Consumer Debt in America


Uploaded by uimediaproduction on 23.12.2009

Transcript:
>> A DECADE OF PROSPERITY, THE LONGEST ECONOMIC EXPANSION
ON RECORD. THE 1990s TO MID-2000s BROUGHT
PROFITS TO WALL STREET AND AFFLUENCE TO MAIN STREET.
WAS IT THE BEST OF TIMES, OR WAS IT AN ILLUSION?
AS THE NATION NOW GRAPPLES WITH AN ONGOING ECONOMIC RECESSION,
WHAT IS THE COST TO INDIVIDUALS, FAMILY, SOCIETY?
UNIVERSITY OF IOWA SCHOLARS RECENTLY CONVENED TO ADDRESS
QUESTIONS LIKE THESE. "BORROWING TO THE BRINK:
CONSUMER DEBT IN AMERICA," SPONSORED BY U.I.'S OBERMANN
CENTER FOR ADVANCED STUDIES, BROUGHT TOGETHER SCHOLARS FROM
AROUND THE COUNTRY TO ADDRESS THE ISSUES OF CONSUMER DEBT.
THE SEMINAR WAS DIRECTED BY COLLEGE OF LAW PROFESSOR
KATIE PORTER, WHOSE RESEARCH EXAMINES BANKRUPTCY OUTCOMES FOR
EVERYDAY AMERICANS. >> BANKRUPTCY LAW HAS A PURPOSE
OF GIVING FAMILIES A FRESH START, AND WE HAVE A LOT OF
DISCUSSION IN THE ACADEMIC RESEARCH ABOUT A FRESH START.
BUT WE HAVE VERY LITTLE UNDERSTANDING OF WHAT REALLY
HAPPENS TO FAMILIES AFTER BANKRUPTCY.
HOW YOU RECOVER, HOW FRESH YOUR START IS, DEPENDS ON WHAT
HAPPENS TO YOUR INCOME, AND WHEN INCOME KEEPS GOING DOWN, EVEN
AFTER BANKRUPTCY'S WASHED AWAY YOUR DEBT, IT'S REALLY HARD FOR
THESE FAMILIES TO MAKE ENDS MEET ON A GOING-FORWARD BASIS.
>> THE SUBJECT OF INCOME IS A FOCUS FOR U.I. SOCIOLOGY
PROFESSOR KEVIN LEICHT, WHO LOOKS AT THE INCREASING USE OF
CREDIT AS A SUBSTITUTE FOR INCOME GROWTH.
>> THE MAJOR THING THAT'S HAPPENED WITH DEBT IS THAT DEBT
IS USED TO SUBSIDIZE A LIFESTYLE THAT PEOPLE'S EARNINGS CAN'T PAY
FOR. WHEN PEOPLE'S INCOMES STARTED TO
STAGNATE IN THE 1970s, AND ESPECIALLY THE EARNINGS OF THE
MIDDLE CLASS FROM JOBS, ALL OF A SUDDEN, YOU COULD LEASE CARS
RATHER THAN BUY THEM, YOU COULD BUY CARS WITH NO MONEY DOWN, AND
THERE WERE ALL SORTS OF INTEREST-ONLY AND OTHER
ADJUSTABLE-RATE MORTGAGES YOU COULD GET FOR HOUSES.
>> JERRY ANTHONY, PROFESSOR OF URBAN & REGIONAL PLANNING,
EXAMINES HOUSING COSTS AS A CRITICAL FACTOR IN TODAY'S
ECONOMY. >> THE NATION HAS HAD A
HISTORICAL PROBLEM WITH HIGH HOUSING COSTS.
HOUSING PRICES HAVE OUTPACED INCOME GROWTH, AND THEREFORE THE
PERCENTAGE OF INCOME SPENT BY HOUSEHOLDS FOR HOUSING HAS
INCREASED CONSISTENTLY OVER THE LAST THREE OR FOUR DECADES.
THE DECADE OF THE 1990s WAS A FANTASTIC OPPORTUNITY FOR US TO
RECTIFY THIS PROBLEM, BECAUSE IN THE 1990s, WE SAW PHENOMENAL
ECONOMIC GROWTH, AND THE FACT OF THE MATTER IS THAT BETWEEN 1990
AND 2000, HOUSING COST BURDENS DID NOT GO DOWN, IN SPITE OF THE
ECONOMIC PROSPERITY THAT WE HAD. >> IN COMBINATION WITH STAGNANT
INCOMES, HIGH HOUSING COSTS HAVE MADE THE AMERICAN DREAM OF HOME
OWNERSHIP AN INCREASINGLY DIFFICULT PROSPECT.
