Stuck In The Middle: The Middle Class Has a Debt Problem

[Purveyor]

By The Editors

Of all the burdens weighing on the American middle class, one has grown immensely in recent years: debt. Absent reform, it presents one of the gravest threats to the prosperity of the typical family.

For much of the past century, easier access to credit benefited most Americans. It helped them buy what many see as the necessities of a middle-class life -- a home, a car, an education. Those assets, in turn, gave them the stability and earning power they needed to build wealth. Regular mortgage payments acted as a form of saving, making home ownership almost synonymous with financial security.

More recently, though, borrowing has taken on a very different character. During the housing boom of the early 2000s, it became a way to bet on house prices, or to turn home equity into the spending money needed to compensate for stagnant incomes. After the housing bust, the excesses shifted into other areas, such as auto loans designed to end in repossession, and student loans that leave graduates too indebted to move out of their parents' home.

As of 2013, the average debt of middle-class families -- those that fall within the middle three-fifths of the population by earnings -- amounted to an estimated 122 percent of annual income, according to the Federal Reserve. That's down a bit from before the 2008 crisis, but still nearly double the level of 1989.



It's hard to say exactly how much debt is too much, but research and the lasting repercussions of the subprime mortgage crisis suggest the U.S. is pushing the limit. When consumers -- and the financial institutions that provide them with credit -- borrow too much against their assets, a market slump can easily leave them owing more than they own. The consequence is banking crises and long, slow recoveries as people try to rebuild their wealth instead of spending. This financial fragility undermines the long-term growth in jobs and incomes that's needed to support a prosperous middle class.

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http://www.bloombergview.com/articles/2015-05-13/the-middle-class-has-a-debt-problem

[Erich Bloodaxe BSN]

1. Debt is a symptom, not the disease.

The problem is cost of living without living wages.

[staggerleem]

2. The American Middle Class is in free-fall!

In 2000, 62% of Americans had incomes/wealth that placed them in the middle class. By 2010, that number had fallen to 51%.

There was an piece in Monday's NY Times that pointed out that none of the current crop of Presidential candidates even uses that term any more (not 100% true, btw - Bernie does, but usually to illustrate how their numbers are shrinking and not to refer to a constituency.) Nowadays it's "everyday Americans" (are billionaires only American on certain days?), Hard-working Americans (which ABSOLUTELY leaves the wealthy out!) and my favorite - Rand Paul's "the people who work for the people who own businesses" (because if you ain't rich yourself, you only matter insomuch as you do things for the rich.)