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US might be a 'nation of deadbeats'

Americans have been paying down debt but walking away from more.

By MSN Money Partner Jan 15, 2013 12:49PM

This post comes from Brett Arends at partner site MarketWatch.

 

MarketWatch logoPresident Barack Obama said on Monday that "we are not a nation of deadbeats," but instead a people who "pay our bills."

 

Image: WorriedMan (© Corbis)Really?

 

A close look at the data reveals a very different story -- and one that gets far too little airing in public discourse.

 

Far from paying our bills, the current generation of Americans -- or some of them -- have set records for default which probably have no parallel in the history of the human race. During the last five years, U.S. individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans. That works out at about $6,000 per household.

 

And if the numbers are to be believed, there is probably a lot more to come.

 

Turn on any news program devoted to the economy and you will doubtless hear some Wall Street blowhard telling you that American households have been "repairing their balance sheets" and paying down their debts. They make it sound so virtuous, and they often then segue into sneering remarks about those degenerate Greeks and other Europeans who don't behave in the same responsible way.

 

The truth is very different. According to the Federal Reserve, U.S. household debt peaked five years ago at a gigantic $13.8 trillion. Since then it has declined to $12.9 trillion -- a decline of about 7%. To put that in context, household debts today still exceed those seen at the end of 2006, near the peak of the bubble. They are three times what they were in 1998.

 

Furthermore, the majority of that reduction hasn't come from people paying off their loans, but from banks writing them off.

The total debt reduction from the peak, says the Fed, is $954 billion. Loan write-offs, at $585 billion, account for 60% of that. In other words, for all the chest-thumping about how Americans are repairing their balance sheets and how we aren't a nation of deadbeats, in the past five years Americans have walked away from $3 in debt for every $2 they've paid off.

 

In the first quarter of 2010 alone, about 13% of all credit card debt was just written off.

 

Households weren't alone. Corporations have defaulted on $35 billion to $40 billion in debt per year in recent years, according to Moody's.

 

Naturally this has occurred even while the federal government has bailed out bankrupt financial institutions, and flooded the economy with massive deficits, low interest rates and free money to make it all easier.

 

Heaven knows what the situation would have looked like under a system of honest money.

 

It's easy to get too sanctimonious. Once a country gets itself into a disastrous debt hole, write-offs may be the only sensible way out. After all, for every reckless borrower there was also a reckless lender. If a debt is not going to be repaid, a policy of "extend and pretend," let alone, say, debtors' prison, is not going to help. So maybe deadbeat economics is the way to go.

 

But let's go easy on the chest-thumping.

 

More on MarketWatch and MSN Money:

 

430Comments
Jan 15, 2013 5:24PM
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You know you live in a Country run by idiots if...

Hard work and success are rewarded with higher taxes and government intrusion, while slothful, lazy behavior is rewarded with EBT cards, WIC checks, Medicaid, subsidized housing, and free cell phones.
Jan 15, 2013 5:25PM
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You know you live in a Country run by idiots if...

You pay your mortgage faithfully, denying yourself the newest big screen TV while your neighbor defaults on his mortgage (while buying iPhones, TV 's and new cars) and the government forgives his debt and reduces his mortgage (with your tax dollars).
Jan 15, 2013 4:52PM
Jan 15, 2013 5:30PM
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The Fire Chief Said...
For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.
Not fair to make judgment of this, until you see what the Fire Chief says!!!!

In South Los Angeles , a 4-plex home was destroyed by a fire.

A Mexican family of six, all welfare recipients and gang members,
Lived on the first floor, they died.

An Islamic group of seven welfare cheats,
All illegally in the countryfrom Kenya , lived on the second floor,
And they, too, all perished in thefire.

6 LA, Hispanic, ****ers, & ex-cons,
Lived on the 3rd floor and they, too, died.

A lone, white couple lived on the top floor.
The couple survived the fire.

Jesse Jackson, John Burris and Al Sharpton were furious!!
They flew into LA and met with the fire chief, on camera.
They loudly demanded to know,
Why the Blacks, Black Muslims and Hispanics,
All died in the fire and why only the White couple lived?

The Fire Chief said,
"They were at work"
Jan 15, 2013 4:44PM
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I am not a deadbeat myself (I like to work to stay strong) though I do know more deadbeats than hard working folk. Everybody milks the system as best they can so they do not have to move that much and sit on a couch and watch Springer or Judge Judy. Then the other part of it,,NOT taking any responsibility for anything. Yeah at 50 years old now I have seen a dramatic shift towards being complacent and downright lazy as the years have gone by. I was raised to work hard and to not expect anything from anybody without earning it myself.
Jan 15, 2013 5:24PM
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You know you live in a Country run by idiots if...

Being self-sufficient is considered a threat to the government.


Jan 15, 2013 5:23PM
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You know you live in a Country run by idiots if...

