Insights & Advice


Is the American Dream Changing?

Time was when most Americans pointed to their home and the automobile as proof that they were “living the dream.” No one questioned those values and just about everyone worked hard to achieve those symbols of prosperity. Not anymore.

Gone are the days when people of my generation (and my Dad’s) could fill up for under a $1.00/gallon, pile the kids in the Chevy or Ford and take a trip to the country on the weekend. Recent studies that measure America’s preferences indicate some interesting trends. The percentage of 16-to-24-year-olds with a driver’s license, for example, is now below 70% for the first time in fifty years.

A study this year by the U.S. Education Fund Frontier Group argues that America’s love affair with the automobile has come to an end and that “the driving boom is over.” They found that “we drive no more miles in total today than we did in 2004 and no more per person than we did in 1996.”

The study argues that the aging of the Baby Boomers, the projected continuation of higher gas prices, a reduction in the labor force, the unwillingness to spend much time on road travel, and a peaking of demand both for vehicles and driver’s licenses has rung the death knell for autos.

Historically, Americans like my Dad drove more miles in nearly every year between the end of World War II and 2004. My generation, the Baby Boomers, did the same, driving 85% more miles each year than in 1970.It was also a time of full employment, increasing wages,  and an expanding system of roads and bridges throughout the country. The automobile was practically an object of worship, with more songs about our cars than our kids.

Since then things have changed. Gasoline has exploded in price. At the same time, the nation’s highways and infrastructure has crumbled and tolls have skyrocketed. Traffic has turned what was once a leisurely cruise through the bucolic countryside into endless delays, speed traps and detours. Many ex-urban communities have simply folded up as more Americans have moved closer to cities and public transportation. The Baby Boomers are retiring and many of them have or will be migrating to planned communities where cars have been replaced by golf carts and community vans.

As the price tag for cars has climbed, with the average vehicle costing $30-31,000, more and more families of median income have been priced out of the market. Insurance has risen as well and between car payments and premiums, many young drivers find public transportation a far more reasonable alternative.

Of course, the auto industry rejects the entire concept. They argue that it is simply the recession and the higher costs that burden potential buyers that are responsible for these grim statistics. This new generation, the Millennials, defined as people born between 1983-2000, are the largest segment of the present driving generation.

This generation appears to be growing up at a slower rate than past generations. They are living with their parents longer (mostly out of economic necessity), postponing the purchase of large ticket items, whether it be a house or a car, and seem perfectly satisfied with taking the bus, subway or train while communicating with their peers via the social network.

Of course it is this same generation that is saddled with enormous college debt, the worst recession since the Great Depression and a salary structure that has them earning less than their parent’s generation.

I suspect the debate on how the new generation will be living the dream will have to wait until the economy comes back, unemployment drops and our young people can actually come up for air and enjoy their working lives.  In the meantime, I would not worry too much over the fate of the automobile. Us old-timers still love our cars and seem willing to pay whatever it costs for the latest model and gadget.

Posted in A Few Dollars More, Macroeconomics