“They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests. That’s right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fuckin’ years ago. They don’t want that.”
— George Carlin, 2005
- The bottom 95 percent of income earners have gone from having 0.60 cents of debt per dollar of income to $1.40 in debt for every dollar — while the top 5 percent of income earners decreased their debt per dollar share from 80 cents to 65 cents on the dollar.
- The portion of US economic activity devoted to the delivery of healthcare has gone from just under 9 percent to over 18 percent of gross domestic product (GDP). Despite the massive increase in spending, millions are still uninsured and many more underinsured.
- Private debt (credit extended to nongovernment borrowers) has grown from 2.9 trillion in 1980 to 27.6 trillion in 2016. The “boom” economy of the 1990s saw a near-doubling of private loans—from 7.4 trillion to 14.2 trillion—IN ADDITION to adding 2 trillion to the federal debt.
- Per-person debt has grown from just over $1,500 per person in 1980 to $11,140 per person by the middle of 2016. Per-person consumer credit has grown from 7.3 percent of the 1980 average household income of $21,100 to 13.7 percent of average household income of $75,700. Debt “increased 70% faster than income from 1980 through 2014.”
- The United States has been running consistent annual trade deficits—1975 was the last year on record the United States had a trade surplus. We have been running annual deficits in excess of $400 billion a year since 2002; the only exception being in 2008 in the midst of the financial crisis. The US trade deficit in 2016 was $502 billion.
- Outstanding auto loans have grown from $112 billion to $1.1 TRILLION. The 2008 economic crisis brought on a decrease in outstanding loans, but since 2011 American consumers have taken on $400 billion in debt liabilities to purchase new vehicles.
- College tuition “since 1980 has grown by 260%, compared to the 120% increase in all other consumer items.” At the same time enrollment is up 67 percent from 12.1 million students in 1980 to 20.2 million in 2015. States are covering an increasingly smaller share of college costs, from 72 percent to 35 percent since 2000.
- The cost of a four-year college education has tripled from $8k a year to over $21,000 in 2013. The total student loan debt has grown from $250 billion to $1.34 trillion since 2003.
- All outstanding mortgage debt in the United States has grown from $1.4 trillion to $14.2 trillion. The current level of mortgage debt is less than the $14.8 trillion that existed in 2008 before the financial crisis wiped out $1.5 trillion in mortgage debts.
- Thirty-year fixed mortgage rates have gone from 15 percent in February 1981 to just over 4 percent in February of 2017. These historically low home rates make buying a home easier in theory, but all things being equal, more and more people are devoting a larger percentage of their incomes to housing costs.
- Since 1980 “median rent has increased 33 percent. Median household income, however, has only increased 12 percent.” Average rents in the United States took up 23 percent of one’s income in 1980 and take up 30 percent today.
- The US federal debt has grown from just under $1 trillion to $20 trillion. Federal debt was around 25 percent of GDP in 1980 and it has exceeded 100 percent of GDP since 2013.
Why Does All This Talk About Debt Matter?
Since the late 1970s the United States has used debt to spur economic activity and growth. From home loans to student debt, auto loans to trade deficits, credit card debt to massive increases in the federal debt, economic growth in the United States has come from individuals, groups, and institutions borrowing money from banks and essentially creating new money as a result. As consumers borrow more to afford the cost of their first home or a college education, the federal government put two major wars (Iraq and Afghanistan) and prescription drug benefits on a credit card.
The total of public and private debt, based on the figures above, has gone from $3.8 trillion in 1980 to over $48 trillion today. It’s worth noting that the debt crisis really took off in the late 1970s.Why have debt levels grown considerably over the last forty years? Why should we be talking about debt at a time when we aren’t doing all we can to help the most vulnerable meet their basic needs? Is addressing the debt more important than climate change or any of the other very serious issues we face in 2017?
Rising federal debt has been used by elected officials as a reason to oppose any and all new spending programs. Our debts and deficits have been used to justify cuts to welfare programs. They’re used to end discussion over single-payer healthcare, tuition-free public colleges, and even infrastructure improvements. Airports, roads, sewers, bridges, and the electrical grid have gone into disrepair because we’re told we just don’t have the money to pay for the upkeep and repairs. Programs that help working people are cut over and over again while we lower tax rates for the wealthy and open tax loopholes for the biggest companies. Since 1980 we have been practicing a sort of “socialism” for the rich while imposing a sort of capitalism on everyone else.
We can debate the specific figures above, but what’s not up for debate is the considerable expansion of debt over the last forty years. The financial crisis we are facing today should be obvious and apparent to everyone. The 2008 housing/financial crisis was said to have come from out of nowhere. Regulators and most all people in positions of power offered no warning to the public. There were voices warning us of the impending crisis, but they were ignored until it was too late to do anything about the problem.
The resistance to Donald Trump, the far right, and the Trump agenda will not succeed unless it has an economic message. To shape that economic message, we need to understand what happened over the last forty years and what we are dealing with today as a result. Part 2 of this piece will be a survey of economic history and trends from the Great Depression through most of the 1990s. Part 3 will wrap up with the last twenty years and then present some proposals that could help us not only shape the economic message of the resistance but also address the dire situation our economy is in.
No one has a silver-bullet solution to the problems that come from exploding debt levels and dramatic changes to our economy, but if we start discussing some proposals already out there, we will be better suited to deal with the results of the next market crash.