Your government   believes that the best way to eradicate trillions of dollars of debt is to spend trillions more of our money.
Jan 15, 2013 4:40PM
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This clown has to be doing this on purpose.  $117 Trillion in unfunded obligations.  The politicians are deadbeats.
Jan 15, 2013 3:36PM
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when the people start to laugh at their government, the end is near.
Jan 15, 2013 4:56PM
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Spend wisely, buy what you need and stop trying to keep up with the Jones.
Jan 15, 2013 5:24PM
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You know you live in a Country run by idiots if...

The rights of the Government come before the rights of the individual.


Jan 15, 2013 5:10PM
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Bankruptcy use to be an evil thing. Now it is used like a reset button. What ever happened to being responsible? How can the leader of a nation which is in debt for almost 17 trillion dollars declare that nation is not a deadbeat borrower? Isn't that a bald faced lie? Maybe the definition of "deadbeat" has been amended by executive order...
Jan 15, 2013 5:08PM
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When a dead beat from Chicago is put in POWER..   Yes! what did you expect?
Jan 15, 2013 5:26PM
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You know you live in a Country run by idiots if...

Using the "N" word is considered "hate speech" but writing and singing songs about raping women and killing cops is considered "art".


Jan 15, 2013 4:54PM
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Paying your bills means, you know, actually paying them.  Getting out of debt usually works best when you are minimizing or eliminating new debt.  Telling oneself, "If I spend even more money I don't have then I can reduce my debt" is something people have tried in the past.  I mean that honestly.  People have tried borrowing to pay off borrowed money and credit for years.  It never works though.  It just makes the problem bigger until it can no longer be sustained.  For just an individual or family it is disastrous.  Anyone else afraid of how bad it is going to be when America hits that point?
Jan 15, 2013 5:15PM
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Americans are just following the example set by their government.
Jan 15, 2013 2:49PM
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Oh, how quaint.  People don't realize the new modern way of paying back money is so easy now that we're much more enlightened than our forefathers about the whole matter, just print, baby, print!

Jan 15, 2013 4:42PM
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Just following the policies of our leadership.
Jan 15, 2013 7:07PM
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TOP-11 "ONLY IN AMERICA" OBSERVATIONS -- BY A CANADIAN*

1) Only in America could the rich people - who pay 86% of all income taxes - be accused of not paying their "fair share" by people who don't pay any income taxes at all.

2) Only in America could people claim that the government still discriminates against black Americans when they have a black President, a black Attorney General, and roughly 18% of the federal workforce is black while only 12% of the population is black

3) Only in America could they have had the two people most responsible for our tax code, Timothy Geithner, the head of the Treasury Department and Charles Rangel who once ran the Ways and Means
Committee, BOTH turn out to be tax cheats who are in favor of higher taxes.

4) Only in America can they have terrorists kill people in the name of Allah and have the media primarily react by fretting that Muslims might be harmed by the backlash.

5) Only in America would they make people who want to legally become American citizens wait for years in their home countries and pay tens of thousands of dollars for the privilege while we discuss letting anyone who sneaks into the country illegally just 'magically' become American citizens.

6) Only in America could the people who believe in balancing the budget and sticking by the country's Constitution be thought of as "extremists."

7) Only in America could you need to present a driver's license to cash a check or buy alcohol, but not to vote.

8) Only in America could people demand the government investigate whether oil companies are gouging the public because the price of gas went up when the return on equity invested in a major U.S. oil company (Marathon Oil) is less than half of a company making tennis shoes (Nike).

9) Only in America could the government collect more tax dollars from the people than any nation in recorded history, still spend a Trillion dollars more than it has per year - for total spending of $7-Million
PER MINUTE, and complain that it doesn't have nearly enough money.

10) Only in America could politicians talk about the greed of the rich at a $35,000.00 a plate campaign fund-raising event.

11) Only in America can a man with no background, no qualifications and no experience ... and a complete failure at his job ... be reelected.
 


Jan 15, 2013 5:27PM
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On Monday, June 25th 2012, the following occurred: The Supreme Court unanimously - yes, UNANIMOUSLY - upheld the portion of Arizona 's Immigration Law that directs law enforcement officers to check the immigration status of   EVERYONE who is ARRESTED for a crime. It not just "ALLOWS" them to check, but "DIRECTS" them to check. That means it 's mandatory.

Less than three hours later, the President of the United States issued an executive order BLOCKING THE ENTIRE STATE OF ARIZONA 'S ACCESS to the the Federal Database that would allow such checks. The only State or Local entity EVER to be blocked.
One hour after that (which means they had it all ready in advance), the Department of Justice went live with a toll-free number, a web site, and ads, ASKING FOR PEOPLE TO REPORT BEING "RACIALLY PROFILED" because of this ruling, so they - THE U.S. JUSTICE DEPARTMENT - can file "Civil Rights" lawsuits against the Police Departments, Sheriffs, Cities, Counties and State of Arizona .

In other words, the American Citizens of the State of Arizona are going to be sued for vast sums of money, BY THEIR OWN FEDERAL GOVERNMENT, for enforcing a law that The Supreme Court UNANIMOUSLY held as constitutional.
 
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