Thursday, August 10, 2017

COTW: Why They Voted for Trump

According to Edward Luttwak, political scientist and historian writing an article in the Times Literary Supplement, a major reason for the election of the political disaster known as Donald Trump is the banal fact that more middle-class 'Mericans can no longer afford to buy a new car.  In US society, cars are a necessity--you need one to get to work and buy food in most places.  People who can use convenient mass transit in urban areas for these life-sustaining activities are lucky.  But cars are also an emblem of middle-class affluence.  Cars are becoming so expensive, and disposable incomes shrinking so much that average people have to forgo the "new car" smell of which they are so fond. That sad fact upsets them enough to vote against their economic interests for a scamming billionaire posing as one of them.  Look at this chart:

The index in blue shows that a prudent, median income household can only afford to pay 61.7% of the price of a new car.  Back in 2016 when the polls were open, they could only buy half a new car!  Which means persons wanting to purchase a new car must incur more consumer debt.  The average length of time to payoff a car loan is now 68 months, a record high.  The average monthly payment is over $500. Such large expenditure for a depreciating asset is not smart consumption. Personal finance advisers recommend the 20-4-10 rule to insure a car purchase does not overextend an owner (20% down, 4 year term, monthly payment > 10% of gross income.  This rule is the basis of the affordability index in the chart.    But owning a car is more about perceived social status than smart consumption.  Just ask Donald Trump.