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 16, 2013 2:27PM
The government has become the largest bleeding heart. You can guy most anything on food stamps rather then just the nnecessities they are also just handed our when it used to be you paid $20 dollars cash to get $40 dollars food stamps. You can walk into the hospital and be seen in the ER for a sore throat and have no intentions of paying. You can rack up debt that can easily be forgiven, while you turn around and buy a new car that you can't afford but can get approved because your FICO score has sky rocketed with no debt to your name. The work ethic in America has gone to crap with the government when older generations used to have an issue with buying anything not american made I'm worried about buying anything american made since the job quality that I see every day everywhere I go is nothing short of poor.
Jan 16, 2013 2:26PM

What we as a people need to do is demand that the government STOP giving our hard earned tax dollars away! I'm not talking about getting rid of Welfare, but limit it. Some States have required that they be drug tested. This is a start. They need to go through the files and see how many recipients are living in the same house, same apartment. It has become GENERATIONAL! Two, three and sometimes four generations all on welfare, all in the same home.

MORE SO, the American people HAVE to demand that we STOP giving monies to Foreign Nations! Obama is giving Egypt how many BILLIONS of dollars? How many billions to how many countries? How much of our National debt could be paid off with these monies?

Before I'll buy the kids next door shoes, I  make sure MY kids have shoes!

Jan 16, 2013 2:17PM

Why does MSN only blame the GOP and completely ignore the debt that this president has incurred since becoming our leader.  Why does MSN  focus only on the GOP and how they will not deal with the debt limit all the while ignoring that this president acts like a dictator and DEMANDS that they do what he say's.  HE will not work with anyone, just like the first time we went through the debt limit crisis.  If we don't get it through our thick heads that we have a SPENDING problem then we are doomed.  The  dem's. will once AGAIN tell us that the mean old GOP will take away your SS and you won't be getting your checks and we will buy it again and NOTHING will change as we merrily go off the fiscal cliff never to return.

Jan 16, 2013 2:15PM
It seems we have become a nation of complacency.  However, there is a difference between Greed and success.   I too was raised, if you want it you work for it, save for it.   I have always lived below my means.  I guess this is why I will be retiring between 55-60.  Be able to build my retirement home with cash and live out the rest of my days in comfort.  I did not feel the need to keep up with Mr. And Mrs Jones.   I saved and invested.
Jan 16, 2013 1:57PM

Does anyone have COMMON SENSE?!!!! As in the book "pamphlet" by Thomas Paine. That's what made this country great. Wouldn't it be curious to know how many "public servants" (joke!) have read it? And what their criticisms would be if they did. (If they could, I mean. I have come to the conclusion that most of them are illiterate because intelligence doesn't mean anything anymore, does it?) I am not a political person, just a healthy one so I have something to add....


You Know You Live In A Country Run By Idiots If….

you are punished and fined for choosing to be healthy and choosing not to be a burden to society, never having to go to the doctor or have insurance while people who eat fast/processed food everyday have hundreds of thousands of dollars surgeries that get sent to insurance companies that other people pay for and not the patient.


Definitions are NOT subjective. Why does freedom mean something totally different for someone else than it does for me? Poor education?


We are not immortal, we never will be. Don't be a burden to others because you like cheeseburgers and soda. An apple a day...


Did anyone ever think that is a way we are deadbeats, too?

Jan 16, 2013 1:55PM
we have gone away from teaching responsiblity--it is to much trouble for the parents of today to descipline their children--take away their car--who is going to take them to school? take away their cell phone--how are going  they call and text  their friends---then we are shocked when these same kids don't pay off their student loans---then we are shocked when they don't pay off their credit card debt--then we are shocked when they don't pay their house or car notes---we have life time politicians that are anything but stupid--our politicans see the way to get re-elected is give give give give to the deadbeats and take away from the few workers--why would any politician cut spending and in any way punish the deadbeats--they do get to vote you know--a long time back you would have to own property to vote---how about you just have to have a job to vote--or how about -you can't vote if you have declared bankrupsy--or how about you go to jail when you don't pay your debts and you can't vote if you are an x-con--civil rights--what about my rights as a worker and tax payer???
Jan 16, 2013 1:41PM
We gotta a lot of bombs and aircraft carriers though.  Maybe we can use the aircraft carriers to bring out citizens food?
Jan 16, 2013 1:15PM

This is what you get when you vote for lawyers instead of business people to be in office.


WILL people ever learn the the Govt is a business... so much money coming in, so much going out.


When you spend more than you bring in. Your BUSINESS FAILS. ie the Govt fails.


