EzraKlein Archive | The American Prospect

Feeds: Articles | Issues


	TAPPED \| Beat the Press

SUBSCRIBE | LOGIN

Current Issue

Download the PDF

The

symbol identifies content for paid subscribers only.

Momma said wonk you out

« PORN RULES ALL. | Main | ASSIGNMENT DESK: AMBULANCE FEES. »

CHART OF THE DAY: HOUSEHOLD DEBT OVER THE AGES.

While I'm not going to defend the use of revolving debt in Elizabeth Warren's presentation, Megan is underplaying the steady creep we've seen in household debt over the past decades. The following graph charts debt as a percentage of personal income, as a share of all assets, and mortgage debt as a share of real estate assets (source data here). The trends are pretty clear, and I'd argue, rather worrying:

So this stuff is increasing. The "all debt as a share of income" number is particularly worrying, as it's increased as much in the 2000-2005 period as in the 1979-2000 period. Megan might say it's all a function of asset bubbles, but economists I've talked to say the upper-bound estimate for the impact of asset market bubbles is half of the decline in the savings rate. Significant, but not, on its own, the whole story. So something is going on here. And I'm not the only one who thinks so. Michael Mandel, the chief economist at Business Week, calls the following graphic "the world's scariest chart," and while I don't think it quite compares to this one, it's not far off:

According to Mandel, the difference between the debt load we've seen and the debt load we might expect is $3 trillion dollars -- that's a lot of financial obligation weighing down our households, and we've only begun to see the effects. Im not one who believes our middle class is finished, but I wouldn't downplay the problems we're likely to face as these debts begin to come due.

Posted by Ezra Klein on May 8, 2008 3:17 PM | Permalink

COMMENTS (24)

That EPI site is a remarkable source of interesting and scary tables. The breakdowns by income seem to say that it those in the bottom three quintiles that have seen the largest increases in debt burdens (at least in the last 15 or so years). Which would be the middle class and poorer - those who are presumably those least able to manage it.

Posted by: Tristan | May 8, 2008 4:47 PM

That top line is debt to DISPOSIBLE income. Contributing factors to that increase are: less disposible income due to no real rise in wages; higher prices; more available debt to maintain the standard of living that the wages once purchased (insulating us from the fact that our lots have not improved, but declined.)

Posted by: Steph | May 8, 2008 5:40 PM

Why is all debt less than mortgage debt in your first chart?

Posted by: James B. Shearer | May 8, 2008 6:19 PM

Why is all debt less than mortgage debt in your first chart?

I think this is just a simple typo and should be "Mortgage debt as a share of real estate assets". At least that's what it says at the link provided.

Posted by: Tristan | May 8, 2008 6:53 PM

Tristan: I strongly suspect that the reason people in the lower quintiles are seeing such an increase in their debt burden is that they are buying homes in greater numbers than ever before.

A person paying $X to the bank every month is not materially worse off than if he were paying $X to his landlord every month, but his "debt burden" is likely to be an order of magnitude greater.

Posted by: Brandon Berg | May 9, 2008 8:31 PM

Brandon: You may well be right and I'm no expert on this topic but a quick look at some numbers from the the 2004 SCF suggests this is only part of the story. For example - the percentage of families in the lowest quintile with a home secured debt increased by about 7% between 1989 and 2004 while on the other hand the percentage with credit card debt increased by about 14% in the same period.

As came up in the thread over at McArdle's site it is perhaps worth changing focus to consider how people are actually managing with this increased debt. One piece of evidence that this is imposing a genuine burden is the number of consumer bankruptcies which ,for the same period, went from 2.49 per thousand to 5.32 (according to here).

Posted by: Tristan | May 10, 2008 8:31 AM

It would make a whole lot more sense to look at interest as a percentage of disposable income and disposable income as a percentage of income.

Posted by: aaron | May 12, 2008 4:34 PM

Herbal Nutritional Supplements are one of the most popular ways to get your body functioned properly and it promotes general good health. smart-herbals.com has its own individuality in selling Herbal Nutritional Supplements. We carry more than 9000 products, which are divided into different stores based on their relative categories. We always try to provide quality products wrapped up in the package of reasonable prices and best services, considering that here we present a wide range of Herbal Nutritional Supplements, which we carry to facilitate our valued customers.
http://www.smart-herbals.com

Posted by: Penis Enlargement Products | May 13, 2008 11:57 PM

We always try to provide quality products wrapped up in the package of reasonable prices and best services, considering that here we present a wide range of Herbal Nutritional Supplements, which we carry to facilitate our valued customers.
http://www.naturomeds.co.cc/

Posted by: Herbal Products | May 13, 2008 11:58 PM

New Pharmacy-online Guide is an energetic and accomplished herbal company that focuses on developing the best natural products worldwide.
http://www.phamacy-online.co.cc

Posted by: Pharmacy Online | May 13, 2008 11:59 PM

SEO | SEM | Internet Marketing Guide.

http://www.wahidqazi.com/

Posted by: SEO Consultant | April 25, 2009 12:38 PM

List Of Internet Domain Extensions

http://blog.wahidqazi.com/list-of-internet-domain-extensions/

Posted by: List Of Internet Domain Extensions | April 25, 2009 12:44 PM

Free GCSE Coursework. We are providing free services.

Posted by: GCSE Coursework | April 28, 2009 6:14 AM

nice man.. keep it up.. keep going

Posted by: PhD Dissertation | May 13, 2009 5:04 AM

Cope with premature ejaculation. All natural pills to cure.