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Surging Economy Leaves Middle Class Behind

Surging Economy Leaves Middle Class Behind

We keep hearing about this wonderful economy of ours. Jobs plentiful. Inflation low. Interest rates low. Where’s the problem?

Problem is, the uptick in pay has been modest while the prices for things the middle class thinks it’s due are beyond reach — or rather, impossible to obtain without borrowing. Thus, middle-class families are racking up big debt to keep up middle-class appearances.

Prudent people (and countries) reduce debt at times of prosperity. This country and its people are not. Such scenarios rarely end well.

Consumer borrowing has hit a record $4 trillion after inflation, not counting mortgage debt, according to an analysis in The Wall Street Journal. Credit card debt is headed skyward, as people borrow for vacations, restaurant dining and other items they can’t pay for outright.

Auto debt has climbed nearly 40 percent after inflation in the past 10 years. Unlike homes, vehicles are rapidly depreciating assets.

Over three decades, average house prices have jumped 290 percent. Not bad if you’ve long owned a home. Really tough if you’re a first-time buyer. More Americans in the middle are putting off homebuying, while many making the plunge have taken on heavy mortgages.

If they have an adjustable-rate mortgage and interest rates go up, so will their monthly mortgage payments. The average size of a new adjustable-rate mortgage is over two times that of a new fixed-rate mortgage, the Mortgage Bankers Association reports. This suggests that homebuyers are choosing adjustable-rate mortgages with their artificially low introductory rates so they can borrow more — a seemingly strange thing to do when rates on fixed-rate mortgages are still low.

Homeowners are increasingly tapping their equity for cash to buy stuff, according to the government-sponsored mortgage corporation Freddie Mac. They often do this through mortgage refinancing. Even when interest rates were rising last fall, more Americans were taking cash out of their homes and assuming a mortgage with a higher principal balance.

The average tuition at public four-year colleges has soared 549 percent over three decades. (That in itself is a scandal.) This has contributed to a frightening level of student debt, now a crisis at $1.5 trillion.

Then there are wheels. Experian reports that the average loan for new cars is now $32,187. How can that be when a brand-new Honda Accord can be bought for under $24,000 and a larger Chevy Impala for under $29,000?

Turns out trucks were the “big story” driving new-vehicle prices higher, according to a Kelley Blue Book analyst. Many Americans feel they must have an SUV or a truck. A sedan just won’t do.

As for stock investments, in these days of trade warfare and exploding federal deficits, who knows? Americans who depend on the farm economy, meanwhile, are in our prayers.

Thus, you have couples with two big car loans, hefty student debt, a sizable mortgage and growing unpaid balances on their credit cards. Some are able to handle it, but just barely. They assume no one loses a job or gets really sick without adequate health coverage.

What’s driving much of this consumer behavior is that people who thought themselves middle-class have not recognized the new economic reality. The median household income in 2017 was $61,372.

Good economic times don’t last forever. Jobs can disappear. Note that the Federal Reserve Bank just lowered interest rates out of concern that the economy is slowing. When things go in the other direction, many Americans will learn yet another lesson in the economic risk of piling on debt. Expect more anger and more pain.

Debt Buyers Bury Hard-Hit Consumers In Lies

Debt Buyers Bury Hard-Hit Consumers In Lies

Good news, people: The “boom” is back! Yes, good times are here again, thanks to an economic boom that’s being generated by (of all things) bad times.

As you might know from your own experiences, tens of millions of Americans have been hit hard, knocked down and held down in recent years by the collapse of jobs and wages. This calamity has led to a second blow for millions of the same families, who find themselves suddenly buried in piles of overdue bills for credit card charges, student loans and other consumer debt.

But the good news is that there’s a bright silver lining in that dark financial cloud. Only it’s not for the indebted families, but for a booming breed of finance hucksters known as consumer debt buyers. Believe it or not, in the warped world of high finance, “there’s gold in them thar hills” of bad debt, and where there’s gold, there are diggers.

Whenever a corporation issues a statement declaring that it’s committed to “treating consumers fairly and with respect,” chances are, it’s not.

After all, why say such a thing, when actually practicing it would make a statement unnecessary? Indeed, with names like Encore Capital Group and Sherman Financial, these miners of human misery buy bales of these unpaid bills from banks and other lenders, paying pennies on the dollar. Then they unleash packs of their hard-nosed, aggressive collectors on the families. If they still can’t extract payment, the corporate debt profiteers turn to their meanest dog: The courts.

Debt firms routinely file thousands of lawsuits a day against financially devastated Americans. They know that most debtors can’t understand the legal gibberish filed against them, can’t afford a lawyer, can’t take time off to go to a court hearing, and can’t mount an effective defense against the corporate lawyers. So, some 95 percent of these lawsuits produce default judgments against hapless borrowers — meaning debt buyers can then confiscate the wages of borrowers or freeze their bank accounts.

This boom in vulture capitalism is disgusting — but, worse, it’s subsidized by us taxpayers! We pay for the judicial system — the judges, courtrooms and endless rounds of hearings. Predatory debt corporations have perverted our so-called justice system into their own subsidiary for squeezing profits out of destitute debtors.

This is why New York attorney general Eric Schneiderman has started going after these for-profit corporate debt collectors. He found that Encore, based in San Diego, filed nearly 240,000 lawsuits against debtors in a recent four-year period, using the courts as its private collection arm. Problem is, Encore’s bulk filing of lawsuits against the hard-pressed borrowers is rife with errors, out-of-date payment data, fabricated credit card statements, etc. With debt buyers scooping up millions of overdue bills each year from lenders, tons of them are missing original loan documents, payment histories and other proof of debt.

Debt predators, however, scoot around this lack of facts by simply having their employees sign affidavits asserting that the level of money owed is accurate. Judges, overwhelmed by the unending flood of lawsuits filed by Encore et al, have accepted those affidavits as true, thus ruling in favor of the corporations. But Schneiderman found that — surprise! — affidavits were simply being rubber-stamped by company employees, with no effort to ensure the truth of the information. An employee of one large debt buyer testified that his corporation ran an assembly-line scheme in which he signed about 2,000 affidavits a day.

This is no minor scam — 1 in 7 adults in the U.S. is under pursuit by debt collectors. It’s hard enough for struggling families to claw their way out from under the economic crash without having lying, cheating, predatory corporations twist the court system to pick their pockets and shut off their hope of recovery.

To find out more about Jim Hightower, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Web page atwww.creators.com.

Photo: FrankieLeon via Flickr