financial obligations ratio incorporates other recurring expenses, such as rents, property taxes, and payments associated with homeowners ’ insurance and auto leases, that might subtract from the uncommitted income available to households. the federal reserve also calculates separate aggregate financial obligations ratios for homeowners and renters. * * * both the debt - service ratio and the financial obligations ratio rose over the 1990s, but that upward trend has not continued in this decade. the debt - service ratio has been hovering close to 13 percent for three years, whereas the financial obligations ratio, after peaking above 18 - 1 / 2 percent in 2002, has moved down to near 18 percent. the recent stability of the aggregate debt - service and financial obligations ratios reflects largely the evolution of the financial situations of homeowners, who owe more than nine - tenths of all household debt. despite average annual mortgage debt growth in excess of 12 percent over the past two years, the financial obligations of homeowners have exhibited little change as a share of their income because mortgage rates have remained at historically low levels. the enormous wave of mortgage refinancing, which ended only in the fall of 2003, allowed homeowners both to take advantage of lower rates to reduce their monthly payments and, in many cases, to extract some of the built - up equity in their homes. in the aggregate, the cash flows associated with these two effects seem to have roughly offset each other, leaving the financial obligations ratio little changed. indeed, the surge in cash - out mortgage refinancings likely improved rather than worsened the financial condition of the average homeowner. some of the equity extracted through mortgage refinancing was used to pay down more - expensive, non - tax - deductible consumer debt or to make purchases that would otherwise have been financed by more - expensive and less tax - favored credit. * * * by our calculation, both homeowners and renters have seen an increase in the share of income used to cover credit card payments over the past decade. the federal reserve ’ s survey of consumer finances suggests that renters who have recently purchased homes tend to carry higher levels of nonmortgage debt and, in particular, credit card debt. moreover, credit card debt ratios have been rising among all households because of the use of credit cards for new purposes. the convenience of credit cards has caused homeowners to shift the way they pay for various expenditures to credit card debt. in

as freedom ( oxford, england : oxford university press ). for example, see rafael di tella, robert j. macculloch, and andrew j. oswald ( 2001 ), “ preferences over inflation and unemployment : evidence from surveys of happiness, ” american economic review, vol. 91 ( march ), pp. 335 – 41 ; and justin wolfers ( 2003 ), “ is business cycle volatility costly? evidence from surveys of subjective well - being, ” international finance, vol. 6 ( spring ), pp. 1 – 26. high percentage. 4 perhaps people don ’ t want to admit to survey - takers that they are unhappy, but the explanation preferred by most researchers is that human beings are intrinsically very adaptable and are able to find satisfaction in their lives even in very difficult circumstances. another area of this research bears directly on what i said earlier about the relationship between income and happiness. some years ago the economist richard easterlin showed that, just as would be expected, wealthier people in any given country are more likely to tell a survey - taker that they are happy with their lives than are poorer people in the same country. however, easterlin also found two other things that don ’ t fit so well with the economic perspective. first, he found that as countries get richer, beyond the level where basic needs such as food and shelter are met, people don ’ t report being any happier. for example, although today most americans surveyed will tell you they are happy with their lives, the fraction of those who say that they are happy is not any higher than it was 40 years ago, when average incomes in the united states were considerably lower and few could even imagine developments like mobile phones or the internet. second, he found that – again, once you get above a basic sustenance level – on average, people in rich countries don ’ t report being all that much happier than people in lower - income countries. the finding that people in rich countries don ’ t report much greater happiness than those in lower - income countries – even though, in any given country, the rich say they are happier than the poor do – is called the easterlin paradox, after its discoverer. 5 now, research in social science is hardly ever the final word, and a large body of more recent research has contested easterlin ’ s results, finding that people in rich countries may, on average, be happier or more satisfied after all. but this research