Wednesday, January 12, 2011

Piece of Advice #84: Expect and prepare for your standard of living to decline

It seems to me that there are quite a lot of people out there who think that when we shake the dust of this "recession" off our boots, things will go back to normal and it will be Disney World/McMansion/retail therapy time again.

This is not going to happen.  I live in Michigan.  We have been in a one-state recession/depression for a full decade now.  All of our good jobs shipped south and east after NAFTA passed, and we've been scaling back every since in fits and starts, mostly in fits.  Despite all of this practice we've had at getting poorer, we're still fighting the realization that that means there isn't any money, as evidenced in a recent HuffPo article, "Hamtramck's Budget Nightmare: Michigan Town Left with Nothing Else to Cut":
In November 2009, Cooper sat down with the unions and laid out the city's problem. Representatives from the Ranking Officers Association, the Fraternal Order of Police, the International Association of Firefighters and the American Federation of State, County and Municipal Employees sat around the table in the conference room at Hamtramck City Hall, a three-story converted hospital building, as Cooper walked them through a Powerpoint presentation.

The union workers have traditionally enjoyed solidly middle class wages. Under their existing union contract, police lieutenants will earn $78,000 this year, not including benefits. A patrol officer makes up to $58,000. A typical firefighter makes up to $55,000.

Cooper aimed to roll those numbers back. Though Detroit had yet to officially stop paying, he was already worried. He told the unions he wanted to cut benefits. If the unions didn't accept his proposals, he would have to start laying off workers.

But in Hamtramck, labor contracts bar such layoffs without the assent of the unions, and Cooper was swiftly rebuffed in his effort to gain it.

The unions were enraged. Just months earlier, the local branch of the International Association of Firefighters had finalized a new five-year contract with the city. The police, too, were bitter, especially given that they collect cash by issuing traffic tickets and seizing drug proceeds.

"We're the only department in the city that's actually generating revenue besides the income tax department," says patrolman Jon Bondra.

After the November meeting, the police unions rejected Cooper's request for concessions. Instead, they agreed to a creative plan to raise cash: They would implement a strict traffic safety program, with officers working overtime to write as many tickets as they could.

Traffic enforcement has proven to be a bonanza. In its first year, the program earned the city just over $800,000, according to estimates from Cooper and police officers.

Still facing a considerable shortfall, Cooper sought and gained concessions from the International Association of Firefighters, which, in January, agreed to forgo payment for 13 annual holidays. The union also agreed to increase its contribution to a pension fund in exchange for keeping a pay raise. And the union assented to keeping a single position vacant.
Kind of amazing, huh?  Ten years, all our good jobs shipped out, daily media coverage, and the cops in Hamtramck would rather shake down the citizenry for more cash than accept that this is the new normal: lower wages, crappy benefits, and an attitude of gratitude just for having a job. It's been a steep learning curve with plenty of denial built in.

But given our terrible long-term employment outlook and shaky financial institutions, the enormous shortfalls our local, state, and federal governments are looking at (but not really facing), and rising food, energy, education, and health care costs, it would not take a genius to conclude that things are going to get worse for the average joe, not better.  So adjust your future outlook accordingly.  Personally, I think it's time the media stopped running those articles on how hard it is for a middle class family to get by, and start running more pieces on intergenerational and community cooperation.  Doubling up, the backbone of family economies before the rise and fall of an American manufacturing economy, is going to be the trend.  We are also going to have to learn to cooperate and get along with our neighbors, because we are going to need them.  The best thing we could all do is to learn to live below our means as practice.  In the short term, money saved can be used to pay down debt, set aside for emergencies, or used to purchase things that will allow us to be more self-sufficient.  In the longer term, it will prepare us for the austerity ahead. 

Most importantly, do not delude yourself that the government will be able to legislate or stimulate us back to prosperity or catch us gently on the way down.  The good news is that America, at least, does not lack for resources.  We only lack knowledge of how to use them more efficiently, sparingly, and cooperatively.  These are the things we should be trying to learn again.


  1. "...there isn't any money" and "...does not lack for resources" Hmmm...?Acknowledging the possibility of a wrongful act does not imply the advocacy of a wrongful act.

  2. I was thinking about Barry Sanders as I wrote this.And many-MANY-other Detroitian stuff;past,present and future.

  3. Good advice. The worst part is, this economic downsizing is not inevitable. It is a direct result of the decision making of our financial elite. They are happy to sell the people of our nation down the river, for greater profits in their pockets.

