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Poorhouse, Here We Come

e·re 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.

Now for 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.

The only 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 time.

What·s 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.

Knowing 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.

Now let·s 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 $616 billion.

When you 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.

Conservative 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.

Unfortunately, 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.

There 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.

·Gene Mirabelli


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