How Americans Are Getting Whacked by the Big Ticket Expenses

Walk around a Target store, and you can see why consumerism is the new opiate of the masses. There's so much stuff to buy and it's so damn cheap. I once bought a full dining ware set at Target for $9.99.

Data in today's New York Times shows just how shockingly far prices have fallen for various consumer goods. The cost of a TV is down by over 100 percentage points in the past nine years, adjusted for inflation. It's 80 percentage points cheaper to buy a personal computer now than in 2005. The cost of phones is down by 60 percentage points. Ditto for toys. Clothing prices are also down, and that's true for cars, too.

And so when some pundits and policy wonks argue that lower class Americans are doing fine, despite stagnant wages, because they can buy anything they want, that claim can get heads nodding. The masses really do so seem to be in good shape if they live anywhere near big box stores and, thanks to incessant sprawl, everyone does these days.

The only problem with that rosy picture is that it ignores how costs have risen for big ticket items that few households can do without. Healthcare costs have famously risen faster than inflation in the past decade (although that rise has stopped lately). Childcare costs are also up, and are a killer for young families. Yes, you can buy a car seat for less than ever, but getting someone to look after the kid who sits in it can wipe you out.

Food is more expensive, too, and so are car repairs. But worst of all, prices have climbed most sharply for one of the biggest ticket items of all: College tuition, where costs have risen by 40 percentage points in just the past nine years.

This data offers important background to the findings of Demos' new report on credit card debt, which found that it's not the proverbial DVD player that's landing Americans in the red, but other key expenses, particularly healthcare. As Amy Traub wrote here earlier today:

One clear finding is that credit card debt is closely correlated with the absence of health coverage: households in which a member has gone without health insurance at some point in the last three years are 20 percent more likely to be carrying credit card debt than households in which no one has been uninsured

Being unemployed for some period was another sure fire way to pile up debt as the bills keep coming even as the paycheck stops. And, more broadly, it's the amount of wealth assets a household can draw on that's really key here. If you have savings, you're not going to turn to Visa for your co-pays or to pay the nursery school.

It makes sense that spending on consumer goods is not driving credit card debt, given how cheap that stuff has become. And that the big ticket items are. All in all, writes Amy:

Contrary to popular belief, there’s little evidence that households with credit card debt are less responsible in their spending habits than households that do not have accumulated debt. Instead, among similarly situated low- and middle-income households, unemployment, education, health care coverage and the value of assets households have to fall back on are the major predictors of credit card debt.