    We desperately need new leadership, following a Populist stance of protecting our jobs and way of life.

  4. MI, like NYC, NY state, CA, New Orleans, et al, is a bastion of socialism. Socialism doesn't redistribute wealth; it redistributes pain and misery. It's the socialist policies of MI that have made a middle class lifestyle all but extinct.

    That said, it seems as if this virus is solidly entrenched in Washington, DC, the District of Criminals. There's nowhere to go to get away from it now. The GOP won't have the guts to do what's right, and cut gov't spending & taxes. IOW, we're all screwed...

  5. Great post, Grerp. I can't think of a thing to add to it.

    Except that maybe we should all pray.

  6. Good post grerp. I do love it when the police expose themselves as a revenue generation agency and not an agency of public safety.

    All across the country, it is becoming apparent that the primary obstacle to restoring fiscal health to state and local governments are the public employee unions. Oh, and politicians who lack the fortitude to take them on. Result: what you blogged about, and Illinois' tax hike, a hike entered into with the specific purpose of avoiding a sure fight with the public sector unions.

    I wonder if we will soon see laws that proscribe government employees from uninionizatio nfurther entrenches the conflict of interest inherent in their the serve the people, or do they serve themselves.

  7. Grerp, here's one for your "lose the weight" piece of advice: stop binge drinking. Hat tip to Dr Helen.

  8. These unions remind me of the bank customer in "It's A Wonderful Life" who insists on withdrawing his entire $200 during a run even though the bank is on the verge of collapsing and taking the entire town with it.

    Another aspect of declining standard of living I often cite is kids not adjusting their expectations for after college. Many college kids from good lines get supplemented by their parents in college, or get credit cards and run up frivolous debt with clothes, vacations and drinking. Then when they get out of school, they've never lived the "poor student" lifestyle and aren't ready for living away from home while working, budgeting their future and all the rest of it. By the time they hit 25 or 26, they could be years behind in an unnecessary debt cycle because they just can't imagine living within their income.

  9. Hi Grerp;

    I live in MI. too. Out of curiosity, whereabouts? You don't have to be specific, just say SE, NW, etc.. I'm in SE Mi.


  10. Blue Blazer - I am certainly not advocating theft or violent redistribution. Obviously, there is a huge gulf between the haves and have nots, but it is not the first time the gulf has been so wide. Unfortunately, this time around it is complicated by the fact that the average American household is so in debt. We can't create until we dig out first, and that is going to take some time.

    Justin - I agree; so many of our problems are the result in government meddling in the market and playing with not only the current generation's money but future generations' as well. The housing bubble, the student loan bubble, the national debt, SS shortfalls, all of it is the result of terrible policy making and blundering. How much of it was deliberately malicious, I can't tell. But it has been disastrous. Every thing the gov't touches becomes mired in inefficiency and debt. Even farming - the laws they passed and incentives they devised killed the family farm and made us dependent on an unhealthy, unsustainable Big Ag food market unadaptable to the needs of local consumers. What a mess.

    John G. and MarkyMark - I live in W. Michigan. We are pretty conservative over here. Outside of Detroit Metro, Flint, and Ann Arbor, the state is conservative. Those three areas, however, have so much population that they wind up speaking for the rest of us on the national stage.

    Terry - I agree. Prayer is always a good idea.

  11. Hi Gerp;

    Yes, it's like being a partisan behind enemy lines. I don't talk about much because you don't know who you're talking to. We all know how crazy it is, not life and limb, nothing melodramatic. But property damage is not out of the question (key your car because it has a certain bumper sticker, etc...)

  12. Very excellent article, my thoughts exactly. I recently read a book called "The Black Swan". It was written by, Nassim Nicholas Taleb. Taleb spent his youth in the civil war in Lebanon. He says:

    "I was constantly told by adults that the war, which ended up lasting close to seventeen years, was going to end in 'only a matter of days'. They seemed quite confident in their forecasts of duration, as can be evidenced by the number of people who sat waiting in hotel rooms [etc]..."

    He goes on to make the point that the longer the person is in exile, the less likely it would be that they would ever return. I can't help but think of his words as we keep going along in our current economic state; especially with economy crushing deficits piling up at exponential rates, and the ramifications when this all comes crashing down on a culture largely amoral.

