Monday, May 20, 2013

Why the US economy is in such bad shape

US census bureau reports that in 2009 the median home price was $216,700 and the average price was $ 270,000.

According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400.

If we accept that you only need 10 percent down to buy a house, then you will need to finance $243,000. With a 30 year fixed mortgage at 7% your monthly payment will be $1616.

To buy a new car with 1/3 down you will need to finance $18,933 resulting in a monthly payment of $580.

So lets do some calculations:

House payment          $1616
Car payment               $  580
Car Insurance              $  200
Telephone                   $    60
Electricity                   $   125
Food                            $   600

Monthly total             $3181

That suggests a weekly income of $734 a week or $18.35 an hour.

The March 2004 wage number (the latest I could find) state that the average weekly income is $520 a week or $13 an hour. Bump that monthly wage $2253 against the projected monthly costs and the average wage earner can’t afford an average house or an average priced new car and still meet the minimum to live an average life.

Keep in mind that we didn’t include clothing costs, gas costs or any of the other reasonable monthly expenses. So the question is why is anyone shocked that personal debt is so high? In attempt to live an average life style the average American worker had a short fall of about $1,000 a month or $12,000 a year.

It’s not that the average American had unrealistic expectations; it is American business that had the unrealistic expectations. Business expected people to work for less than a living wage or they expected that a lot of working Americans would live far enough below the “average” to support the people making well about that average wage.

National Center for Children in Poverty has developed a Basic Needs Budget that calculates the minimum cost for a family of 4 to live at, in their words, a bare-bones level.

The Basic Needs Budgets show that it takes an income of about 1.5 to 3.5 times the official poverty level ($22,050 a year for a family of four), depending on locality, to cover the cost of a family’s minimum day-to-day needs.

According to the Social security website, the median wage is 66.8% of the average wage.

Do these numbers give you any insight into what the problem with the US economy is and where the blame really belongs?

1 comment:

Anonymous said...

Well, that's an ugly bit of a jolt, but it does tend to explain some things rather clearly! Now, how do we fix it?