Article published October 19, 2008
Families struggle to stay afloat
I was interviewing a guy last week whose family runs a small bakery, asking if the economic downturn can be measured in flour and sugar, when in walked a young couple.
They stood before the glass display case and pointed. A few of these, a couple of those, and away they went with a small bag of pastries that didn't even amount to $5 - paid for with the swipe of a credit card.
The bakery manager told me he's noticed more and more these last years how readily people turn to credit cards for even small purchases. Then again, that's roughly that same time frame in which even fast-food restaurants started taking plastic.
When Big Macs go on the MasterCard, we have surely left the pay-as-you-go economy - not that such an observation comes as any big surprise, especially not lately.
There's been a lot of chatter these past weeks about the need for Americans to start (finally) living within their means.
The Associated Press quoted a senior analyst at Bankrate.com making this prediction: "I think we're undergoing a fundamental shift from living on borrowed money to one where living within your means, saving and investing for the future, comes back into vogue."In his speech here, Democratic nominee Barack Obama called for a "new ethic of responsibility" as we move - or rather, are moved - beyond "an era of easy money." If our motto was "Buy Now, Pay Later," then I guess consumers (if not Washington) have arrived at "Later."
But credit itself is no villain.
American consumers have used credit since practically forever. Yet only for more recent generations have credit cards become widespread and, more importantly, something not to be paid off at the end of the month but something to be paid on.
It is almost a foreign notion now, this idea that maybe you should save up for something, that maybe if you can't buy it right now, well, you can't really afford it.
Granted, it's hard to pay cash for something like a house (a purchase so large that it is exactly the purpose of consumer credit). But for a flat-screen TV, or groceries? These are questions many will now be forced to ask, questions that we should have been asking all along.
But while we're at it, let's ask why working-class incomes have dropped by some 1 percent (adjusted for inflation) since 2000, as the Economic Policy Institute notes.
And ask how we're supposed to pay costs - for food, fuel, and other basics - that do nothing but climb ever higher.
For so many families trying to reconcile wage drops with price hikes, as economist and former U.S. Labor Secretary Robert Reich noted last week, "the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking."
Mr. Reich (an Obama supporter) believes it's not enough to expect Americans to spend within their means without also buoying middle-class earnings.
"In other words," he suggested, "the way to make sure Americans don't live beyond their means is to give them back the means."
Economically insecure Ohioans know only too well exactly what Mr. Reich is saying.
Roberta de Boer's column appears here on Sunday and in Second News on Tuesday and Thursday.
Contact her at:
roberta@theblade.com
or 419-724-6086.
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