Three-quarters of Americans don’t feel confident that their kids’ lives will be better than theirs. That was the screaming headline from a new Wall Street Journal / NBC News poll this week – a new peak in economic pessimism that our colleague Chris Cillizza declared “the single most depressing number” in the survey.
Clearly, Americans are bummed about the still-not-strong-enough recovery. But are they right to be so worried about the future? Will our kids really live harder lives than we’re living now?
Let’s ask an economist.
Austan Goolsbee is a father of three, ages 8, 11 and 14. He’s also a former top economic adviser to President Obama and a professor at the University of Chicago’s Booth School of Business. For this question, we agreed to talk entirely about generational trends – and not short-term policy questions that run into partisan politics – and we talked a lot about what we expect for our own children.
I’m with the 76 percent in the poll: worried we’ve sucked up economic opportunity, overloaded the atmosphere with carbon and run up the national debt, all burdens on the next generation. Goolsbee is less concerned.
“When our first kid was born,” he said, “we made a home movie where we asked all the extended family members what they thought she would be when she grew up. Her great grandma, who was 90-something at the time, said, ‘Oh probably something that hasn’t even been invented yet.’ That’s what I expect for them. I think it will be better, but I’m an optimist by nature.”
Here’s an edited version of our discussion, which revolved heavily around two debates in economics: How do we value technological progress, and how does widening inequality affect people psychologically?
Jim Tankersley: So, are Americans right to be so pessimistic?
Austan Goolsbee: It’s probably fair to say that whether your kid’s going to be better off than you are depends a lot on who you are and how you’re doing. You might think there would be mean reversion. Beyoncé made $98 million last year. The chance that Blue Ivy Knowles will do better when she’s grown isn’t high. Yet the data has shown that idea is wrong — the higher you go up in the income distribution, the better you’ve done over the last 25 years. Inequality will probably continue rising because of the technology changes and all the rest, so at the top, their kids will probably do way better than now. That’s different than asking whether a kid at the 50th percentile is going to actually be worse off than his parents were at the equivalent.
That said, I’m inclined to think that the doubters are wrong – that if you look at the history of the United States economy over 200 years, it’s pretty steady in terms of upward trajectory of real income.
Two things are going to make people feel overly pessimistic in this poll. One is just the basic bias toward the here-and-now. The economy hasn’t been great, so people assume that will be permanent. If you asked them in the depths of the 2009 recession, I bet they would have been even more pessimistic. The second is how you define progress and what it means to be better off. [U.S. Sen.] Elizabeth Warren and I are friends from when she was a fellow professor, and I remember back in the 2000s when she was trying to construct a middle-class index and talking about the notion that a family with one salary could not buy a house, a car, health insurance and put three kids through college the way they could 40 years ago. She was right. But, I said, if I tried to give you today the non-air-conditioned house, the 45-year-old Pontiac, the health care of the time and three TV channels with rabbit ears that you had then, you wouldn’t think you were doing too well.
J.T.: I try to get my son to play my old Nintendo with me. He mostly wants to play XBox.
A.G.: I started with that old Atari tanks game and eventually moved up to the Caleco handheld football game. God, I loved that thing. I would play for hours when I was 10. Yet my kids wouldn’t touch the thing now. Red dots that you moved around on a screen? Please. And that same thing is true in TV, cable, movie explosions, computers, phones, Internet – you name it. Make your kid watch your dad’s favorite movie as a kid and see how that goes.
J.T.: But don’t Americans more or less expect technology and health care and everything else to progress? Aren’t they really saying, “I’m pessimistic that my kids will do better even with access to better stuff?”
A.G.: You might be right. Economists are weirdos, and we jump to the literal answer to the question – can we compute a true price index to compare what it costs in different times and then see if people’s real income is higher. If looked at that way, I think the 76 percent in this poll will be wrong. Their kids will be better off. But I think most people are looking at it a different way. Is life going to be harder? Are the kids going to face more challenges and more pain than they themselves had to face? And there, we don’t know. And certainly the last 15 years have been a tough, bumpy patch. And for sure that could happen again for the next 15 years.
I still think it’s an amazing time to be alive, though. Don’t you? And it’s going to be even more amazing for our kids. If you actually went back to standards of living 30 years, I don’t think people would say they were better off. But I also think that people should appreciate that relative income also matters, and if inequality rises a lot for a small group of super-rich, it is going to make a difference and make average people feel worse. The question of whether average families’ real income will be up 1 percent in 30 years or down 1 percent seems a bit of an esoteric comparison if a select group is up 1,000 percent. That’s a very different social dynamic than we have ever had in this country, and it makes me nervous about the political viability of leaving things to the free market to sort out for themselves.