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THRIFTY FAMILIES AND OTHER LIES

Like Their Government, Americans Live on Debt

NEW YORK--During his State of the Union address President Obama repeated this ancient canard: "We have to confront the fact that our government spends more than it takes in," he said. "That is not sustainable. Every day, families sacrifice to live within their means. They deserve a government that does the same."

Republicans have used this "families balance their budgets, so should government" line for years. Now Democrats are doing it too. Everyone is jumping aboard the pseudo-austerity bandwagon. (Why pseudo? Neither party really wants to balance the federal budget because it can only be done by bringing home the troops, shrinking the Pentagon by 90 percent, ending corporate welfare, and soaking the rich--i.e. major campaign donors--with higher taxes.)

The family budget talking point is a fascinating meme that reflects a rarely considered national blind spot. As with other cases of mass denial (we think we're generous do-gooders around the world, foreigners see us for the crazy mean torturers we also are), we give ourselves more credit than we deserve.

We Americans value thrift and personal responsibility. We believe we should live within our means. These cultural ideals stem from our Puritan history.

But we don't live up to our ideals. Not even close.

Americans are up to the ears in debt.

Four out of five individuals have at least one credit card. The average family has an outstanding balance of $10,700. It spends 21 percent of its monthly income to pay interest on that balance.

The average American family has assets: It owns a house worth $160,000. But it owes $95,000 to the bank. As the housing market continues to crash, equity shrinks.

Our average family's savings are virtually nonexistent: $3,800 in the bank, no retirement account whatsoever (for half of families, average retirement savings $35,000 for the other half), no mutual funds, no stocks, no bonds.

The claim that American families live within their means is a joke.

To be fair, it's not entirely their fault. The typical American family only earns $43,000. It's hard to buy much of anything, much less the house that embodies the American Dream, with that. And it's impossible to save.

So they/we borrow.

As grim as a life of indebted servitude may seem, imagine what the American economy would look like if families really did live within their means, spending no more than they earned. No debt. No credit.

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