News & Views from 465 California Street

No Pain, No Gain

Clint Reilly
Nov
25
2008

History is about to take a whole new generation of Americans to the woodshed. Hopefully, the old-fashioned backyard beating will leave a lasting impression about the virtues of hard work, saving money and sacrifice for others, values that made the United States the world’s greatest country in the first place.

My parents’ generation – those now in their 80’s – developed values that are as scarce today as material wealth was during the 1930s.

My parents both lived through the Great Depression, as did my grandparents. The grave lifestyle and dire conditions shaped their attitudes about both career and money.

A good job was treasured. During the 1930s, both of my grandfathers lost their jobs and never really regained their economic footing for the rest of their lives.

My mother particularly understood the importance of my dad’s job as a milk deliveryman for Berkeley Farms Creamery and later as a driver for Dreyer’s Ice Cream. In an era in which 25% were unemployed, financial calamity was always a fearsome possibility.

This had two effects on my parents. First, even though they were not deprived, they feared deprivation. Second, they stretched every dollar to provide maximum benefit for their family.

“Money doesn’t grow on trees,” was my father’s favorite admonition. My mother made seven totally different dishes with ground beef and we kids thought we were eating a banquet every night. My mother went to work part time. How else could they have raised 10 children on a milkman’s salary while buying a house and sending their kids to Catholic schools?

I remember my grandmother Dora Stone of Berkeley. She grew up at the turn of the century in Soulsbyville in the Gold Country – the daughter of a hard pick miner who immigrated to California from Cornwall, England. Her father – my great grandfather – died in Richmond of black lung disease.

She married my grandfather, Clinton Stone, and raised four children during the Depression. When my grandfather died in the early 1950’s, Dora was forced to find a job. She worked and shared her lean salary with her children and grandchildren until she passed away in 1984. Ironically, she personified hard work and frugality but emanated a generous glow that inspired everyone in her family.

Both my parents and my grandmother believed that nothing worth having could be gained without sacrifice.

Perhaps subsequent generations of Americans are about to learn that hard truth.

Today, we are a nation of conspicuous consumers drowning in our own debt. On average, each household has only $300 in savings but $118,000 in debt. We have $51 trillion in personal, corporate and government debt. Our consumption has been financed by leveraging homes and other assets – not by income or savings.

Now that home values have plummeted 40% in the Bay Area and even more elsewhere, the nation is gripped by debt panic.

For us to put our personal financial houses in order, we need to stop spending on new clothes, televisions, cars and vacations, and pay off our credit cards and second mortgages.

Unfortunately, consumer spending accounts for more than 70% of our GDP. Just think about that! The U.S. economy depends on consumption for growth. Therefore, if Americans do the right thing and pay down debt, they will trigger a prolonged recession that will bring bruising hardship to households throughout the country.

But the certain economic contraction on the horizon may be a blessing in disguise.

First, it may create the rationale for President Obama to launch a $1 trillion program to restore America’s decaying roads, highways, bridges, transit systems, sewage systems, and schools – not because of a renewed commitment to infrastructure, but in the name of job creation and money circulation.

If we can find $700 billion to bail out the financial system, we can certainly allocate money to repair, rebuild and innovate.

Second, the urgent need to pay down debt will reinforce the very values that led our nation to global preeminence – hard work, saving money and sacrifice for a greater future good.

No pain, no gain.

Comments (17)

  • my, it’s refreshing to hear someone tell it like it is. sometimes you just have to take your medicine, right? maybe instead of so much fancy financial footwork by the fed and the treasury we should actually have to suffer the consequences of our reckless behavior?

    if americans never have to reap what they sow, how will they ever learn?

    Posted by: Connie | November 25th, 2008 at 11:33 am

  • Clint,
    We were raised by the same generation. We have some remarkable similarities. My parents had 8 kids, and never finished their college education because of the depression. They had to work but their kids all went to Catholic schools and completed college and advanced degrees in some cases. My father was raised in Smartsville. His mother was the school principal in Marysville, his father a shopkeeper. My mother was raised in SF – her father was a policeman who ended up as a Captain in the PD. Everything they acquired they worked for and they all died with no debts. “Money doesn’t grow on trees” was also a mantra in our house.

    Your comments are right on.

    Best regards, Dennis

    Posted by: Dennis McQuaid | November 25th, 2008 at 11:44 am

  • No doubt the sense of duty coming out of the WWII generation and subsequent war-torn generations motivated those affected to seek a better life, both economic and social.

