Average US household has $668,000 of debt

[CosmicCowboy]

Soooo...who's gonna bail US out?

http://www.usatoday.com/news/washington/2009-05-28-debt_N.htm


Leap in U.S. debt hits taxpayers with 12% more red ink


By Dennis Cauchon, USA TODAY
Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

"We have a huge implicit mortgage on every household in America — except, unlike a real mortgage, it's not backed up by a house," says David Walker, former U.S. comptroller general, the government's top auditor.

USA TODAY used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions.

Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.

The numbers measure what's needed today — set aside in a lump sum, earning interest — to pay benefits that won't be covered by future taxes.

Congress can reduce or increase the burden by changing laws that determine taxes and benefits for programs such as Medicare and Social Security.

Rep. Jim Cooper, D-Tenn., says exploding debt has focused attention on the government's financial challenges. "More and more, people are worried about our fiscal future," he says.

Key federal obligations:

• Social Security. It will grow by 1 million to 2 million beneficiaries a year from 2008 through 2032, up from 500,000 a year in the 1990s, its actuaries say. Average benefit: $12,089 in 2008.

• Medicare. More than 1 million a year will enroll starting in 2011 when the first Baby Boomer turns 65. Average 2008 benefit: $11,018.

•Retirement programs. Congress has not set aside money to pay military and civil servant pensions or health care for retirees. These unfunded obligations have increased an average of $300 billion a year since 2003 and now stand at $5.3 trillion.

[Extra Stout]

Nobody is going to bail us out. The U.S. government will default on its debt. The social programs will cease, the federal government will cease to exist, there will be lots of misery and panic, and we'll start looking for groups to scapegoat. Then the killing starts.

[CosmicCowboy]

Nobody is going to bail us out. The U.S. government will default on its debt. The social programs will cease, the federal government will cease to exist, there will be lots of misery and panic, and we'll start looking for groups to scapegoat. Then the killing starts.

I figure that won't start till around 2025.

[LnGrrrR]

Just more proof that Americans are idiots. :)

Which is a good thing for me... now I might be able to afford a house! Cmon market, keep depressing!

[LnGrrrR]

Nobody is going to bail us out. The U.S. government will default on its debt. The social programs will cease, the federal government will cease to exist, there will be lots of misery and panic, and we'll start looking for groups to scapegoat. Then the killing starts.

At least SOMEONE is being optimistic. :D

[SpursStalker]

I guess I'm not an average household, since there is no way in hell I would let myself get into that much debt.

[Extra Stout]

I guess I'm not an average household, since there is no way in hell I would let myself get into that much debt.
You didn't grasp the point of the article. The $668,000 represents the amount, on average, each U.S. household would need to pay in taxes, beyond what they already do pay, in order to keep the nation from eventually going bankrupt.

Your personal financial responsibility has nothing to do with it.

The underlying point, of course, is that there is no way in hell taxpayers could ever make up the difference even if they were willing, which they aren't; therefore, the collapse of the United States in our lifetime is inevitable.

[SpursStalker]

You didn't grasp the point of the article. The $668,000 represents the amount, on average, each U.S. household would need to pay in taxes, beyond what they already do pay, in order to keep the nation from eventually going bankrupt.

Your personal financial responsibility has nothing to do with it.

The underlying point, of course, is that there is no way in hell taxpayers could ever make up the difference even if they were willing, which they aren't; therefore, the collapse of the United States in our lifetime is inevitable.

Yes I did, apparently you didnt grasp my smart ass comment.

:lol

[boutons_deux]

Some historical context to how a de-regulated/laxly enforced financial sector lured suckers into deep debt.

================


The Huffington Post (http://www.huffingtonpost.com/)June 1, 2009


http://www.huffingtonpost.com/contributors/hale-stewart/headshot.jpg (http://www.huffingtonpost.com/hale-stewart)
Hale "Bonddad" Stewart (http://www.huffingtonpost.com/hale-stewart)

Posted: May 30, 2009 08:22 AM



What Will Economic Recovery Look Like? (http://www.huffingtonpost.com/hale-stewart/what-will-economic-recove_b_209339.html)

Over the last few months we're had several important signs that the economy may be bottoming. The Conference Board has recently reported that leading indicators (http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1) spiked up last month and consumer confidence (http://www.conference-board.org/economics/ConsumerConfidence.cfm) has improved. In addition, the number of people who say the country is on the right track has been increasing since October, (http://www.pollster.com/polls/us/issue-rdwt.php) while the number of people who say the economy is getting better is increasing. (http://www.pollster.com/polls/us/issue-econ-gbw.php) We've possibly seen a bottom in retail sales (http://bonddad.blogspot.com/2009/05/why-i-think-retail-sales-are-bottoming.html) and durable goods orders. (http://bonddad.blogspot.com/2009/05/are-durable-goods-orders-bottoming.html) Finally, it appears that the four-week moving average of initial jobless claims as topped out. While all of this is preliminary data which could change given the volatile nature of the economy, things do appear to be moving forward. That means we need to start looking at what kind of recovery we'll see. And in that category there is a great deal of concern about what will actually drive growth.
To illustrate this issue, let's break US GDP down into its four components. Personal consumption expenditures, gross private domestic investment, exports and government spending.

