Credit card debt rises faster for those 65 and older

By Kathy Chu, USA TODAY
Cash-strapped older Americans are racking up credit card debt faster than other consumers amid dwindling retirement portfolios and rising medical costs, a study shows.

The study, which will be released Tuesday by Demos, a liberal public policy group, shows that low- and middle-income consumers 65 and older carried $10,235 in average card debt last year, up 26% from 2005. Card debt for all borrowers surveyed rose 3% during that time, to $9,827.

Overall, revolving debt — mostly on credit cards — grew during much of 2008, the Federal Reserve says. But as consumers pared spending, outstanding debt also fell. From the fourth quarter of 2008 through the first quarter of 2009, revolving debt slipped 2.3% to $939.6 billion.

Vulnerable consumers are turning to credit cards for necessities, not luxuries, Demo's survey shows. For instance, more than half of households say medical expenses contributed to their credit card debt.

"The frivolous spending idea, that's not what's driving families into crazy debt," says Jose Garcia, a Demos associate director. "The expense that most affects families is the cost of living."

Demos' phone survey, conducted April through August 2008, polled 1,205 low- and middle-income households, defined as those with 50% to 120% of local median income. The margin of error is plus or minus 3.7 percentage points.

The data are in line with other industry research showing that seniors are becoming the face of the indebted.

From 1992 through 2007, the latest data available, older Americans' credit card debt grew faster than the overall population, according to the Employee Benefit Research Institute, a non-partisan group that studies economic security.

"You see a great increase in credit card debt for people right near retirement age," says Craig Copeland, a senior research associate at EBRI. "They're probably still working, but they're also the most likely to become disabled," which could force them to rely on credit cards.

Demos' survey found that those carrying credit card debt are also paying more for it: Close to one in four households now pay more than 20% interest. And households charged late fees paid an average of four fees during a 12-month period.

These high rates and fees can upend consumers' budgets, advocates say. "When your interest rate goes up, it's another hammer blow to your ability to make ends meet," says Sally Hurme of AARP, the group for consumers 50 and older.

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ALEX FERGUSON BLASTS CITY

SIR ALEX FERGUSON has launched a savage attack on Manchester City over their controversial billboard of Carlos Tevez.

The United boss branded City arrogant and showed contempt for Tevez, who has been heralded with a huge poster on a main road in the centre of Manchester.

Fergie also claimed City new boy Emmanuel Adebayor called United to try and engineer a move to Old Trafford instead. But the former Arsenal striker was turned down flat.

Ferguson said: "The billboard is City, isn't it? They are a small club with a small mentality.

"All they can talk about is Manchester United, that's all they've ever done and they can't get away from it. That's stupid. That arrogance will be rewarded in the right way. It's a go at us, that's the one thing it is. I don't look upon City as my biggest challenge.

"They think taking Tevez away from Manchester United is a triumph. It is poor stuff. I thought he would go to City a long time ago. Now I don't have to deal with certain players who are miserable because they are not playing. I have good professionals here.

"What's Mark Hughes got, 10 strikers? So if he picks a squad to go to Chelsea he has to leave seven behind, or five at least. He has to deal with that. It will not be easy."

Fergie also revealed striker Adebayor - desperate to sign for a club playing Champions League football - called United and Chelsea in the hope they would hijack his move to Eastlands from Arsenal.

The United chief added: "At the last minute, from what I can gather, I know Adebayor or his agent phoned us after he had agreed a deal with City and then did the same to Chelsea.

"You ask why he is going to Manchester City and it can only be for one reason. He was desperate to get to Chelsea and he was desperate to get to us.


"I am not saying they are different to any other player but when someone offers you more money, that is a big attraction. That is the reason those players have gone there. I can't say I'm enthusiastic about the season because of everything that has gone on but there is an edge being put on us because of all the buying City have done.

"Do you know what City's biggest triumph is? It's getting those players there. I don't know if they will do anything. It's not easy to get in that top four so the biggest success is just to get the players there. They might not get beyond that.

"The top four has been established a long time. Liverpool or Chelsea won't die. City's spending is only demoralising if you panic.

"The one who has the challenge is Arsene. I know he doesn't have the money and how he uses that £25m will be very interesting. The test might not come from City. Tottenham, Aston Villa and Everton will all have a say."

Red wine increases women's sexual desire

Researchers concluded that levels of sexual desire were higher in women who were moderate drinkers of red wine than in their counterparts who preferred other alcoholic drinks, or were teetotal.

One theory put forward by the team of Italian doctors who carried out the study is that chemical compounds found in red wine may improve sexual functioning by increasing blood flow to key areas of the body.


The researchers said: "While this finding needs to be interpreted with some caution, it nevertheless suggests a potential relationship between red wine consumption and better sexuality."

