Debt, Debt, More Debt

And It’s Public And Personal

Posted: March 26, 2013

Much has been published on this page about the national debt — $16.73 trillion at this writing. But a recent report shows that rising debt is a problem with individual Americans, on top of what the government is borrowing on their behalf.

According to a recent report from the U.S. Census Bureau, “the percentage of U.S. households holding some form of debt decreased from 74 percent to 69 percent between 2000 and 2011.” Well, that sounds like good news, but there is a big catch.

The statistics from the Census bureau reveal that “the median amount of household debt increased over this period from $50,791 to $70,000.” As Tim Mullaney reported for USA Today, “[m]ore Americans are debt-free than in 2000, but the ones who have debt owe nearly 40% more, and seniors have the biggest percentage increase in debt.”

Disturbingly, Mr. Mullaney reports that “[d]ebt owed by seniors doubled, to a median of $26,000, according to the Census. A median figure means that half of households carry more debt while half carry less.”

In a release, Census Bureau economist Marina Vornovytskyy, said Americans “65 and over became more likely to hold debt against their homes,” a fact she says accounts for a large portion of the increase.

Lynette Khalfani-Cox, a personal finance expert, told USA Today that seniors also experienced increases in unsecured debt across many fronts “as they try to help their adult children cope with job loss, divorce, or education costs.”

Khalfani-Cox summed it up for USA Today as such: “Most of us have this idealized concept of riding into the sunset with a paid-off house. Unfortunately, that isn’t the case.”

And the debt news is not heartening for those one generation removed from becoming seniors. As USA Today also notes, “the biggest increase in debt, measured in dollars, was for households led by people 35 to 44 years old, who owed a median of $108,000.”

In a bit of encouraging news, the same report disclosed that the percentage of households holding credit card debt fell from 51 percent to 38 percent from 2000 to 2011. But, before we get too excited about that finding, the same release from the Census Bureau notes that “the percentage holding other unsecured debt, such as educational loans and medical bills not covered by insurance, rose from 11 percent to 19 percent.”

Whether the average American household can reverse this trend of rising debt is unknown. That the trends for seniors are so bad is particularly alarming, as they are the consumers of Social Security and Medicare, which represent the lion’s share of the government’s entitlement spending.

Washington knows that entitlement reform is a must for any real effort to restore our nation’s fiscal house to order. Whether this White House cares about doing that is questionable, but it doesn’t take a genius to see that the idea of cutting benefits to seniors with growing household debt could be viewed as a train wreck in the making.

There is no easy solution, and true compromise in Washington seems like a fairy tale. We need reduced spending and true tax reform to stimulate the economy to reverse the rising debt of both our nation and the individual American household. We are beyond the need for comprehensive entitlement reform.

One question is this: If the White House and Congress can’t even put a budget on the table, how will they craft the entitlement, spending and tax reform necessary to rescue the country’s fiscal future? Here is another: What is that future when so many older Americans are accumulating debt at a rate that rivals the federal government’s.

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