According to the latest report on consumer debt released by the Federal Reserve, US consumer debt is over $ 2.5 trillion. Every year, the amount of credit card debt in America goes higher and higher. Why Do American Credit Card Debts Spur Out of Control? There are a good number of reasons for the annual increase in US consumer debt.
One of the reasons Americans are going deeper into debt is that wages have not risen enough to meet rising inflation. Earnings Variability Trends Report Over the Last 20 Years Report from the U.S. The Congressional Budget Office (CBO) stated that approximately “one-in-five saw their earnings fall 25 percent between 2002 and 2003, and about one-in-seven saw their earnings fall by” a fall of more than 40 percent. This significant drop in earnings for Americans means that while the price of gas, food, groceries, clothing, utilities and other basic needs is rising, average wages just aren’t holding up.
Another reason why US consumer debt is rising is because credit card companies spend billions every year on gaining new customers and increasing the rate limits for current customers. The average credit card debt for Americans is over $ 9,000, and even with the current credit crunch, the continuous flow of credit card offers continues.
However, credit card offers do not require recipients to sign up. Credit card debt in America would not grow at a fast pace, that is if consumers were more realistic with their budgets. Our community’s attitude has become “I want it now, even if I can’t afford it, so I will charge it.” If consumers exercised more discipline in their spending, credit card debt in America would reverse its current course.
Whatever the reason you may be in credit card debt, you need a solid debt reduction option. Credit card debt consolidation and debt consolidation loans are similar methods of debt relief that can benefit consumers with good credit. Debt settlement and bankruptcy are viable debt reduction options for consumers with bad credit.
US public debt in 2008
U.S. public debt (from the federal government) has risen for decades. Gross federal debt has risen greatly from $ 909 billion in 1980 to an estimated $ 97575 B in 2008. (The federal debt was approximately $ 9.509 billion in July 2008.) During these 28 years, the increase has been approx. $ 8.666 billion or approx. 10.53 times for an increase of approx. 953%. (Source: US Office of Management and Budget, United States Budget, Historical Tables, Yearly.) In 2008, we are facing a federal deficit of $ 560 billion to $ 900 B. (The official figure will be closer to $ 560 B for political and business reasons.) How much more do you owe if we spend only $ 600 B more than we levy U.S. federal taxes in 2008? If you divide $ 600 billion into 100 million workers, you get $ 6,000 a year. Worker. If you share a $ 600 billion federal deficit with 160 million workers, you get $ 3,750 for each worker. The population of the United States in mid-2008 was about 300 million citizens. Splitting $ 600 billion by 300 million equals $ 2000 for every U.S. citizen, including children under 10 and people over 90.
Some of the increases in our US public debt (US national, federal debt) between 2003 and 2012 are due to our wars in Iraq and Afghanistan if the battles continue through 2012. What will be the costs? While hard numbers are hard to find and estimates are often reduced by 50% or more, the cost of these wars in 2007 was approx. $ 200 billion. These $ 200 billion in 10 years would amount to $ 2000 billion or $ 2 trillion. Since there were few years since 1965 that we paid any national debt, we probably won’t be able to pay off those $ 2,000 billion over the next 10 to 15 years. The $ 2,000 billion interest rate at 6% for a year is $ 120 billion. Now you can start to see the extent of the problem. The cost, including interest, of these wars could easily amount to at least $ 3 trillion from 2003 to 2022. $ 3 trillion or $ 3 billion divided by $ 300 million equals $ 10,000 for each US citizen. Expensive wars for over 2 or 3 years tend to bring very large amounts of new debt to the US government and US citizens.
The US trade deficits are another huge source of increases in US public debt. The following table is data from the U.S. Census Bureau website (www.census.gov/foreign-trade/statistics/historical on July 15, 2008):
Annual trade balances
Year US trade percentage
Balance from earlier
for billions of dollars years
1995 -96.4 98
1996 -104.1 108
1997 -108.3 104
1998 -166.1 153
1999 -265.1 160
2000 -379.8 143
2001 -365.1 96
2002 -423.7 116
2003 -496.9 117
2004 -607.7 122
2005 -711.6 117
2006 -753.3 106
2007 -700.3 93
The numbers are seasonally adjusted.
Average per Month for 2008 is -59
The first 5 months annually for 2008 -709 billion dollars
You may notice that the foreign trade balance has increased from a deficit of -98.5 billion in 1994 to -379.8 B in 2000 to an expected trade deficit of around -709 B in 2008. The overall increase from 1994 to 2008 is likely to be about 620%! It is amazing that the US trade deficit of approx. 14 years will be greater than 7 times the amount in 1994. If inflation increased by 5% over 14 years, the factor would be only approx. 2 times.
