Angelenos aren't buying the old maxim that what goes up must come down. But that's about the only thing they're not buying.
At the Beverly Hills Lexus dealership, General Manager Gene Viglione marvels that he can't keep enough automobiles in stock. Sales this year are up 40 percent over last year when sales jumped 50 percent from 1997. No longer just the province of lawyers and stockbrokers, his cars are being purchased by housewives and teachers.
And he sees no reason why the growth shouldn't keep going and going.
"Probably for the next 25 to 30 years, things are going to be great," Viglione says. "I can't see any problem on the horizon except for a natural disaster and that would start a construction boom again."
While Viglione's blue-sky forecast may seem extreme, he doesn't sound all that different from other retailers and consumers around Los Angeles. In a town celebrated and satirized as a mecca for consumption, the pilgrims are more devout than they have been in years.
Does anyone remember that only a few years ago, layoffs, restructuring, riots and general malaise were the order of the day?
"An awful lot of people are banking on things continuing as they are," said economist Peter Passell, editor of the Milken Institute magazine. "They have ceased to think of their (standard of living) as something they might lose. People are preparing less for downturns."
There is no doubt that Angelenos have more money to spend these days. More than four in 10 L.A. households had an annual income of $50,000 in 1998, according to figures compiled by the United Way of Greater Los Angeles.
But even that amount seems insufficient to satiate Angelenos' consuming hunger. Local residents are charging far more each month and carrying a higher monthly credit card balance than the national averages, according to a recent study by J.D. Power & Associates.
The average L.A. resident charges $774 a month to credit cards while carrying an average monthly balance of $2,776. That's above the national averages of $500 in new monthly charges and a $2,458 balance.
It's not that Angelenos are the only Americans with the spending bug. In fact, the national net savings rate of minus 0.2 percent in the first quarter was the first time that figure had turned negative since the Great Depression. Thanks to strong capital gains on Wall Street and in the real estate markets, Americans are using their paper profits to justify spending patterns.
"With housing prices way up, people are saying, 'Hey, I've saved money,' " Passell said. "Especially in New York and L.A., the double hit of rising housing prices and the stock market has made people worry less (about the future)."
There are plenty of reasons for the future to look bright. Some economists theorize that the nation's second-longest period of post-war growth, now in its eighth year, can continue because of the economy's fundamental restructuring. Where previously a prolonged rise in production often led to a huge oversupply of goods that caused production to halt and unemployment to rise, the integration of computers in the manufacturing process has reduced the chances of boom and bust.
"Things may be different because computers now have such strong control of inventory that companies don't build up big inventories," said Edwin J. Perkins, professor emeritus at USC specializing in financial history. "Circumstances can change and make the past irrelevant. You're right people aren't preparing for the future. But that's because they've been preparing for the past five years and nothing's happened."
As a result, consumption, already on the rise in L.A., has been even more conspicuous of late. More expensive cars, more nights eating out, bigger and more expensive houses.
But some argue that such extravagance could ultimately lead to financial ruin. Take buying a house.
The average U.S. home is 50 percent larger than it was in 1970. The wealthy have built larger homes and many of those on the lower rungs have followed suit. With families willing to devote ever-greater portions of their take-home pay to mortgage payments, there is less money available for savings. Simultaneously, the greater competition to purchase a home in a nice neighborhood drives property values ever higher, and that drives property taxes higher.
The trend is not yet resulting in financial problems, with national unemployment at its lowest level in almost 30 years. But when a recession hits and the jobless rate rises, bankruptcies will spike, warns Robert H. Frank, author of the book "Luxury Fever" and an economist at Cornell University.
"In the long run you can't buy more than you earn," he said. "The median wage earner in this country doesn't earn more now in real terms than in 1975. The savings rate is lower, debt is higher and the commute takes longer hours. In a place like Los Angeles, it's very hard to save money if your kids want to have a semblance of a middle-class life."
As a result, an increasing number of Angelenos are unprepared for the bump in the road that Frank says is inevitable.
"It's hard to get anybody to listen while things are going well," he said. "The next (economic) downturn will probably be more painful than anything we've had in the recent past."
Not everyone agrees, especially when it comes to L.A. The painful restructuring that took place in the early '90s has resulted in an economy less dependent on big business. Dramatic defense cuts and the emasculation of the aerospace industry in the region led to the loss of tens of thousands of jobs, a phenomenon that is unlikely to repeat itself any time soon.
"The most recent downturn was really a fundamental major restructuring of the local economy that is not going to happen again in our lifetime," said Joseph Magaddino, an economics professor at Cal State Long Beach. "That doesn't mean a recession won't occur, but it won't be as painful."
Along with such structural rationales for the good times persisting are psychological ones.
"America is a country where people want to be optimistic," said Passell. "There is a basic belief that things will work out."
That is especially true in Los Angeles, where the sun always comes out tomorrow. Which brings us back to buying for now instead of worrying about later.
"The attitude of the customers we deal with is that times are good, and why should we cut back?" Lexus dealer Viglione said. "I went somewhere the other day to listen to someone give a speech about the economy, and the first thing the guy said was, 'Economists are always wrong.' "
But nobody's wrong forever.
For reprint and licensing requests for this article, CLICK HERE.