"Dedicated to exposing the lies and impeachable offenses of George W. Bush"

High US debt rate can be blamed on rising cost of basics
Boston Globe/Washington Post
May 13, 2006

WASHINGTON -- Why are Americans so deeply in debt? It's not because they are using credit cards to buy plasma-screen TVs, and premium coffee. The real culprits, according to a new analysis, are the rising costs of housing, healthcare, and education.

The debt of the typical American family earning about $45,000 a year rose 33.1 percent from 2001 to 2004, after adjusting for inflation, according to a study based on data compiled from the Federal Reserve Board's most recent Survey of Consumer Finances. The Fed report, released in February, gave raw numbers on debt levels. The new study analyzed the data more closely to determine the sources of debt. It was conducted by the Center for American Progress, a Washington think tank run by former Clinton White House chief of staff John Podesta.

Real wages, after adjusting for inflation, have been flat since 2001, according to the study, while the cost of big-ticket items, for which families pay the most, rose.

In the past five years, the costs of medical care, housing, food, cars, and household operations rose 11.2 percent, the study said. Many families are trying to make up the difference by borrowing, according to Christian Weller, author of the report and a senior economist at the center.

His views were echoed in a news conference by Elizabeth Warren, a law professor at Harvard University who analyzed the sources of debt that emerge in bankruptcy filings and reviewed the results of Weller's study.

"The average American family is walking a high wire and hoping there won't be a high wind," Warren said.

Many families, particularly middle-income households, aren't acknowledging that declining incomes mean they must radically adjust their living standards, Weller and Warren said.

Warren suggested that families that can no longer afford their single-family houses should move to condominiums, consider limiting their families to a single automobile, get second jobs, or move to less expensive school districts where children perform acceptably well.
© Copyright 2006 Globe Newspaper Company.

Original Text