from China International Business: Regardless of who wins, it will be extremely difficult to turn the economy around. The US has been living in a debt bubble. Greenspan kept interest rates continually low during his 18-year reign at the Fed, didnât rigorously regulate derivatives, and tolerated the subprime surge. Wall Street concocted complex products with assumed, not real, reduction in risk, and sold them to credulous investors. But this bubble-conducive environment wouldnât necessarily have led to a bubble unless American households were eager to borrow. Why did they borrow and spend beyond their means for so many years? The root cause was that many, possibly the majority, of Americans tried to maintain their standard of living while the rapid pace of globalization chipped away at their earnings power. Economic theory says free trade is almost always beneficial for every economy, i.e., making the pie bigger for all. However, how the pie divides within an economy changes. Some wealth redistribution is needed to make everyone better off. This is where politics comes in. The success of the political process depends on how quickly the pie expands, and if the system is flexible and responsive. Americaâs economy hasnât been expanding fast, but income inequality has. The Gini coefficient, which measures income inequality, rose to 0.469 in 2005, from 0.428 in 1990. This suggests a declining standard of living for a significant proportion of the population. A rapid increase in healthcare costs has played an even more important role in increasing inequality. Healthcare costs in the US surpassed 16% of GDP recently, twice as high as a quarter-century ago. The high cost of healthcare imposes a harsher burden on low-income households, as healthcare is a bigger share of their income. Indeed, adjusting for healthcare costs, the median income for the middle class has been stagnant in real terms for the past decade. Despite these headwinds, Americans still believed in an ever-rising standard of living. http://www.cibmagazine.com.cn/Colum...&obama_or_mccain__the_dollar_will_weaken.html
Maintain a high standard of living? I would say most people were attaining a higher level than they had previously been with credit. I see a heck of a lot of middle class/upper middle class and even lower middle class people with luxury SUV's (leased of course), 3,000+ sq. ft. homes (0 down, intrest only in many cases) and taking vacations (CC's), $10k+ in electronics in their households. It's not uncommon for couples in their late 20's/early 30's to have these things. That wasn't the expected norm 20 years ago. I have a friend who is in his early 30's who owns a 5,500 sq.ft. home. He and his wife make a nice living (est. $200k/yr) and have two kids. They can probably afford it, but do they really need that large of a home????