In the project, described as the first to examine red wine intake and women's sexual function, doctors at the University of Florence recruited 800 women aged 18 to 50. The women, none of whom had reported a sexual health problem, were split into three groups – those who regularly consumed one or two glasses of red wine a day, those who consumed less than one glass a day of any sort of wine or other alcohol, and those who were teetotal.

Women who drank more than two glasses a day were excluded from the study to avoid the possible confounding effects of drunkenness.

All participants completed a questionnaire, the Female Sexual Function Index, which is used by doctors to assess women and sexual health. It includes 19 questions with a total score range between two and 36, with higher scores meaning better functioning.

Overall the red wine drinkers scored an average of 27.3 points, compared to 25.9 for the less-frequent tipplers and 24.4 for the non-drinkers.

The researchers, who reported their findings in the Journal of Sexual Medicine last week, say the outcome is even more striking because the red wine drinkers were, on average, older than the other two groups, and age tends to be associated with a declining sex drive.

Just how red wine could have such an effect is not clear, although there are a number of theories. One suggestion is that antioxidants in red wine have a beneficial effect on the lining of blood vessels, widening the vessels and increasing blood flow to key areas of the body.

San Diego high-rise condo market goes from frenzy to fizzle

Drive through California's sprawling inland suburbs and you'll spot the familiar mileposts of a real estate bust: foreclosure signs, brown lawns and abandoned subdivisions.


There you'll see hundreds of unsold luxury condominiums stacked in vacant high-rises. Some units downtown are now selling for less than half what earlier buyers had paid during the market peak.

These see-through buildings, with names evoking European sophistication like Aria and Vantage Pointe, are the opulent spatter from the bursting of one of California's flashiest housing bubbles.

From 2001 through 2008, more than 8,000 condominium units were built in downtown San Diego. That's double the number of downtown units constructed over the same period in Los Angeles, a city three times its size. So while sales of urban high-rise units are convulsing elsewhere, nowhere is the collapse more dramatic than in downtown San Diego.

Flush with easy credit, developers and home buyers were eager to invest in "America's finest city," the nickname used by officials to tout San Diego's bay-side location and perfect climate.

At the height of the frenzy, hopeful purchasers queued up outside sales offices to plunk down deposits. There were occasional arguments over who was first in line. No one wanted to miss out with condo values riding an elevator to the sky.

Near the peak, in May 2004, median resale prices of downtown condos hit $647,500, a 56% increase in just three years, according to San Diego research firm MDA DataQuick.

One savvy flipper made a $91,000 profit in less than two months in 2005 by reselling a 560-square-foot studio for $340,000.

"There was a little bit of a mass hysteria mentality. . . . People thought they would be priced out of the market," said Bradford Willis, 47, who signed a contract in 2004 to purchase a $341,000, one-bedroom condo in a planned luxury development. Willis said he bought on speculation because there was little existing inventory on the market at the time, much of it priced above $500,000.

Irrational exuberance has long since given way to buyer's remorse. Median resale prices for downtown units stood at $370,000 in June. That pricey 560-square-foot studio? It was foreclosed and resold this year for $162,000, down more than half from its 2005 sale price.

Downtown San Diego, a 2.2-square-mile area, is now awash in condos. About 400 new and occupied ones are listed for sale, and more than 450 are in some stage of foreclosure and will eventually be put on the market. An additional 1,000 units that were under construction when the market soured are slated to be completed this year, adding to the glut and putting further downward pressure on prices.

So far this year, 159 new homes have been sold downtown, according to DataQuick. At that pace, it would take several years to sell all the units recently completed or being finished this year. Developers are holding units off the market.

Some companies have simply walked away. Los Angeles housing developer KB Home abandoned plans for a 184-unit luxury project in 2007, before construction began. The new owners of that downtown parcel are now building 226 units for low-income families.

"It was like the Gold Rush down there, and this is the fallout," said Peter Navarro, a UC Irvine professor of economics and public policy who in 1992 ran unsuccessfully for mayor of San Diego.

The same factors that led to overbuilding everywhere, such as loose credit and false expectations of ever-rising prices, were at work in San Diego, Navarro said.

Still, there were some unique forces pumping air into the bubble.

Canadian developers with little experience in Southern California, starting with Nat Bosa, a prominent Vancouver, Canada, condo builder, led the condo charge downtown, overestimating its potential, experts said. Buyers likewise bet too heavily on the urban revival triggered by the 2004 completion of the Petco Park baseball stadium, home to the San Diego Padres.

City policies encouraged multi-unit housing development in the lightly populated downtown area, where large projects could be built with little community resistance. Builders loved high-rise towers because they could sell more units on the same space.

But that almost exclusive focus on upscale high-rises was a mistake, said Howard Blackson, who heads a San Diego urban design firm. Towers aren't as attractive to families as other types of housing, such as row houses or smaller, walk-up buildings, Blackson said. Nor were they affordable for many. With some three-bedroom units priced at more than $1 million, the pool of purchasers was limited.

