Looking at the BLS’s 2003 Consumer Survey, the people who save in this country are overwhelmingly wealthy. The bottom income quintile pulls home $8,201 a year before taxes, and spends $18,492. Meanwhile, the top quintile hauls home $127,146 a year before taxes, and spends $81,731. The poor are borrowing to the hilt and the rich are happy to oblige them. At the end of 2004, the amount of after tax income that went towards debt service was roughly 16 percent, and those numbers are much higher for low-income families. Bankruptcies are skyrocketing. So why are these families borrowing so much? Robert Pollin of EPI put out a study in 1990 arguing that the bottom 40 percent of Americans were borrowing to compensate for stagnant or falling wages. More recently, Elizabeth Warren and Amelia Tyagi’s Two-Income Trap compiled similar evidence…the 6,000 percent increase in credit card debt between 1968 and 2000 didn’t come about because people were buying frivolities; they’re simply trying to tread water, pay for health care, that sort of thing.
Now obviously if you’re in the creditor class, this state of affairs looks pretty damn good. Not only do you earn interest on your surplus funds, but mass borrowing among low-income Americans reduces pressure for higher wages, by letting them buy stuff they couldn’t otherwise afford, and it certainly makes America look like a middle-class consumer society, thus staving off the angry hordes from rioting.[...]
The downside, of course, is that among the lower classes, very few people have much wealth to speak of. The richest 10 percent of Americans own 79.8 percent of all financial assets. The bottom 40 percent, collectively, own as much in liabilities as in assets. (Average wealth among the bottom 10 percent has been consistently declining since the 1960s.) Among minorities, especially African-Americans and non-white Hispanics, the disparities are even worse. In 2001, the average black household had a net worth equal to about 14 percent of the average white household.
Here’s what I always wonder about fundimentalist Christians: Why aren’t they interested in putting an end to predatory lending practices? The Bible is very clear about the matter, and yet – at least here in Oregon – the party of right-wing Christian politicians firmly oppose proposals to reign in predatory lending practices.
I’m frankly terrified by how little wealth low-income Americans have, especially when you consider how little most people have put aside for retirement. A TV report I saw this morning claimed that the typical American has less than $20,000 put aside for retirement (in an 401K or the like), and even among Americans over 55 the average is less than $100,000 (and presumably much, much lower among low-wage workers). Social Security is going to survive – but Social Security is meant to be a suppliment, not an entire retirement. And for everyone but some firefighters and cops, “pension” is becoming an obsolete concept, like churning butter or sewing your own clothes.
Elder poverty is going to be huge in 30 years time.