OPINION | Janet Yellen Is Wrong: Borrowing on Credit Cards to Survive Is ‘a Disturbing New Trend’
This year it's the "economic inequality, stupid"
Treasury Secretary Janet Yellen recently offered a glimpse at everything that’s wrong with the Biden administration’s economic message.
In touting its “Bidenomics,” President Biden and his team try to drive home statistics like historically low unemployment and record-high job creation as well as consistently muscular growth in Gross Domestic Product (GDP) as proof of a strong US economy.
All of which is absolutely true, and are equally positive facts.
They just as equally miss the point about why so many Americans are hurting financially at a this time of such a robust economy.
Yellen gave away this disconnect the other day in an interview with Fox Business Network.
She was asked about the trend of Americans driving up record amounts of credit card debt just to pay for basic things in order to survive.
Yellen’s answer was fearfully glib:
“Now, over time, they have spent some of that buffer of savings and particularly lower income households are borrowing again on credit cards. I see that as a normalization, rather than a disturbing new trend.”
No, Madame Secretary, both can be — and are — true.
Americans borrowing on their credit cards is a normalization and that fact is a deeply disturbing trend.
The source of this trend is economic inequality in which upper-income households have seen more rapid growth in income in recent decades and wealth increasingly has become concentrated among an alarmingly few Americans at the top of the economic ladder.
A greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.
The share of American adults who live in middle-income households has decreased from 61 percent in 1971 to 51 percent in 2019.
This has had a profound effect on the ability of many Americans just to make ends meet and survive day-to-day.
Consider the example of Nikki Cimino, a 40-year-old recruiter living in Denver, Colo.
Interest rates pushed her monthly mortgage payments to $1,650. And, after a divorce in 2020, she’s shouldering $4,000 in credit card debt.
“I’m making the most money I’ve ever made, and I’m still living paycheck to paycheck,” she said. “There’s this wild disconnect between what people are experiencing and what economists are experiencing.”
Cimino’s is just one example in what has become a stormy sea of economic struggle and stress for millions of Americans.
And, no, these troubles are not due primarily to inflation. Big corporations are doing just fine. Corporations in the United States made profits totaling $3.3 trillion in the third quarter of 2023, an increase from the second quarter of 2023.
CEO pay has skyrocketed a bewildering 1,460 percent since 1978, and CEOs were paid 399 times as much as a typical worker in 2021.
But, rather than stubbornly try to hang onto sunny economic statistics which are detached from the daily experiences of financially tormented Americans, Biden and his team should embrace the potential for a populist economic message these financial troubles provide.
The president and other Democrats should lean in on the battle against economic inequality as a core rationale for Biden’s second term.
They've already taken nibbles at the problem: such as capping insulin for seniors and their new fight against “junk fees.”
This ought to be the beginning — not the end — with the president promising much more help to Americans who are falling further and further behind every day.
In 1992, an earlier Democrat rode to the White House on the slogan, “It's the economy, stupid.”
Some 32 years later, the slogan this Democratic president ought to embrace is: “It's the economic inequality, stupid.”
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