"We Can Fall Quite A Ways"
Neil Irwin offers a story of optimistic pessimism in which spending on things like houses, cars, and durable goods is already so low that it can’t really tumble again. I’d like to believe that’s true, but the fact that we’re currently destroying excess housing stock because nobody can afford to buy or maintain it is a disturbing reminder that a poorly governed society can do a lot to immiserate itself.
I think the intuition here is that people aren’t going to just go without a working car, stove, washing machine, etc. so spending on these outcomes has some kind of floor. I think this ignores the fact that there’s a lot of slack along the “quality” dimension of American consumption of these things. Here’s the Consumer Expenditure Survey data on household items by income quintile:
It’s not like households in the second quintile of the distribution don’t have refrigerators or chairs. They just have cheaper stuff. It’s perfectly possible for people in the top three quintiles to downshift their spending on these household durables without plunging into some kind of universe of inconceivable material deprivation. Individual households find themselves being downwardly mobile all the time. A second lost decade would just be a society-wide spat of downward mobility. Households in the top quintile spend an average of $5,000 a year on net vehicle purchases. At the median it’s only $2,320. And yet the median American household is equipped with functioning automobiles. Overall spending could plummet and people would still be able to get around.
This is all just to say that America is a rich country. Which means we could tumble a long way.