(Feb. 13) It’s time for the whining to stop. This nation’s new record-high levels of household debt and credit card debt are not evidence of Americans being victims. They are evidence of Americans being undisciplined, perhaps spoiled.

The dreadful numbers were released Feb. 11. Total household debt now stands at a massive $14.15 trillion, which is $1.5 trillion above the prior record from 2008 as the financial crisis was hitting. Credit card debt, at $930 billion, is likewise at an all-time high. Worse, in the fourth quarter of 2019, the proportion of credit card debt late by at least 90 days rose to 5.32%, an eight-year peak. For people aged 18-29, that rate of serious delinquency stood at a 10-year high of 9.36%. Of those with credit card debt in this age cohort, a whopping 67% of them report feeling serious stress about it.

These are awful numbers, especially in context. When top-line economic measurements are as good as they are (unemployment at record lows, while overall inflation has been in check for decades and interest rates near zero), people should be able to pay off debt far more easily, not fall further behind.

Against that common sense, millennials, in particular, complain that their circumstances are particularly harsh because (quoting Business Insider), “millennials have less purchasing power than previous generations did at the same age.” And yes, official statistics are naturally read that way. Yet as former Sen. Phil Gramm of Texas, an economist, has reminded readers in a series of Wall Street Journal columns, those official statistics significantly mismeasure (by underestimating) actual, practical spending power. Those official stats don’t account for increased efficiencies from modern technologies, nor for consumers constantly finding new, less expensive options than the items used in official measurements.

Many serious economists across the ideological spectrum agree….

… Still, the more important point here is not to quibble about statistics. The bigger point is that, in most respects, personal debt results from conscious choices. Absent catastrophic life events such as hospitalizations, accidents, or disability, Americans are not forced to live beyond their means. They choose how to spend their money….

[The full column is here.]



Tags: , , , ,