The Issue: Personal Debt
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THE ISSUEThe United States is obsessed with overspending and borrowing to pay off previously borrowed finances, the citizens do it, the government does it, and nobody questions the legitimacy of piling debt on top of debt. Our government is able to finance its debt by borrowing from foreign governments. The American people finance their debt by borrowing from banks, credit cards, corporations, and other lenders. In the end, everyone has to pay their debts, and the American people are already buried beneath a staggering amount of it. According to Federal Reserve data Americans carried a total of $627 billion in mortgage and consumer debt in 1974. By 1994 that number had increased to over $4.2 trillion; and by 2004 the accumulated total of mortgage and consumer debt was over $9.7 trillion. In 2007 the total consumer and mortgage debt was nearly $15 trillion – with nearly $12 trillion locked into mortgages and another $2.7 billion derived from consumer spending. Our spending has continued unabated for decades and Americans are now paying the price for it. As our recession turns the corner into what could easily become a full-blown depression the American people are faced with real hardships down the road, yet they are somehow unable to rein in their spending and find ways to responsibly deal with everyday economics. There is no reason for Americans to spend more money than they earn, yet our government and corporations have encouraged this illogical boom in spending. Americans have no money, they may have cash on hand in their checking and savings accounts, they may have a few dollars in their purses and wallets; but when all is said and done they are still swimming in a sea of unfounded debt. Students are buried with tens of thousands of dollars in loan debt upon graduation. What do they look forward to in the future? They will have a car loan plus compound accumulating interest, a mortgage plus compound accumulating interest – a $300,000 mortgage paid off at 6 percent a year for 30 years will cost more than $600,000 in the end. Should students decide to further their education, they will accumulate even more student loan debt. They will have exorbitant medical bills for even the slightest procedure or checkup, and then they get to look forward to the burden of paying for their childrens’ education as well. The vicious cycle of debt starts at the top and works its way into every facet of American life. The government carries a nearly $11 trillion national debt which is expected to increase by at least $1-2 trillion in 2009 alone. The people carry a $15 trillion burden by themselves. Our unfunded debts to Social Security, Medicare, and other programs could total upwards of $40 trillion within a few years’ time. To make matters worse, the American people have more and more money but their money is worth less and less. In 1964 the average American worker's income was about $302 each week, in 2004 that total had fallen to just $277 each week (note: adjusted for inflation in “1982 dollars”). To offset the loss in “real wages” Americans have engaged in almost 40 years of borrowing. It started small, but it has since become a huge problem. According to the Federal Reserve, 17.64 percent of household earnings are spent servicing mortgage and consumer debts (as of the third quarter 2008). With our personal and governmental debts skyrocketing we can expect that total to rise precipitously in the future. The biggest problem facing this country today is the debt time-bomb waiting to go off. The United States used to be the world’s largest and most prestigious creditor nation, it is now the world’s largest and most infamous debtor. When the loans are called in we will have nothing to pay them down with. And if we cannot borrow more money we will be left in an economic abyss. We have no profitable homegrown employment to build for the future, and every time a sound policy is enacted by any party in Congress the other side does all it can to revoke it. The result is a country and populous mired in debt, wallowing in self-pity and in need of a handout, when the handouts stop coming there will be nothing left. EIC POSITION"There is no reason for Americans to spend more money than they earn, yet our government and corporations have encouraged this illogical boom in spending. Americans need to begin a new era of fiscal responsibility and abstain from the consumerism debt-driven mentality. We need to save more and spend less." |
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