A STRONG SENSE of a declining standard of living has haunted American politics for nearly a decade. It began in 1974 with the enormous jumps in food and fuel prices, and since then it has been a constant consideration in three successive administrations' thinking about economic policy. But the basic question about this decline is whether it ever actually happened.
A standard of living is, to some considerable degree, a matter of subjective judgment. Switching from roast beef to poultry, for example, is a reduction in your standard if you really prefer beef--but not if you'd just as soon have chicken. In the past year, the recession has brought unquestionable reductions. But the longer trend is less obvious.
As societies get richer, they spend smaller shares of their money on food--because they have more money--and larger shares on things ranging from houses to hospitals and universities. Since the late 1940s, Americans have greatly reduced the shares of their spending on personal consumption for food, clothing and, surprisingly, liquor. Conversely, they have spent increasingly larger shares of their money on housing, cars and medical care.
However notable it may have been for other reasons, 1974 was not a turning point in American habits of consumption. But the years 1977-1980--in political terms, the Carter years--were a little different. With the unusually rapid inflation in real estate, people greatly increased the share of their total spending that they put into housing. Something had to give, and for the first time in a generation it was spending on automobiles. That was very bad news for Detroit. But was it a sign of financial strain in American families--or merely an indication that they thought houses were better investments than cars? In those years there was a small reduction in the share of consumers' spending that went into recreation and, very slightly, into foreign travel. But people did not cut back on private school and college tuition for their children, and they continued rapidly raising the share that went into doctors' and hospitals' bills.
Certainly there were people who ended the decade of the 1970s less well off than they entered it. But in the national averages, there's no evidence of decline. To the contrary, the figures show clear progress in directions that unambiguously indicate for most people, in at least the economic sense, better lives in 1980 than in 1970 or even 1974.
Perhaps the present recession will change that trend. It's quite true that some of the improvement in the late 1970s was bought at the price of an inflation rate that could not have been sustained. New and different policy, by 1980, was essential. But it's useful to remember that its purpose was not, as the Reagan administration occasionally seems to think, to rescue a falling standard of living. By the end of the decade, the American standard of living was higher than it had ever been. It would be a melancholy irony if it turned out that a false diagnosis by the administration led it into precisely the decline that it was mistakenly seeking to remedy.