The Debt Crisis That Wasn’t: The New Normal That’s Spooking Consumers

Featured Image

If you believe the headlines, the world narrowly avoided a disaster when Congress agreed to raise the limit on the nation’s indebtedness at the eleventh hour. In his victory-lap speech, President Biden assured us that “The stakes couldn’t have been higher.” 

As someone who studies consumer behaviors and preferences for the retail industry, when the deal was struck, and a near miss with apocalypse declared, I couldn’t help thinking, Really? Among the 431 House members who cast a vote, it was a landslide — 73% voted yes. The same thing happened in the Senate — 63 in favor versus 36 against.

As an armchair economist, there was nothing narrow about the vote and nothing particularly surprising about the outcome. Default was never a possibility because allowing such a thing to happen would have benefitted none of us, regardless of politics. According to Betsey Stevenson, an economics professor, and former Council of Economic Advisers member, it was an act of puffery, a “manufactured” crisis.

More than three years since the onset of the pandemic, it’s starting to feel like an atmosphere of fear, with an unending cavalcade of real and ginned-up crises, is the new normal. Inflation is out of control… until it isn’t. Consumers are holding on to their wallets, hurting retail sales… except consumer spending is up. Wages aren’t keeping pace with inflation… but they are catching up, and jobs are plentiful. All this against a backdrop of doom and gloom about climate change and the future of the planet.

So, is it any wonder that most of us are anxious, especially about money? That’s the finding of a recent CNBC Financial Confidence Survey: 70% of us feel financially stressed. And no wonder a Gallup poll conducted in February found a record percentage of US adults diagnosed with depression, up ten percentage points from 2015. As all of these crises seem to portend a dismal future, small wonder that Gallup found those age 18 to 44 have “significantly greater depression diagnosis rates in their lifetime.”


What comes next?


Consulting giant McKinsey offers some hint of generational change in a survey conducted in Brazil, where Generation Z (loosely, those born from 1995 to 2010) makes up 20 percent of the population. Gen Z, says McKinsey, “are true digital natives” growing up with the Internet.

The McKinsey study dubbed Gen Z the “True Gen,” in contrast with Millennials — the “Me Generation” that grew up during a period of economic prosperity and is “more idealistic, more confrontational.” According to McKinsey, “Gen Zers value individual expression and avoid labels. They mobilize themselves for a variety of causes. … They make decisions and relate to institutions in a highly analytical and pragmatic way.”

The implications for consumer-facing companies could be profound in the years to come. Most intriguingly, “For Gen Z, consumption means having access to products or services, not necessarily owning them. As access becomes the new form of consumption, unlimited access to goods and services (such as car-riding services, video streaming, and subscriptions) creates value. Products become services, and services connect consumers.”

While the rest of us are mesmerized by apocalyptic headlines and manufactured crises, it seems the next generation in line to dominate the consumer landscape is learning to adapt. Perhaps there’s a lesson for all of us here….that is: beginning with not obsessing about the crises we can’t control and focusing on solving the problems we can. Focus.

Greg Petro

Looking for more info? Complete the form below.