No matter how bad it gets, we’ll still be spending

September 5th, 2009 at 06:48pm Annette LaCross

We’ve been hearing a lot about the New Economy lately, the new “normal.”

We are saving, not spending. We are clipping coupons, wearing our frugality proudly. We are organizing neighborhood swap meets.

So goes the prevailing wisdom, at any rate. It’s no longer the economy we knew, national experts intone solemnly, even as an encouraging number of reports suggest that the Great Recession, if not actually dead, is at least having trouble breathing.

Still, they say, Americans have rethought their fiscally imprudent lifestyles and have embraced living without.

Nonsense. What they don’t say, and what I’m wondering, is how long it takes before “new” gets old.

For the American consumer, it doesn’t tend to be too long. After all, we can get just so excited about reusing tin foil before the urge to buy something new becomes overpowering.

Certainly, rising unemployment is enough to put a damper on anyone with a hankering for a new electronic gadget. And as I wrote last week, the economy isn’t actually going anywhere unless consumers get back into the spending business.

But they will. If the baby-boomer generation has taught all other generations anything, it’s our right to spend money.

And after a full decade of unbridled spending, there’s a lot of pent-up demand out there.

We may have been forced to recover some semblance of sanity — to start cleaning up our debt, to live within our means — but it never lasts.

And that’s OK — just like we needed a housing bubble to pull ourselves out of the crisis after the 9/11 terrorist attacks, we need consumer activity to jump-start this one.

But there’s an interesting dynamic that will kick in at some point, one that promises to keep our standard of living below the heady years of recent memory.

Those same baby boomers, the ones who taught the world how to spend, are moving away from their spending years.

They’re moving into retirement, or savings, mode.

And the rest of the population doesn’t have that kind of spending power at their disposal.

I think we’ll see a mini-bubble, when the boomers pocket that pent-up demand and head out to spur the economy. But inevitably, it will slow, with more of it making its way to the health-care system and the rest safely in retirement and savings accounts. For the rest of us, that’s the new “normal.” And it hasn’t been established yet.

Even when it does, we’ll find a new reason to find ourselves atop an unsustainable mountain of debt — it happens every decade or so, after all — as individuals and corporations develop “recession amnesia,” as Rockford Area Economic Development Council chief Janyce Fadden calls it. And then we’ll find another new normal.

It’s the thing to remember about the economy, new or not: We don’t like change, and we tend to return to our most comfortable behaviors. Even if those behaviors can be a little self-destructive.

Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.

Entry Filed under: spending, recovery, recession