Americans criticize government leaders for running up the federal budget deficit, but do they practice what they preach?
Not really.
Individuals are living beyond their means at an even greater rate than the government, based on recently released household debt figures.
U.S. household debt totaled $13.4 trillion at the end of 2010, or about 107 percent of the $12.5 trillion Americans earned in total household income last year, according to the Federal Reserve.
The government’s total debt of $13.8 trillion represented about 94 percent of the $14.7 trillion in national income, or Gross Domestic Product (GDP), last year.
“You hear people say that the government should manage its finances like the private sector does, but that’s the problem,’’ said James Brock, an economics professor at Miami University.
Brock said household debt built up largely in the boom years preceding the recession has left millions of Americans struggling to escape overwhelming financial burdens.
“It’s all a reflection of the 2000s, when it was spend-spend, borrow-borrow, and don’t worry about tomorrow,’’ Brock said. “Then tomorrow came.’’
Before the recession began, household debt doubled from about $7 trillion at the beginning of the decade to about $14 trillion in 2007. Government debt also climbed during that period, but at a slower pace. It grew from about $6 trillion to $9 trillion.
Since then, government debt has skyrocketed. Stimulus measures adopted to revive economic growth, programs such as Medicare and Medicaid, tax cuts and the ongoing wars in Iraq and Afghanistan have driven the budget deficit to a critical stage.
While lawmakers continue to wrangle over borrowing and budget issues, many local residents are facing similar challenges.
Lorraine Ransell of Dayton said concerns about job security and the general state of the economy have led her to “cut way back” on spending and concentrate on paying down her debts.
In years past, the 46-year-old dietitian said she wouldn’t hesitate to make an impulse buy, using one of several credit cards to buy a pair of shoes or a handbag.
Not anymore.
“I have one credit card now, and I try to pay the balance off every month,’’ Ransell said.
“You never know what’s going to happen with the economy the way it is. I want to buy a new car so bad. But I’m trying to pay off my debts, not get in deeper.’’
Ransell is among the growing number of Americans trying to pay down credit card debt and stay current on payments, based on the latest figures from the credit reporting bureau TransUnion. And they are making progress.
Average credit card debt fell $286, or 5.8 percent, to $4,679 in the first quarter of 2011 from $4,965 in the fourth quarter of 2010, TransUnion reports.
That was the lowest average balance since the third quarter of 2000 and significantly lower than the peak of $5,776 in the first quarter of 2009, the company said.
But the decline in credit card debt doesn’t mean, necessarily, that consumers have suddenly become more frugal or responsible.
“People are still doing some spending, but what we’re seeing now is people using credit for basic necessities,’’ said Melodee Sheils, director of Consumer Credit Counseling Service of the Miami Valley. “People are using their credit cards now to survive.’’
Sheils says the counseling service’s clientele has changed dramatically from a few years ago, when many people were leveraging easy credit to buy cars and remodel their homes.
“When you’re talking about some of the things that people are charging now, you’re not seeing as much of the want as the need,’’ she said.
“Some people are trying to put away credit all together and pay down debt, but there are some people who are still out of necessity needing to use credit cards. But it’s going to be for gas and for food and for those kinds of things, more than for something that is just a whim.’’
Contact this reporter at (937) 225-2437 or rtucker@DaytonDailyNews.com.