Wednesday, December 20, 2006

Econ-Atrocity: The High Cost of the Holidays

Econ-Atrocity: The High Cost of the Holidays
By Helen Scharber, CPE Staff Economist
Dec. 21, 2006

Ahh, the holidays. So full of joy, laughter, good cheer… and contradictions. The holidays are all about spending time with loved ones. Or are they all about finding the perfect gift? They are a time of relaxation and spirituality. Or perhaps a time of stress and consumerism? According to a 2005 poll by the Center for a New American Dream, more than three in four Americans (78%) wished that holidays were less materialistic, yet shoppers around the country planned to spend an average of $907 on gifts this holiday season. Sixty percent of people polled anticipated spending less this year than last, but according to the National Retail Federation, holiday retail sales were forecasted to rise five percent to $457.4 billion. As Howard Dvorkin, founder of Consolidated Credit Counseling Services, Inc. (CCCS), observes, “It seems that consumers are trying to be more conservative with spending this year over last, but many of the best laid plans fall through when the pressures of advertisers and unrealistic holiday expectations hit a fever pitch of season overload.” The fast pace and high cost of the holidays can seem to be out of our control, but there are a number of good reasons to take the reindeer by the antlers and reign in holiday consumption.

Let’s return to this $457.4 billion holiday sales figure for a moment. According to the National Retail Federation, this was the amount of anticipated retail sales in the U.S. for November and December 2006, and it constitutes one-fifth of total sales for the year. To put this number in perspective, only 26 countries have a yearly income above the $457.4 billion mark (that means at least 166 countries are below it), and it is roughly equal to the national income of the Philippines. According to the World Bank, the additional expenditure needed to achieve universal access to safe water and sanitation is around $30 billion. The list could go on, but you get the point: Americans spend a lot of money during the holiday season.

Perhaps spending 15 times the cost of safe drinking water and sanitation for everyone in the world could be justified if it were really making people happy. And we certainly shouldn’t underestimate the cultural importance of the holiday gift exchange, or the genuine satisfaction that can come from giving a particularly thoughtful gift. Yet, as a country, we don’t seem to be getting $457.4 billion worth of happiness out of the holidays. It is cliché by now to talk about holiday stress, and newspapers and magazines often print helpful tips this time of year for dealing with it. The National Mental Health Association even has a webpage devoted to coping with the “holiday blues,” which they say can be brought on by “unrealistic expectations, over-commercialization, financial constraints” and other pressures. Thanks to credit cards, financial constraints may not exactly be binding, but then, a poll conducted by CCCS in November found that 46 percent of all respondents were still paying off debt from last holiday season.

So spending the equivalent of the Philippine’s yearly income over the holidays seems to have bought us quite a bit of extra anxiety and debt. As you might imagine, $457.4 billion worth of stuff also represents a great deal of resource use and manufacturing pollution. Furthermore, all the packaging, wrapping paper, and items made redundant by gifts create a lot of waste. According to the EPA, the amount of household garbage in the U.S. generally increases by around 25 percent in the period between Thanksgiving and New Year’s Day. And the U.S. already leads the industrialized world in municipal solid waste generation, with each average American producing twice as much waste as the average German. Apparently holiday consumption isn’t great for mental or planetary health.

Isn’t there any good news? Here’s some: plenty of people have simplified their holidays by agreeing to cut back on gift-buying, or giving “alternative” gifts like donations to charitable organizations or gifts of time. You can too. For help, refer to the “Holiday Survival Kit” linked below or to your own ideas of what the perfect holiday might include (or not include).

Social and familial expectations can be powerful reasons to stick with the high-spending status quo, but listed above are some equally compelling reasons to challenge the norm. Perhaps you’re convinced, or maybe you didn’t need convincing in the first place. Still, you might be thinking, doesn’t the country need to keep consumer spending high for the health of the economy? Aha! Another contradiction to add to the list. It would be good if everyone cut back on holiday spending, but you’re worried the economy will collapse. Don’t worry too much. Consumption patterns don’t change overnight, and if (or when) Americans do trade in their thousand-dollar holidays for low-budget affairs, the economy will adjust just as it has adjusted to structural changes throughout history. And if there seems to be a contradiction between the well-being of the country and the health of the economy, we should be asking—what’s the economy for, anyway?

Statistics on holiday spending:

© 2006 Center for Popular Economics

Econ-Atrocities are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.


At 10:14 PM, Anonymous Economics Specialist said...

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