    In Generation X and Y’s era, the sense of duty is lacking due to the need for personal, “instant gratification” consumption. I think the mainstream media is partly responsible for this lifestyle.

    The allure of “bling-bling” without values has created this want it now culture. How can this be reversed? Pain.

    Hardship teaches character. Just look at generations that suffered from the effects of war and economic hardship. They were extremely motivated to improve their lot in life. They also understood that their neighbor had to be considered in their life equation as well, and it was those “capitalism with a sense of community” values that contributed to consistent, gritty growth and one of it’s positive by-products was an interconnected society.

    President-Elect Obama is about to embark on a super Public Works Program to create new jobs and spur economic activity. His administration will take a page out of the FDR playbook that gave the Bay Area the Bay Bridge.

    http://en.wikipedia.org/wiki/Work_Projects_Administration

    Not only does public works projects like these create employment, but they also provide mechanisms to connect cities and People.

    Posted by: Don Nguyen | November 25th, 2008 at 12:32 pm

  • Your column gets the Blue Ribbon award for the most right-on look at the future. I love the personal stories.

    The only problem is, your column is probably about 6 to 9 months ahead of its time. I think we still need to get hammered with more “pain” until we are ready for “gain”.

    I think the coming meltdown is inevitable. I believe we’re going to go through all the things that people did back in the 1930′s. Maybe even worse. I think it’s tragic because I ask myself “are we up to it?” Can we really make it through a meat grinder like 1929?

    As a nation, we’re so much weaker than we were in 1928. That’s what worries me. I have friends who are losing everything. I mean everything, their houses, their jobs their lifestyles. I’m really concerned about them, especially with the holidays coming up.

    That’s the worst part about the government we’ve had for the past 8 years. They KNEW what was coming. They could have done a much better job to organize people, prepare rather than rob the gullible American population into a Hologram Wealth ponzi scheme.

    Survival, baby.

    Posted by: Cliss | November 25th, 2008 at 12:58 pm

  • A wonderful column. If it’s any consolation (it won’t be), studies show that the level of happiness in poorer societies is higher than in those where the consumption ethic lashes people to acquire ever more material possessions. Simplify, said the philosopher. Complicate, countered the age. Most of us went with the age. Keep up with the Joneses? No way, we had to pass them. More square footage in the house, a bigger SUV. And bling? Yes, that was the frosting on the cake.

    Posted by: Jerry Carroll | November 25th, 2008 at 1:33 pm

  • No Pain, No Gain was the title that caught my eye,but your essay didn’t follow. You advocate a philosophy of thrift, but promote a promiscuous expenditure of of federal funds, taxpayer funds, in the trillions. Your grandparents would not approve!

    Your ultimate paragraph promotes the idea of paying down the debt while previously urging expenditures that are so large they exceed our imagination.

    It is a certain mess when you jam your toast on both sides, but that is to be expected when you mistakenly state that consumption is the source for growth. Anyone can consume, even without money or assets, as the current debacle proves. No gain with that attitude, but great pain. Your grandparents would agree with that outcome as you stated they believed in thrift, hard work and sacrifice,and we have arrived at the abyss neglecting those ideals.

    Production requires hard work, sacrifice, risk ideals which your grandparents extolled, and when we pull up our ideals and produce products that are wanted we will again prosper, and not by building bridges to satisfy a political clamor. That only moves the money from one taxpayer to benefit another and does not add to the nation’s wealth.

    Posted by: Ronald G. | November 25th, 2008 at 1:59 pm

  • Clint-
    You said it all. Thanks for the straight talk that we need to heed!
    Best,
    Larry

    Posted by: Larry Simi | November 25th, 2008 at 3:11 pm

  • $700 billion, $2 trillion, $8 gazillion — it’s all just delaying the inevitable. The party’s over friends. Hope you enjoyed American dominance while it lasted.

    Posted by: Gustavo | November 25th, 2008 at 4:39 pm

  • One of your best columns ever…

    Hit the topic right on the head – but you usually do. This one struck me right where it counts though and I wanted to compliment you.

    W. Radcliffe
    Palo Alto

    Posted by: W.Radcliffe | November 25th, 2008 at 6:49 pm

  • Greetings Mr, Reilly.
    I just wanted to thank for your logic and good reasoning, and your
    well thought out articles.

