Net Standard of Living

Some days won't end ever
Some days pass on by
I'll be working here forever
At least until I die
--Huey Lewis and the News

A family borrows heavily to elevate lifestyle today. Jumbo mortgage. Multiple car loans. Big credit card bills. Student loan debt.

"Look at our standard of living," the family proclaims. Big house. A garage full of cars. Lots of stuff. Vacations. "We are prosperous."

Their prosperity is an illusion, of course. The family's standard of living has not been funded from its own production. Instead, it has been made possible by borrowing resources produced by others. In the future, the family will be working for others rather than for themselves. Unless future productivity is high enough to permit them to maintain their profligate lifestyles while paying off creditors, the family members will have to reduce their future consumption in order to pay their bills.

To correctly assess degree of present prosperity, the extent to which today's consumption comes from borrowed production must be taken into account. If this is done, then many would be surprised to learn how low their net standard of living is.

The family of the United States would be particularly surprised.