Economics wizards, corporate chieftains, Wall Street poohbahs, and media mavens say it’s good for the economy if Americans bought a lot of stuff at Christmas and will continue buying a lot of stuff throughout the New Year, even if they buy the stuff on credit.
Good for the economy? Huh?
Consider:
- Credit card debt per American is $2,781, up from $41 in 1971, for a grand total of nearly $900 billion. Auto loan debt is $3,219 per capita, up from $195 in 1971, for a grand total of $1.03 trillion.
- Other consumer debt is $300 billion.
- Tuition loan debt totals $1.19 trillion. In theory, this is an investment in one’s future that will pay off in higher earnings. But this is only true if one doesn’t drop out of college or doesn’t graduate with a worthless degree.
- Residential mortgage debt totals $13.6 trillion. In theory, mortgage debt is an investment in an asset with a value that keeps pace with inflation. But this is only true if the mortgagee didn’t overpay for the house, doesn’t live in a locale where home values decline, and hasn’t taken out second loans on the house to buy a Viking stove, a car, an ATV, or anything else that depreciates in value.
- The national debt is $19.8 trillion. Americans will have to pay this off, either through higher taxes or through inflation.
- Unfunded liabilities for the pensions of pampered public servants in the public sector are $5.5 trillion.
Let’s round the numbers, list them in descending order, and come up with a grand total:
$19,900,000,000,000 in national debt
$13,600,000,000,000 in mortgage debt
$5,500,000,000,000 in unfunded public pensions
$1,190,000,000,000 in student loan debt
$1,030,000,000,000 in auto loan debt
$900,000,000,000 in credit card debt
$300,000,000,000 in other consumer debt
Grand Total = $42,400,000,000,000, or $42.4 trillion.
Note that student loan debt is fourth on the list and is just slightly more than auto loan debt. Yet many munificent politicians at the top of our spendthrift government, including the incoming president, want to excuse some or all of the tuition debt, which means that the debt will be paid off by all taxpayers, including those who didn’t incur any student debt. No doubt, once the debt is paid off by all taxpayers, many of the formerly indebted will take out an auto loan to buy a new car. Thanks to taxpayers, they will just exchange one loan for another. Oh well, at least the auto industry will like this.
Come to think of it, why not excuse auto loans in addition to student loans? After all, the average outstanding auto loan is about equal to the average outstanding tuition loan; that is, about $30,000. If it’s fair and ethical to excuse one type of loan, then it’s fair and ethical to excuse another type of loan. Besides, the auto industry would really like this. So would the nation’s wizards, chieftains, poohbahs, and mavens.
Anyway, let’s return to the grand total of $42.4 trillion in debt.
This huge number comes to $132,500 for each person in the USA. And it comes to $341,935 for each full-time worker.
Blame it on my ignorance, but I don’t agree with the wizards, chieftains, poohbahs, and mavens that such indebtedness is good for the economy or for people.
My working-class parents are to blame for my ignorance. When I was a kid being driven around by them in our family beater with the rusted-through floorboards, Mom would say, “Look at the millions of dollars in cars on the road. Where do people get the money?” I didn’t look at the cars, because I was distracted by my feet getting wet from the rain on the road coming through the floor. My dad would respond, “Most of them don’t have a pot to piss in but drive expensive cars.”
Fortunately, my parents were savers who lived below their means and didn’t care that neighbors drove nicer cars. As a result, my 95-year-old mom has been able to afford to live in a nice retirement home for the last 10 years. The cost of her room, board and care has averaged about $3,300 per month, or $396,000 over the 10 years, which is close to the total per-capita debt owed by working Americans. She could live for another 10 years on her savings without having to depend on family or taxpayers.
Isn’t this what society and the government should be encouraging? Isn’t this good for the economy and people? Don’t savings translate to investments in plant, equipment, and technology; and don’t these investments translate to prosperity, higher wages, and a higher standard of living, in a virtuous circle?
Apparently not. If saving and living below one’s means were a good thing, this behavior would be encouraged, reinforced, and rewarded by the wizards, chieftains, poohbahs, and mavens.
Oh well, they must know more than I do, which is why I’ll never be a wizard, chieftain, poohbah, or maven.
I feel so stupid and inadequate.
