Families go deep into debt to stay in the middle class

[BeyondGeography]

The American middle class is falling deeper into debt to maintain a middle-class lifestyle. Cars, college, houses and medical care have become steadily more costly, but incomes have been largely stagnant for two decades, despite a recent uptick. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.

Consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation. Mortgage debt slid after the financial crisis a decade ago but is rebounding.

...Auto debt is up nearly 40% adjusting for inflation in the last decade to $1.3 trillion. And the average loan for new cars is up an inflation-adjusted 11% in a decade, to $32,187, according to a Wall Street Journal analysis of data from credit-reporting firm Experian. Unsecured personal loans are back in vogue, the result of competition between technology-savvy lenders and big banks for borrowers and loan volume.

The debt surge is partly by design, a byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it, companies increasingly can’t sell their goods without it, and the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.

...Median household income in the U.S. was $61,372 at the end of 2017, according to the Census Bureau. When inflation is taken into account, that is just above the 1999 level. Over a longer stretch—the three decades through 2017—incomes are up 14% in inflation-adjusted terms. Average housing prices, however, swelled 290% over those three decades in inflation-adjusted terms, according to an analysis by Adam Levitin, a Georgetown Law professor who studies bankruptcy, financial regulation and consumer finance. Average tuition at public four-year colleges went up 311%, adjusted for inflation, by his calculation. And average per capita personal health-care expenditures rose about 51% in real terms over a slightly shorter period, 1990 to 2017.

“The costs of staying in the middle class are going up,” Mr. Levitin said.

More at https://www.msn.com/en-us/money/markets/families-go-deep-into-debt-to-stay-in-the-middle-class/ar-AAFbEHE

[Skittles]

1. that's the goal of the GOP

there's the ultra rich and then there's......everyone else

[BeyondGeography]

2. Private equity swooping in on the real estate crash to pick up homes for rent

was a nice touch. Steven Schwarzmann/Blackstone now own 80k homes. I imagine their sympathies for out-of-reach housing prices for middle-class buyers are limited.

Here’s a related article:

https://www.latimes.com/business/story/2019-07-30/housing-affordability-crisis-spreads-to-midwest

[Skittles]

3. I think we need to see another housing crash

fuck these ridiculous prices

[BeyondGeography]

4. It'll happen but capital will just add to their rental inventory

Seems like something that government might want to manage better than it did last time.

[essme]

10. It's already started to happen

You have to look at Trulia, or Realtor.com to see it-- but, in the most expensive areas, housing prices are starting to drop.

We were looking at retiring in a town in NC (where we live), husband was offered a job....I was following. We started looking at housing, and realized that anything we bought would be underwater in two years.

Huge half million dollar places are sitting on the market for months now.

When you mention this to anyone, some nod- and some tell us that we are "crazy--- the economy is the best it's ever been!"

I was a history major-- this economy to me looks like 1880 or so. Money is being consolidated at the top....workers are barely getting by. Most people think the crash of '29. This one looks worse to me. Here's a link:

https://eh.net/encyclopedia/the-depression-of-1893/

[PoindexterOglethorpe]

5. Some of those costs are more or less unavoidable. Others not so much.

You don't need a new car very often. The kids can start at a community college, and quite frankly would be better off with a two year degree that leads directly to a decent job. If they really, really want to learn art history or 17th Century French poetry, they can learn those on their own or take classes at the local university in their spare time.

Housing prices are harder to avoid. Most people can't just up and move to a place with cheaper housing. But young people can seriously consider roommates. It's what people my age (70) did when starting out. And it's not so terrible.

Health care is likewise a huge problem. All I can say is let's hope this country moves to some kind of real universal basic health care soon.

[ck4829]

6. Late Stage Capitalism - Going poor in the long term so you're not-poor now

[Sherman A1]

7. I believe that you are at least in part correct

It is easy to say live within your means and in some cases that would be the correct answer, but with the stagnation of wages, the consolidations, what I refer to as internal outsourcing (where current company jobs are replaced by outside contractors for less) and the advancing of AI in the workplace we need to rethink how we look at work and the value of people.

Capitalism needs some serious review and repairs starting with adding a Universal Basic Income for all citizens.

[MichMan]

8. Why aren't people demanding answers on why college is so expensive?

Last edited Sat Aug 3, 2019, 08:30 AM - Edit history (1)

Instead nearly all attention is focused on student loan forgiveness.

One reason in my opinion, is that students keep borrowing regardless of cost. There is no incentive for colleges to keep costs reasonable as long as people keep lining up to attend. Only when enrollment starts dropping substantially will you see costs go down.

I'm afraid costs will skyrocket even faster if free tuition ever happens. Students and parents will care even less what it costs once someone else is paying for it.

[sinkingfeeling]

9. Just read that the University of Arkansas is considering 'relaxing'

admission standards to draw more out-of-state students. About 20% of the student population is from Texas already, but I think they pay in-state tuition rates.

[uponit7771]

11. +1, we were in Spain and university of Barcelona was 3300 usd a year !!

[delisen]

13. I think our problem is systemic-other countries do better

and we need to to willing to gather the facts on how they succeed where we fail.

One issue we will eventually come to is the amount we spend on military but even before we get to that conversation we need to understand how so many other countries have been able to meet the needs of people so much better than we have been doing.

Germany has zero tuition higher eduction and spends significantly less on higher education than we do.

The following site provides a comparison between US and Germany higher education:

https://affordableschools.net/germany-free-education/

[Recursion]

14. If college doesn't nearly bankrupt a middle class family it can't serve its purpose

The only reason 90% of jobs that require a degree require it is because they only want middle class people in the office. If college doesn't nearly bankrupt a middle class family, then it can't serve as an effective class signal.