In Focus: Trump’s Affordability Crisis Forces Middle Class Families to Take on Debt
This year, consumer spending looks very different between high income households and lower earners, as low income shoppers are increasingly forced to use bad credit practices and Buy Now, Pay Later (BNPL) mechanisms to afford their holiday shopping.
Economists are predicting that holiday spending in the United States will cross $1 trillion this year, however these increases are largely attributed to higher prices rather than an overall increase in sales volume. A main contributor for this increase is President Trump’s tariffs, which have sent prices soaring for frequently gifted items like clothing and accessories (up 15.1%), jewelry (8%) and household tools (6.2%).
According to CNN Business, the numbers paint a picture of a very divided America. High-income families (earning over $170,000) are driving much of the sales volume, while lower and middle income families are buying less, looking for bargains and are “increasingly cash-strapped.”
Lower-income families spending rose .7% over the last year - but that figure is far below annual inflation. This suggests consumers are cutting back wherever they can. Meanwhile, spending by high-income shoppers increased more than three times that amount.
According to a Navigator Poll, a majority of Americans have carried a credit card balance in the past year, and a quarter have used a “buy now, pay later” tool. And according to Adobe Analytics, holiday shoppers will use BNPL plans for more than $20 billion of online holiday purchases - an increase of 11% from last year.
These Buy Now, Pay Later plans offer cash strapped consumers convenience and flexibility in purchasing - like a modernized “layaway” program except you get the products up front and pay it back in future installments.
While these plans seem like quick relief for shoppers who are feeling the pressure of Trump’s economy, there are certainly strings attached. Like credit cards, these plans can lead to overspending and accumulating debt. Unlike credit cards, these plans do not have the same consumer protections, do not require credit checks and can allow consumers to take on far more debt than they are able to pay off.
While some may boast higher than ever spending this holiday season, those figures do not tell the whole story. We are looking at a spending economy that is being inflated by higher earners, while lower income Americans are skipping non-essential purchases to buy holiday gifts - or taking on debt to keep up with the demands of an economy that is stacked against them.
By Garnet McLaughlin