Today is Thanksgiving; one of the few holidays U. S. workers still get time off to celebrate. We tend to think it as uniquely American and yet it was English colonists who brought the idea with them from their native lands and incorporated it into our culture like so many other ones have been. The Thanksgiving we celebrate is based upon the English colonists version of "harvest day" they celebrated in 1621 with their new neighbors, the Wampanoag, and without whose help there would most likely not have been a Plymouth Colony for very long.
And like most of our other most cherished holidays, the origin goes so far back in history that it transcends Christian ideology and becomes lost in the historical mist of paganism; offering proof that every holiday we celebrate has evolved over the many centuries into what we have made it today. And although we have exchanged our harvesting of crops to the gathering in of our families; Thanksgiving is evolving into another tradition of "harvesting" known as Black Friday.
Black Friday, described as the day after Thanksgiving when the official Christmas shopping season kicks off and merchants expect to be "in the black" again. To do this they offer deep discounts for those of us who have the stamina to roll out of bed far earlier than we do for work and stand in long lines in the cold and dark for the opportunity to acquire those deeply discounted objects we covet.
Like the holiday preceding Black Friday, we can trace its origins; but only back to the 1970s when the term was originally used to describe the heavy traffic the day after Thanksgiving but has quickly evolved to mean the day that merchants began turning a profit. Myth evolution says that it is the heaviest shopping day of the year although the reality is that there is more looking than buying (except for those early door busters) and that Christmas Eve is still the champion shopping day.
As our economic problems grow ever worse, and as our discretionary spendable income shrinks (that money left after all expenses AND taxes have been taken care of) and our refusal to "downsize" our social class in spite of our low wages, we depend more and more upon those ever rising credit limits arbitrarily set by those companies now charging loan shark interest rates (and user fees that devours more of that shrinking discretionary spendable income) to keep us "in the hole".
Just three days before Black Friday, the bellwether of our nation’s financial security, The Federal Reserve, issued an article saying that it had lowered it’s growth target for the economy in 2008 and added that it expect an economic growth rate of 1.8% to 2.5% instead of the predicted 2.5% - 2.75%. Unfortunately for us, this also means that it will influence how much "interest consumers pay for credit card borrowing, home equity lines of credit and auto loans". The Fed is blaming "tightened terms and reduced availability of sub-prime and jumbo mortgages, weaker than expected housing data, and rising oil prices" for its low growth predictions for 2008. And on Wednesday it was reported that "The Dow dives more than 210", and while retailers are pushing a Christmas season buying binge, our 401 Ks are taking another beating.
Another article titled "The Coming Consumer Crunch" warns us that whether or not we call it a recession, we’re going to be forced to tighten our belts...but not just yet. While consumer costs in the two "volatile food and fuel" categories not counted in the economic index are expected to rise substantially while wages remain stagnant, retailers are using all their wiles to entice us to spend more even as they downsize their Christmas inventory and bargains.
Since 1981 consumer spending is said to have risen every year except for the first quarter in 1991 even though wages did not keep pace with the inflation rate. And like the budget of the country we live in, that bottom line is enhanced by borrowing in order to continue the life we wish we could afford to lead. But you can’t live by borrowing from Peter to pay Paul forever and the latest housing crisis is expected to put an end to the credit financed consumer spending. A Business Week article (Nov. 18, 2007) by Michael Mandel says:
What comes next could be scary—the largest pullback in consumer spending in decades, perhaps as much as $200 billion to $300 billion, or 2%-3% of personal income. Reduced access to credit will combine with falling real estate values to hit poor and rich alike. "We're in uncharted territory," says David Rosenberg, chief North American economist at Merrill Lynch, who's forecasting a mild drop in consumer spending in the first half of 2008. "It's pretty rare we go through such a pronounced tightening in credit standards.
The article also states that economists have been complaining about excessive borrowing and spending since the early 80s, and journalists regularly ran stories about debt-ridden American consumers being "tapped out", "profligate" and "spendthrift". And as more and more consumers fall deeper and deeper in debt it is important that we realized that at least half of these "tapped out" bankrupt consumers got that way trying to pay medical bills but economists say that no matter how far behind you get on your bills spending continues because as long as we have kids to cloth and medical bills and credit, it will continue. The Bureau of Economic Analysis has released statistics showing that the personal savings rate fell from 12% at the beginning of the Reagan administration and has fallen below zero today.
And this means that salaries are no longer large enough to accommodate a middle class lifestyle without us falling deeply in debt. However, that same middle class lifestyle has been financed by credit since the 2001 recession according to David Rosenberg, chief North American economist for Merrill Lynch, who was quoted as saying, "In 2001-2002, the credit window was open for anyone who had a pulse." So for the past 25 years, middle class America has been loosing ground in the fight to remain middle class and, with low salaries, and the loss of professional jobs in fields like Engineering and Computer Sciences outsourced to foreign countries - both friend and foe, there is very little indication that salaries will be rising any time soon.
And just to make sure we get the message this holiday season, George W. Bush has put his two cents in again by letting us know in advance that he plans to veto "any bill that raises taxes as a condition of fixing AMT" (alternative minimum tax). What he didn’t tell you is that the AMT was created in 1969 (a more liberal era) to ensure that wealthy people could not use tax breaks or deductions to avoid paying any taxes. Since it was never indexed for inflation, over the years middle income taxpayers have crept into a category once the province of the wealthy.
And if Bush vetoes the bill Congress has passed, 21-25 million middle class taxpayers will be paying approximately $2,000 more in additional taxes because Mr. Bush believes that this bill would represent a tax increase that "would undermine the competitiveness of U. S. businesses in the global economy and could have adverse effects on the U. S. economy." Congressional Republicans agree with Mr. Bush believing that closing the loopholes would increase taxes. What they are actually saying is that they won’t pass the bill if Congress succeeds in closing the loopholes in the bill used by the wealthy because Mr. Bush believes that protecting his well heeled buddies is more important that grabbing another $2,000 from middle class Americans buried under a mountain of debt.
But lets look at it another way; tomorrow we will rise before dawn, stand in long lines waiting until those businesses Mr. Bush is so worried about protecting opens their door and clutching our lucky tickets stampede inside to buy our precious item and then pull out that piece of plastic that says "charge" for which we will be paying for months or years because
Not everyone thinks American shoppers are tapped out. Consumers have about $4 trillion in unused borrowing capacity on their credit cards, enough to keep spending afloat, points out Stuart A. Feldstein, president of SMR Research in Hackettstown, N.J., which studies consumer loan markets.
The fate of the free world is resting in your hands; or the hands that transfers that "unused borrowing capacity" to the businesses Mr. Bush plans to protect from an increase in taxes at the expense of raising yours.
But none of this will concern Mr. Bush this weekend, he will not be participating in Black Friday. He will be relaxing at taxpayer expense at Camp David, safe from war protesters and keeping his money safely pocketed. And I doubt that Mr. Bush even paused this Thanksgiving Day to consider his good fortune at being born into a family that made it unnecessary for him to strive for a college education, a resume, or medical expenses. So much to be thankful for and yet he shows no gratitude or empathy for those not as fortunate. And his middle class "subjects" may have a lot to be thankful for if they can only survive one more year.