The New York Times poorly serves readers this morning with a surprisingly ill-informed story about Americans paying cash these days instead of using their credit cards.
In making that unobjectionable but not well-supported point, the Times swallows whole and passes along the myth that Americans got into this hole because of their discretionary, more or less frivolous, spending on non-essential consumer items.
Audit readers, as most middle-class Americans not living in the financial-press bubble already sense, that myth is just that, a myth. Even a cursory glace at a growing body of literature—with which any business reporter covering any beat should be familiar—shows that Americans’ debt trap was built by stagnating incomes and skyrocketing costs for housing, health care, and education—known to non-business reporters as “the essentials.”
Let’s look at the Times piece, “Economy Fitful, Americans Start to Pay as They Go.” Notice the sprinkling of casual and thoughtless references to Americans’ supposed envy, weakness for consumer products, and collective need to one-up neighbors. The italics are mine:
In homes now saturated with debt, conspicuous consumption and creative financing have come to seem a sign of excess not unlike that of a suntan in an age of skin cancer.
And:
During the technology boom of the 1990s, an extravagant mind-set took hold. In ads for the discount broker Ameritrade, a spiky-haired hipster ridiculed middle-aged professionals for settling for conventional returns.
I don’t see the connection between an ad for a stock brokerage and consumer spending, but never mind.
And here’s the worst, in a line talking about an Oklahoma woman who once looked across the street with envy at her neighbor’s Cadillac, but now no longer does:
For decades, that envy has been a prime engine of economic growth. Debt-willing consumers hungering for the latest-generation this and the fastest that kept factories busy from Michigan to Malaysia.
Okay, so “envy” has been a prime engine, not only of consumer spending and credit-card debt, but of “economic growth”?
Are we sure about that? Who says? Personally, I think the Times gives “lust” and “pride” short shrift.
Elizabeth Warren, a Harvard law professor and bankruptcy expert who has worked on the causes and effects of personal debt for decades, and her daughter Amelia Warren Tyagi, coined the term “over-consumption myth” right before they exploded it in chapter two of their popular 2003 book The Two-Income Trap, which was right before they exploded the “myth of the immoral debtor” in chapter three.
Contrary to popular belief at the Times’s Business Day section, the average American family today spends 21 percent less, adjusted for inflation, on Tommy sweatshirts, Prada, and all clothing than it did in the 1970s; 22 percent less on food, both at home and at TGI Friday’s and all restaurants; and 44 percent less on major appliances.
Meanwhile, housing prices for married couples with children shot up 78 percent between 1984 and 2001; in-state tuition at a public university, adjusted for inflation, has doubled in twenty-five years (don’t even ask about private schools). Today, thanks to low or stagnant income growth, an average two-income family, after paying for housing, insurance, child care, and other essentials, has less disposable income than their single-income counterpart in the early 1970s. That’s incredible.
Additional work on the transformation of credit cards into Americans’ “plastic safety net” has been done by the Center for Responsible Lending, Demos, and other nonprofit research groups, and others, including Robert D. Manning, author of Credit Card Nation, the basis for a recent movie. I’ll have more on this topic in the Columbia Journalism Review’s upcoming print edition.
In the end, Americans’ biggest extravagance has been having children. The Times may believe fervently its moral decline assumptions. If so, it provides no data to support them.
Tellingly, the Times’s own anecdotes help with the main thesis—Americans are using credit cards less—but don’t fit the Americans-are-profligate assumptions that underpin the story.
Great story. Economic coverage on the TV networks and in the NY Times consistently is consistently flawed in that it assumes an upper-middle-class perspective and shows little understanding of what middle-class and working-class people are experiencing. If one were to judge by these media sources, one would think the average American family has an income of $150,000 and has gone into debt to pay for ski vacations in Europe.
Posted by kweberlit
on Tue 5 Feb 2008 at 02:42 PM
The perspective of the NY Times management is not difficult to understand. Simply browse through the first several pages of Sect. A and you'll see ads for only the most extravagant items. Watches for thousands of dollars and up. Jewelry at multiple thousands for even simple earrings. It seems that Sulzberger and Keller have become completely out of touch with real life and the interests of the bulk of its readers. It is exeedingly
disappointing that it is only occasionally that a truly worthwhile bit of journalism finds its way into the pages of the NY Times. What more can be expected from a newspaper management that sees some benefit or balance in the hiring of William Kristol to soil its influential Op-Ed pages.
Posted by Jack
on Tue 5 Feb 2008 at 10:32 PM
While Dean Starkman makes some very interesting points with respect to the NY Times article; this story reminds me of the half empty/half full glass theory. The writer of the NY Times article went in with a lot of facts and numbers that the audience is bombarded with everyday from the 6am news to the 11pm version. We all know that Americans are falling into debt, this is not "breaking" news to anyone. Unless of course you're living under a rock. What's really interesting about this particular piece is that Starkman discusses some key points as to why some Americans are falling into debt in a manner that is rather "unconventional". Starkman begins by citing skyrocketing prices for education, health care, food and housing as the catalyst for this "debt trap". This is an unconventional method in my book because every other news source that I've either read or listened to has completely bypassed this method of logical reasoning. Secondly, she points out that credit cards are often used to pay for the "essentials" of everyday living, clearly her version of what's considered essentials varies greatly from that of the NY Times writer. By far the most entertaining part of this whole piece was when Dean Starkman challenged the NY Times writer's journalistic approach by not interviewing that "lady across the street with a Cadillac". She remains for all intents and purposes a flat character.
Posted by V11067
on Wed 13 Feb 2008 at 08:44 PM