Wednesday, February 13, 2008

Poor People Watch HBO

People on the political fringe are all up in arms about a NYT Op-Ed showing that poor people in the US are doing pretty well, as measured by the acquisition of consumer goods.

The fact that goods are cheaper doesn't diminish the fact that the ability of the poorest Americans to consume is increasing. Cheap goods increase consumer purchase power in the same way that increasing incomes do. The money people have buys more stuff.

I do think a problem is that poorer people tend to make worse decisions with regard to consumer purchases, and tend to pay more. Historically, poor people have been swindled on furniture and electronics rent-to-own arrangements, which result in them paying much more than an item costs over a period of months, in exchange for the immediate gratification of taking it home with no money down.

While chain-store practices are less predatory, they offer payment plans on big-ticket items that include hefty interest payments. So, while it may be progress that a poor person can own a $900 television, it's unfortunate that it will often cost him $1400. This also indicates the precariousness of an economy driven by the people buying depreciating assets with loans against future earnings.

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