Societal legends are born out of challenging times. The Great Recession bore out not only the difficulties of American capitalism, but provided a myth among millennials of living through uniquely bad times. The current crop of young adults has known the comfort and ease their parents’ work afforded them. A serious recession is something for which most in that age cohort have done little planning. The unsustainability of work-from-home, low-output and overpaid jobs, massive student loan debts accumulated for prestige, and the effects of the pandemic will come to bear soon. For many young people who have known nothing but relative ease, the coming years will be a harsh reality check.
Many under-40s seemed to enjoy a “Goldilocks” view of the American economy. Any major pressure — from 9/11, to the 2008 financial crash, to massive money printing, to the pandemic — appeared to be solvable, for the most part, through a combination of economic stimulus spending and smoke and mirrors at the Federal Reserve. While each of the above came with its own economic pain, a low-inflation, moderate-growth future appeared inevitable for millennials and Generation Z — especially for those with a college education. However, this type of economic growth cannot remain forever. The current runaway inflation shows just the tip of the iceberg of federal irresponsibility, which we are already paying for as a massive unlevied tax.
The U.S. will tumble into a full-blown recession in 2023 as inflation soars, 70 percent of economists predict. The past two years are a reminder that economic policy has consequences. The pandemic ushered in full-force Keynesian economics. The Fed grew the money supply by a whopping 42 percent in 2020 and 2021, while keeping interest rates low. Trillions of dollars in emergency pandemic funding, capped by President Biden’s 2021 American Rescue Plan, saturated the economy with cheap dollars.
At first, it appeared that the rapid growth of government spending, money printing and federal power that ballooned during the pandemic would aid white-collar Americans. Being able to work from home or receive enhanced unemployment was an extension of the Goldilocks fallacy. Even the inflationary proposed partial forgiveness of student loan debt tracks along the same general benefit that college-educated young people derived from the pandemic. But just as 2008 burst their parents’ dream of real estate empires, so will 2022 or 2023 tear apart the uniquely advantageous position that young, upper-middle class Americans currently enjoy.
When the reckoning comes, it will be especially harsh on millennials and Gen Zers, who will be left without the safety net to which they have grown accustomed. The white-collar lifestyle of $14 margaritas, DoorDash and their parents subsidizing a tiny yet expensive apartment in New York City, Washington or San Francisco is not sustainable for most families during a recession. This is not to say that a young person can’t enjoy a night out with friends or an expensive avocado toast every once in a while. However, the lack of foresight shown by many in the youngest two generations is unique in recent history.
All hope is not lost for young people; after all, some have recession-resistant jobs or have been responsible with their money. However, that won’t be the case for most. A pre-pandemic survey found most Gen Zers have less than $1,000 in their bank accounts, and almost half have nothing at all. The 22.5 million young people under 35 who attended college carry an average of $28,000 in student loan debt. Millennials also carry over $27,000 in average non-mortgage debt.
Spending habits among the young are heavier on convenience, something that will come crashing down when the next recession hits. Almost three-quarters of millennials and 65 percent of Generation Z live paycheck to paycheck. Rapidly increasing rental and mortgage costs and the overall pressure of inflation will be the coup de grace of a 1970s-esque stagflation spiral. The last two decades have allowed for a false understanding of cost-of-living expenses that is unsustainable.
At the same time, the hope of working from home indefinitely will begin to dry up. When the recession hits, employers will prioritize essential and practical jobs over self-important ones. Layoffs will ensue and other positions will die through attrition. Working from home and demanding large salaries for relatively easy work will be increasingly difficult.
Just as the lean Carter presidency years created a generation of conservative leaders, President Biden is looking at a similar fate. Biden declared that he wants to stand out in history. Young people may experience a moment similar to one that their parents did in the 1980s; they can double down on failure under Biden, or entertain voting for a young, energetic and competent Republican.
And for those who are currently privileged, there will be a chance to understand a crucial lesson: The laws of economics are real. Efforts by Democrats to ignore them may cause voters to abandon the party for the next generation, and with good cause.