Wednesday, October 22, 2008

Have US households been living beyond their means?



Robert Reich looks at this question . It seems they have been. However, Reich points out that the recent past has seen a rise in inequality and stagnant incomes for those on average and below-average earnings. The fruits of growth have gone to the rich. In that sense, the average family has had to run just to stand still. This may be why they have taken on more and more consumer debt.

He suggests that an economic policy which aimed to boost lower-paid workers' earnings would mean that they would need to borrow less. This would thus lessen the chances of an artificial credit-led boom.

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