Zogby: The Modest Majority

Forget the personal debt horror stories--most Americans are living within their means.

by John Zogby
www.forbes.com

It's no secret that Americans have become addicted to credit in order to maintain an artificially high standard of living. According to a recent CardTrak.com survey of 55,000 consumers, 13% of Americans have credit card balances of more than $25,000.

Have we lost our way when it comes to credit? Now celebrating my 25th year as a pollster, I've learned to read statistics with a bit of dyslexia, taking a look at them backward and upside down. So I discovered that almost half of that 13% were people who could well afford to carry that much credit card debt--which meant to me that approximately nine in 10 Americans were living within their means with regard to credit card debt. The real truth here is that most Americans are living their lives modestly, but this does not make a dramatic headline.

But Americans have bought into the misconception that most of us are overextended. Taking into account a household's overall financial picture, a Zogby Interactive survey conducted in March 2008 found that 79% of Americans believe they themselves live within their means financially, given their current personal financial situation.

This same survey found that 87% believe that most other Americans are living beyond their financial means. Our more recent polling shows Americans have been trimming their budgets in response to today's financial reality--on entertainment, major purchases, even groceries. The Great Recession has not created a new mindset, because it was already here.

It's not so much that we're a nation of debtors--though there are a lot of us with too much debt--but that we're not a nation of savers. On the surface, it would appear that Americans have an insatiable appetite for things they cannot afford. The Economist reported in 2008 that household and consumer debt was up from 100% of gross domestic product in 1980 to 173% by 2007.

But consider the reality that much new debt has been caused by students who graduate from college with unmanageable credit card payments, and that a substantial burden is being carried by these college graduates well into their thirties. Much of this growing debt is in start-up costs for young people and added penalties and interest rates.

There are many of us working for less, and many who have come to the realization that they cannot achieve the American Dream on a buy-now pay-later basis. The Great Recession is not creating a new trend but rather accelerating one I have noted over the last decade: a move away from easy credit, away from buying what we can't afford, away from seeking out fantasy.