Recent consumer-finance data should offer ample argument against drawing more people into the Wall Street whirlwind. Many Americans already fail to follow the most basic rules for managing a household budget. How could politicians look at the wreckage and think that replacing the Social Security guarantee with stock investing is a good plan?
First off, the delinquency rate on credit-card and consumer loans rose in the last quarter of 2000. Americans were spending more money than they were taking in. The radical notion of actually saving something did not cross many minds.
Spending more than you have is not the wisest way for a family to prepare for a future economic downturn. The scary part was how few people even considered that possibility.
Consumer borrowing continued to accelerate in January. Some economists took the optimistic view that Americans' willingness to take on more debt reflected their confidence in the economy: the belief that they could always get a third or fourth job.
Others, however, held that rising energy costs and decreasing overtime work had hindered many people's ability to keep up with credit-card payments. Bolstering this opinion were increasing default rates on auto and home-equity loans.
We are not talking about a few out-of-control spenders here. Advisers urge consumers to pay off their entire credit-card bill every month. Credit cards tend to charge extraordinarily high interest rates of 18 percent and up. Yet maintaining unpaid balances - $5,000 is typical - has become the norm.
Heaven knows what will happen to loan delinquency rates now that the economy is heading south. With the new bankruptcy law narrowing the Chapter-7 escape route out of oppressive debt, these folks should be paying off creditors for years to come.
