Here We Come
going broke. For years people in the United States have saved
less and less of their income. Now, on balance, they don·t
save any of it. To put this in fancier economic jargon, this
country now has a negative savings rate of minus-one percent.
Let·s look on the bright side. (Unfortunately, this
won·t take long.) Paying out more than you have coming
in isn·t necessarily a sign of daffy self-indulgence.
On the contrary, sometimes it·s part of a prudent and
happy life cycle. Prudent people tend to save a part of their
income during their high-earning middle years. Then, after
they retire, they can spend beyond their income, taking from
their savings in order to enjoy a lifestyle similar to what
they had when they were working.
the dark side. Workers who spend more than they take in are
heading for ruin, since they enter retirement not with savings
but with debts. About a third of adults in this country have
no savings at all·no money in the bank, no retirement
account, nothing. For most people it·s hard to live
on pension income, and it·s wretchedly hard with only
social security, and paying off debts makes it near impossible.
way people with no savings can spend more than they take in
is through the magic of borrowing. Credit cards have made
massive borrowing possible. A generation ago, if you wanted
a loan you had to go to a bank, and when you got there they
asked humiliating questions, such as what did you want the
money for and how did you plan to pay it back. Furthermore,
they wouldn·t give you so much as a penny unless you
put up collateral·something the bank could snatch (the
car or the house) if you didn·t pay off the loan on
astonishing about the credit-card system is that it permits
you to borrow for whatever necessary or lunatic thing you
choose, no questions asked, without collateral.
As a result,
gross national credit-card debt is approximately $2,293 per
person, $3,632 per cardholder, about $6,400 per household,
or roughly $8,000 per carded household (those with at least
one credit card). That·s a conservative estimate. More
students now have credit-card debt than have student-loan
debt. Some 23 percent of students use credit cards to pay
for tuition and fees, and 52 percent use them for textbooks
and school supplies.
what you know, this next fact won·t surprise you at
all. The United States, as a nation trading with other nations,
buys more than it sells. The dollar difference between what
we sell and what we buy is our trade imbalance or trade deficit.
Last year the U.S. trade deficit reached a record level of
$726 billion, an 18-percent increase over 2004. The overall
imbalance increased $1 billion in December alone, the third-highest
monthly level on record. The rising price of oil and related
products caused 63 percent of the increase in the deficit.
The growth of the trade deficit with China, which reached
$202 billion in 2005, was responsible for the entire increase
in the United States· non-oil trade deficit.
be brave and take a look at the current administration and
how it deals with income and expenditure. When George W. Bush
walked into the Oval Office on Jan. 20, 2001, the U.S. government
was enjoying rare annual surpluses. But things have changed.
Last year, Bush·s administration spent $760 billion
more than it took in. That·s an increase of $144 billion,
or 23 percent, over his previous year·s deficit of
add up all the yearly deficits, you get the total amount of
government debt. On April 20th of this year the United States
Treasury said it was in debt $8,349,277,698,254.18. Like the
rest of us, the government is able to spend more than it takes
in by borrowing. Slightly more than half of our borrowing
is done overseas. Currently we owe the Chinese government
around $263 billion, an amount second only to what we owe
Japan. Such overseas indebtedness can play havoc with foreign
policy. For example, Rumsfeld has complained that China is
sharply increasing its military spending and buying large
amounts of sophisticated weapons, but there·s little
he can do about it. If China decided not to loan us any more
money, we·d be sunk.
social critics often portray credit-card debtors as greedy
nitwits. But U.S. workers certainly work hard. In the 1980s,
the Japanese were averaging more than 2,100 hours of work
per year, but Asians have reduced their working hours as their
incomes have increased. The average American employee now
works more than two full weeks longer than the average Japanese
or Korean worker. Dutch and Norwegian workers average about
two-thirds of the U.S. level. The French work 28 percent fewer
hours per person than Americans, and the Germans put in 25
percent fewer hours. Fortunately, our abundant work hours
make us a very wealthy country.
the wealth is not distributed according to hours worked. For
the past several years the rich in this country have been
getting richer, and the poor, poorer. Recent figures show
that the richest one percent of households own 30 percent
or more of this nation·s wealth. The top 5 percent
own more than half the wealth; the top 10 percent, about two-thirds.
At the bottom of the scale you have bag ladies and those guys
fishing in trash barrels.
was a time when we taxed people progressively more as their
income increased. That helped create the boom years after
World War II. President Bush·s radical economic philosophy,
his regressive tax policy and indifference to the poor, has
fostered a brutally competitive culture. Borrowing money is
the only way people can keep up the illusion of equality in
this grossly unequal society.