US: Working families struggle to make ends meet

[Omaha Steve]

http://www.wsws.org/articles/2009/mar2009/ends-m21.shtml

By Mike Bryan

As thousands of jobs are shed on a daily basis and consumer credit tightens, the economic crisis is driving working families and individuals to make difficult decisions on how to spend their dwindling resources—many with serious ramifications for their current and future well-being.

Because real wages have stagnated since the early 1970s, families have attempted in recent years to make ends meet by working longer hours, taking on second jobs, or by adding more family members to the labor force. Such options have now become few and far between as more and more workers search for work and many are forced to work reduced hours.

The most recent Federal Reserve flow of funds report indicates that at $13.9 trillion, American household debt more than doubled over the last decade. Or, as Time magazine put it, "Household debt in the US—the money we owe as individuals—zoomed to more than 130% of income in 2007, up from about 60% in 1980."

However, with the collapse of the housing market has come a drying up of credit. Decreased home values mean decreased home equity that can be realized either through sale or borrowing. Some banks are even offering customers hundreds of dollars to cancel their unused home equity lines of credit. Likewise, credit card companies are decreasing credit limits, raising rates, canceling cards, or offering small financial incentives to cancel them.

Reuters quoted banking analyst Meredith Whitney, who warned that "credit cards are the next credit crunch." Available lines of credit were reduced by nearly $500 billion in the fourth quarter of 2008 alone, she said, estimating that over $2 trillion of credit card lines will be cut in 2009.

In response to these pressures, people—and businesses—have cut back on spending. According to a Commerce Department report released February 27, consumer spending—which accounts for about two-thirds of the US economy—decreased in the fourth quarter of 2008 at a 4.3 percent pace, the most in 28 years.

FULL story at link.