The ‘Living Beyond Your Means’ Myth

The idea of ‘living beyond our means’ is not a myth in the sense that it isn’t true or doesn’t apply to reality. It’s a little more subtle than that. It does however evoke idea’s or outlooks that are themselves myths, and so is worse than any simple myth.

If you search for ‘living beyond your means’ you will get a bunch of webpages giving lists of ways to tell if you are living beyond your personal means. They tend to tell the same basic story: you are saving less, spending more and emitting debt. Depending on the level of right-wing bias in the article the debt you are said to be emitting is to some extent the result of buying things you shouldn’t be with credit. If you search for ‘living beyond our means’, things start to get interesting. Using the word ‘our’ implies some kind of socioeconomic perspective, so you would expect that the responses are how we as a society are living beyond our means. This is the case, the hits do go along that theme. For me the first two hits are very broad in scope. The third hit, however, has in it three charts showing the time series progression of different types of debt that, the author says, shows we are living beyond our means.

What I find interesting about this idea is that the situation those living beyond their means are actually in in most cases is technically called ‘poverty’. The idea of living beyond your means casts a state of poverty firstly into something that is continuously self inflicted and secondly frames itself as an individualist phenomenon rather than a collective one. The charts on the previously mentioned site are very clever, they show geometric growth in debt in the various parts of the economy: the total, the government and household. Being on separate charts comparisons are harder. Missing is the chart showing debt held in the financial or commercial sectors. The moral of the story is clear: the illusion of poverty and the terrible state of the economy is your own fault. The use of the word ‘live’ is interesting too. Corporations don’t live, so they’re excluded from the discussion as a matter of definition. Corporations can’t live beyond their means.

Many of the factors of living beyond our means are largely out of our control. Your utility bills cost what they cost, the mortgage repayments are what they are, you get paid whatever you can get paid (in fact many of those talking about living beyond our means would probably argue these people are paid too much). There are allusions to people using credit to buy things they shouldn’t be buying but rarely any figures to back it up. The proportionality of the situation, like so many in public political discourse, is overlooked. How much of the household debt being generated is done so by bad decision making and how much of it is beyond the control of those inflicted by it? What proportion is even being emitted by the household sector?

I don’t know much about the US economy but I do know about the UK one. For example, household debt is a fraction of GDP, as is pubic debt. These are the areas that we are supposed to focus our intention according to deficit rhetoric. Meanwhile, the good old financial sector has debts equal to a few times GDP [1]. So who is living beyond their means? The BBC reported on some research done by the Money Advice Service that found that those in financial hardship now (given whatever their definition is) compared to in 2006 has increase from 35% to 52%. Could it be that the public ‘living beyond our means’ is the result of the economic situation rather than a factor in causing it, and that the entities living beyond their means are the private corporations?

[1] A possible counter to this (given a trickle down mentality) that the commercial sector is responsible for a higher proportion of GDP, which should be corrected for. Actually this idea is absurd because, given that ‘household’ means everyone, its effectively saying that the majority of GDP happens without any staff.

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