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Americans must stop digging themselves deeper in hole of personal debt

Friday January 16, 2004

"A ticking time bomb" is a shopworn phrase that has been used by alarmists of all stripes since, well, time bombs were invented. Population, debt, pollution, erosion of morals - you name it and it has been described as a ticking time bomb over the years.

So when economist Sung Won Sohn of Wells Fargo & Co. was recently quoted by the Associated Press saying of the level of personal debt in America, "In the long run, it's a ticking time bomb," it was quite easy to shrug it off.

Been there, done that.

Well. Been there, done that is still a problem because we're still there, doing that. That being borrowing beyond our means.

According to figures from the Federal Reserve, consumer debt in this nation has inched past $2 trillion. Mind you, that's just things like car loans and credit cards, not mortgages. The average U.S. household's share of this debt comes to $18,700.

Two trillion dollars is a figure that's hard to put into perspective. One way to imagine it is to put a dollar bill flat on a table. The thickness of that dollar is .0043 inches. Stack two trillion of them and the pile would reach 135,732 miles high.

Mount Everest, the world's tallest peak, is by comparison about 5 1/2 miles high.

We're talking not about a mountain of debt, but an entire mountain range of debt.

The reasons for this trend - consumer debt has doubled in the last 10 years - are on one level complex and on another downright embarrassing. The complex part is that new financial regulations and strategies have made lending easier for financial institutions, and that sophisticated sales pitches have made borrowing more alluring to consumers.

The embarrassing part is comments like these made to The Associated Press:

From Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Services in Fort Lauderdale, Fla.: "The Depression generation is passing on, and we're losing their values. 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."

And from Robert D. Manning, a sociology professor who authored "Credit Card Nation - The Consequences of America's Addiction to Credit," who described credit cards to the Washington Post as "yuppie food stamps'' - an entitlement, not something earned.

Manning, who teaches at the Rochester Institute of Technology, 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.

After this, Manning told The Associated Press, "People had this sense of entitlement based on the idea that this generation was expected to outperform the earlier generation. It was OK to buy yourself a better standard of living than your parents, and the banks would help you do it."

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