>> OWNING A HOUSE HAS BEEN SUCH A CENTRAL COMPONENT OF THE
AMERICAN DREAM THAT PEOPLE HAVE BEEN WILLING IN THE
UNITED STATES TO DO JUST ABOUT ANYTHING TO OWN A HOUSE.
AND SO PEOPLE HAVE PURCHASED HOUSES THAT THEY CAN'T
NECESSARILY AFFORD, BUT IN ADDITION TO THAT, PEOPLE WHO
HAVE BOUGHT HOUSES THAT THEY CAN EASILY AFFORD HAVE SEEN THEIR
PROPERTY VALUES DROP CATASTROPHICALLY BECAUSE OF THE
FORECLOSURE CRISIS. THERE ARE A LOT OF PEOPLE OUT
THERE WHO ARE SAYING, "I'VE PLAYED BY THE RULES, AND I'VE
MADE MY PAYMENTS ON TIME, AND I'M LOSING MONEY HAND OVER FIST
AND THIS IS NOT FAIR." >> LEICHT ADDRESSES THE CULTURAL
DAMAGE OF CONSUMER DEBT IN "POSTINDUSTRIAL PEASANTS: THE
ILLUSION OF MIDDLE CLASS PROSPERITY."
>> THIS WORLD WHERE CONSUMER DEBT PROPS THE U.S. ECONOMY UP
IS NOT REALLY SUSTAINABLE. PEOPLE WHO DON'T KNOW WHERE
THEIR NEXT PAYCHECK IS COMING FROM AND DON'T KNOW WHETHER THEY
CAN PAY THEIR OWN DEBTS FOCUS EXCESSIVELY ON THEMSELVES, AND
SO THE CUB SCOUTS AREN'T MENTORED, THE BASEBALL TEAMS
AREN'T COACHED, THE BICYCLE RIDES AREN'T TAKEN, THE SUNSETS
AREN'T WATCHED. ALL OF THOSE THINGS THAT MAKE
COMMUNITY LIFE INTERESTING SORT OF GO BY THE WAYSIDE AS YOU DO
EVERYTHING IN YOUR POWER TO PAY OFF YOUR DEBTS AND KEEP YOUR KID
IN A DECENT SCHOOL. >> WHILE THE PLIGHT OF THE
MIDDLE CLASS SEEMS INCREASINGLY DIRE, THE ISSUES OF CONSUMER
DEBT IN AMERICA ARE BEING BROUGHT TO LIGHT AS ACADEMIC
WORK FOCUSES ON BANKRUPTCY POPULATIONS.
>> WE CAN USE BANKRUPTCY AS A WINDOW TO SEE THE KINDS OF
PROBLEMS THAT PLAGUE ORDINARY, EVERYDAY AMERICANS.
SOMETIMES THE ANSWER WILL BE REGULATING CREDIT, CUTTING BACK
ON THINGS LIKE MORTGAGES THAT ARE NOT UNDERWRITTEN FOR
PEOPLES' REAL INCOME. AND THEN THE OTHER LESSON IS
TAKING A LOOK AT THE INCOME SIDE OF IT.
WE'VE HAD A VERY STAGNANT WAGE GROWTH IN AMERICA FOR A NUMBER
OF YEARS, AND A LOT OF FAMILIES HAVE USED BORROWING TO SORT OF
MAKE UP FOR THAT LOSS IN WAGE GROWTH.
SO WE KEEP SEEING AN IMPROVED STANDARD OF LIVING IN AMERICA,
BUT A LOT OF THAT STANDARD OF LIVING HAS BEEN DRIVEN BY
BORROWING. >> FROM THE COMMUNITY-PLANNING
PERSPECTIVE, DISCUSSION OF CONSUMER DEBT IN AMERICA CAN'T
BE SEPARATED FROM THE CHRONIC ISSUE OF HOUSING COSTS.
>> UNLESS WE AS A NATION FOCUS ON HOW TO REDUCE HOUSING-COST
BURDENS AND MAKE HOUSING MORE AFFORDABLE, WE WILL HAVE HOUSING
FORECLOSURE CRISES LIKE THIS AND WE WOULD HAVE CONSUMER-DEBT
CRISES LIKE THE ONES WE'VE SEEN IN THE RECENT PAST.
>> WHILE ECONOMIC RECOVERY HAS YET TO ARRIVE, CONTINUED STUDY
OF CONSUMER DEBT CAN ONLY HELP US TO BETTER UNDERSTAND THE
PRIVATE ISSUE OF FINANCIAL DISTRESS.
COMING UP, INSIDE THE IOWA SPIRIT SQUADS.
NEXT, ON "IOWA MAGAZINE."