Say What?

OK, I like listening to and reading different news services, I have to admit. Since I was old enough to get pissed off because my dad insisted on watching Cross-Fire (old school Pat Buchannon vs. Micheal Kinsley) instead of Jeopardy, I have had at least some awareness of the issues. Over that 20 year period, one of the most consistent issues has been America's debt. It has always been a vogue issue, with editors and anchors lamenting about "the sad state of the American Houshold and our love for consumer debt." Watch the news over the next week and you will hear the same thing, especially now that everybody is worried about sub-prime debt issues causing the financial sector to tank.

However, I saw this today on Fox News:

http://www.foxnews.com/story/0,2933,257999,00.html

Should you be too lazy to follow the link, let me paraphrase. The net worth of American households has climbed to record levels. This doesn't make sense. I mean we are swimming in debt right? For the more economically challenged, net worth is what you would be worth, basically your assets (stuff you own) vs. your debt (stuff you owe). People are getting richer, surprise!

I want to make a few points here:
1) When people make an issue about debt, they talk about it in absolute terms, which isn't always beneficial. Having more debt isn't necessarily bad if you still have net worth. Take my situation. In the last two years, my family debt has more than doubled. It sounds bad, but hardly surprising, because I had to move to a more expensive area and finance a house that cost more than double from the place I moved from. In this situation, my net worth has continued to increase, even though my debt is up, so I am in a financially healthy position. People talk the same way about the Federal Budget defecit. "The Federal Deficit is at record levels, which bodes ill for our future." Very scary. No one says that as a percentage of GDP it's actually well below both our national average and most of the current deficit levels of other major economies. The bottom line is that as our economy, and even ourselves personally, grow, debt levels will increase. It's the net worth and debt vs income (or equity) that really matters. Think in terms of historical percentages and the data is much more meaningful.
2) While I think this data paints a rosy picture, I'd like to get a feel for what the distribution of the net worth increase is. Most likely, the majority of gains where in upper middle and upper class households. Many see this as proof that the American system is unfair, and families are being left behind. I agree, if poor people could actually build wealth with the only income they can afford to put towards their retirement (Social Security), instead of having it consumed by the government, then thay could build weath too. Instead, we have a system where the working poor pay relatively high taxes on the promise of future social security benefits. Try getting a small business loan with your social security statement of benefits as collateral. The American system is unfair to the poor. We need to abolish social security so the working poor can start building wealth.