Valerie Schultz: 'Trickle-down' recession? More like a waterfall
| Friday, Feb 20 2009 04:21 PM
Last Updated Friday, Mar 27 2009 01:22 PM
An admission upfront: My grade in economics class was the lowest one I received in four years of college. My professor was less than patient with my need for repeated explanation, because, as is often the case with people who are naturally gifted at something, it all just seemed so obvious to him. But my brain does not travel along the logical lines of economic theory, as a close look at my household budget would confirm.
So when I read up on current events, I don’t quite understand how different actions that the government might take will affect the overall health and direction of our economy. I know our situation is dire, but are fewer taxes the way to fix what ails us? Or smaller programs? Or increased/decreased spending? Or all of the above? Or none? I don’t know.
The graphs and curves do not resonate with me. The theories I was supposed to learn in college, named after serious men, never took up residence in my memory. I can only hope that wiser minds than mine are working on the problem.
I do remember the concept of “trickle-down economics” from the Reagan years, which described the premise that the effect of tax cuts for the wealthy would eventually drip down to benefit everyone. I do not, however, remember ever needing an umbrella. My family is currently experiencing something that could be called a “trickle-down recession.” I don’t know if there is such a term.
A recession is defined as “widespread decline in the GDP and employment and trade lasting from six months to a year.” But as the saying goes, if it looks like a duck, swims like a duck, and quacks like a duck, it might just be a duck. I may not understand the mechanisms, but I recognize the quack of recession on the phone in the voices of my daughters when I hear it.
This is how the recession has been trickling down for us: My husband and I make a finite amount of money each month. While we also earn sick time, vacation time and health benefits, our monthly take-home pay rarely varies.
Our three grown daughters, living on their own in three different cities, are hourly workers, meaning that they are paid only for each hour they work. They do not earn vacation time or sick time or health insurance. When their hours are cut, their take-home pay shrinks. Which is exactly what has been happening to them of late. Their employers cannot be blamed for minimizing their hours: If business is slow or the company is in financial trouble, fewer worker hours are indicated. This part of economics I get. This explains the phone calls making hesitant requests for parental loans when the rent is due.
My daughters who are employed in the coffee industry also earn weekly tips based on the number of hours they work. The tip money is often their grocery money. But when business is sparse or customers are feeling pinched themselves, the tip jar suffers. So, basically, I have figured out that when I am cutting back and do not make that trip to Starbucks for a chai and leave my tip, somebody’s else’s kid goes hungry. This is perhaps the highest level of economic theory that I get, because its reality hits so close to home.
Factor in my two furlough days a month, or 10 percent of the pay for my state job that I am not receiving thanks to the governor’s brainstorm, and the trickling of recession becomes audible in our house. As we engineer our own version of a family bailout, we scale back our household spending. We go out less frequently (see reference to “Starbucks” above). We are less apt to replace things. We give less to charity. The trickle of “less” becomes a waterfall.
Now multiply what we are experiencing by thousands of families like us.
I start to despair for my daughters’ economic futures, until I remember my early married days. As the 1980s began, inflation was galloping away at 13.5 percent. Mortgage rates were close to 18 percent. The unemployment rate hovered near 10 percent. I remember my dad looking at my new husband and me with the same furrowed brow that I now feel scrunching my face.
“I don’t know how you two will ever be able to buy a house,” he said sadly.
Buy a house? Who cared about a house? We were in love and were nesting in euphoria in our first apartment. As far as we could see, which wasn’t very far, there was nothing to worry about. My dad’s real concerns were, to us, no big deal.
As I suspect my worries are new to my daughters. They may come up short at the end of the month, but they gaze with the clear-eyed optimism of youth that won’t allow them to lose sleep like their mother does. They worry about the month. I worry about the decade.
So I am comforted when I remember my dad’s fears for us. We have bought and sold three houses since our salad days, and the economy has skated and soared through its cycles of boom and bust. We get by. We’re still here. Somehow we’re all right. Which is perhaps the lesson: each generation figures out its own economics, its own cycles, its own priorities. We’ve had our day. Now it’s their turn. And chances are, they’ll be all right.
