Americans Now Doing What Gov't Should — Cutting Debt

IBD Editorials ^ | October 18, 2011 | Y.T. YOUNG

[Kaslin]

Washington's recent deficit reduction deal is only the latest, not the last. Deficit reduction is neither a temporary nor a localized phenomenon. Washington finds itself in contradiction to Americans' sentiments, and, even more importantly, their actions. While Washington continues its leveraging, America is de-leveraging.

Some may still question whether deficit reduction is good economic policy, but no one is questioning it as political policy. The latter debate is over: Deficit reduction won hands-down. It has become the touchstone of fiscal conservatism, reaching across party lines and the nation — at all levels of government.

Why is deficit reduction suddenly such a potent political force? Will it fade as quickly as it seems to have flared?

Deficit reduction is no more a temporary phenomenon than it is a localized one. It is here to stay for some time, because it is now emanating from Americans' own personal experience, rather than from Washington's political experience.

This change in attitude is undoubtedly no less surprising to Americans themselves than was the change in financial circumstances that caused it. The table below helps explain deficit reduction's saliency and its ambushing of Washington in the process.

Washington and America have been ambivalent regarding debt for decades. From 1997 to 2007, household debt as a percentage of GNP increased by roughly half, rising in every year. From 1993 to 2001, federal debt as a percentage of GNP fell by almost two-fifths, declining in every year. Federal debt as a percentage of GNP then remained rather static, rising by 3.4% of GNP from 2001 to 2007.

[paul51]

As Americans cut their personal debt, their share of the debt their government is running up is exploding. They, their kids and their grand children will be paying it off.

[MasterGunner01]

Since the American people are smarter than the politicians as far as personal debt goes, let us hope there are enough of us to throw a bunch of RINOs out along with Barry and his Marxists. Then let’s hope his replacement and the Congress have the guts to eliminate whole government departments that are worse than useless: EPA, DOE, DOEd, DHS, HUD, DOAg, DOCommerce — for starters. Lay ‘em all off and let these worthies figure out how they’re going to survive.

[donna]

Saving used to be the norm - credit and debt for the average family is a new invention:

Credit Cards:
1959 - option of maintaining a revolving balance was introduced. Cardholders no longer had to pay off their full bills at the end of each cycle.

1966 - a national credit card system was formed when a group of credit-issuing banks joined together and created the InterBank Card Association

1987 - American Express issued a credit card allowing customers to pay over time rather than at the end of every month.

[Oldexpat]

I remember when Gulf Oil and Holiday Inn teamed up to offer revolving credit on your Gulf card. I know a guy who worked for Gulf at that time and they really didn’t understand the impact of what they had invented.
Right now American’s are not voluntarily getting rid of debt, but as mortgages are foreclosed..and realestate lending gets tougher..they are hitting credit limits. Limits that that should have been there all along to avoid that huge debt bubble.