I got a call from Alma Mater last night, and once again offered to substantially increase our modest contribution if it would only hold its cost increase to the rate of inflation. Yes costs are going up less this year, but that is because inflation is zero, and they are once again going up by three percent over that.
What I told the student caller is that we are all going to die, because some powerful interest is going to capture 100% of GDP, leaving the rest of us no money for food. The race is between housing costs, the health care sector, executive pay, public employee pensions and other retirement benefits, debt service, and the cost of higher eduation. Each thinks it get more and more without limit, until they get all there is, but they can't all be right, even if the rest of us are dead. Housing costs have already become winded, keeled over, and dropped out, although not everyone in NY knows it yet. Any bets on what is next?
Now to be fair, people have to spend their money on something. And as productivity and trade has reduced the cost of other goods and services, such as clothing and food, more is left for other things. I have no objection to people spending their surplus on more years of life or active life, through better health care, more years of leisure, through early retirement, and a greater life of the mind, through more education. It beats adding more square footage to your house, which then just requires more energy to heat and cool and more water for the landscaping. And if executives are figuring out ways to increase the surplus benefitting us all, then perhaps they have earned more.
But that isn't what is going on.
First off, there will never be enough surplus resources for everyone to stop doing anything for anyone else at age 50 or 55 while living to 80 or later, at anything close to our current standard of living in the U.S. What you have had is an assertion of power by some people for leisure funded by other's toil, a story as old as the beginning of slavery.
Second, the executives haven't earned all that pay, they've merely worked with each other to seize it, which is why their share of total personal income is going up, rather than the share staying the same as overall income rises.
Third, debt service doesn't add much to people's current well being, other than to provide joyful memories of the past receipt of something for nothing for those facing a diminished future. But you can't eat a credit card payment. And, once again, in many cases the people who benefitted from the past borrowing are not those who will be sacrificed in that diminished future to pay it back — particularly in the public sector, but with "socialized" losses to go with the "privitized" profits, increasingly in the private sector as well.
Fourth, people haven't decided how much to spend on health care. For the most part the government has seized their money and forced them to spend on health care, directly (Medicare or Medicaid) on indirectly (health insurance for public employees, the exclusion of employer-provided health insurance from taxable income no matter how much it costs). And it has seized money from some to pay for others. With some missing basics which could provide a significant expansion of health at modest cost, and others getting gold-plating subject to the law of diminishing returns, the health care industry might get to 100% of GDP without adding much more health, expecially if everyone starves or becomes obese.
Finally, there is higher education. Yes, those graduating from Alma Mater have more job skills than I did at the time: I didn't even us a computer until second semester senior year. But, as in health care, much of the money has gone to gold plating: professors who teach fewer courses so they can do more pretigious research, more administrators, plusher dorms and recreation facilities, and edible food. Meanwhile, as in health care, some are missing the basics — as in courses taught only by harried adjuncts, with not enough spaces for all students to get their required courses and graduate, in increasingly stressed public higher ed.
After what happened a year ago, I though executive pay would be next to drop off the pace. Shockingly, the sense of entitlement of the financially rich has barely been dented. The same the sense of entilement of the pension rich, if the coming "day of outrage" is to be believed.
I've been predicting that higher education would hit the wall forever, but the same could be said of the housing bubble before it burst. Insanity seems to go on far more than I could ever believe possible. But higher ed is not in a position to force people to pay, or seize their money, unlike the other interests going for 100%. The more people were able to go into debt for college, the more colleges charged. Some have asserted that the "housing bubble" created the "college bubble" as parents cashed out their equity to pay tuition.
(I also believe that cash-out mortgage refis also helped support the gambling bubble, after states pushed a massive expansion of gambling to get out of their previous two fiscal crises. That has to explain many foreclosures).
It's hard to say which interest will be next to drop off the pace, although higher ed seems a likely target. The future of those not going for 100 of GDP, however, is easier to predict, absent another revolution.