    Great article.

  13. Hi everyone.

    Firstly, you all have my sympathy and prayers. My daughter (living in Manitoba) has some protection because her husband is in the Canadian Army, but she can't find work. When she was over visiting us in NZ we had to struggle with remembering NOT to support her overmuch... she was going back to living on a very tight budget. BTW, she spent half the trip freaking on how much food cost -- and fuel, which is now pushing two dollars a litre (eight dollars a gallon).

    I consider we are in a depression, and we have been there for about two to three years. I also (sorry guys) think that the current US leadership are repeating the mistakes of the 1930s, which prolonged said depression. The way out is to follow Iceland, default, go bankrupt, and then reorganise and rebuild.

    Me? I chose to take a pay cut and work for a university and not a hospital -- the university is more secure as the hospitals (owned by the state) are prone to governmental meddling. I have paid off the mortgage (there are no tax breaks for mortgage payments in NZ). But I'm 50, and a solo Dad, raising teenage boys. I'm now praying that I'll be around for the next 30 years as my kids will need my support and subsidy for a long, long time.

  14. I got into an argument on twitter with someone about the fact that government jobs are not going to help anybody. He later got butthurt and banned me from following him, but I wonder why people think the government is the solution. Don't they realize that government jobs are propped up by taxes, and if the private sector isn't generating any revenue, there won't be any taxes for government jobs?

    Sometimes I get the crazy feeling that I'm the only sane person I know. >_>

  15. Grerp,

    MI may be conservative in parts, but its government is SOCIALIST. Ergo, socialist policies are implemented, thus giving you folks an 'official' unemployment rate of 15%. The same applies to your major cities like Detroit. If gov't would just get OUT OF THE WAY, then we'd be fine. Thomas Jefferson was right when he said that the government that governs best, governs least...


  16. Another thing to remember is at some point , the currency will take the brunt of this digital printing to cover Federal deficits and the bank scam.

    Seriously considering moving at least part of your assets into gold and silver. It's purchasing power it is preserving.

  17. What will happen after America defaults on it's huge debt on all sectors of government? There is college debt, muni binds, federal government debt, state government debt and so much more! I present to you reality in this link

    Prepare cause it's going to be a really bumpy ride!

    (Maybe after the West collapses and destroys itself completely there will be restoration? I heard Europe is pretty bad too!)

  18. Sorry I meant muni bonds (muni debt).

  19. Very nice post. But I think most of the responders miss the point. The point is we should not expect top-down solutions to our problems. And blaming "them" (pick your "them" and add your favorite "ism") isn't going to get you anywhere, except perhaps self-destruction. Or a job on today's cable TV "news".

    If you go back to your 4th Turning posts and the best characteristics of our (Gen-X) generation, it is the ability to dig deep, be tough and be pragmatic. When they say "surrender", we say "Nuts."

    We need to focus on ignoring government (until we clean out the Boomers) and building communities -- on-line, with neighbors, whomever. And finding ways to live on less and celebrating the freedom of frugality.

    Chris Martenson at has been writing about the various crises (here and to come)for many years and has a lot of interesting things to say on his site about them and how to survive. I'd highly recommend his "crash course."

    But I think an important community can even be formed here. Your insights are impressive and your target audience is something our "lost" generation will rally around. You should connect them up better on Facebook and Twitter.

  20. Oh for goodness sake, no place in the US is even remotely socialist! You don't even know what the word means.

  21. MarkyMark - MI has a republican congress and governor now, as of this past election cycle. We'll see how they address the problems. I am so glad to see the back of La Granholm, I confess.

    Dragline - thanks for your comment. It sparked some thoughts in me and I'm working on a new post because of it.

  22. Hello-

    I am also from Michigan, though I now live in Chicago, and love your blog and the wisdom you share. You are not the only one holding the line regarding traditional values and thought you would be happy to know that the Oklahoma Agricultural and Mechanical College is now offering courses that teach women how to run a home and men how to appreciate all that wives and mothers do. I read this recently somewhere though I can not recall where.

  23. I lived in Ann Arbor for 4 years and went to UM. It was a socialist and libtard cesspool!

  24. Shalina - Thanks for commenting and I'm so glad you like the blog. I'll have to look up that OK Ag College course info. It might make for a springboard for a topic here.

  25. Wow. What an eye-opening post. Keep writing this kind of thing, it's very insightful.