Recession By the Numbers

Respected financial columnist Scott Burns does the numbers (registration required)on working stiffs and comes up pessimistic. Reason: the rich have gotten richer while those in the bottom 75% (that's household income of $57,343) have not even kept up with the inflation rate while those in the upper 25% have experienced outsized gains. Rising costs of energy and health care hit those at the bottom the hardest and eat up any gains from lower rents, mortgage interest rates and easy credit. There is much more structural weakness in the economy, however, than just wage imbalances.

More broadly, the U.S. economy has lately been propped up by a consumption binge brought about by low interest rates, mortgage refi's and cheap foreign goods. Since the U.S. savings rate has now dwindled down to 0.00% (lowest recorded since 1959!) and our budget and account deficits (the "twins") are at shockingly high levels, depending on ever more consumption seems reckless at best. If foreign central banks decide not to continue financing the U.S.'s spending, the result may be a race out the door to dump dollars. Simply put, the country has forgotten how to live within its means, and neither the politicians nor the public wish to make inconvenient choices that require sacrifice.