No. of Recommendations: 9
this is useful

Aug.9, 2006 - For the first time ever recorded, Americans owe more money than they make. Household debt levels have now surpassed household income by more than eight percent, reaching 108.4 percent in 2005, according to a May 2006 study by the Center for American Progress. Consumer debt is now at a record $2.17 trillion, reports the Federal Reserve Board and consumers cashed out a whopping $431 billion in home equity last year.
Jessica Bennett, newsweek

The following is not, it may very well be harmful
"The data shows that people are borrowing more money not because of over-consumption, but because they're caught in a bind, . . .

I would argue that people are borrowing more money now than in the past [not because of more access to credit] but because prices have risen in the face of a very weak labor market . . .

A lot of the new debt people are taking on is because they have to [and] I think if people were better informed they would [continue to] take out the same amount of credit, [though] they may be paying a little less on it.(quoates from Christian Weller

This guy is painting a picture where it isn't the fault of the household for large debt but its big business at the feeding trough. I really don't care if you want to bash big business and executive compensation, they earn their lumps. But to say that the middle class consumer is in a bind beyond thier control is crap, pure crap. The only way it is a bind is if they insist on living at their current life style. If they are willing to accept a different life style then debt becomes less of a neccessity.

Here is part of his arguement that almost makes sense
The labor market has been rather weak, employment growth has barely kept pace with population growth, wages have been flat, income has fallen for five years in a row, and at the same time, prices for critical big ticket items-items such as health care, housing, college education—have gone through the roof. In that bind, the only escape valve for middle class families is to borrow more money

I'm not in complete agreement with the pundents that say the employment market is weak but I don't want to hash that out right now so I'll agree that wages have been flat.

Price for critical big ticket items have gone through the roof? I'm not going to argue that prices haven't gone up but really the only one of those three that is critical for middle class americans is health care. Middle class americans don't have to upgrade their house, they don't have to put on an addition, they don't need to add a pool. The dramatic real estate price increases of the last 5 years was not driven by first time buyers. There are two primary reasons for a home owner to buy a different house: relocation for employment or to own a "better" home. The employment numbers tell us that people are not relocating at an unusual pace.

I wont argue that college is not important for the long term success of our children. I will argue that you can save a pile of money by taking classes at a J.C. for the first two years. Or here's an old fashioned idea, let the kid work their way through college. A hate to burst some academic ego bubbles but with the exception of a few schools and few specific programs on some campuses the same job can be had no matter where the degree came from. Staying in state and picking the cheapest of the available options is probably not going to effect junior's long term earning power. At the Bachelors and Masters level the degree issuing school isn't a make or brake issue.

This leaves health care. I have no anecdotal evidance of many employed people who have had to take out a HELOC in order to pay for thier medical expenses.

It really bugs me when people take useful data and stink it up with a dressed up theory presented as truth.

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