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Credit comes due - Martha Randolph Carr

There is a common perception in America that most of us live beyond our means with credit cards financing the party. However, the newly released Federal Reserve Board's Survey of Consumer Finances for 2007 tells a different story.

According to their results, it's easy to see that members of the middle class have been steadily increasing their consumer debt, in order to keep up with inflation.

An easy translation of that is the average Joe is using his Visa card to pay the light bill and keep his family fed. He's not partying, but trying to find a way to live from day to day. That news has real repercussions for what the next bad news and blow to our already battered confidence in the economy is most likely going to be.

The Fed's survey, which is taken from a carefully selected cross-section of 4,500 consumers, shows that since the last reading in 2004, median family incomes dropped slightly for middle income Americans, particularly those headed by a single parent. Average incomes for the wealthiest 10 percent rose substantially by 8.5 percent.

The mean amount of credit card debt being carried by individuals rose 25 percent from $3,000 to $7,300, a much faster rate of increase than in previous years. That doesn't sound significant enough until all the pieces start to come together.

The survey noted that the majority of the credit card debt has shifted from stand-alone companies, such as Capital One, to 87.1 percent being held by commercial banks. Those are the very same banks that the Feds have been working with to ferret out poisonous mortgage debt. Commercial banks that are doing well also made the same decision to not lend short-term consumer debt in large quantities to high-risk people. That means that the debt that is most likely to go unpaid is sitting with the same banks that are already in trouble.

Also, most consumers in the middle income category reported that they were saving less than one percent, which makes sense if it's already taking a credit card to pay for the basics of life.

So the picture that's forming is an average voter who has a family to support but fewer real dollars in order to accomplish the feat, and vital credit sources that have quickly disappeared, except for the bill with no monetary reserve to get through a tight year.

Add on top of that the climbing unemployment rate of this very same group. It becomes easy to see the very real likelihood that a lot of the retail debt now held by weakened commercial banks will go unpaid. Consumers will choose paying for pretty much anything else before catching up the credit card debt when there isn't enough to cover all of the essentials. A damaged credit report will stop being seen as enough incentive, if there's a risk of foreclosure on the house or the phone being disconnected.

Banks will start to make hard decisions about covering the debt owed to the retailers who accepted in good faith the bank-generated credit card. It all starts to roll downhill again.

What's astounding, given that the survey is generated by the Feds, is how little Bernanke and his crowd is talking about the coming tidal wave. It can't be that we're still practicing the idea that if we look away long enough it won't all fall apart, yet again.

Fannie Mae, AIG, Wamu and Lehman were apparently not a big enough lesson. One of the more galling aspects is that, right now, there is not only no significant consumer loan modification being offered in this category, but instead, banks are trying to generate bottom line income by charging fees of 25% based on a consumer's balance.

There was a time when that was called usery in the United States. It starts to beg the question of what real differences exist anymore between the dreaded payday loan and some of the bank-issued credit cards.

It's also possible to conceive that consumers are now paying down debt that consists more of fees owed than actual retail debt. That's where we are at the moment.

If nothing is done, then voters can rightfully say that once again big business and another pending bailout of some titan of industry on the taxpayer dollar mattered more. After all, the Federal Reserve was the one who gathered the necessary information and then stuck it in a drawer.

If you'd like to get involved in the 2009 America Challenge to raise funds for community-based charities, e-mail me at Martha@CagleCartoons.com, for more information. Together we're going to build stronger communities and empower ourselves.

Martha's column is distributed exclusively by Cagle Cartoons Inc., newspaper sundicate. E-mail her at: Martha@caglecartoons.com.