Debt Is a 4-Letter Word
It seems that whichever way we turn, we listen to discussions concerning debt. Government debt, credit card debt, student loan debt and mortgage debt are among those most discussed. Discussions of government debt and deficit spending are all the rage in political circles, primarily among elected officials in local, state and federal governments, as well as the media pundits who cover these issues. Right now, there is little talk of anything else in Washington, DC, as Congress and the Administration continue to struggle with the issues involved in not solving the budget problems for as long as possible and in a way that narrowly averts disaster for as short a time-frame as the American people can stand. That is all I will say in this post about government debt.
Personal debt is a problem which plagues most of us from the time we get our first bank account and/or credit card until the time of our deaths. Many are consumed with figuring out how they can escape the constant need to catch up on our personal finances so we can reap the benefits of our hard work and live the good life. Many obstacles are placed in our paths making the achievement of this goal increasingly difficult with the passage of time. It is all too often in the perceived interests of the financial services industry to keep us in the dark regarding how easy it is to create enormous debt for ourselves and spend our entire working lives trying to get out from under it. Little effort, however, is exerted in helping us to reach our goals while avoiding these debt traps that have been set for us.
Education is heralded as the most important ingredient in setting the stage for a successful career in our adult lives. Succeeding in getting good grades in K-12 education (most of which is still publicly funded) is essential in getting accepted to the best institution of higher education possible for each and every one of us. A college degree is considered essential for success in getting started in a career in most fields of endeavor now. Paying for that degree has become more difficult in recent years. Tuition at even public universities has skyrocketed in recent decades, even as sources of student financial aid such as grants and scholarships have decreased.
When I attended the largest public university in a very small state back in the late 1970’s/early1980’s, I was able to do so with the aid of state and federal grants and work-study for two years, before being granted a 2-year ROTC scholarship. My parents could not afford, nor did I expect them, to pay any of my expenses. The scholarship meant I owed Uncle Sam four years active duty in the Army upon graduation, which debt I gladly paid in full. Do similar opportunities to graduate from college with a bachelor’s degree without taking out sizable student loans still exist today? I’m sure they do. Most colleges have scholarships for athletes and others. There are still grants available from state and federal coffers for some. But statistics show an alarming rise in the rate of student loan debt accrued in recent years. In fact, student loan debt has recently eclipsed credit card debt in amount owed in this country.
Student loans come with the caveat that getting the loan in no way guarantees that one will get a job with that degree that will enable one to pay back that debt as required when signing on the dotted line. The particular debt incurred in obtaining my degree did contain a guaranteed job for the amount of time the government deemed necessary to repay it immediately upon graduation. I was also being compensated for my work at the same time. Perhaps non-military alternatives could be made available to others now. There are certainly many jobs that need to be done which graduates could perform for a salary for a period of time to reimburse the government for the educational expenses, without so many needing to sign for a loan with no tangible means of repaying it once they leave school. Furthermore, perhaps more resources should be devoted by society as a whole to paying for more of the education its’ people require in order to prosper. Providing equal opportunity to higher education regardless of income and family wealth should be a priority in this country. This clearly is not the case today
After school, the goal of many is to purchase a home in which to raise a family any accrue equity for the inevitable day when they will wish to retire from actively working to earn a living, as well as a means by which they can pass on some of their hard earned gains in life to their children. Mortgage debt is an area that has recently become very high-profile in light of the surge in foreclosures that accompanied the bursting of the housing bubble which has been a cause/result of the recent economic recession. People signed to pay mortgages in good faith that they could not repay as required due to either fraud on the part of lending institutions or loss of income due to being laid off during the recession. Many of those affected ended up losing their life savings because they could not see the mortgage through to completion. Where did their years of work go – not to them. They no longer have their houses nor the money they paid towards them. The bank/mortgage provider got both. Settlements of fraud by the banks have neither been admissions of guilt on their part, nor have they compensated most of those affected. Most of the institutions involved have seen no one jailed for misconduct and those “too big to fail” are now bigger than ever, and just as apt to fail as they were in 2008, when they were saved by taxpayer bailouts known as TARP.
Credit card debt has become the bane of the existence of millions of Americans.It is very difficult to escape for long seeing a television commercial touting the virtues of obtaining a piece of plastic that will enable you to purchase thousands of dollars worth of merchandise right now without needing the cash available to pay for it immediately. Folks are encouraged by the financial services industry to obtain as many of these as possible with the promise of low interest rates for limited time periods. They are even encouraged to obtain cards to transfer balances from other cards in order to lower interest rates for short periods of time. The result is billions of dollars of personal debt that the financial companies have to know many individuals will never be to pay in full. Calling for “personal responsibility” in fulfilling obligations is somewhat hypocritical coming from an industry that gambled away enormous sums of other people’s money creating the greatest economic disaster this country has seen since the Great Depression and then being bailed out by the same people they were scamming in the first place – the American taxpayer.
Regulation of the financial services sector is essential to obtaining and then maintaining strengthened economic viability of individuals and families in this country. The Dodd-Frank law passed awhile back was designed to provide some of this regulation. A lynchpin of this was the creation of the Consumer Financial Protection Bureau (CFPB). Those who have credit cards have seen some of the changes brought about by some of these new regulations. One is that credit card billing statements include a portion that tells how long it will take to pay off a current balance if the monthly minimum payment is being paid. I believe a common standard for this is 20 years, assuming no new charges are made. No wonder people can’t make headway unless they experience some sort of financial windfall or dramatically alter their spending habits. I cringe every time I see somebody in the grocery store checkout line whip out a credit card to pay for their week’s groceries, knowing full well they will be paying for them long after their nutritional value has passed through them on its way through the city’s sewage system. The same can be said for furniture, appliances or anything else one may purchase in this manner. I was still paying off a laptop I purchased with my first credit card years after it hit the recycle heap.
The party mostly responsible for the protection of Wall Street thievery in recent years, the GOP, has fought implementation of the CFPB and other aspects of the Dodd-Frank law ever since it was passed. Democrats share in the blame, as they participated in the Glass-Steagall Act repeal during the Clinton Administration. The CFPB has rightly been perceived as a threat to the status quo in the financial services industry because if it performs its function as designed, it will do as its name states – protect consumers from being lured into predatory financial practices. People should not be paying outrageous interest rates on loans that would be seen in other eras as usury being perpetrated by mafia loan sharks. People need protection from this behavior, or they risk figuratively living at the mercy of these institutions for the rest of their lives – contributing most of their livelihoods to paying to support the banks/credit card companies more than their own families.
The Senate GOP has thus far refused to allow the approval of a head for the CFPB. That resulted in the replacement of a GOP senator from Massachusetts with the obvious choice to head that bureau, Elizabeth Warren. Further refusal to approve Richard Cordray to the post resulted in his recess appointment to head the unit, but that appointment has since been deemed illegal by a federal court. Democrats in the Senate need to put an end to this obstruction and allow this important body, as well as the National Labor Relations Board, to function fully as intended by the laws under which they were created by Congress and signed into law. We need the protection from the financial misdeeds which have plagued us for far too long. Our elected representatives need to start representing their constituents, rather than merely following the dictates of their wealthiest contributors. Economic justice in our society needs to be determined by what is morally right, not by how many politicians corporate money can get elected to do their bidding.