    Samuel

    Posted by: Samuel L. | November 25th, 2008 at 11:07 pm

  • 1929 stock market crash harkened the Great Depression era. FDR’s “New Deal” began the process of healing and calmed some of the hysteria. However it wasn’t until the US entry into WW II that brought our nation out of the Great Depression.

    My hope is that while Obama invests in our infrastructure that he knows that this alone will not cure our economic ills. We must incent and create an environment of investment in new technologies that makes it possible for US companies to develop these products. Our greatest need is re-engineering our power grid and developing real technologies that will save our planet. In so doing we can lead the world with real products and solutions…and pay for the bridges and infrastructure that has been left to rot for far too long. This is this era’s WW II.

    Posted by: Melinda Maginn | November 25th, 2008 at 11:46 pm

  • What you should have written was “…. create the rational for ‘THAN” President Obama. I know his fans like the sound but, as an educated man I’m sure you know he won’t be President Obama, until Jan 20th.

    Mr. Obama’s ancestors apparently didn’t have the same work ethic as yours for he wants to “give” tax breaks to 95% of tax payers (?) which includes 40% of those people who pay no taxes. This means, every 4 out of 10 are going to get something for nothing. If you actually believe that 40% is going to work for nothing on all of that infrastructure, I have a bridge I’ll sell you.

    This country is failing because the very liberal minded like Barack Obama never learned the work ethic of your parents, grandparents and great grandparents.

    But, that’s just my opinion

    Grandpa Jack

    Posted by: Grandpa Jack | November 26th, 2008 at 7:23 am

  • Mr. Reilly – I really enjoy your columns you post in the San Jose Mercury News. I wonder if you have an email distribution list to which you could add me or some way I could sign up to receive your column? By the way, in your “No Pain, No Gain” column, you noted the irony I saw expressed eloquently in a political cartoon in the 1980s: The title was “How to Fix the Economy” and had two panels: one panel said “Save!” and you can guess that the other panel said “Spend!” One thing you said in your column is something I have never understood about our economy. You say “The US economy depends on consumption for growth.” But why does the economy always have to grow? I understand that we don’t want large downward swings, but why do we expect and try to drive large growth? When the economy is reasonably healthy, why don’t we want stability? I just thought you might know a commonsense answer. Regards –

    – Amy Pearl

    Posted by: Amy P. | November 26th, 2008 at 8:52 am

  • Good article.

    Two rules that almost certainly will insure financial stability for a family.

    1. Never buy a car if you can’t pay cash.
    2. Never carry credit card debt.

    Posted by: B.Morgan | November 26th, 2008 at 10:57 am

  • Dear Mr. Reilly,

    After my husband read the paper first, he pointed out your thoughtful column to me. You hit the proverbial nail about “no pain, no gain” on the head!

    We, too, have been baffled over today’s common and preferred methods of (un)balancing household budgets. While my husband went through difficult times in this country, I experienced the war and post-war period in Europe. In essence, our background is much like your parents’, and it shaped our view of employment, saving, and spending–and other areas of life. Today’s generation considers us old-fashioned. However, the prolonged economic recession on the horizon, with all the inherent hardships, may open their eyes yet. Let’s hope that your excellent column was especially noted by the current generation, since they are about to get acquainted with the symbolic woodshed. For them, that will be an entirely new experience, since they have been accustomed to always getting what they want.

    My husband and I appreciated your insightful comments and we enjoyed the glimpse of your grandparents’ and parents’ lives.

    Sincerely,

    G. Riggle
    Brentwood

    Posted by: Gisele | November 29th, 2008 at 2:09 pm

  • Clint – I appreciate your thoughts. They are interesting to me. My wife and I are near 80, and have much the same attitude about about frugality as you.

    My wife’s financial management of the ” bacon” I brought home from work
    is responsible for the financial well being we now enjoy in retirement.

    Keep up the good work. R. Smith Los Altos, CA

    Posted by: Roy | November 30th, 2008 at 10:54 am

  • Clint,

    I am a “fiscal conservative” liberal. I enjoyed your column “No Pain, No Gain” that appeared in the 11/25/08 San Jose Mercury News. I second your “virtues of hard work, saving money and sacrifice for others”.

    However, it is going to require a cultural shift for many, away from “easy money” obtained from “easy credit”. Additionally, it is going to rrequire a generational shift perspective, as each generation tries to make life easier for the next generation, e.g., here is a new car for graduation, instead of “you have to earn and pay for your own vehicle, along with insurance, fuel, etc.”

    Gerard W.

    Posted by: Gerard W. | December 1st, 2008 at 11:07 am

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