According to the US Treasury (http://www.treasurydirect.gov/NP/NPGateway ) the U.S. national debt on July 3, 2008 was about $ 9.492 billion. dollars or approx. $ 9.49 trillion. The national debt on July 3, 1998 was approx. $ 5.53 trillion. So in 10 years it has increased by approx. 72%. While the interest rate is unknown for the next 12 months, the dollar interest rate on the US government debt with 5% interest rate would be about $ 0.475 trillion or $ 475 billion. Splitting $ 475 billion with 100 million taxpayers equates to $ 4,750 for each taxpayer. (I’m spending the figure 100 million because it’s a tenth of a billion, so you can multiply a billions by 10 and get the number of dollars per person, and probably no more than 100 million individual taxpayers can afford to pay off things like interest rates on the national debt and trade deficit. So dividing $ 475 billion by 100 million taxpayers equals $ 475 x 10 = $ 4,750 for each taxpayer.)
How does this affect you? In several ways; it would take a book to explain them. A couple of ways are as follows: · Increasing US national debt means that total US debt has increased. Part of this debt is due to foreigners. When interest is paid, some of that money goes out of the U.S. economy to foreign governments, businesses, and individuals. · Rising US national debt often means US interest rates rise. For example, mortgage rates and car loans often increase in interest rates. · Increases in US trade deficits mean that money and jobs are flowing out of the US. The jobs left may pay less in direct money and perks. Loss of technology usually follows jobs in engineering and IT. · It may be necessary to raise taxes to pay the increased interest on the US government debt.
Rising US national debt and additional trade deficits mean that the US dollar is depreciating compared to more stable currencies in the world. It is somewhat easier to export but imports cost more. This is one of the reasons why imported oil has risen from $ 60 a year. Barrel several years ago to over $ 140 in July 2008. General inflation is rising with larger federal deficits. Inflation in the years 2008 to 2012 could easily be between 8% and 15% in each year. However, we may have some deflationary forces in 2009 to bring the rate to approx. 2%.
· When the federal government borrows more money, it often makes it more difficult for individuals and small businesses to borrow additional funds. Lenders lend money to the federal government instead of a riskier individual or small business.
· Social Security payments for individuals grow over the next 10 years and beyond. Some of the money to fund the annual federal deficit comes from the Social Security Fund. For example, if the federal deficit is $ 800 billion in 2010, $ 400 billion could possibly come from borrowing from the Social Security Fund. One year, there will be less than $ 100 billion to borrow from the fund, as almost all of the money is paid to the beneficiaries. After that, when we have a total national debt of over $ 10 trillion and an annual deficit of more than $ 500 billion, it will be very difficult to pay the beneficiaries of Social Security. Benefits must be reduced, taxes raised or both. So increases in national debt are detrimental to future Social Security payments.
Debt relief options in 2008
Although US consumer debt has grown at alarming rates, consumers still have more options for debt relief available. The important thing for consumers to remember is that each debt reduction option has its own advantages and disadvantages. A credit card debt calculator can also help you determine the best debt relief method for you. Choosing the right debt reduction option is crucial for you to get back to financial harmony. We provide a debt calculator and debt relief options on our website at [http://www.DedicatedToDebtRelief.com] .
Update to October 9, 2008
The credit crunch and federal bailout are now facts. The above section was written in July 2008, except for the comment that inflation in 2009 might be around 2 percent. Even in July, many economists and so-called financial experts said we were not in a recession and the economy was basically healthy. (What is their definition of “healthy economy”?) By October 9, the US Congress and President had already signed a $ 850 billion financial rescue package. While oil was under $ 100 a. Barrel, I expect it to be greater than $ 130 in August 2009 and it could be more than $ 150. And this $ 850 billion federal bailout will add inflation over 2009-2013, although inflation may be down about 2% in 2009 due to the recession, the lack of funds to borrow and the lack of consumer confidence.
It will be harder to get loans for small businesses and individuals in 2009. This is likely to lead to more redundancies and bankruptcies from small businesses and individuals.
In October 2008, I wrote an article “Bailout – Taxpayers and Ordinary Citizens Pay for the US Economic Rescue.” This article explains some of the key factors in the rescue and a few long-term dangers.
Copyright 2008 by Kenneth S. Sumerford