Three recent New York Times articles have captured the essence of a new gilded age in America: “The Nightmare Before Christmas,” by Bob Herbert; “The Richest of Rich, Proud of the A New Gilded Age,” by Louis Uchitelle; and “Report Says that the Rich are Getting Richer Faster, Much Faster,” by David K. Johnston. The current gilded age has been fueled by deep tax cuts for the wealthy and mountains of debt — government debt, corporate debt and household debt — plus the inhumanely cheap labor of globalization.
The U.S. national debt is currently $9.13 trillion, expanding at a rate of 1.4 billion dollars a day (one million dollars a minute). Five trillion dollars have been added to the national debt since G. W. Bush took office, sharply cutting the tax rates for the wealthy and launching his wars in Iraq and Afghanistan. Together, these wars will cost (if not stopped sooner) $42.4 trillion over the next decade.
We owe, we owe…
Total U.S. consumer debt, excluding mortgages, reached $2.46 trillion in June 2007. Eight percent of the households owe $9,000 or more on their credit cards, with the average consumer having a total of 13 credit obligations on record at the credit bureau. These include credit cards, department store charge cards, gas cards, bankcards, installment loans for cars, student loans etc. Fifty one percent of the U.S. population has at the minimum two credit cards. (creditcards.com)
An article by Stephen Roach, chairman of Morgan Stanley Asia in the Jan. 7, 2008 Financial Times.com reported “household debt in the U.S. hit a record 133 percent of disposable income.” Noting that this trend is unsustainable, he foresees a sharp drop in the price of housing.
Outstanding mortgages total $11.8 trillion. At the end of 2006 there was already a sharp increase in the number of homeowners with no or negative equity. According to the S&P/Case-Shiller Home Price Indices that number reached approximately 5.6 million in 2007.
In the May, 2006 Harpers Magazine, economist Michael Hudson refers to the condition that recent homebuyers find themselves in: “debt serfdom,” brought on by the “real estate collapse.”
Tax cuts for the elites in a period of “permanent war,” coupled with the demands of the financial, insurance, and real estate sectors, guarantee the escalation of ever more debt and the acceleration of the pace of what Paul Krugman calls a “debt peonage society,” (The New York Times, 3/9/05)
Newsweek reported on December 23, 2007, that Americans are falling behind in their current payments at an alarming pace, with “delinquencies and defaults surging to double digit rates.” Mark Zandi, the chief economist and co-founder of Moody’sEconomy.com, sees credit card quality continuing to “erode” throughout 2008.
Where economy meets politics
In anticipation of such a development Congress, in 2005, sided with creditors and made it harder for debtors to default on credit card debt. With the financial, insurance and real estate sectors firmly in control, at least for the moment, we can anticipate now, with housing prices in decline, a surge of debt collectors coupled with Congress seeking to block the exits from indebtedness.
In an echo from the Gilded Age, Sanford I. Weille, former City Bank chairman and billionaire, told the New York Times reporter Uchitelle that “People can look back at the last 25 years and say this is an incredibly unique period of time…We didn’t rely on somebody else to build what we built, and we shouldn’t rely on somebody else to provide all the services our society needs.”
In the face of the gathering economic storm, with families witnessing the evaporation of home equity, the opiate of “ownership” may be wearing off. It so, 2008 could be the year that class struggle began to challenge the so-called ownership society.
This is reflected in the record turnout in the Democratic primaries where voters, including unprecedented numbers of young people, are expressing concern about the economy and their futures. The overwhelming sentiment for change represents a massive rejection of the pro-corporate economic and military policies of the Bush administration.