The Lady Speaks

Families in debt for basics

In case you're one of the few completely unaffected by stagnant wages and increased costs of living, you probably didn't know this. The rest of America, on the other hand, knows it all too well:

People aren't going into debt because of outrageous spending on expensive TVs or sports cars or second homes. Most of them are just trying to keep the homes they have.

From Kirstin Downey in the Washington Post:

Why are Americans so deeply in debt? It's not because they are using credit cards to buy plasma TVs and premium coffee drinks at Starbucks. [*cough* Rick Santorum *cough*] The real culprits, according to a new analysis, are the rising costs of housing, health care and education.The debt of the typical American family earning about $45,000 a year rose 33.1 percent from 2001 to 2004, after adjusting for inflation, according to a study based on data compiled from the Federal Reserve Board's most recent Survey of Consumer Finances. The Fed report, released in February, gave raw numbers on debt levels.


Real wages, after adjusting for inflation, have been flat since 2001, according to the study, while the cost of big-ticket items for which families pay the most rose. In the past five years, the costs of medical care, housing, food, cars and household operations rose 11.2 percent, the study said. Many families are trying to make up the difference by borrowing, according to Christian E. Weller, author of the report and a senior economist at the center.

"Very little can be explained by frivolous consumer spending," Weller said. His views were echoed in a news conference by Elizabeth Warren, a law professor at Harvard University who analyzed the sources of debt that emerge in bankruptcy filings and reviewed the results of Weller's study.

"The average American family is walking a high wire and hoping there won't be a high wind," Warren said. [emphasis mine]

Housing debt has climbed notably because home prices have risen and people have borrowed against the equity in their homes. From 1989 to 2004, for example, the median mortgage debt more than doubled, from $46,900 to $96,000.

That is all. Please feel free to return to watching American Idol and Survivor and Desperate Housewives, and ignore all signs of impending disaster.


May 24, 2006 - Posted by | Congress, Economy, Family, Gas Prices, Government, Politics


  1. I decided to read this after you told me about it…and before I go to Cash Advance for the millionth time just to make ends meet until next payday. My credit sucks…so I don’t have credit debt…except for these stupid advances I can’t get out from under. I am definitely NOT one of the ones watching American Idol Sissy {as you well know I can’t afford cable anymore ~LOL~} I see this crap every day…and if they think the people making $45,000 a year have it bad – tell them to check out the people who aren’t grossing {let alone netting} that much – like us!

    Greatblog Sissy…maybe it will help people see it isn’t fun stuff that is sapping our paychecks – it’s just every day bills! ~sigh~

    Comment by eowen77 | May 24, 2006 | Reply

  2. Same here, baby sister – cable is a luxury item these days, as is RoadRunner. Dial-up may suck, but at least it’s cheap!

    If I were making $$45K a year, I’d be living on easy street! That’s nearly 3 times what I grossed last year. Rent is the only expense I have that hasn’t been jacked over the last three years – the incredible hikes in the electric and heating bills are enough to cause heart failure.

    At least you have one thing better than me: you get regular raises. I haven’t seen a wage increase in 2.5 years. ‘Course, it’s hard to ask the bosses for a raise when a) they’re family and b) you know they’re struggling just to keep the business open and you working.

    Comment by PA_Lady | May 24, 2006 | Reply

  3. I’ll tell you another trend. My boyfriend contracts at a multi national corp. This year, they had record profits. Their employees got a 1.25% increase in pay. These huge corporations are getting greedier and greedier. The rich are getting richer…. and the rest of us are stuggling more and more. If things don’t change, we’re going to see the disappearance of the middle class.

    Comment by QuestionGirl | May 24, 2006 | Reply

  4. That’s another thing that bothers me. It used to be that you could expect a company to share its windfalls to some extent with employees -through bonuses or pay raises- as a thank you, because employees were the ones doing the work. Now, even though the corporations are making HUGE profits, next to nothing of it goes to employees in any form. It’s all money for the big bosses.

    Comment by PA_Lady | May 25, 2006 | Reply

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