Middle Class Squeeze

Indeed, this is one of the most striking things when visiting the USA from Britain, where we are cramped together, partly by geography but mainly by political corruption wearing the guise of environmental protection

Apparently, Samuelson doesn't know why restaurants serve large portions. The actual cost of the food is one of their lower costs. Large portions convince customers that they're getting value for their money and increasing the portion size is a relatively low-cost way of justifying higher prices.

Yeah, often I think the "middle-class squeeze" is a bunch of dog-squeeze, but there might be something to be said for the "single and middle-class squeeze". Without two-incomes in a household few Americans would be able to afford these overwrought homes. As a single guy I'd be super-happy with one of those 900-some sq. ft. homes of the 1950s. So long as there's room for my kegerator.

Is this increase in size (and presumably quality) accounted for in the statistics showing the big runup in the price of a home?

Masestro -- it depends on the data you use. This is the reseason the CPI uses the "rental equivalence" approach, to adjust for this.
The census bureau also publishes a "same home" price index that captures and adjust for this.
But the data by the various private sources, like the Realtor associations does not adjust for changes in quality or size.

My question for the quote given here is what do you mean by the average home. Do you mean the averge newly constructed home, or do you mean the entire housing stock. I suspect the quote is for the averge newly constructed home. But since housing is a very long lived durable, I suspect the averge of the entire stock of homes has increased much less.

Two things I've noticed - houses getting bigger and the kids not moving out. I wonder if the two are related and I'm curious to see how this plays out over the next couple of decades.

Apparently, Samuelson doesn't know why restaurants serve large portions. The actual cost of the food is one of their lower costs. Large portions convince customers that they're getting value for their money and increasing the portion size is a relatively low-cost way of justifying higher prices.

My question would be this: doesn't the average not tell us much of anything? In any population, if the the top end purchases extravagently expensive houses, the average is going to go up. The average could go up even if the middle group of that population is purchasing less expensive houses than previously. It seems to me that looking at the average doesn't necessarily tell us anything about the middle of that population. Am I wrong?

(*) I'm not ignoring spencer's comment re: what does "average home" mean. I'm reusing whatever definition Arnold used.

I just checked with the census data.
http://www.census.gov/hhes/www/housing/ahs/ahs03/tab218.htm

this shows that the median size of existing homes in the US is 1,755 sq feet compared to Samuelsons quote of 2,330 .
so as I suspected he is quoting the size of new homes not the size of an average home.
there are about 106 million housing units in the US, and the median age is 1970.

I did not check to see how the size and median age have changed over the year. but as I suspected the Samuleson data is obviously only for new homes built. The average size of a new home is some 30% larger then the existing stock.
Moreover, if we build some 1 to 2 million houses every year the implies that the stock is growing at something like 1% to 2%.

But this clearly shows that the conclusion that you drew from the article about the average size of new homes is growing very rapidly is incorrect. the census data implies that the average size of the existing housing stock may be only growing about 1% anually.

Moreover, if you talk to Pulte, Centex, Kaufman & Broad -- the major national homebuilders -- you see that they are building for the baby boomers retirment market and that the individual that does not already have substantial home equity to make the downpayment are prices out of the new home market.

Another interesting item is that he points out that home ownership is at a record 69% but then claims the tax benefits go more to the well-to-do. Sure they do, but still, 7 out of 10 people are getting these benefits. (Not accounting for which homes are paid off or not -- but if the less well-to-do have paid off their homes then they can really cash in on the sales break.)

I think Samuelson is right to scold Americans for being so extravagant. Why? Because they should be saving for retirement instead. They don't need to save so much for retirement because they're planning to live off the government, that is, off the tax dollars of young and unborn generations.

On the plus side, when those young and unborn generations get enough voting power to stop themselves being bled to death by elderly welfare queens, when the Social Security benefit cuts start kicking in, maybe some of those by-then-elderly people will have to start partitioning off parts of their oversized houses and turning them into apartments where miserable exploited young people like me can live.

"Its clear, that only the RICH are buying these mega McMansions! The middle class is being squeezed ... ignore that man over there, it is I, Oz the great and powerful who has spoken."

The relevant statistic here is probably "square feet per pound". With my two big dogs, I am probably worse off by this statistic than my parents were with two small kids and two pint-sized dogs in the 70s.

Y'all have to know that the printing presses are runnung faster than there is any place for "money" to go.

So--- store it in land and real property - what else?

As I think about it, all that Gold action seems logical.

Dewey,

I really don't get the fascination with gold. In early history it met all the requirements of "money", but it just doesn't anymore. Imagine carrying around enough gold to buy a modern home. I think that if the world ever reverts to a situation in which gold has value as money, then a better investment for such a time would be weapons, ammunition, and batteries.

Ok Randy.

But "Money" will soon ( remember the Emporer's clothes?) be worth nothing. (Germany 192?)

I have a problem with Money as a measurement and money as wealth. Maybe you can trigger a discussion which wil help me.

If I in 1939 (first man job) had saved $10 it would have been 10 hours of work. Today, if I take that $10 to market it gets me little.

These blogs inevitably anchor on raising 1.(interest) to a power of years which is a mathematical exercise which seems to me to have nothing to do with combining land and labor to create - - - - a house?

When will someone start at the beginning - Land, Labor and tools?

Oh well, that will just lead to "distribution", and "socialism" and "capitalism".

There must be an answer someplace or is the ultimate economic system War ? Discouraging to an aging man.

PS I think that if you have a stash of gold when the new money gets printed you will get you share of it.

[quote]I think Samuelson is right to scold Americans for being so extravagant. Why? Because they should be saving for retirement instead. They don't need to save so much for retirement because they're planning to live off the government, that is, off the tax dollars of young and unborn generations.[/quote]

Buying a home is just an alternative form of retirement savings...if you plan to stay in it for the entire 30 years of your mortgage. However, I like how Arnold points out the hypocrisy with liberals: they complain about how the middle-class is feeling the crunch, yet the middle class is buying bigger homes, bigger and more expensive cars, and doing a lot more spending than ever before. If anything, the middle-class squeeze is self-inflicted and not a product of bad government policy.

Dewey,

The ultimate economic system is belief. Money has value because we believe it does. Those who do not believe that money has value often do turn to war, just as you suggest. Perhaps that is the nature of the threat posed by those who decry the desire for wealth. What is their proposed alternative? They don't believe in money. What do they believe in? Because believe me, they will use force to obtain it.

Samuelson has no right to question the preferences of Americans ... he has not the intellect ...

First, Americans do not plan to retire, they plan to expire ... why save for that brief moment that one cannot forecast with any speficity ...

Second, when will intellectials simply accept that Americans are the smartest humans that ever graced the planet ... have faith in their choices and wisdom ... it has never failed them ... the average American makes only rational choices