14.10.04

DISCRETIONARY LOCK IN? Kevin at Truck and Barter is not happy that the Washington Post's Christopher Stern is not happy with monthly connection charges for Internet providers, health clubs, cable television, and newspaper subscriptions. More income committed to fixed charges means less income available for discretionary purchases such as food, clothing, tapes (or do you buy disks now) to watch or to hear, and books.

There is a connection between rising fixed commitments and the Two Income Trap (details or compare prices) and once the latest conference ends I will offer some more comments. For now a tease. The authors of Two Income Trap do not like the easy access to credit at high interest rates on offer today. The article quotes Jeremy Rifkin in such a way as to suggest he approves of easier access to credit. (I love a good fight, let's you and him have one!)
Rifkin points to the proliferation of tree-lined gated communities where 40 million Americans now have, in effect, their own private parks with swimming pools and bike paths. Until the mid-20th century, parks were largely viewed as public spaces. Rifkin claims that the move away from free radio and free television toward subscription models is just one example of a broader trend, with more Americans finding themselves paying premiums for traditional services such as education and health care.

The barriers are highest for consumers on the lowest economic rungs, those without credit or credit cards, according to Rifkin. "Credit cards are what open the door for those who can afford to live in this society," Rifkin said.

The number of consumers who have access to credit cards and electronic bill-paying services is large and growing. According to Synovate Inc., a research firm that follows the credit card industry, 75 percent of all households have access to a credit card. And more than half of people under 35 have paid at least one bill through online banking services.
The short form of the Two Income Trap is that more of the two incomes are going for the fixed charges and for debt service, leading to yet a different drain on the discrectionary income.

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