frank_talk (2006-45)

Busted Boomers

Why don’t worried families give the Republicans credit for a good economy?

by Frank Cagle

Is it time to retire the slogan that, in political races, “It’s the Economy, Stupid?”

The Dow is at record levels, unemployment is low and interest rates are allegedly low. Yet the economy didn’t show up much as an issue in the recent mid-term elections, and President Bush and the Republicans complain they aren’t getting credit for boom times.

I think it is still the economy, but I think we need to come up with new ways to measure it.

Wages have been flat for many Americans. Though inflation has been low, it does have a cumulative effect over a decade. The amount of money in many people’s paychecks has also declined because skyrocketing health insurance costs have led many employers to shift more of the premium to employees. The net effect is less take-home pay.

There are a couple of reasons why most middle-class American families are squeezed, even in a time of evident prosperity. The  reasons are MasterCard and Visa. How many families are paying 26 percent interest on unpaid balances for a dinner out they had five years ago? It’s insane. Making minimum payments on three or four credit cards puts a family in a bind every month with no prospect of relief. There is a reason why Dave Ramsey’s credit counseling talk show is one of the fastest growing radio shows in the country.

I find it amusing to hear financial experts and politicians talk about the low interest rates. We get breathless reports on whether the Fed will raise or lower interest rates, and they discuss interest rates that have no meaning for the average American. You have one late payment on your credit card bill and the rate can go from 13 percent to 26 percent. There was a time in our country when states had usury laws that prevented extortionate interest rates. Now, it’s an American growth industry. Not to mention the Tennessee Legislature’s move to legalize the exploitation of the poorest among us by “regulating” the check-cashing industry. How did we as a society decide we can allow people to set up in business to collect 300 percent interest from people who already can’t pay their bills?

Given low mortgage interest in recent years there has been an opportunity for middle- and lower-income American families to double up payments and pay down if not pay off their home mortgage. What have we actually done? We’ve rolled credit card debt into the home mortgage, increasing the lien on the family home. Instead of paying off the mortgage, the first principle of family economics for the Greatest Generation, the Baby Boomers have taken the short-sighted approach of turning an unsecured credit card loan into a lien on their home.

This strategy has been aided and abetted by seductive advertisements and easy re-finance schemes by the lending institutions. There has been no countervailing outcry at the idiocy of this approach. Do we doubt that, once credit card debt has been paid by using the equity in our homes, we Baby Boomers will proceed to run up even more credit card debt?

Is it any wonder families feel they are two or three paychecks away from bankruptcy? While the credit card companies have been busy getting the college kids hooked on easy credit and running up debt, while they have been sending every family in America three new credit card offers a week, they have also been busy having the Republican Congress change bankruptcy laws to make it harder for families to get out from under crushing debt with ruinous interest.

Now, in addition to making the minimum payment on three or four credit cards, parents are also taking on the credit card debt of college-age children suckered into an impossible credit card trap that threatens their credit worthiness as they are beginning careers.

One thing many parents are finding worrisome today is the future for their children and grandchildren. We sent the kids off to a good college. Now they are graduating with crushing student loan debt and face a tough job market.

We worry that the next generation will have it worse than we did. The prospect of getting a good job at one company and spending a working career there, building a pension and having health insurance, grows increasingly remote.

My wife is baffled by my obsession with paying off the mortgage. I suppose it goes back to spending my youth sitting around talking to Old Timers; the stories about the Great Depression are very vivid and very real to me. But we Boomers mostly seem content to continue to sail along and live on debt. After all, we have Social Security to take care of us.

Uh oh.

Frank Cagle is a political analyst and the editor of Knoxville Magazine . You can reach him at .