Conspicuous Assumption

The Times recycles discredited myths about personal debt

The New York Times poorly serves readers this morning with a surprisingly ill-informed story about Americans paying cash these days instead of using their credit cards.

In making that unobjectionable but not well-supported point, the Times swallows whole and passes along the myth that Americans got into this hole because of their discretionary, more or less frivolous, spending on non-essential consumer items.

Audit readers, as most middle-class Americans not living in the financial-press bubble already sense, that myth is just that, a myth. Even a cursory glace at a growing body of literature—with which any business reporter covering any beat should be familiar—shows that Americans’ debt trap was built by stagnating incomes and skyrocketing costs for housing, health care, and education—known to non-business reporters as “the essentials.”

Let’s look at the Times piece, “Economy Fitful, Americans Start to Pay as They Go.” Notice the sprinkling of casual and thoughtless references to Americans’ supposed envy, weakness for consumer products, and collective need to one-up neighbors. The italics are mine:

In homes now saturated with debt, conspicuous consumption and creative financing have come to seem a sign of excess not unlike that of a suntan in an age of skin cancer.


During the technology boom of the 1990s, an extravagant mind-set took hold. In ads for the discount broker Ameritrade, a spiky-haired hipster ridiculed middle-aged professionals for settling for conventional returns.

I don’t see the connection between an ad for a stock brokerage and consumer spending, but never mind.

And here’s the worst, in a line talking about an Oklahoma woman who once looked across the street with envy at her neighbor’s Cadillac, but now no longer does:

For decades, that envy has been a prime engine of economic growth. Debt-willing consumers hungering for the latest-generation this and the fastest that kept factories busy from Michigan to Malaysia.

Okay, so “envy” has been a prime engine, not only of consumer spending and credit-card debt, but of “economic growth”?

Are we sure about that? Who says? Personally, I think the Times gives “lust” and “pride” short shrift.

Elizabeth Warren, a Harvard law professor and bankruptcy expert who has worked on the causes and effects of personal debt for decades, and her daughter Amelia Warren Tyagi, coined the term “over-consumption myth” right before they exploded it in chapter two of their popular 2003 book The Two-Income Trap, which was right before they exploded the “myth of the immoral debtor” in chapter three.

Contrary to popular belief at the Times’s Business Day section, the average American family today spends 21 percent less, adjusted for inflation, on Tommy sweatshirts, Prada, and all clothing than it did in the 1970s; 22 percent less on food, both at home and at TGI Friday’s and all restaurants; and 44 percent less on major appliances.

Meanwhile, housing prices for married couples with children shot up 78 percent between 1984 and 2001; in-state tuition at a public university, adjusted for inflation, has doubled in twenty-five years (don’t even ask about private schools). Today, thanks to low or stagnant income growth, an average two-income family, after paying for housing, insurance, child care, and other essentials, has less disposable income than their single-income counterpart in the early 1970s. That’s incredible.

Additional work on the transformation of credit cards into Americans’ “plastic safety net” has been done by the Center for Responsible Lending, Demos, and other nonprofit research groups, and others, including Robert D. Manning, author of Credit Card Nation, the basis for a recent movie. I’ll have more on this topic in the Columbia Journalism Review’s upcoming print edition.

In the end, Americans’ biggest extravagance has been having children. The Times may believe fervently its moral decline assumptions. If so, it provides no data to support them.

Tellingly, the Times’s own anecdotes help with the main thesis—Americans are using credit cards less—but don’t fit the Americans-are-profligate assumptions that underpin the story.

The Cadillac passage, for example, relies on an Oklahoma woman who doesn’t actually own a Cadillac, but sees one across the street and assumes her neighbors are strapped because of it:

Not long ago, Elena Gamble would have looked at the Cadillac parked across the street from her modest home in Elk City, Okla., and felt a twinge of jealousy.

“We live in a small town, and everybody looks at your clothes and what you drive and where you have your hair done,” said Ms. Gamble, who earns about $2,600 a month as a grievance counselor at a local prison.

Now, she and her husband—a prison guard who brings home $2,000 a month—are grappling with $10,000 in high-interest debt. They no longer go to the movies or out to eat, except occasionally to McDonald’s. They quit their Internet service. Their car was repossessed. “What we say now is, ‘If we can’t afford it, we can’t buy it,’ ” Ms. Gamble said.

And when she looks across the street at that Cadillac, her envy has been replaced by pity for the neighbor on the hook.

Here’s a reporting tip brought to you by the Columbia University Graduate School of Journalism: Cross the street and ask the neighbor what’s up with the car. We have no idea who they are and whether they can afford it. They might have been a better subject for the story, but we’ll never know.

As for the Gambles, notice that they did not have their Versace dinnerware repossessed, but their car, which some prison guards in places without subways use to get to work, and they cut spending by dropping Internet service, which is not really a frivolity these days, is it? The make and vintage of the car, by the way, is unidentified. It may be late-model Hummer, but I doubt that detail would have gone unmentioned.

Fran Barbaro, the subject of the article’s final anecdote, also provides clues that “envy” and an “extravagant mindset” aren’t the problems behind credit-card debt. Yes, she had art and a three-bedroom (wow) house, but she earned mid-six figures in the computer industry.

Her $200,000 personal debt is the result of “divorce, illness and motherhood,” including unidentified after-school programs that cost $25,000 a year and were apparently needed by her two boys.

The Times’s main point is fine with me. Its recycling of hackneyed myths is disappointing.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.