Do you think debt is "too acceptable" in America?

Question

while consumer debt can drive the economy to some degree, it seems like more and more often people are spending more than they could ever hope to make...

housing costs have went insane, consumer debt is through the roof... college debt is through the roof...

it seems we almost have a "I want it now and don't care how much it costs" society... and where will that lead us?

even our government is in a huge amount of debt...

interest alone is killing everyone...

what do you think?

has fiscal irresponsibility hurt our market economy, by giving people more loans that they have money, therefore artificially driving up prices, espeically on high ticket items like houses?

and some debt is ok... but I think there is a responsible amount of debt... and I think many go way beyond that...

some great points made... and while I think personal responsibility would help... it's far from all of the problem...

guh... I'm not in debt... it was an observation... but thanks for the help anyway...

Answer 1

Your question suggests a typically American approach to social problems. That is, you always say that the root problem is a lack of personal responsibility and/or other moral problems. The problem of debt is far more complicated than this.

The median income in the US is about $18K/year, or $9/hour. Even by very conservative gov't standards, this isn't enough for a small family to live on. Over the past decade, the price of consumer goods has remained steady, but the cost of nearly everything else--such as tuitions, housing payments, insurance, taxes, professional fees, auto expenses and child care--has increased a great deal. Basically, over the past 20 years, the economy has adjusted to the idea that many households have two income earners, and has adjusted its prices to be sure to tap every last dime of that income.

And remember that that $9/hour median means that half of all income earners in the US earn less than this. You don't have much of a life at $9 an hour, and you certainly don't have much money for extras or emergencies. Some economists have come up with that they call a "sustainable wage index;" this means, 'how much money does a person/family have to earn in order to live decently?' In San Francisco, the minimum sustainable income level for a single person is about $12/hour. With rents what they are in SF, I doubt that even $2K/month would provide a very good standard of living.

You are right that all this spending (on housing largely, and on consumer goods) is propping up the economy; nobody disagrees with this. And there will have to be some sort of reckoning. Pres. Bush did say yesterday in the SOTU address that we are in recession. I was surprised to hear that. And it is true that some people buy without regard to whether they really need it or can afford it. But I suspect the more typical scenario is that people buy and go into debt for necessities, like food, car insurance and repairs, and medical care.

More thoughtful socioeconomic analysts ask the following questions: 1. Why do medical care and insurance take up such a large amount of our money and GDP? 2. Why do credit issuers get away with giving credit to people who are poor risks? 3. Why is it that so many americans work so hard, and for such long hours, for so little remuneration? 4. Why is it that the ratio of college education expenses to enhanced wages is shrinking?

Your last question is answered yes, our economy has been hurt by price inflation. But lenders wanted this inflation, and they wanted to give too much credit to poor risks, because they stood to make money doing this. And yes, this all contributed to price inflation. You can be sure over the next 3 years there will be some bank or home mortgage company failures, and it will be learned that these institutions participated in deliberate shenanigans with home mortgage assessors in order to inflate prices (so they could make more money). In Dallas, mortgage foreclosure rates are nearly what they were during the Great Depression.

You might want to read "The Two-Income Trap" to learn more, and/or browse to http://www.motherjones.com/news/qa/2004/11/10_400.html

Answer 2

Debt has become the "American way" of doing things. Currently , personal debt is at an all time high. Yet at the same time we are told how great the economy is doing. It it doing so well because we have to borrow money for everything we own??? Is that a good thing?? I don't think so.
The National debt is also at an all time high. In 2006 , we paid nearly a half a trillion in interest alone on that debt. A half a trillion dollars. That is a lot of money that could have been used else where to boost the economy if we were debt free.

Answer 3

The banks love people being in debt. Most middle class people spend their whole lives in debt, they might have a nice house a nice car and live quite comfortably, but they will always be in debt because thats what the banks want, its how they make their money. A lot of banks have all these incentives for students, like free overdraft and low interest credit card and all this, to try and suck people into a life of debt at a young age.

Until the banks stop encouraging debt (and I don't see that happening) people will continue to be irresponsible - often they don't have a choice, how else can the average family afford a house?

Answer 4

Good points. I myself have only one debt - my mortgage. You should strive for a debt free lifestyle. I found that I lead a much more "wealthy" lifestyle than my peers that make the exact same amount of money as I do.

Answer 5

Politicians need to look at the country's economy as they would the economy of their own family. They need to be productive, balance the budget and make sacrifices now for the long term benefit. But unfortunately it still the rich get richer and the poor get poorer, all supported by the politics of the economy.

Answer 6

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