Control debt now or pay even more later

contributing writerApril 15, 2012 

Somewhere in the manual of The Pundits Society, after the section on the secret handshake and clubhouse knock, is a requirement that all opinionizers must within a five-year span make at least one use of Sen. Everett Dirksen’s quote about government finances:

“A billion here, a billion there, and pretty soon you’re talking real money.”

We will set aside for the moment the inconvenient matter that the senator from Illinois may never have actually said such a thing, according to research by the Dirksen Congressional Center. The quote is too good to pass up when trying to convey the surreal qualities about very large and all too real numbers.

Such as in, the amount of debt we as individuals, as a society and as a nation are accumulating.

Debt is a huge topic in the news today because the numbers are so huge. Federal debt is now more than $15 trillion. Total U.S. consumer debt is $2.5 trillion. Total student debt outstanding is now more than $1 trillion.

But who can wrap their heads around a trillion of anything, especially dollars, even if we’re the ones who owe it and are supposed to pay it back?

It’s actually the smaller numbers, broken down to the individual and household level that are more daunting. The average household credit card debt, according to CreditCards.com, is nearly $16,000 – and if you’re one of the households out there that doesn’t carry a balance, imagine how high the tally must be in other households in order to balance you out and produce that average.

The consequences of debt loads and payments that exceed an individual’s ability to pay have figured in numerous stories published in this newspaper about families, businesses and construction projects, not to mention the failed and struggling banks that made loans borrowers couldn’t repay. Hundreds more stories can be found in the foreclosure notices posted in the windows of vacant homes.

Now the big question is: Have we learned anything from the experience?

There have been occasional signs that the lessons of too large, too uncontrollable debt have taken hold. Federal Reserve data on total revolving credit debt show declines in 2009 and 2010 – not surprising, that being the depths of the downturn – but also in the third quarter of 2011 and as recently as January and February of 2012. If the reason for those declines is that consumers are smarter and more cautious in managing debt, that’s encouraging.

Not so encouraging, though, are the trends in other types of debt – those student-loan figures, for example, and for government.

At a contract manufacturers’ show in Bellevue last week, the head of a Spokane-area company echoed the thoughts of many exhibitors in saying that, “For now, things are pretty good.”

Then he added, “I’m still extremely pessimistic long-term.”

Why so? “Our government’s borrowing 43 cents of every dollar. Some day reality will hit. I don’t know when that day is. I’m just doing everything to posture myself where I have no debt. I’m being as protective as I can and smart as I can, not leveraging myself out there.”

He’s not alone. Many Americans, having experienced firsthand the hazards and pain of crushing debt, or seeing what it did to others, are reducing the amounts they owe and swearing off taking any more debt to their personal balance sheets.

But the lulling effects of economic recovery, however halting, may encourage many others to lapse into complacency. The experiences of the Great Depression seared the minds and shaped the behaviors of its generation for decades to come. For the sake of families, the economy and the country, we had better hope the lessons about debt so expensively acquired in the Great Recession have similar lasting power.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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