Transfixed by turmoil in the financial markets, we may be missing the year's biggest economic story: the end of the Great American Shopping Spree. For the past quarter century, Americans have gone on an unprecedented consumption binge--for cars, TVs, longer vacations and just about anything. The consequences have been profound for both the United States and the rest of the world, and the passage to something different and unknown may not be an improvement.
It was the ever-expanding stream of consumer spending that pulled the U.S. economy forward and, to a lesser extent, did the same for the global economy (the reason: imports satisfied much of Americans' frenzied buying). How big was the consumption shove? Consider. In 1980, Americans spent 63 percent of national income (gross domestic product) on consumer goods and services. For the past five years, consumer spending equaled 70 percent of GDP. At today's income levels, the difference amounts to an extra $1 trillion annually of higher spending.