Personal consumption expenditures account for 70% of US economic growth. Unfortunately, the US consumer does not appear ready to lead the economy out of recession. The main issue is US households are heavily indebted: (http://www.frbsf.org/publications/economics/letter/2009/el2009-16.html)
U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to U.S. economic growth over the period.

In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased.
Here is the accompanying chart:
http://i17.photobucket.com/albums/b84/bonddad/el2009-16a.gif
Simply put, US households have gone on a debt acquisition binge over the last 30 years. The primary event forcing them to deleverage is the massive loss of assets over the last few years thanks to the stock and housing market corrections. According to the Federal Reserve, (http://federalreserve.gov/releases/z1/Current/) household wealth has decreased from $64.361 trillion in 2Q07 to $51.476 trillion in 4Q08, or a decrease of 20%. This decrease means households have fewer assets relative to debt, meaning households are in fact poorer. This in turn forces consumers to pay down debt at the expense of spending. In summation, there is little reason to think that consumers will return in droves to the malls. It is far more likely they will consume less, leading to a slower recovery.

Next, there is investment. Here is a chart of the percentage change from the preceding quarter in gross private domestic investment.
http://i17.photobucket.com/albums/b84/bonddad/Investment-2.jpg
Notice how this number has been negative for nine of the last 12 quarters. In other words, the US economy is already in an investment recession. And there is little reason to think we'll be coming out of it anytime soon.
http://i17.photobucket.com/albums/b84/bonddad/starts.png
Housing starts are already at 40 year lows.
http://i17.photobucket.com/albums/b84/bonddad/caput-6.png
Capacity utilization is also at 40 year lows, meaning there is little incentive for companies to buy new capital equipment.
http://i17.photobucket.com/albums/b84/bonddad/Commercial.jpg
Commercial real estate prices (http://www.frbsf.org/publications/economics/fedviews/index.html) are falling as well, indicating a lack of demand and therefore no need to build more commercial property.
In short, there is no reason to think investment will bring us out of the recession either.'

Then we have exports. First, remember the US is is a net importer and has been for several decades. That means exports haven't bee a positive contributor to GDP for some time. But most of out trading partners are also in a recession so they have no need to buy things from the US. In other words, don't expect exports to bring us out of the recession either.
Simply put, there are no parts of the economy ready to step up to the plate and take the lead pulling the US out of recession. As a result: (http://www.bloomberg.com/apps/news?pid=20601109&sid=a3i27FMViXmY&refer=home)
Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 and an economy that won't grow much beyond 2 percent as a consequence of the lost confidence in consumer credit that shattered financial markets. By this time next year, "the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under," Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

(http://www.huffingtonpost.com/big-news/)

[FaithInOne]

It's just a freight train coming your waaaaaaaaaaaaayyyy



I won't let the Bear eat me before it has gotten to everyone else.

[MiamiHeat]

doom and gloom ST'ers in this thread

the US will never go bankrupt. at least not within the next 50 years.

all the problems that we have now are fixable.

[angrydude]

dudes, the US is NEVER going to default on its debt.

Its going to (and currently is) inflate its currency and pay back the debt with weak dollars.

The real question is will anyone ever invest in the US again after that and how will the US respond to its standard of living becoming extremely lower as a result of it?

[EricB]

Its ok, all those evil rich people will pay for it.

You know, every family that makes over 50 grand.

[TDMVPDPOY]

hey what happens if america forfeits its debt....what happens to teh currency? devalue?

whats the likely hood of forfeiting?

[Aggie Hoopsfan]

hey what happens if america forfeits its debt....what happens to teh currency? devalue?

whats the likely hood of forfeiting?

It will make the LA Riots after Rodney King look like a walk in the park.

[CosmicCowboy]

It will make the LA Riots after Rodney King look like a walk in the park.

Yep, and after the urban scumbags wipe out all the "nice" people in the city and still run out of food they will head to the countryside to forage and the "good old boys" will whack em and stack em.

[Bender]

I better stock up on ammo.