EU Ambassador Says Russia at Risk

By Michael Stott / Reuters

Russia risks being a Third World-style raw material exporter mired in economic crisis unless it boosts democracy and the rule of law, European Union Ambassador to Russia Marc Franco said in an interview.

Franco, the outgoing head of the European Commission delegation to Russia, said that during his five years the relationship with Moscow had suffered “standstill, if not a regression” and many reforms of the 1990s had been reversed.

“My stay here coincided with the second term of President [Vladimir] Putin,” said Franco, 62. “Rightly or wrongly, I have the impression that in that period many reforms of the Yeltsin era seem to have been turned back.”

But he expressed optimism that in the long term a new generation of Russians would prevent a return to Soviet-style authoritarianism and reassert citizens’ rights — essential for the country to grow a modern, knowledge-based economy.

Asked whether it was impossible for the country to get out of economic crisis without political reform, Franco replied: “The simple reply to that would be yes. … Russia still has many characteristics of a Third World economy, exporting raw materials and importing finished products.”

“I am not sure you need fully fledged democracy to export oil, gas and nickel, but you do need it to build up a 21st-century, knowledge-based economy. That is impossible without a full realization of the rule of law.”

The EU is Russia’s biggest trade and investment partner, but flourishing business ties have not been matched in the political realm, where disputes over Russia’s alleged use of gas as a diplomatic weapon, its treatment of neighboring states and its record on human rights and democracy have soured the mood.

Asked what needed to change in Russia, Franco said it would be presumptuous to give recipes but added, “Where the problem in Russia starts is in a not-sufficiently developed and aware civil society and a lack of freedom of expression in media.”

“I do believe — no matter which country we are talking about — that you cannot have rule of law … without the basic elements of democracy, implying free elections and a vibrant civil society supported by a free press.”

Franco, a Belgian economist who has worked for the European Commission since 1978, said he felt comfortable making his observations — unusually direct for a head of mission here — because they did not contradict “what President Medvedev says.”

Medvedev has made the rule of law, the fight against corruption and the pursuit of a more open political system priorities for his presidency, although many diplomats and analysts complain that the results so far have been meager.

Aside from the reform agenda, a more urgent priority for the Kremlin is to combat a deep recession gripping Russia.

Franco said deep economic crises threaten governments anywhere but added that in Russia “the existing regime is to a large extent based on a social contract,” under which the administration guarantees prosperity in exchange for a leading role in the economy and a dominant role in society.

“The Russian government can only maintain its credibility and stability provided it can ensure that ‘Russia Incorporated’ functions or can be expected to function soon,” he said.

Billions 'wasted' in health system: report

KEVIN Rudd's hand-picked health reform adviser has warned that Australia is wasting much of the $94 billion it spends each year on health services and will not be able to afford even the current, flawed system without major reforms.

The Prime Minister's National Health and Hospital Reform Commission will publicly release more than 120 recommendations in Canberra today, handing the government a blueprint for change, but allowing for "long-term" implementation that pushes the most politically sensitive reforms beyond the next election. Among its recommendations will be taking responsibility for some health services away from the states and giving it to the commonwealth.

The commission, set up early last year to help redesign Australia's health system, will warn that healthcare services, already under strain, will be swamped by the rising tide of chronic illness, an ageing population and costly new health technologies.

The commission urges governments to build stand-alone elective surgery hospitals and set new performance benchmarks requiring most operations to be performed within three months and emergency patients to get treatment within minutes. It also urges the creation of a Denticare scheme, paid for by a 0.75 of a percentage point increase in the Mecicare levy.

The commission's final report cites figures indicating Australians are forgoing two years of life because of waste and duplication in the health system. Errors are also taking a human toll. "The number of adverse events each year (is) equivalent to 13 jumbo jets crashing and killing all 350 passengers on board," it says.

Australia could save $1bn in healthcare costs by preventing just half of these mistakes. Better care in the community, through general practice, community health centres and other frontline services, would also eliminate the need for 700,000 hospital admissions a year.

The current health system is "unlikely to be sustainable without reform", the 10-member commission argues.

It wants financial responsibility for key health and aged care services to be shifted from the states to the commonwealth.

The Prime Minister promised before the 2007 election that he would "end the blame game" by wresting financial control of public hospitals from the states if they failed to lift their game. He set a deadline of the middle of this year to take the issue to a referendum, but has stayed silent ahead of the release of the final NHHRC report.

Two of the commission's interim reform options, released late last year, proposed a more ambitious federal takeover of all state-run health and aged care services. But the final report is widely expected to opt for a more manageable transfer to the commonwealth of primary health services, such as child health clinics and drug and alcohol services, as well as hospital outpatient services.

Even such a comparatively modest reform would have to be phased in beyond Mr Rudd's current term since it could cost the states $3bn in funding, according to the commission's interim estimates.

The move would be a first or transitional step towards a more dramatic restructuring of responsibilities, involving $4bn in state-run health and aged care services.