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 6:50PM
My question is since i am paying an addtonal 13k in taxes next wife and i made 184k last year....never had made that much before, had some hard times over the past 35+ years...but made it through it. Got a few breaks this last two years, promotion, ect. We live frugally, house is a foreclosure, paid about 97k for it two years ago. Paid for my kids to get through college w/scholarships, and my kids worked on top of that.  My last daughter has about 1 year of college left. I spent about 12k last year on it. My big question, who going to pay for next years college? My daughter didn't get into her dream school because;
1. We couldn't afford princeton.
2. The addmissions staff told me that we were in the donut hole' make to much so we cant get fedral grants, and don't make enough to pay the full price
Jan 15, 2013 6:48PM
Is is intentional that the President"s picture/video is included with this article? 
Jan 15, 2013 6:35PM
The deadbeats are in public offices .  The president says " You can't finish deficit reductions though spending cuts alone".  I say QUIT SPENDING.  Common sense tells me don't spend money you don't have. duh  Why is this so hard for this lawer wanta be to grasp. 
Jan 15, 2013 6:32PM
With $ 1 trillion+ annual deficits the USA is now heading for financial collapse at warp speed. The kick the can down the roaders did not forsee that the collapse is on the horizon and in their lifetime. Unfortunately those who played by the rules will bear the brunt of the austerity measures. The unearned entitlement deadbeats will be basically unaffected. Goodbye middle class.
Jan 15, 2013 6:30PM
Hey the biggest dead beats that America has is the Obamas. They are living high off of the tax payers. Who else in America lives like they do? They are the laziest two people in the world. By the way why do we have to furnish anything for moochelle's Mother? Think about that whole mess in the White House and why do they keep getting by with it. Please somebody bring back dignity to our country!!!!!!
Jan 15, 2013 6:30PM
All of you people are way too self righteous.  I pray that you never need a good Samaritan.  I am always willing to help the least of these.  Don't listen so much to those that belittle people, just because they have nothing.
Jan 15, 2013 6:29PM

A nation led by the Deadbeat-in-Chief.


Welcome to Obamaville.

Jan 15, 2013 6:28PM
Gimme a break!  I'm a boomer and have witnessed what the economy has done to the younger generation.  My nephew is up to his eyeballs in student debt - he has little disposable income, so I try to help him out.  My son and his wife graduated college and couldn't find jobs so they went to China to work for a year.  My other nephew, an Army Ranger, college grad with many skills, has struggled to find work.  I have never seen anything like this and I feel so bad for them.  I think during the Great Depression people walked away from homes because there was no work and the banks took their money and the current climate is similar.  The younger generation doesn't seem to know that TV used to be free, phones were cheap and there was no such thing as bottled water.  They pay for all this stuff!
Jan 15, 2013 6:26PM
We may not be a nation of deadbeats but we certainly seem to be a nation of idiots. Who voted for this moron? How did we let things get this far out of control?
Jan 15, 2013 6:25PM

We are a nation of deadbeats and the biggest one is in the White House living off the American People.

Trying paying for your vacations Mr head Deadbeat. You've brought the office of Presidency to such a low that working Americans are disgusted by you.

When the shiftless hate the wealthy and are supported by the President its revolting.

Jan 15, 2013 6:24PM

Since 47% of the nation lives on entitlements provided by the other 53% the US is indeed a nation of deadbeats.



Jan 15, 2013 6:21PM
Speaking of deadbeats, barry has never had a job & lives in government housing. Hmmmmmmm
Jan 15, 2013 6:17PM
Yes it could be done through spending cuts alone.  If there weren't a a bunch of jackasses running things.  The main problem I have with democrats, they don't live in fiscal reality.  It is morally wrong to pass this huge debt onto the next generation.  How would you like it if you inherited a huge debt because your parents had no common sense.  There are two ways to destroy a nation war and/or debt.
Jan 15, 2013 6:16PM
 We all need to work hard and spend wisely...that goes for the GOVERNMENT ALSO!
Jan 15, 2013 6:13PM
wait til it all comes crumbling down the politians will be running for the hills because the people will declare open season on them wanting them dead or alive
Jan 15, 2013 6:09PM
Here is idea for new entitlement program. For everyone that wants to work you will get a job.For everyone who does nto want to work you will get a one way bus,boat,or plane ticket to leave the country!!! That is what you are entitled to!!!
Jan 15, 2013 6:02PM

A lot of the credit card write-offs that the author speaks of are the result of predatory lending practices. 


Many people signed up for credit cards with reasonable interest rates, only to have the rates raised to a level that makes it almost impossible for them to pay off their debts.


The credit card companies made a business decision, betting that they could make more money by keeping people on a "payment treadmill," even though they knew a certain percentage of these people would not be able to make their payments.


If one person pays off their debt by making payments that amount to three times their principle balance, it makes up for someone else who doesn't pay at all.


Sure the borrowers share some of the blame, but is it anything other than predatory to offer $10,000 credit lines with low introductory rates to kids who may be only 19 or 20 years old?

Jan 15, 2013 6:01PM
Why is it that a person can pay for their big cart of groceries filled with steaks and brand name food that I can not afford.Then they walk out to a nicer car then I can afford. There are too many people abusing the system.How many people are living together abusing the system getting entitlements they are not entitled to get. It seems like the only way you can get ahead in the world is to lie and cheat. How can a person make 15000 a year pay in 1000.00 dollars in taxes and get back 5000.00? How can a person be on welfare pay 0 taxes and get back 5000.00? Close the loopholes and reward the hard working.
Jan 15, 2013 5:59PM
Who would've known 30 years ago that the downfall of our country's financial stability would be that people would make it too easy to borrow money?
Jan 15, 2013 5:56PM
Worked steady for 45 years. When a lot of people in California have jobs they treat it like an entitlement program. Socialism has eroded away at what made America great. Incumbent elected officials are more interested in saving their career that doing the job. When politicians can buy the votes with the voters money nothing remains but a deadbeat country that is well on it's path to self destruction    
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.