With age comes ... insecurity

Another reason for economic pessimism: Older Americans are more likely to file for bankruptcy than ever before.

Published June 20, 2008 1:46PM (EDT)

Why are Americans so gloomy about the economy? On Wednesday, the Washington Post's Neil Irwin expressed some puzzlement at all the pessimism. Observing that, hey, inflation and unemployment aren't that bad, he surmised that maybe Americans just got too used to the good times. And maybe we're overreacting to food and energy prices, because they're so in our face, every day.

But now, coming off two decades of prosperity and low inflation, Americans have come to treat low unemployment and inflation as givens. We have gotten so used to things being good, in other words, that even when conditions become somewhat bad, it feels terrible.

The story received plenty of attention. Barry Ritholtz noted at "The Big Picture" that comparing inflation and unemployment rates to the numbers that we have from 30 years ago is suspect, given the changes in how those economic indicators are computed. Dean Baker argued that, well actually, the last couple of decades haven't been that good for many Americans. But Mark Thoma provides, to my mind, the best smackdown.

If you ask instead, "why are people so gloomy when the economy has all these problems, reduced economic security, stagnant real wages, rising health care costs, falling home values, rising college costs, rising food costs, loss of employer based retirement programs, rising energy costs, worries about the future, etc., etc.," there's really no mystery.

Let's add another piece of data to the puzzle. Data collected by the 2007 Consumer Bankruptcy Project reveals that bankruptcy rates for older Americans are rising sharply.

The story from these data is one of rising risk with age. The average age for filing bankruptcy has increased, and the rate of bankruptcy filings among those ages 65 or older has more than doubled since 1991. The corresponding decline in filing rates among young Americans might signal better financial security than that of their earlier counterparts. But the fact that previous generations show a sharp rise in filings in their early middle age may signal instead that people are living with financial stress for years, putting off the day of reckoning in bankruptcy for as long as possible.

If "older Americans, now more than ever, are confronting serious financial challenges" then perhaps it is time to stop wondering why people are gloomy, and time to start doing something about it.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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