Correction: In this Blog on August 15, I reported that bankruptcy filings by Baby Boomers had skyrocketed in recent years. I was relying on recent articles published in the New York Times, the Financial Times, the Washington Post, the Los Angeles Times and others — all of which reported that bankruptcies were surging among seniors, especially those over 65.
Well, it turns out we were all wrong. Data from the Federal Reserve Bank of New York show that from 2000 to 2018 the bankruptcy rate for Americans age 60 and older fell by 37%. Oops. One of the newspapers noted above reportedly published the story based on a long-outdated research paper, and the others – including me – just assumed it was accurate.
The lesson to be learned – and I should know this – is you can’t just assume something is accurate simply because it appeared in multiple major news outlets. So, let me set the record straight.
The Federal Reserve Bank of New York’s “Consumer Credit Panel” is based on more than 13 million credit reports from the credit bureau Equifax. Despite the New York Times’ claims that bankruptcy is hitting “a rapidly growing share of older Americans,” the Fed’s data show that from 2000 to 2018, the bankruptcy rate for Americans age 60 and over fell by 37% — from 4.1 bankruptcies per 1,000 Americans in 2000 to just 2.6 per 1,000 in 2018.
The Fed points out, “bankruptcy filings among older Americans have always been quite low. Even after climbing during the Great Recession, filings fell again to very low levels.” The Fed adds that other indicators of retiree financial distress such as rates of home foreclosure and credit card delinquencies are lower today than they were in 2000.
Moreover, in the Fed’s 2018 Survey of Household Economics, only 4% said they were finding it “hard to get by.” In the Fed’s 2016 Survey of Consumer Finances, 75% of retirees said they had at least enough money to maintain their pre-retirement standard of living, versus only 61% in 1992.
Congressional Budget Office data show that since 1979, incomes for retirees have risen dramatically faster than for working-age households, and Census Bureau data show that poverty in old age is rarer than among working-age adults or kids.
So how is it then that the New York Times, supposedly employing the best-and-brightest journalists, get retiree bankruptcies so wrong? One article I read claimed the Times erroneously looked at data from 1991 to 2000 when retiree bankruptcies did rise. I find that hard to believe.
Another writer suggests the Times and the other media sources named above are obsessed with portraying America’s retirement security in the most dire terms possible – especially when Republicans have control of Congress and/or the White House. Maybe so, I’m not sure.
What I do know is the Times published its story on August 4, and the media outlets I listed above fell for it in their publications just a few days later, as did I. My apologies.
Hat tip to Andrew Biggs at the American Enterprise Institute for bringing this to my attention.
Fed Cuts Key Interest Rate Again, No Surprise at All
For the second time in two months, the Federal Reserve on Wednesday agreed to press down on the economy’s accelerator to keep the 10-year old expansion chugging along.
A divided Fed Open Market Committee (FOMC) lowered its benchmark interest rate by another quarter percentage point to a range of 1.75% to 2.00% in an effort to stave off a possible recession triggered by a global economic slowdown and the US trade war with China. This was once again highly anticipated.
In his press conference on Wednesday, Fed Chairman Jerome Powell left open the possibility of another rate cut later this year, citing “uncertainties” about its outlook for the US and global economies and vowed once again to “act as appropriate to sustain the expansion.”
Yet the 17 members of the FOMC are split on where they think interest rates should go in the near future, with seven saying interest rates should fall further later this year, five who think rates should remain unchanged and five who believe rates should be higher.
President Trump reacted to the announcement with more criticism of the central bank, saying it had “no guts” and failed again. Mr. Trump has called Powell an “enemy” and the members of the FOMC “boneheads” in recent weeks, even though he hand-picked Powell for the job.
While I don’t believe the Fed needs to be cutting rates in this good economy, they are doing so because they are scared to death of the inverted yield curve, as I explained on September 10. Therefore, I won’t be surprised if there is one additional 0.25% cut later this year following the FOMC meeting on December 10-11.
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