Life is expensive.  A few months ago, one of the springs on my garage door broke on a Sunday.  We had one car inside and one car outside.  We would need both cars on Monday.  I quickly realized it wasn’t a do-it-yourself fix, especially since I needed my car on Monday.

Luckily, two guys were able to come out that afternoon and fix everything.  That is the good part.  They replaced both springs and also had to do some other fixes.  There were also a couple of minor things they recommended I do.  They also did a small fix with the sensors that they didn’t charge me any extra for.  When all was said and done, it was over $700.

That is a huge expense.  I still have the same garage door, and even the same motor.  It needed to be done, and I paid for it.  I don’t blame the business at all.  I looked at a review website and the company’s prices are competitive, or maybe even better than average.

It took the two guys probably a little over an hour.  I can’t imagine these two young guys are making any more than $30 per hour, and that might be generous.  Their time and gas for their vehicle couldn’t have been any more than $100 out of the more than $700 bill.

But if they are only getting a small fraction of the total amount I paid, then where is all of the money going?

It would be easy to say that the company is making a huge profit, but somehow I doubt it.  The company is obviously profitable, or else it wouldn’t be a business.  We need profitable companies in this world so that they are there to serve us.  But there are many garage door repair companies in my area.  In a relatively free market, it is unlikely that a whole bunch of companies competing against each other are making extraordinary profits.

Obviously there must be other costs.  There are the costs of the parts to fix the garage door, and I believe the replacement springs weren’t cheap.  Even here though, one has to wonder why there are so many things that seem so expensive now.  How much more are the springs because of tariffs, regulations, and other taxes?

Then consider the costs associated with the employees.  If they are making $30 per hour, the actual cost to the employer may be double that.  The employer is likely paying for benefits.  We all know how expensive health insurance is.  The employer has to pay the employer’s share of payroll taxes.  The employer has to pay for unemployment insurance.  The employer also has to buy his own insurance in case one of his employees gets injured or in case someone decides to sue the company.

Here in 2018, we are supposedly in a boom.  In some ways this is correct.  There is a stock market boom.  There is somewhat of a housing boom, at least in some areas.  There is an employment boom in the sense that unemployment is low.

I know that some will say that the unemployment rate is much higher than what the government’s statistics show.  This may be the case.  But most people looking for a job today can find a job.  It just may not be a desirable job, or it may not be a job that is not worth the pay, especially if you can collect welfare instead.

Some employers are actually struggling right now because it is hard to hire good help.  If you are an employer and have a good employee or good employees that you rely on, then I suggest you give them a significant raise to make sure they stay with you.

Some will say that the current boom is built on loose money, artificially low interest rates, and massive debt.  To some extent, I agree.  I think it is a mix.  We are obviously gaining in wealth and productivity in some areas, but there are certainly many misallocations as well, where the boom is artificial.

The problem I am pointing out here though is that this isn’t really a boom for consumers.  Again, life is expensive.  It is great that most people who want to be employed are employed.  The problem is that their paycheck isn’t carrying them very far.

The middle class continues to struggle, despite the good economic numbers.  Perhaps consumer price inflation is understated.  Regardless, there is a large segment of the population that doesn’t feel the boom as much as the numbers should indicate.  They have a job and their 401k balance has been going up, but then they are close to living paycheck to paycheck with little money in the bank.

This is similar to around 2006/ 2007 when housing and stocks were booming.  Yet, many people were struggling to keep up with their bills.  They probably felt embarrassed and ashamed to a certain extent.  They probably wondered how all of these other people could afford these nice houses, but the truth is that many other people weren’t affording the nice houses.  That is one of the main reasons why foreclosures exploded.

It may sound odd to hear this, but we actually need a recession.  In the long run, if the government and central bank do not do something too drastic in response, then a recession would actually be good for middle class America.  Sure, it would be especially difficult for those who lose their jobs.  It would be tough watching your 401k balance go down if you own stocks.  It would be tough to take a pay cut.

However, there is a major upside that is missed.  Unless the Fed resorts to massive inflation (which isn’t impossible, admittedly), then there should be a reduction in consumer prices.  Maybe it would only cost $500 for that garage door fix instead of $700.

There is a reason that a recession can also be referred to as a correction.  It is a correction in the allocation of scarce resources.  It is a correction in that it is redirecting resources to their proper use in accordance with consumer demand.  It stops the resources from being funneled into the unsustainable bubbles.

Life is expensive.  Unfortunately, in order to solve that, we are going to have to get a recession to cleanse out the malinvestment.  Then we need a drastic reduction in government spending and we need for the Fed to stop inflating the money supply every time the economy turns down.  Until then, look forward to a relatively expensive life, even if you are trying to be frugal.