For years, Americans thought they were living on credit. The truth is just the opposite: they were living on debt. So, what is the cost of this debt?
Noted financier and philanthropist Stephen Robert quantifies the debt problem in a piece for Forbes magazine. Household debt soared from around 60 to 65 percent in the late 1950s up to 130 percent in 2006, with over 6 trillion dollars of debt added between 2000 and 2008. “Savings rates for consumers at times dropped below zero, as our economy feasted on a binge of easy credit,” writes Robert. Over time, only a small fraction of the accumulated debt has been repaid.
Government debt, which Stephen Robert calls “the other major component of our borrowing dilemma,” has been equally damaging. It is projected to balloon from 60 percent of GDP in 2000 to about 300 percent by 2040. The bulk of this debt, he says, can be accounted for by social security, Medicare, and Medicaid. “We are becoming a nation of Floridas,” he writes.
The good news is that Florida’s economy is improving and will outpace national growth. Time will tell whether the national economy follows suit.