FacebookTwitterRedditEmail

NYT Gets Hysterical About Non-Existent Debt Crisis

It is common practice for people who completely missed the housing bubble to warn about another impending debt crisis which will sink the economy when it bursts. In this vein, we have a New York Times editorial telling us about the dangerous increase in credit card debt.

The piece tells readers:

“And now rates are now rising at time when household debt reached a record $13.21 trillion in the first quarter. Household debt service payments as a percentage of disposable income hit 5.9 percent in the first quarter, according to the Federal Reserve, a figure not reached since just before the Great Recession. Average credit card debt per borrower is about $5,700 and growing at a rate of 4.7 percent while wages are growing at about 3 percent. That can’t continue forever.”

Since they had the Fed’s data on debt burdens in front of them, they should have known the full picture, which is below.

fredgraph

Are you scared?

The piece also includes several other silly comparisons, starting with the comparison of the growth in average household debt to the growth in the average hourly wage. The czar of apples to apples insists they use average household income, which in nominal terms is growing at roughly the same rate. The editorial also repeatedly compares wealth to the 2007 bubble peaks. Surprise! We haven’t recovered.

The basis of the piece is the bad news that when the Fed raises interest rates it will mean higher interest payments on credit card debt. I am happy to have the NYT as an ally in the battle against unnecessary interest rate hikes, but the burden on credit card debt hardly tops the charts as a reason. Suppose interest rates rise 2.0 percentage points (a huge increase) on $1 trillion in credit card debt. That comes to $20 billion a year or about $150 a year per household. That’s not altogether trivial, but not a concern that keeps me awake at night.

It would be a much greater concern if Fed rate hikes kept 2-3 million people from working and lowered the wages on 30 or 40 million low and moderate wage workers by reducing their bargaining power. There is some value in keeping your eye on the ball and actually knowing something about the topics on which you write.

This column originally ran in Beat the Press.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

bernie-the-sandernistas-cover-344x550
Weekend Edition
July 19, 2019
Friday - Sunday
Rob Urie
The Blob Fought the Squad, and the Squad Won
Miguel A. Cruz-Díaz
It Was Never Just About the Chat: Ruminations on a Puerto Rican Revolution.
Anthony DiMaggio
System Capture 2020: The Role of the Upper-Class in Shaping Democratic Primary Politics
Andrew Levine
South Carolina Speaks for Whom?
Jeffrey St. Clair
Roaming Charges: Big Man, Pig Man
Bruce E. Levine
The Groundbreaking Public Health Study That Should Change U.S. Society—But Won’t
Evaggelos Vallianatos
How the Trump Administration is Eviscerating the Federal Government
Pete Dolack
All Seemed Possible When the Sandinistas Took Power 40 years Ago
Ramzy Baroud
Who Killed Oscar and Valeria: The Inconvenient History of the Refugee Crisis
Ron Jacobs
Dancing with Dr. Benway
Joseph Natoli
Gaming the Climate
Marshall Auerback
The Numbers are In, and Trump’s Tax Cuts are a Bust
Louisa Willcox
Wild Thoughts About the Wild Gallatin
Kenn Orphan
Stranger Things, Stranger Times
Mike Garrity
Environmentalists and Wilderness are Not the Timber Industry’s Big Problem
Helen Yaffe
Cuban Workers Celebrate Salary Rise From New Economic Measures
Brian Cloughley
What You Don’t Want to be in Trump’s America
David Underhill
The Inequality of Equal Pay
David Macaray
Adventures in Script-Writing
David Rosen
Say Goodbye to MAD, But Remember the Fight for Free Expression
Nick Pemberton
This Is Heaven!: A Journey to the Pearly Gates with Chuck Mertz
Dan Bacher
Chevron’s Oil Spill Endangers Kern County
J.P. Linstroth
A Racist President and Racial Trauma
Binoy Kampmark
Spying on Julian Assange
Rose Ramirez – Dedrick Asante-Mohammad
A Trump Plan to Throw 50,000 Kids Out of Their Schools
David Bravo
Precinct or Neighborhood? How Barcelona Keeps Rolling Out the Red Carpet for Global Capital
Ralph Nader
Will Any Disgusted Republicans Challenge Trump in the Primaries?
Dave Lindorff
The BS about Medicare-for-All Has to Stop!
Arnold August
Why the Canadian Government is Bullying Venezuela
Tom Clifford
China and the Swine Flu Outbreak
Missy Comley Beattie
Highest Anxiety
Jill Richardson
Weapons of the Weak
Peter Certo
Washington vs. The Squad
Peter Bolton
Trump’s Own Background Reveals the True Motivation Behind Racist Tweets: Pure White Supremacy
Colin Todhunter
From Mad Cow Disease to Agrochemicals: Time to Put Public Need Ahead of Private Greed
Nozomi Hayase
In Crisis of Democracy, We All Must Become Julian Assange
Wim Laven
The Immoral Silence to the Destructive Xenophobia of “Just Leave”
Cecily Myart-Cruz
McDonald’s: Stop Exploiting Our Schools
Kollibri terre Sonnenblume
Our Veggie Gardens Won’t Feed us in a Real Crisis
CounterPunch News Service
A Homeless Rebellion – Mission Statement/Press Release
Louis Proyect
Parallel Lives: Cheney and Ailes
David Yearsley
Big in the Bungalow of Believers
Ellen Taylor
The Northern Spotted Owls’ Tree-Sit
July 18, 2019
Timothy M. Gill
Bernie Sanders, Anti-Imperialism and Venezuela
W. T. Whitney
Cuba and a New Generation of Leaders Respond to U.S. Anti-People War
FacebookTwitterRedditEmail