For the first time ever, the Nasdaq hit the 8,000 mark on Monday, August 27, 2018.  Two days later, the revised GDP estimates for the second quarter came in at 4.2%.  With unemployment low and consumer price inflation seemingly in check, the good times are here.  Or, the good times are here at least according to the statistics.

We don’t know what’s next.  Maybe the Nasdaq will hit 9,000 before the year is over.  Maybe it will hit 10,000 next year.  Maybe the Dow will go to 30,000.  The S&P 500 is just a couple of good days away from the 3,000 mark.

In the tech bubble of the late 1990s and early 2000, the Nasdaq peaked at just over 5,000 in March 2000.  It plunged to about 1,200 by 2002.  Then it recovered a little bit up until to 2007 before falling again to below 1,400 in the spring of 2009.  The return has been staggering for the last 9 and a half years, as it has gone up almost 6 fold since that time.

If you had invested all of your money at the very bottom in February or March of 2009 in a Nasdaq index fund, then you would have done incredibly well.

On the GDP front, the revised second quarter GDP number is higher than it has been for almost four years.  Of course, it’s important to remember that GDP was above 5% for the first quarter of 2006, and we know how that turned out a couple of years later.

In other words, no matter how good things look right now, they can turn around quickly. Sometimes the numbers lie.

This is somewhat anecdotal, but several people I know or have had communication with are not doing that great.  Most everyone I know who wants to be employed is employed.  So they are making money.  The problem is that they don’t really have any money.

I have heard from several people who essentially live paycheck to paycheck.  Their savings consist of a 401k plan and, for some, equity in their place of residence.  In terms of money in the bank, there is almost none. There is just enough to pay the next round of bills.

Now, I know the common objections.  Yes, they all have smartphones.  Most of them will go out to eat, at least on occasion.  They don’t need all of the stuff that they have.  At the same time, I am not speaking of shopaholics.  If they really buckled down, they could probably save up $1,000 over the course of 6 months to a year.  But they just don’t want to give up their smartphones and eat rice and beans for dinner every night.

While we all have to take responsibility for our own actions, I find it rather ridiculous when conservatives and libertarians put an emphasis on all of the luxuries (such as smartphones) as the reason that many people are struggling.  I get especially irritated when I hear libertarians emphasize this.

Sure, someone could give up their smartphone, although maybe they do use it for some work purposes. If you don’t have any cell phone, then maybe you can save $80 per month, or whatever it is.  After a year, maybe you can get up to a $1,000 cushion in your checking account.  Is that really something to get excited about?  I think I would rather take my chances with my smartphone and at least enjoy life a little.

It shouldn’t be this way though.  We should be able to enjoy luxuries that didn’t exist decades ago without retracting our living standards in other places.  But this is not happening.  People are struggling, and many of them are far from frivolous in their spending habits.

This is because of big government.  At all levels (federal, state, and local), government is spending (misallocating) about 40% of our wealth.  If you add the burdensome regulations on top of this, probably over half of our money is taken away from us in some fashion.  I understand that some of it comes back to us in the form of various “benefits”, but most of the “benefits” are not what we would have spent our own money on.

Even though GDP is doing better and the stock market is roaring, the experience of the average middle class American is not one of great prosperity.  Their house value may be up if they own one. For those who don’t own, they are getting locked out of the market for now.

And maybe the 401k balances are going up, but we don’t know how long this will last.  Most are probably not well diversified in a setup such as the permanent portfolio.  And the 401k does little good if you can’t easily access the money to help pay your bills.

We have a government problem.  It is way too big. This is why we need a correction. We actually need some price deflation because our wages aren’t keeping up with prices.  Any correction is initially going to be painful for almost everyone.  But if it forces some kind of reduction in government, then it is ultimately what we need.

We need a drastic reduction in the size and scope of government at all levels.  This is how we can vastly improve our living standards.  We should be able to have our smartphones and still save money.  We should be able to get a $5 coffee if that is what makes us happy, without having to worry about paying the next electric bill.

For libertarians, we should not squander this opportunity.  When someone says they are struggling, you don’t need to lecture them on their owning a smartphone or their drinking of a $5 cup of coffee.  It is an opportunity to sell them a message of liberty and drastically smaller government.

People shouldn’t use big government as an excuse not to better themselves.  But at the same time, everyone needs to be made aware of the main reason that middle class America is struggling to get by. It isn’t the little luxuries. It is a problem of big government.