Many middle-income Americans, 84.3 percent of them, do tend to hold some form of debt. And rising interest rates in the Trump economy — a consequence of strong economic growth and Federal Reserve actions meant to prevent the economy from overheating — are making that debt more costly.
In 2016, 53 percent of middle-income households had credit card debt, with an average debt balance of $4,400. The average rate on such debt has risen to 16.5 percent today from 13.6 percent in November 2016, implying an extra $10.50 a month in interest cost for a family carrying that balance.
In other words, debtors — and the average middle-class American fits that description — are paying a price for the surging economy even as they enjoy the benefits of higher pay and low inflation.
Given the limitations in the data on which these calculations are based, it’s best to think of this analysis as an impressionistic painting rather than a high-resolution photograph of the economic lives of the middle class.
But it is a telling one, and helps explains the limits of a political message built on what seems to be a booming economy. It booms for some people more than others.
How we did the math
To develop this portrait, we started with two government surveys from 2016: the Labor Department’s Consumer Expenditure Survey, which provides details of household spending patterns broken down by income bracket, and the Federal Reserve’s Survey of Consumer Finances, which details assets and debt.
Then, we simply extrapolated forward to the fall of 2018. If those patterns among middle-class families held steady as they were buffeted by economywide forces, would they be better or worse off in the days before the midterms?
This is assuming that they had no radical changes to their financial lives like getting a lucrative new job or winning the lottery, and that their wages, costs and investment performances plugged along at average rates over the last 23 months.
Because of limitations in the data available for the recent past, we had to combine data sources that aren’t really meant to be combined. We had to switch between different definitions of middle income, and we made some simplifying assumptions. (For example, we calculated how higher gasoline prices would increase people’s spending without adjusting for how they might react to higher prices by driving less.)