Americans impoverished back to 1992
An average American family’s income has fallen to the level of Bush Sr. presidency, the Survey of Consumer Finances published on Monday. America’s middle class has been affected the most, losing 12.1 per cent of income in just three years.
The Fed reports that if in 2007 the wealth of American middle class family exceeded $126,000, but by 2010 the figure had dropped to $77,300, the minimum index since 1992. The survey notes that the wealth of the poorest families has fallen by 7.7 per cent, whereas the wealth of the richest has dropped only 1.4 per cent.
One of the reasons the wealth has dropped so significantly is that the median housing prices dropped to $75,000 in 2010 from $110,000 in 2007. And this is no secret that home equity has scarcely recovered since then.
The richest 10 per cent of American households in 2010 still earned an average of $349,000 a year. These families still had an average net worth of $2.9 million in 2010.
An average family’s yearly income has also plunged from $49,600 a year in 2007 to 45,800 in 2010.
While the income has been falling, the consumer spending remained at relatively the same high level due to obligatory payments Americans make to banks to pay for earlier opened credit lines.
Some households spend as much as 40 per cent of their incomes on loan repayments. Another interesting fact is that the share of car loans has been registered on a lower level than education loans, which make up 19.2 per cent of all loans.
The data in the survey is practically 18 months old so it does not reflect the true state of the American economy. Still, it spotlights the slowdown of economic recovery in the US after the global crisis of 2008.
The survey exposed that the purchasing power of the American middle class has followed its decreasing income and wealth, limiting people’s ability and willingness to spend.
The survey exposed an unjoyful controversy: while a smaller number of households (52 per cent in 2010 compared to 56.4 per cent in 2007) could save anything at all, the overall savings have been increasing. This statistics could suggest that a smaller number of families with high income are now tucking away more money to get through hard times, while more and more families are unable to save anything.
The Fed’s statistics revealed that reduction of households that owe to lenders go at very small paces, decreasing by only 2.1 per cent in three years. Practically three-quarters of American families (74.9 per cent) have some kind of debts.
Another tendency these days is people giving up credit cards. A third of all families (32 per cent) declared they do not have credit cards (27 per cent in 2007). Still, the median balance of those 39.4 per cent of households that have credit card debts sums up to $2,600 as of 2010.
The survey insists that the bottom 20 per cent of the median families actually increased their income due to government aid programs fighting the recession. In any case, wealthier families have passed the recession better due to additional income from investments.
Families wait in line to receive aid from Feed The Children in Hoffman Estates, Illinois (Scott Olson/Getty Images/AFP)