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(Image:
source)
In "Not
Flush," I suggested that "Americans had relied on what
little cash they had left -- or didn't really have -- to buy what they wanted
(needed?) in the run-up to the holidays."
Eight days
later, we have a report out from Reuters,
"US Recovery at Risk as Americans Raid Savings, Borrow
Again," lending further weight to the notion that the
so-called return of the consumer is only a mirage.
More than four
years after the United States fell into recession,
many Americans have resorted to raiding their savings to get them through the
stop-start economic recovery.
In an ominous
sign for America's economic growth prospects, workers are paring back
contributions to college funds and growing numbers are borrowing from their
retirement accounts.
Some
policymakers worry that a recent spike in credit card usage could mean that
people, many of whom are struggling on incomes that have lagged inflation,
are taking out new debt just to meet the costs of day-to-day living.
American
households "have been spending recently in a way that did not seem in
line with income growth. So somehow they've been doing that through perhaps
additional credit card usage," Chicago Federal Reserve President Charles
Evans said on Friday.
"If they
saw future income and employment increasing strongly then that would be
reasonable. But I don't see that. So I've been puzzled by this," he
said.
After a few
years of relative frugality, the amount of money that Americans are saving
has fallen back to its lowest level since December 2007 when the recession
began. The personal saving rate dipped in November to 3.5 percent, down from
5.1 percent a year earlier, according to the U.S. Commerce Department.
Jeff Fielkow, an executive vice president at a recycling
company in Milwaukee, Wisconsin, contributed less to retirement savings and
significantly cut back on dining in restaurants and taking vacations in order
to keep college savings on track for his two children. "We would love to
save more," he said, "but we're doing the best we can."
Aside from that
, it's hard to even comprehend how things could be seen as returning to
"normal" in an economy where, as Real Time Economics writes, nearly half of the U.S lives in a household receiving government
benefits:
The pool of
Americans relying on government benefits rose to record highs last year as an
increasing share of families tapped aid in a weak economy.
Some 48.6% of
the population lived in a household receiving some type of government benefit
in the second quarter of 2010, up a notch from 48.5% in the first quarter,
according to Census data.
Expanding
government programs combined with the worst downturn since the Great
Depression have led to an explosion in the share of Americans relying on
outside help. To combat prolonged economic weakness, Congress extended
unemployment benefits to a record 99 weeks (up from the normal 26-weeks
offered in most states). The food stamp program was tweaked so it was more
generous. Americans flocked to Social Security disability, a last bastion of
support for some of the long-term unemployed.
Sometimes I
really do feel like I'm living in an alternative reality.
Michael J. Panzner
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