05/11/2011 11:20 am ET | Updated Jul 11, 2011

Gas Prices up, Wages Down, Americans Caught in the Middle

Cross-posted from New Deal 2.0.

When picturing people who are so far into debt they can't get on top of their bills, many likely see images of flat screen TVs, Escalades, and giant, unnecessary houses. But the sad truth is that one of the biggest reasons Americans carry $796.5 billion in revolving debt is that wages have stagnated while the cost of necessities rose. That's particularly true now, at the end of a decade where wages actually dropped, 13.7 million people are unemployed, and prices are through the roof.

Gas prices are soaring. The average price is up 80 cents per gallon since January, up to $3.96. With Americans consuming about 140 gallons per year, that's an extra $112 billion over the course of 2011 that consumers will have to shell out at the pump.

So is rent. It is too damn high. A new study came out recently that showed the level of renters spending more than half of their income on rent is the highest in half a century. That's not just low-income people, either. "About 26 percent of renters -- or 10.1 million people -- spent more than half their pre-tax household income on rent and utilities in 2009," the Washington Post reported. Under ideal circumstances, renters aren't supposed to spend more than 30% of their income on housing.

Not to mention buying food. Restaurants are now considering raising prices due to rising commodity costs. Prices for purchased meals and beverages rose almost 2% between March 2010 and March 2011, the biggest increase since November 2009.

And health care is still unaffordable for too many of us. Last year, four in 10 Americans struggled to pay their medical bills and 40% had to forgo needed care due to high costs.

What do Americans do when we can't afford the necessities? What we've learned to do over the past 30 years as our wages stagnated: use credit cards to plug the gaping holes. Only this time it's worse, because wages have actually shrunk over the past decade, with the median family's earnings falling from $52,388 a year in 2000 to $47,127 in 2010. We still have 9% unemployment. And 27% of Americans had no personal savings as of February this year, up from 22% 18 months before that.

Meanwhile, access to credit is flowing less quickly than it was before the recession -- and when it does flow, it comes with overpriced fees and interest. While banks are getting back into lending to riskier, lower-income consumers, it's a slow trickle. Most card mailings are targeting the wealthy, with only 17% going to borrowers with dinged credit scores -- compared to 39% in 2007. And the cards those consumers are offered come with higher fees and interest rates. The NYTimes reports, for example, "Capital One... is offering low-end cards that carry interest rates of 18 percent or higher and annual fees of up to $50."

The ability to cover up our income inequality and wage stagnation with easy credit is coming to end. So now what are workers supposed to do when they can't afford life's basics?