Do we know where the next boom is coming from?

Why we need to tackle our economic house of cards
Bill Norton

I recently reread Paul Krugman’s 1994 book, “The Age of Diminished Expectations. He was only a college professor then, and it reads like one of his lectures, but there are some valid themes.

He never foresaw the post-tech wreck, the dot-com boom, nor did he forecast the Great Recession of 2008-09. He did outline three scenarios in his conclusion: a happy ending, a hard landing and drift. In this century, we have had some of each. I plan to look up some of his current writings and see what he says about future debt levels. From his previous viewpoint, they are in the stratosphere far beyond anything he could contemplate.

Writing this in the second quarter of 2019, the rising entitlements, $1 trillion-plus annual deficits and GDP barely covering inflation makes for a fairly anemic picture. The only way to break out of the malaise is to goose up productivity – back to 3 to 4% annual gains. But the path to achieve that is far from clear.

The second big political issue is income disparity. The very rich are doing very well. The rich and maybe the upper-middle class are holding their own. Everyone else feels an erosion of their buying power and quality of life. Ongoing global competition is going to continue this pattern.

China has essentially caught up to the U.S. (in terms of purchasing power parity) and will surpass us in the coming years. So the U.S. should rethink its role in the global arena, something that no one in Washington has a clue about.

In New Hampshire, we are seeing new presidential candidates every week. It is more than a year and a half to the presidential election, and almost anything can happen. But we on Main Street should not be looking to Washington to figure this out. Even if they liked each other and worked cooperatively (which they don’t), they do not have a clue. So, we need to attend to our own knitting here in Concord. Alas, the issues are the same – growing needs for social services, education, healthcare, with little cash resources to pay for expanded services. The other side of that coin is that throwing more money at these public goods does not guarantee better results.

The spanner in the works is most likely to be healthcare. Currently at 18% of GDP and growing, its trajectory is unsustainable. Yes, there is inefficiency in our healthcare world, but even if we wrung 80% of that out, would the savings cover the rising demographic and social needs?

What triggered these musings was a newspaper story concluding that a livable wage is the best antidepressant, the best stress reliever and the best blood pressure treatment. (In real estate, home prices have been rising too much relative to income for many would-be buyers to keep pace since 2011, the Great Recession.) The U.S. median house price has risen 55% while wages are up only 18%. A month’s mortgage payment on a typical house today is $1,136, up from $639 in 2011.

The New Hampshire House passed a $12 minimum wage bill (higher than Vermont). Its fate is still to be determined. If it comes out of the Senate, will the governor sign it? It is a big jump, but is it enough? At $12 an hour, full-time equals 2,000 hours per year, which equates to $24,000. Enough for a single person perhaps, but two adults? Add a kid or two? This is why we see people stitching together two or three jobs and still barely getting by.

This does not impact just the poorest folks. College graduates with student loans are stymied. Bernie Sanders and others would like to just pay off those loans, but where will the dollars come from? More national debt? We certainly seem to have built quite a house of cards.

In the past, we counted on the next “boom” to boost us up and out. In the ‘40s and ‘50s it was defense contracting, in the ‘60s and ‘70s, electronics, in the ‘80s, computers, in the ‘90s, software, tech apps, and then the dot-com boom. In this century, it was rapidly rising house values and “financialization.”

The next big boom is not apparent, we need to figure that out. This time we will have to earn it (the old-fashioned way, as the TV ad used to say), which brings us back to increasing productivity.

As we enter political funny season, our elected leaders need to be looking over the horizon and be thinking about these big (i.e. expensive) issues and how we can get on a path to deal with them so our children and grandchildren have a quality-of-life worth pursuing. The housing market will correct, but healthcare and post-secondary education seem to be much larger and more complex.

Bill Norton, president of Norton Asset Management and an honorary member of AIANH, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA). He can be reached at

Categories: Real Estate