ABOUT THIS SERIES
SUNDAY: The U.S. standard of living, a rising tide that enabled Americans of each generation to be better off than their parents, is retreating for average families as incomes stagnate, expenses rise and debt consumes everything that's left.
TODAY: Debt, which helps fuel the U.S. economy, has exploded since the 1990s, to the point that the average household now owes more than $110,000 vs. annual personal savings of $400.
TUESDAY: The United States has shifted its retirement system, without a debate, to put the risk on individuals who aren't prepared. A crunch is less than 10 years away.
WEDNESDAY: No one wants to hear it, but it really is time to spend less and save more, personal finance columnist Susan Tompor advises.
Here's the first part:
http://www.freep.com/article/20081012/BUSINESS07/810120483WHY THINGS CHANGED
Slipping standard of living squeezes middle class
BY JOHN GALLAGHER • FREE PRESS BUSINESS WRITER • OCTOBER 12, 2008
Ron and Laurie Kopack are educated, hard-working suburban Detroit homeowners who, by American middle-class standards, should have earned comfortable family evenings, a little peace of mind and a few luxuries. Instead, they are struggling.
Ron, an electrician, spent most of his summer living in a tent city while doing flood repairs in Iowa because he couldn't find work at home. Laurie, who just got a bachelor's degree but is paid only $15 per hour, faces $30,000 in student debt and a teenager coming of age with his dad often gone.
"The whole American dream, that's a snow job," Laurie says. "I mean, who tried to sell us that? Is that to keep us good consumers?"
Without question, the U.S. economy is an engine of prosperity that produces comfort and wealth admired worldwide. But the Kopacks' plight illustrates an uneasy truth for millions today:
Our middle-class standard of living, a seemingly unstoppable vehicle that has carried generations from dirt-floor cabins to manicured suburban subdivisions, has sputtered and stalled.
This is a long-term shift, under way long before this year's financial crisis made the economy the key issue in the presidential campaign.
The common link is debt. It's swallowing family budgets, with the average household now owing more than $110,000 while saving only about $400 a year. Much of this decade's middle-class spending -- critical to the nation's economic growth -- has been fueled by borrowing.
more...
Here's a bit of today's part:
http://www.freep.com/article/20081013/BUSINESS07/810130384October 13, 2008
WHY THINGS CHANGED
Middle class finds itself buried in debt
Simple misfortunes make bills pile up quickly
BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER
What does bankrupt Detroit-area auto mechanic Ernie Berthet have in common with Wall Street?
Both have been humbled by bad debt, the thread that ties the economic struggles of ordinary Americans to the once-venerable financial houses brought to their knees in recent weeks.
It was Berthet's mortgage foreclosure, multiplied by at least a million other bad home loans across the country, that rocked America's financial system and moved the nation toward the biggest business rescue plan in history.
The numbers on Wall Street are dizzyingly large. But brought down to the level of just one distressed borrower, the story shows how even modest levels of debt, if made unmanageable by a layoff, divorce, illness or other hardship, can turn tragic.
Like a lot of bankruptcy filers, Berthet, a 51-year-old Dearborn Heights resident, saw his problems mount not from a profligate lifestyle but from simple misfortune linked with perhaps too-easy credit.
His modest, one-story house in a working-class area cost $82,000. He had a zero-down, adjustable-rate mortgage that reset from 7.35% to 10.35% and then to 13.35%. Losing his job and owing child-care payments to his former wife put him in the red.
more...
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