Living Paycheck to Paycheck, How Many Americans Are Living on Borrowed Time?

Two parallel American realities followed the COVID pandemic: (i) with pent-up demand instantly released, consumers went on a credit card spending spree, and (ii) the Federal Reserve began a very serious effort to increase interest rates to stem high inflation. Adding labor shortages, supply chain challenges, the process of restarting a moribund economy and a decline in unemployment, despite wage hikes, average Americans watched prices everywhere soar. These factors created a general feeling of instability that, in spite of Biden’s litany of economic success, escalated a general fear for the future in the hearts and minds of too many Americans. Whether the fear was real or imagined, it became fodder for the MAGA GOP to claim, without proposing any real or specific economic policies in support, that they would bring economic stability back to America.

Neither the President nor the Congress set interest rates. Likewise, they do not control commodities’ pricing, including that benchmark “price at the pump.” Sure, we could repeal all state, local and federal taxes on gasoline and diesel fuel, but our crumbling roads and bridges just might fail beyond repair. We already are the largest producer of oil and gas on earth, but those who produce fossil fuels don’t discount their products to fellow Americans one cent. So amping up oil and gas production is clearly not the answer, even as some believe logically that it should be. Housing for those seeking to buy a home has slid to a level of the least affordability we have experienced in many decades… and rents are skyrocketing as a result.

But the scariest part of life for too many average US consumers is their level of debt. Aliss Higham, writing for the December 16th Newsweek, underlines the related fear factor: “A new poll… conducted by Redfield and Wilton Strategies exclusively for Newsweek, found that 46 percent of Americans with credit cards are either ‘very’ or ‘fairly’ concerned over paying back their spending debts. The survey was conducted on December 8 with a sample size of 1,500 people living in the U.S…

“Experts have said the rise in credit-card dues comes down to high inflation. Dan Casey, investment adviser representative at Bridgeriver Advisors in Michigan, told Newsweek: ‘I believe credit-card debt has reached record-breaking levels due to persistent inflation…. Inflation has caused increased financial pressure, and many are struggling to keep up with the cost of living… This has caused many people to fall behind on their payments, forcing them to carry a balance over to the next month. Late fees and high interest rates on credit cards only add to the difficulty of getting them paid off.’" There are other factors gnawing at many American wallets as well.

In cities and states where there had been a moratorium on rent and evictions during COVID, most regulations did not relieve the rental obligation but merely deferred payment until the pandemic subsided. Last summer, a lot of shoes dropped when the pandemic officially “ended,” when those accrued rents began to mature: “Evictions [were] soaring as pandemic-era protections intended to keep tenants in their homes have been lifted. Princeton University's Eviction Lab finds average eviction filings in some cities have jumped 50% or more compared to pre-pandemic rates.” NPR, June 23rd. Some financial assistance was still available, but clearly it was trickling away. Homelessness continued to soar as a result.

For the monied class and their corporations, the ability to buy foreclosed homes, fix, aggregate their acquisitions and then flip them into the rental marketplace, made the rich so much richer. This practice became a new major housing path, for those still able to afford it, to access the homes they used to buy. Indeed, wannabe homebuyers in a rapidly contracting housing market often could not outbid or react fast enough thwart these corporate “we pay cash” buyers… and were forced into the expensive rental marketplace.

With the richest in our land – particularly the mega-rich billionaires with equally mega-borrowing ability – able to use their legions of tax experts to sidestep paying taxes, my Christmas day blog, Is the Middle Class Becoming the Upper Lower Class? took a long, hard look at our rapidly expanding income/wealth inequality gap. Even as the economy settles down as much as it can, the new American polarization anomalies – particularly our unwillingness to tax wealth except on transfer or death – are very likely to continue represent the greatest income gap in the developed world for the future.

We can succumb to the pablum of a promised return to the glorious days of yesteryear – which if you look carefully enough were anything but glorious – or we can dump false promises, dangerous conspiracy theories, inapplicable labels (like “entitlements” and “creeping socialism”) or false hope, and actually fix these anomalies with pragmatic solutions. Or we can feed the egos of wannabe leaders who truly offer nothing more than the same old-same old… or worse.

I’m Peter Dekom, and I continue to be amazed at how gullible so many Americans can be as they seem to believe the most obvious false promises and blame that unscrupulous politicians shamelessly pedal to satisfy their personal ambitions.