Holidays
Consumer Debt More Than Doubles in Decade
Consumer Debt Has More Than Doubled in the Past 10 Years to Record Levels
NEW YORK Jan. 5 -
As the bills from holiday spending sprees arrive, Americans
are finding that the mountain of debt they've built has gotten even higher.
Consumer debt has more than doubled in the past
10 years to record levels, making it hard for many families to cope.
For Bruce and Lorraine Esbensen of Clifton Heights,
Pa., trouble started when they spent lavishly on their wedding six years ago.
They soon found themselves falling behind on their bills.
"Creditors were calling, and I knew if I paid one,
I couldn't pay the other," Lorraine Esbensen remembers. "It was so painful I got
to the point where I didn't want to answer the phone."
Credit counselors helped the couple work out a repayment plan, but it still took more than four years to pay down their debt.
"We still basically live paycheck to paycheck,"
she said. "But we do have an IRA (Individual Retirement Account) going now, and
we're careful with our spending so we feel better."
Consumer debt hit a record $1.98 trillion in October
2003, according to the most recent figures from the Federal Reserve. That debt which includes credit cards and car loans, but not mortgages translates to some $18,700
per U.S. household.
At the same time, the government says the nation's
savings rate dropped to just 2 percent of after-tax income in the first half of
the year. That means many people lack the means to deal with financial emergencies,
much less their eventual retirement.
Experts worry about the impact not only on individual
families but on society as a whole.
"The Depression generation is passing on, and we're
losing their values," said Howard Dvorkin, president of the nonprofit Consolidated
Credit Counseling Services in Fort Lauderdale, Fla. "Now we've got an entire generation
that doesn't know anything about thrift and careful spending. It's tearing the fabric
that made this country great."
Just how did American consumers get so deeply in
debt?
Robert D. Manning, a sociology professor at the
Rochester Institute of Technology who wrote "Credit Card Nation The Consequences
of America's Addition to Credit," says the problem dates back to the 1980s, when
financial institutions began issuing credit cards and making loans to people who
wouldn't have qualified in the past.
"At the same time, people had this sense of entitlement
based on the idea that this generation was expected to outperform the earlier generation,"
Manning said. "It was OK to buy yourself a better standard of living than your parents,
and the banks would help you do it."
