Tuesday, May 22, 2012

Debt is Hurting the Economy...

...Just not the way Republicans (and Germans) think.

In the US, the economy really sucks if you are un-/under- employed.  But there are still a lot of people who have jobs--even good ones--and they could provide a much needed boost if it wasn't for personal debt.

Young people buy lots of things.  We are just starting out, and need all sorts of things that we didn't have/couldn't afford in school: houses, cars, furniture, families, pets, vacation.  These all cost money, which helps the economy.  But now we are saddles with lots of debt--mostly student loan--so instead of getting/doing all these nice things with our new jobs, we are paying off debt.  In the 4 years since I started at my job I have paid off roughly $50,000 worth of debt that was accrued in some form or another while at school.

A more detailed breakdown:
~$22k on credit cards, of which about half was medical and moving expenses.
~$28k on student loans

I also paid off my car and some of my house, but I bought both of those since I started work. 

Of course it's worse than those numbers.  Interest means that closer to $70k was spent on debt reduction over that time frame.  That is $70k that couldn't help boost the economy at all.  Now if I had been debt free, a decent fraction of that would have ended up in savings/retirement accounts, to be sure, but a pretty good fraction would have gone for/would be going for house projects/rennovations, durable goods like furniture, toys like a road bicycle, probably more clothes/shoes (lots of holes in some of mine), ...

I still have student loans to go, so this is continuing, and I'm just one person.

If we handled education properly in this country, the debt levels would be dramatically lower for young people who have the most spending to do.  Managing health care properly would further reduce debt levels, especially for those who can't afford insurance but still manage to get hurt/sick.  This is excluding the immense good that could be done by properly handling the banks/housing mess.

Debt is hurting our economy badly, just not federal debt.  And more of the latter could fix the former.

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