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.
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.