SALT LAKE CITY — Quick quiz: When was the following published in a major newspaper?
“While most have been worrying about the public debt and its unwieldy proportions, private debt too has been sneaking up on us. … The situation could make a readjustment in the case of a recession very difficult. It was the attempted liquidation through the market of a vast volume of private debt that brought on the 1929 debacle, at least in large part.”
You probably guessed it wasn’t written yesterday, or I wouldn’t have quoted it. But it could have been. Today’s problems have plenty of echoes from the past.
But this particular quote came from an editorial in the Los Angeles Times on March 1, 1952.
The editors were prompted by figures showing private debt at a combined $278 billion nationally. The national debt that year was $259 billion, as calculated by a website called thebalance.com.
It’s easy to get lost in figures, so I’ll try to keep this simple. With inflation, that year’s consumer debt would be about $2.6 trillion today, and the national debt $2.5 trillion.
Today, however, private debt is $13.5 trillion, as measured in the fourth quarter of 2018. The national debt just crossed the $22 trillion mark and continues to rise rapidly.
Those comparisons can be tricky because there are a lot more Americans today than 67 years ago and the economy is much bigger. It’s more instructive to see today’s numbers in the context of recent history. So chew on this: Household debt today is $869 billion more than its previous peak in 2008, when the great recession hit. And the national debt grew by more than $30 billion so far this month alone.
The website bankrate.com conducted a survey recently that found 44 percent of American households have more in emergency savings than they owe on credit cards. If you think that’s good, it’s not. Last year the figure was 58 percent, and this year’s total is the worst in the survey’s nine-year history.
The same study found 29 percent have more credit card debt than emergency savings. Only 40 percent could come up with $1,000 or more in cash for an emergency, and 60 percent say they aren’t even prioritizing the need to pay off debt.
This, the website’s chief financial analyst said, is “an ominous indicator of the financial health among American households.”
It’s human nature: Prosperity breeds complacency, and when people feel complacent, they don’t give much thought to the future. If recent history has taught anything, it is that the culture of deficit spending, at home and in Washington, is impervious to jarring events. At least, it is to the sort of jarring events we’ve had so far in the 21st century.
Ten years ago, a lot of people thought the culture had learned a lesson. We would keep our credit cards holstered, or at least keep balances low enough to be easily paid off.
That was true for some who lost homes and jobs or had to make do on smaller salaries. But it was a temporary condition.
There is one more interesting comparison between 1952 and today. Back then, more people seemed to be sounding warnings. They remembered the Great Depression.
Even a few years ago, Republicans were shutting down government in order to spur deals to minimize debt and possibly reduce the need to continually raise the nation’s debt ceiling.
Today, the complacency of prosperity has infected both parties. The recent shutdown was waged over how to direct more spending, not less.
Call it what you want: The ticking time bomb, the steadily growing fungus that threatens to eat us all, the hideous swamp creature that will come in the night and destroy all we have. The older people of my youth spoke of debt as bondage.4 comments on this story
In past generations, conventional wisdom kept people from accumulating too much unsecured debt because a day of reckoning always comes.
Someone’s great-grandparent likely wrote that editorial in 1952. Sure enough, a recession came a year later, just as one eventually will come in this age. The smart thing, for everyone but especially for the federal government, would be to reduce debt while the sun is shining.
As that old editorial said, not doing so could make weathering the next downturn difficult and painful.