Smart SpendingSmart Spending

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:


Jan 15, 2013 8:09PM
avatar easy to dish out as we sit on our high horse and point the finger at "everyone else" who got us into finanical difficulty. We all have a hand in this people. Those of you saying "not me"...yes, you as well had something to do with this. We all must sacrifice something in order to get out of this financial trouble...however, the longer we place blame on "everyone else" and refuse to take responsibility for our actions, the longer it takes to address the problem. Remember, the first step in problem solving is identifying the problem. If you blame Obama, the GOP, those on government assistance or any type of entitlement program, then you are one of the many who refuse to acknowledge there's a problem thus advocating a larger problem for our future. We aren't a nation of deadbeats, we're a nation of blamers. And blame gets us absolutely nowhere. Which is why our deficit continues to grow and our nation continues to stagnate.
Jan 15, 2013 7:57PM

Well the middle class never got a bailout! Wall Street firms were going belly up and the government gave them a 800 billion TARP bailout. Then a fact they kept hid for three years the Fed gave Wall Street banks about 3.5 trillion with an interest of .0003%....The Fed under QE1,2, and now 3 buys U.S. bonds every month.


What has the government done for the working and middle class since Wall Street wrecked the economy and raided the treasury. What bailout did the workers get?...Wall Street said trust me, do away with all the regulations that seperated the banks from Wall Street, then easy credit on houses, cars, credit cards...until the bubble burst. Now they will come in and buy everything they want for pennies on the dollar.

Jan 15, 2013 7:57PM
Well here's the deal. Look at all the "jobs" that are out there. The jobs that pay enough to live on are all jobs processing information from one place to the next-in reality producing nothing of material value. The jobs that produce goods of actual value - manufacturing, agriculture, construction - pay sub living wages and have largely been either shipped overseas or are currently held by legal and illegal aliens. When we began valuing knowledge and education above hard work we killed our country.I began my work career in 1978 and have watched real jobs go away and wages become frozen in time. I watched a government grant amnesty to illegals in 1986 and waves more of them come. People give up on paying their debts about the same time their government quit protecting their rights to decent wages.
Jan 15, 2013 7:56PM

"In the olden days" weren't trusted if you didn't pay your were expecfed not to go to your workplace and demanded a whole lot bigger payment for your work, but to live way below your means and pay your debts off ASAP....

There may be a national lesson here.

P.S. "investing in the future" is codeword for "we aren't going to pay our bills anytime soon...."

OK, ok, that sounds too "old school"..........................................but it sure beats the philosophy that goes around now...which amounts to In Debt, Dumb, and Stupid.

Jan 15, 2013 7:53PM
Obama and Obama voters are deadbeats.
Jan 15, 2013 7:41PM
we have always been told to pay , but we watch our Government & Big Corporation's do everything they tell us all not to do! Our Country is a DEAD BEAT plane & simple , dont get me wrong America is the best place in this world at this time , but we keep this **** up & we wont be! And **** all you people saying you never would or have done anything but the right thing I call BS.... 
Jan 15, 2013 7:32PM
Well, every person that takes home a payroll paycheck now actually brings home less.  Median wages are decreasing, peoples need/want for GOV assistance is growing, and debt is increasing.  The millionaires in Congress do not care (at least act/perform like they do not care), and we are 50/50 on the makers and takers.  What do we actually think is going to happen?   We must see very deep austerity cuts, everyone pay some amount in federal income taxes, and start now.   It's always been about good jobs and the economy.  No focus there from our elected ones.  Too late now, start cutting to the bone is now the only choice.  Fair trade is only fair to other countries.  Divided we will fail and Congress/President have only made the division more prominent and in the media. 
Jan 15, 2013 7:30PM

I WANT MY FREE STUFF AND I WANT YOU, THE TAXPAYER, TO PAY FOR IT ALL. I want ipads/iphones and steak and lobster and i want the taxpayer to pay for it all. I want to have free childcare and free healthcare. I want YOU to pay for it so i don't have to work. I want to go to WalMart and buy anything i want and i want you to pay for it. I don't want to work b/c i want you to pay for everything, including my unemployment. I want my kids to NOT work and i want YOU to pay for their college. I want nobama to pay for all the free stuff and then I want the taxpayer to pay for my vacations to Hawaii. I don't want to work and i want YOU TO PAY FOR EVERYTHING I DO. I HAVE FUN SPENDING YOUR HARD EARNED MONEY ON GUCCI BAGS AND CARS. I want free gas too. I want the US taxpayer to pay for all of my fun and all of my children’s fun and future. NOT ONE of my family members will work ever again b/c i can get free stuff from the US government and the US taxpayer. This is the best solution for me and my family so PAY FOR ALL OF MY FREE STUFF!!! AND PAY FOR IT RIGHT NOW!

