil prices will be very volatile for the next 10 years. It will be painful, but our economy will adjust. Volatile, yes - think chaotic. But the trend is oh so clear: Up, up and away! The prices will not be coming down, ever again. Not over time, they won't. And I don't think "painful" even starts to address the ways life will change.

Do I sound like an extremist? Yep. Is there something to it? I think so. Would I care so much if I didn't have a child? Definitely not. Will life for her be pretty much like it is now? ...