College football officially started this past weekend. The NFL gets up and running this week. The weather is starting to cool down. We’re coming off a long Labor Day weekend. And I think September has an argument for the best month of the year.
In the spirit of all of this encouraging stuff, I wanted to take a look at some charts that put a positive spin on some things we’ve been catastrophizing lately.
Let’s start with AI.
According to Pew Research, 73% of young adults think artificial intelligence will lead to fewer jobs in the U.S. over the next 20 years:
The majority of adults under 30 (55%) are now more concerned than excited about AI.
However, despite the gloomy feelings toward AI that many seem to hold, there is still no evidence that AI is taking away jobs.
Across virtually every business sector, companies have reported almost no change in overall employment since integrating AI into their business:
Of the small fraction of companies that did see a change, more firms added jobs rather than cut them. Most companies have increased their hiring.
According to the survey, 44% of firms using AI say it supplemented or enhanced work an employee already does. Ten percent say it performed a task an employee used to do. Eleven percent say it introduced a task no one had been doing.
Of course, we’re still early in this whole AI business. It feels inevitable that there will be some disruption and people’s jobs will change. But the data suggests some of the doomsday claims out there may be a bit hyperbolic.
Shall we pivot to the national debt?
It was recently reported that the U.S. national debt surpassed $40 trillion. Most of it is public debt held by investors, foreign governments, and the Federal Reserve, while a smaller portion is owed to internal government accounts like Social Security.
That equates to about $117,000 for every individual living in the United States.
Given our natural disinclination toward debt, that massive number has caused a lot of people to panic. There are worries that the interest expense alone will become a larger part of the budget and difficult choices will need to be made.
But, if I may, I’d like to try to put a positive spin on the government debt you may not have considered.
Morgan Housel shared the following chart, which shows both government and household debt as a percentage of GDP:
The level has been unchanged for over 20 years.
Yes, government debt has increased significantly, but that debt has bolstered GDP growth alongside it, which in turn has created more profit for businesses and more money for individuals.
The result? Americans are as wealthy as ever.
JP Morgan shows that the household debt service ratio (percentage of disposable income going to debt payments) has tanked since 2008:
Household debt as a percentage of assets has also plunged:
Here’s another way to look at the American balance sheet:
Has all of the government spending been necessary? I don’t know. I’m not here to get into a political discussion. But government spending and subsequent debt have propelled the individual balance sheet to look as good as it does today. Is that tradeoff worth it? That’s up to you to decide.
Looking at debt as a percentage of income or as a percentage of assets is the proper way to put it into context. Cullen Roche wrote about that context:
“The US government’s debt passed $40 trillion this week. That is a humongous number. Did you know that total US financial assets are almost $450 trillion? If you include non-financial assets you’re getting close to $600 trillion. So yes, the US government is huge, but it’s just huge inside of another yuger thing (misspelling intended!).”
Ok, one more pivot.
I came across this Substack article by Drunk Wisconsin (yep) titled Americans Want to Have Their Cake and Eat It Too. I wanted to share this excerpt that I found resonant:
“I see people complaining about how unaffordable middle-class lifestyles are these days, but by “unaffordable” they mean they’re maxing out their 401k contributions and going on two vacations a year. Apparently paycheck to paycheck stopped meaning you spent your last dollar on food before earning enough to feed yourself again. Today, people are living paycheck to paycheck* (terms and conditions apply). You look at the fine print at the bottom of the page and those people drop $7,000 into their Roth IRA every January and regularly donate to their favorite charity. That’s not unaffordable, folks! You’re affording everything!
You think people in the ‘50s were investing in a retirement index fund? You think the women making whatever Jell-O salad was in fashion at the time got fast fashion clothing delivered to their doorstep through next-day shipping? Their diets were 80% canned foods, and you’re complaining about the price of convenience. You ever shit in an outhouse? They used to do that, you know. Not only are you taking the plumbing for granted, you’re upset that the vanity doesn’t have double basins.
Americans want to have their cake and eat it too. They want everything given to them and they want to pay nothing for it. Their standards are so inflated that paying a couple hundred bucks for an annual Christmas photoshoot is just an expectation. What, I’m supposed to go without sending Christmas cards? If you’re poor, yeah! That’s just how the world works. Either you can afford to spend extra on guac at Chipotle or you can’t. If you can’t, then don’t. If you can, then what are you complaining about? No one owes you free guac. Free guac isn’t written in the Constitution. It’s just Qdoba’s business model.”
While Drunk Wisconsin uses more colorful and harsh language than I would, I don’t necessarily disagree with the sentiment.
Most of us complain about affording stuff that previous generations would consider an incredible luxury.
If we take a step back every once in a while, we’ll find that we’re better off than we think we are.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.