 One Question: Where would we ( the U.S.)  be if we could not print our on money?


Jan 16, 2013 1:08PM
Social security and Medicare are not the reason the Federal Debt is so high.  Even all the government giveaway programs don't add that much to the Federal Debt.  The real problem is the hundreds of thousands of Federal Government employees who really contribute nothing to the benefit of the taxpaying public. The Federal payroll is exorbitantly high.  Obama himself has added so many czars making huge amounts of money, and Michelle has hired 40 assistants, thus adding significantly to an already huge problem.  The size of Federal government must be reduced or we will all be buried beneath it.
Jan 16, 2013 1:07PM

But I don't get it - if we save instead of spend, we're accused of ruining the economy.  Remember Bush's tax rebates to "stimulate" the economy  - we were told it won't help if we used our rebate to pay off credit cards.  I'm not quite sure how finance "experts" have the nerve to scold about debt - they're part of the problem because they pimp out debt to make money for the banking industry.

Jan 16, 2013 1:06PM

I'm in the used vehicle sales business in California.  I have to disagree with several points in this article, yet I have to say spot on with some of it also. Young couples, struggling with finances, working and going to school at the same time are usually the the most responsible attitude when it comes time for their car payments. They may not always be on time with their payments, but they make a far better effort then most. The worst at making their payments are the senior citizens and Those that get large amounts of free money from the government because most have no shame about reneging on their contracts because everything is given to them. The absolute worse, and every dealership will agree is the single mother of any age.

Jan 16, 2013 1:00PM
How about lets blame the people who decided that the economy must grow even though the average price of a home can not be afforded by the average wage. So "they" developed a system that allowed credit to be given to people who previously did not qualify.
I wonder what the next scam will be to get average wage people to prop up the economy for "them". "They" will succeed as long as "you" continue to point fingers in the wrong direction.

Jan 16, 2013 12:58PM
and these deadbeats voted a deadbeat president in office hes dumb as a rock
Jan 16, 2013 12:51PM
when drawing unemployment is good for the economy,but taking care of our senior citizens is the only problem the federal govt identifies as causing the debt problem.think about it $16.00 muffuns being served at govt events,oh I  could go on all day,but you get the point I believe.
Jan 16, 2013 12:50PM

Let's not discuss Trump, Hostess, Enron, mining companies and the other corporate deadbeats that declare bankruptcy, often multiple times. The corporate deadbeats that walk away form their debt and obligations. The corporate deadbeats that raid employee pension funds and shaft employees for salaries and pensions. The corporate deadbeats that destroy the environment and walk away leaving a superfund site for me to pay for. No those are such honorable and responsible people. No wonder individuals see not problem with emulating the rich and the corporations that walk away form their responsibilities.

Jan 16, 2013 12:48PM
America is at the mercy of greedy "Slugs" in power. Wall Street and our Banks are the" deadbeats"! They lined their pockets,destroyed the housing market and created a lack of confidence for investors to step up to invest because of the Bernie Madoff's and fradulent activity that went undetecred by the "watchdogs" we empowered to protect us. We are not "deadbeats but more like "abused children" at the mercy of a broken system. Now we have to watch in horror while our elected officials clearly act on behalf of special interest groups instead of the "abused children" you and me!
Jan 16, 2013 12:48PM
If the gov't don't pay their bills then why should we?
Jan 16, 2013 12:47PM
The fact that democrats won the election says a lot about the state of our country..............  the deadbeat entitlers now out number the people with good work ethic . This country is going to have to fall hard before things change, unfortunately the hard working and responsible are the one's who will have to suffer and pay the price  for the slack **** laziness that is rewarded by our government led worthless idiotic democrats. 
Jan 16, 2013 12:44PM
Talking about deadbeats. How about going to work at 9 a.m. turning on the computer. Then punch buttons for 2 hrs. Then a 15 min coffee break. Then punch buttons and talk on the cell phone for 1 hr 45 mins. Then go to 1 hr paid lunch. Then go back and punch buttons and talk on smartphone for 4 hrs. Go home at 5 p.m except on Fridays go home at 3 p.m. This is what the majority of the people who call unemployed people deadbeats calls "working". Talking about deadbeats...
Jan 16, 2013 12:34PM
Median wages have been flat since the 1970s.  The national debt grew more than $4 Trillion during George W Bush's presidency, due to a reduction in taxes for the most affluent, along with the massive defense spending, and the Medicare drug benefit which allows drug companies to charge whatever they want and forbids Medicare from price negotiating.  Lets shut down our worldwide military empire of 700 plus military bases in over 130 countries, and reign in corporate welfare.
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.