Economic denial
Bob Herbert’s editorial today highlights the difference between the Bush administration’s monotone insistence that the economy is strong and getting stronger, with the fact that personal bankruptcies and debt burdens are at record highs. A quote (2003) from Elizabeth Warren, co-author of “The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke,” makes bankruptcy more concrete by comparison:
This year, more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce.
Herbert remarks ‘last Friday’s Wall Street Journal featured a page-one article with the ominous headline: “New Group Swells Bankruptcy Court: The Middle-Aged.”‘
As we discuss purchasing a flat here in Paris, I’m struck by the difference in French and American lending terms for a home. I’m out of date, but I think a 30 year loan is still normal in the states, with 40 years not uncommon. Also, I think small down payments are not a real hindrance. Here, loans are usually 15 years, occasionally 20, and down payments are expected to be 20% or higher. Maybe this curbs the economy? It certainly curbs bankruptcies. And makes for a nice cash flow bump at an earlier age for those who don’t trade up or refinance.
This is a good reminder for us, as we consider Karen going back to work so that we can manage something in this neighborhood we like so much. But as Warren might say, that is a step that is difficult to back away from later. And we’re lucky to be here, making it on a single salary.