Things Aren't as Bad as They Seem

Falling housing prices, reduced credit availability, higher food and fuel costs have middle class people feeling squeezed to the limit even to the point where they are turning to credit cards to survive. Credit card companies are lowering limits because they fear the borrower's ability to pay. Lower credit limits means higher debt ratios leading to lower FICO scores, the gold standard of creditworthiness. Lower FICO scores means higher interest rates on future money borrowed. If you want to restructure your budget by reducing your housing costs, you can't sell your house even if you wanted to. If you try to get a better job, employers are now checking your credit score rather than personal references, the same score which you just ruined by struggling to survive. Even if you want to get help, debt counselors and consumer credit counselors cannot help you until you fall behind on your debt. You have to ruin your credit score before you can get help. It seems like everything is a vicious cycle feeding on itself. And don't even check your retirement account because the teetering stock market is eating our savings alive.

Enter the economists who claim that based on the numbers, things are not as bleak as they were in the 1980s or during the Great Depression. Many claim that the media is responsible for the pervasive "negative propaganda." They state that the reality is that while most people will have to cut back, the consumer is absorbing all of the costs and hikes remarkably well. How is this possible? I always return to this question. We have way more debt and costs in this new age - home equity lines and credit cards, larger houses and associated costs, exurbs requiring increased transportation costs, more vehicles and stuff and new technology payments; cell phones, television programming, internet, satellite radio - that we did not have in 1970s and 1980s when I was growing up. Even the post office says it is losing money and keeps raising its rates when I know that I have never received so much mail in my life. I spend hours each week sorting and dealing with the mail and yet I still can't keep up.

When the government releases numbers for unemployment and inflation, GDP and income growth, they don't sound that bad. The experts say that we still have not dipped into a recession because the economic stimulus package gave the economy a boost and exports are still doing well though no one states overtly that the declining dollar makes American goods a bargain overseas. I want to know how the economy was saved by $168 billion dollars in rebate checks when we have a nearly $10 trillion dollar deficit. Month after month, we hear about layoffs, lack of job creation, net jobs loss and yet according to the numbers we are still holding up.

Debt has been the wind in the economy's sails over this last period of record growth and the country, from top to bottom, has embraced the cheap money mantra. Debt restructure is the name of the game; a company can show profits and still hold billions in debt and the government can give us great economic numbers and still be trillions in debt. We are all good if we can manage the debt payments and avoid our day of reckoning. Sadly, this day has come for millions of homeowners and many of our financial institutions and that day will come for the government when entitlement spending, military spending and debt payments outpace tax revenue and then we will all have to pay. Today, the White House is defending its record deficit of $489 billion for the 2009 budget and it can because the government has an edge, it can and will, one day, tax us for its indiscretion. Until then, we're all managing just fine and the numbers will somehow reflect the same. Things aren't as bad as they seem if you eschew common sense and stick to the numbers.