Jan 15, 2013 7:28PM

politicians don't pay their bills. so, who's the deadbeats??? is a deadbeat someone who doesn't pay up??? what's the national debt up to now??? keep spending you doosh (nobama) and then tax the rich to make yourself look good for the poor people??? now, who's the deadbeat???


way to go you doosh!

Jan 15, 2013 7:28PM
why are'nt the liberal oboma lovers chimming in ?
Jan 15, 2013 7:25PM
The emperor has no clothes!  Tha'st the fact jack!
Jan 15, 2013 7:12PM
Stupid is as stupid does.  Our government is on the verge of default because the government has been busy setting an example for it's citizens for years.  Deficit spending!  Spend money you don't have. Whats good for the goose is good for the gander!  It's a crazy country.  I mean crazy.  We got people on welfare with Iphones!  People want things they can't afford so they get them and then default later when they can't pay the bill!  I'm gonna puke next time I hear politician claim we the greatest country in the world.  The mass majority of our peoples are just poor trash surrounding an elite group of rich people that are under taxed and over paid! 
Jan 15, 2013 7:10PM
You know. My only debt is medical debt. I have worked hard since I was a pre-adolescent. But unfortunately I have been without health insurance on several occassions while becomeing very ill. So, I owe. And I know it and it bothers me. Because paying it back just won't fit in my budget. No matter how many corners I cut. My husband and I both work full time jobs. We do not receive ANY public assistance at all. We will never be able to privately afford health insurance due to my pre-existing condition(fibromyalgia), and work for small businesses that do not offer it. So we are the 34 million unisured. I don't care about having nice or expensive things, I just want good health so I can continue to work, pay my bills and pay into a system I will likely never benefit from. But that is just too much to ask. So, guess what? I'm better off going on disability, getting housing vouchers and free healthcare than I will ever be working and doing the right thing. Maybe, just a reach. We need to start rewarding hard workers and penalizing the baby making welfare queens.
Jan 15, 2013 7:07PM

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 7:07PM
Were all not deadbeats just 47% are.
Just more proof that the muslim in chief doesn't know jack about running a country. He lies more than a lawyer. If we are deadbeats it's because of all the ghetto and white trash that have spent 50 years doing nothing but breeding illiterate offspring and are targeted by banks for high risk loans.
Jan 15, 2013 7:03PM
it don't do any good to talk about this....the yes votes always out-number the no's and we all know who they are...WT, NWA's, WWA's and all the other leech's....
Jan 15, 2013 7:00PM
Would ya like ta know why folks walk away from debt?  How about $45 late fees on $15 credit card payments, a foreign company who has added $2300 (another 6 months of payments) in mysterious  "fees" on to my matured car loan, a "credit counseling" firm that hijacked $463 dollars from my bank account, banks that change their processing methods to max out overdraft fees without giving you prior notice...  screw this country, all it does is find ways to rip off the poor
Jan 15, 2013 6:58PM

hey morons, the President does have perhaps the hardest job (I know I wouldn't want it) I can think of. So knock off the foolish political rhetoric.


And yes, with that, knock off your self-righteous drivel. You sound like whiny children.


The US has become a nation of armed lunatics. It's about all we do with any effectiveness, is bomb, torture and use the military. Whenever anything else is considered from the government, the practiced refrain is "can't trust the government to do it" and "socialism is killing this country".


No. Crony capitalism is. When the top 2% make 75% of the profits AND have you all sneering at the impoverished person of color milking the system for extra food....


Then you're just proving what was started when this once-great country began sneering at evolution. Lack of significant mental agility is what I'd call a deadbeat, and we (the majority of hard-working folks who don't post on here but giggle at your collective stupidity)...are tired of hearing morons spout. Didn't you 'get the memo' last election? Guns, Christian zealotry and deep-south stupidity are all kinda passe. Now please just move on.

Jan 15, 2013 6:56PM
The problem is there is no time line or monitoring of the system it should have a timeline on it, my family needs the assistance as I lost my great paying job because my company was trying to save money on long term high paid employees and just continue to work to maybe get insurance I've had to take a $7 pay cut.  I have never been unemployed until the previously mentioned situation have a college degree and almost 12 years of management experience.  The problem is that cheating the government and the people that do work has become a full time job not only for lazy people but also the politicians who set and make it easy for them to get votes and make their millions.  The middle class is almost 80% of America and we are brainwashed, cast aside, and put out of work so people can fill their pockets by cheaper labor in other countries and machines.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.