America’s Middle Class Falls Deeper into Debt as Income Growth Slows and Costs Climb
America’s middle class is drowning in debt. A typical middle income family earning around $45,000 a year saw its debt burden grow by 33.1% between 2001 and 2004, even after adjusting for inflation. Debt relative to income rose even more, to 33.9%, during this period for middle income families. Personal bankruptcies among these households are rising steeply.
The reasons for greater economic distress among middle class households are not hard to pinpoint. Slow income growth between 2001 and 2004, the last year for which complete data is available, has not kept pace with the rising cost of big ticket items such as housing and education loans, medical expenses and transportation. Family budgets have been squeezed.
| The Times | March 17, 2006 |
IF YOU are worried about how much you owe on your credit cards, this might put things in perspective: America’s national debt limit was increased yesterday to $9 trillion. That’s $9,000,000,000,000 — enough to buy Buckingham Palace 9,000 times.
The increase, passed by Congress, allows the Government to borrow another $781 billion (£447 billion), increasing the national debt limit — the maximum America can borrow — from $8 trillion and $184 billion to $8 trillion and $961 billion.
If the debt ceiling, which is set by Congress, had not been raised by March 24, the Administration would not have been able to borrow more money and the US would have begun to default on its domestic and foreign obligations, an untenable consequence.
The vote to increase the debt limit, requested by the White House, is the fourth since Mr Bush took office. In 2001 the national debt was $5.7 trillion. Today it has ballooned to $8.2 trillion, figures rarely talked about in Washington.
The national debt is the total amount owed by the Government. It is not to be confused with the federal budget deficit, which is the yearly amount by which spending exceeds revenue. When budget deficits are big, the national debt inevitably increases.
When Mr Bush took office he inherited a $236 billion budget surplus. Bill Clinton, his predecessor, had used budget surpluses to pay down some of the national debt in his last two years in office. Mr Bush also inherited some extraordinarily overoptimistic projections. Experts pronounced that budget surpluses would increase to $5.6 trillion over ten years, and there was even heady talk of paying off the entire national debt with the proceeds.
$9 TRILLION
Investors are facing a Wall Street Nightmare: A slower economy and higher interest rates and rampant inflation. Dallas Federal Reserve Bank President Robert Fisher, who has of late been greenspan inflation go-to guy, warned that inlfation was nearing the high-end of the Fed’s comfort zone. The mere fact they even acknowldge this publicy shows the seriousness of the situation. Common Wisdom goes that when the economy is slowing, interest rate cuts can stimulate the economy monetarily, and when the economy heats up, it can take rate hikes, and hikes can keep growth sustainable. Basically, you charge higher interest rates whenever you can. So we are seeing from the weak reading from the service sector October 6th and record upon record setting years in bankruptcy filings, and “higher energy costs that are filtering into the rest of the economy”(Fisher) that the economy is slowing. But Fishers comments on inflation show “a clear signal that the feds short term interest rate hike program would continue, if not accellerate” (Fisher) Now you see how Real Estate can crash. Earnings season ius among us and even Apple, who quadrupled there sales from the same quarter last year, missed expectations. This will not be pretty, ala October 29th…
