Debt imperils America, citizens

A generation ago, Americans put a little money aside each payday "just in case." "Just in case" meant there was cash on hand to replace a broken water heater or repair the car. Or they saved to make a major purchase such as an automobile. Then, there was clear division between "needs" and "wants."

Then came consumer credit for the masses. Consumer credit enabled instant gratification. Want a new cell phone? Charge it! Want a new car? No problem, the dealer will finance. No money for a down payment on a house? Fold it into your home loan.

The problem with credit is, it's easy to obtain, and it can be readily abused. Just in the past decade, the nation's debt load has tripled, according to Harvard Law School professor and author Elizabeth Warren. Warren says filing for bankruptcy protection has become more commonplace than filing for divorce.

The United States government is faring just as poorly. The government cannot keep pace with the explosive budget growth of entitlement programs. It goes into debt to cover the gap — debt that is covered by other countries.

Recently, the Associated Press devoted a three-part series to the issues of personal and national debt. The final installment of the series, titled "Drowning in Debt," runs in today's Deseret Morning News. The series examines the personal, domestic and international implications of America's huge debt load.

Although credit is necessary to negotiate today's economy, undisciplined use of credit can be disastrous to individuals as well as governments. When individuals use credit to live beyond their means, they can be financially hobbled by an unforeseen calamity such as job loss, illness or divorce. Many people unable to manage their debt end up filing for bankruptcy protection. Last year, Utah led the nation in number of bankruptcies. The Beehive State, so named for its industrious nature, has the 13th-highest foreclosure rate in the nation.

Equally troubling are the U.S. government's deficits. Government has developed the habit of providing more services than it can afford, and it goes into deficit spending when it becomes overextended. The picture becomes more bleak when one considers the huge number of baby boomers who will retire in the next couple of decades and will be entitled to Medicare coverage and their earned Social Security benefits.

Increasingly, foreign banks are covering the government's debt by buying it in the form of U.S. Treasury notes. Economists say the relationship is unsustainable over the long run.