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Household debt, including credit card debt, mortgages and auto loans, is rising fast in the United States. A new Nerdwallet survey says, “The average U.S. household owed about $222,000 in mortgages, $17,000 in credit card debt as well as $29,000 in auto loans last year.”
(Nerdwallet)
The study finds:
• Prices are rising faster than incomes. In the past year, median household income has grown just 4%, while the overall cost of living has jumped 8%. The survey found that nearly half of employed Americans (45%) say their pay hasn’t increased enough over the past 12 months to keep up with inflation.
• Buy now, pay later services may mean deeper debt for millions. Close to 1 in 5 Americans (18%) say they have used a buy-now-pay-later service in the past 12 months.
• Consumers are anxious about finances over the next year. Nearly 7 in 10 Americans (69%) have financial concerns about the next 12 months. The No. 1 worry is having to go into debt/more debt to cover necessities (31%), followed by having to pay higher interest on their debt (27%).
• The average amount of credit card interest paid by households is up due to recent Federal Reserve rate hikes and rising amounts of revolving credit card debt. U.S. households that carry credit card debt will pay an average of $1,380 in interest this year. And that’s assuming interest rates don’t go higher.
• Consumers are doing what they can to combat higher prices. According to the survey, nearly 4 in 5 Americans (79%) say they have taken action in response to inflation over the past six months: 42% of Americans say they’ve driven less, and 39% say they’ve bought more store brands and unprocessed staples. Close to 1 in 5 Americans (19%) say they’ve taken on more debt in response to inflation over the past six months.
A third of those Nerdwallet heard from said they fear that they will go deeper into debt in 2023 as they try to keep up with expenses. Many are concerned that the interest rates on their credit cards will keep increasing.
(Nerdwallet)
Some data sources to turn to:
- Household Debt and Credit, September 2022, from the Federal Reserve Bank of New York’s Center for Microeconomic Data.
- Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest, August 2022, from the Federal Reserve Bank of St. Louis.
- Consumer Price Index January 2022 https://www.bls.gov/cpi/
The growing cost of childcare deeply concerns rural Americans
A new study by Save the Children Action Network, the political arm of the Save the Children charity, finds that rural Americans are worried about how they are going to afford the essentials of food and childcare this year. The majority of rural voters said they might not be able to feed their families this year. A quarter of them said they are “very worried.”
(Save the Children Action Network)
The study also finds:
Rural Americans believe that access to affordable, quality childcare and early childhood education is increasingly out-of-reach for many families. In multiple questions, rural voters tell us that “care for your children” is lacking in their community, costs too much, and that access to quality, affordable care has gotten worse in the last few years since the pandemic.
• 55% say the availability of high-quality and affordable childcare has gotten worse since the pandemic, while 31 % say it has gotten better or stayed the same and 13 % are unsure.
• A majority say there are only some or very few high quality, affordable early education programs in their area; 20% say all or most are high-quality and affordable, 26 % say half are, 32 % say some and 22% say very few.
The National Conference of State Legislatures warned a year ago that the pandemic exposed problems with our childcare system. Childcare centers do not pay enough, so they can’t find enough workers, so they hire people who are not qualified to do the work. The Bureau of Labor Statistics reported that in November, the U.S. had 8% fewer childcare workers than before the pandemic.
The Bureau of Labor Statistics says the number of people missing work because of childcare problems reached a level not seen since the height of the pandemic and that was an all-time high.
(Quartz)
Look closely at the chart and you will notice the number of people missing work because of childcare issues is a fraction of a percent, so it would be easy to shrug it off as insignificant. But Quartz figures it differently:
For the reference week in November, 59,000 Americans reported missing work due to child care problems. But for the entire month, the number could be several times higher. Over the course of an entire year, a rough estimate of parents missing work might be in the range of 1.3 to 2.4 million working parents. This indicator also leaves out part-time workers and workers who work more than 35 hours a week.
These figures should also make us wonder what happens to parents of sick kids who can’t afford to take off work. Some 1 in 4 private workers in the US don’t have paid sick days, and workers can be fired for missing hours to care for a sick child. That might mean shifting the burdens of childcare onto friends and family, or simply leaving the workforce altogether. The labor force participation rate in the US still hasn’t recovered to pre-pandemic heights and is now at about the level we saw in 1977. Economist Kathryn Ann Edwards, who studies labor markets and inequality wonders, “how many parents are we pushing out of the labor force?”
The chilling scenario if China invaded Taiwan
If or when China makes a move to take over Taiwan, new estimates say a full-scale invasion would result in “heavy losses” for all parties likely involved, including the U.S. and Japan. The Center for Strategic and International Studies estimates looked at an invasion scenario taking place in 2026, with Japan and the U.S. supporting Taiwan. The extensive “war gaming” of the invasion ends essentially the same way each time, with the extensive loss of ships, aircraft and tens of thousands of troops.
The analysts warn that there is no model for Taiwan that is similar to the U.S.’s involvement in Ukraine, i.e. sending supplies but no soldiers. in which the U.S. send supplies but sends no soldiers.
In peacetime, the United States and Taiwan must work together to provide Taiwan with the weapons it needs; in wartime, if the United States decides to defend Taiwan, U.S. forces must quickly engage in direct combat. In the Ukraine war, the United States and the North Atlantic Treaty Organization (NATO) have not sent troops directly into combat but have sent massive amounts of equipment and supplies to Ukraine. Russia has been unable to interdict this overland flow. However, the “Ukraine model” cannot be replicated in Taiwan because China can isolate the island for weeks or even months. Taiwan must start the war with everything it needs. Further, delays and half measures by the United States would make the defense harder, increase U.S. casualties, allow China to create a stronger lodgment, and raise the risk of escalation.
The study makes a few other points:
- An invasion is not imminent or even assured
- An invasion is not unavoidable if all sides seek a diplomatic solution
- China might well decide on a blockade rather than an invasion, which would impose pressure economically rather than through military force.
