Steve Rattner: American’s savings hitting Rock BottomO

With affordability a top concern, of course, for many, many Americans, new numbers reveal more people are digging into their savings and falling behind on low payments as they try to keep up. Let's bring in former Treasury official, Morning Joe Economic Analyst, Steve Ratner, back with charts this morning, looking at how Americans are trying to navigate all of this. Steve, good morning. So let's just start by setting the stage. As you say, American savings really under pressure right now. Yeah, Willie, look, savings is obviously of critical importance to Americans. It's how you pay for future obligations, education, houses, whatever. And so let's look at what's been happening to the savings rates of Americans as they face this affordability problem, the pressure of inflation on their ability to maintain their living standards and so forth. So this is personal savings rate, how much of people's after tax income they put away for these other kinds of expenses that may come along. Back in the 1970s, that averaged 12.2 percent of after tax income. In the 90s, 7.2 percent. In the 2000s, 4.2 percent. And now, after a steady decline, we are at 2.6 percent. So Americans are at pretty rock bottom of the amount they're willing to save. Another way to measure how stretched consumers' bank accounts and what we call their balance their savings and their and their liabilities are is to look at emergency savings, whether people are in better or worse off to meet an emergency need for cash. And so over over the past year, 21 percent have said they have more emergency savings, just 21 percent, but 29 percent have said they have less. Twenty two percent say they have about the same and 17 percent say they have no savings at all. So only 21 percent of Americans out of 100 percent obviously say they are better positioned to meet an emergency need for cash than they were a year ago. So in these desperate times, Steve, your next chart reveals that people are taking desperate measures, including being willing to pay penalties for hardship withdrawals from their 401k. Yeah, you can take money out of your 401k. You pay penalties, you pay taxes. It's and obviously you deplete your savings. It's not something you want to do. So Vanguard has some numbers showing what's been happening. It's more than the percentage of Americans taking money out of their 401k has more than tripled since 2020. So a relatively low number, but it's gone all the way from one point seven to six to six percent as people have had to grapple with the effects of inflation again on their ability to maintain their living standards. Another thing to look at are mortgage delinquencies. And this is an interesting one because we can separate this one by income. And so using zip codes, people in the lowest income zip codes, you can see that mortgage delinquencies have gone all the way up to almost 30 percent. And they started sorry, three point five percent. And they started over here and they went down, down, down during the pandemic when we had a pause on delinquencies. And now they've soared all the way back up. And then as you go to more wealthy zip codes, you can see that the delinquencies drop because people are better off. So this is so this shows very clearly that this kind of pressure that we're looking at on savings exists more heavily in the lower incomes, not surprisingly, than it does for those closer to the top. And Steve, let's move to your third chart where you reveal that it's not just mortgage payments delinquencies, but there are others across all sorts of loans. Yeah, these this financial stress that I'm talking about on people's ability to make ends meet extends to other forms of debt. So let's take credit card debt. This is the one that people tend to fall into delinquencies 90 days or more the easiest. And you can see that back here around in 2009, this is the financial crisis. It got up to 14 percent. And you can see here it's almost back to where it was before. Student loans are interesting. We we've talked, you know, I'm sure everybody's heard a lot about student loan defaults, people who borrow for their education and can't deal with it. We did have this moratorium during covid, as I mentioned. But as soon as it came off, student loan delinquencies soared all the way back to where they were essentially before then. Another interesting one is autos because auto auto loan delinquencies during the financial crisis actually didn't go up as much as it did for other kinds of debt. And then it came down. But now it is back to actually slightly above where it was at the time of the financial crisis. So for the first time, people tend not to want to be delinquent on their autos because they needed to get to work and to get around their cities and towns. But auto delinquencies have come have come back up. This is also an interesting way to look at it. So student loan defaults and how it affects other debt. If you go back over here, pre-pandemic, the percentage of people who were in default on their credit cards or in arrears on their credit cards was relatively low. Then we had the various relief measures during COVID. But as soon as this student debt obligations came back into play, the default rates on other delinquency rates on other forms of debt shot up. This is credit cards and this is auto loans and this is mortgages. So when you have this problem of high student loan payments, it does affect your ability to stay current on your other obligations. And as you can see, you get very, very high delinquency rates and on the side of the part of people who are also behind on their student loans. Steve, if you put some of your charts and the information on the charts together, especially the emergency savings chart and this last chart that you're looking at right now, the idea that people, when they're strapped for money in terms of purchasing whatever items we can consider, they use a credit card rather than cash because they don't have the cash. What's going to be the short term impact of all of that credit card debt that they're piling up? Yeah, it's a it's a huge problem because at some point the chickens come home to roost and at some point they do have to cut back on their spending or they can declare personal bankruptcy, although nobody really should want to do that. Few people actually do it, but essentially puts them in a financial vice where they have less and less than to spend on their current needs. So far, they've been kind of tap dancing and doing all the things I showed you to be able to maintain some semblance of their lifestyle. But these pressures appear at the moment with inflation where it is and incomes where they are. People are still losing ground relative to inflation. And so this is going to put more and more pressure. Eventually, they're going to have to cut back on their lifestyles, and that's going to be bad and terrible for them and bad for the economy as well. Morning, Joe. Economic analyst Steve Ratner back with his charts this morning. Steve, thanks so much, as always.