The Number of U.S. Citizens in Debt is Growing Fast–This is Why
It’s no longer a secret that millions of Americans are not just struggling with debt instead they are overwhelmed with debt in all forms and shape. According to statistics obtained by Comet, the figures are worrying–80.9 percent of baby boomers, 79.9 percent of Gen Xers and 81.5 millennials owe banks and other financial organizations. The biggest chunk of the debt is contributed by mortgage and student loans. The data revealed that a majority of these people also carry medical debt and credit card loans, which account for a majority of the bankruptcy filings.
The average amount the millennials owe in credit cards is $4,868, compared to $7,175 owed by baby boomers while Gen Xers owe $8,291. It is now clear the youthful population carries the highest mortgage debt. While this shows a growth in the housing sector, it is slowly growing out of control and hence the need to be checked.
Why is the Debt Situation Growing from Bad to Worse?
Both Democrats and Republicans have contributed to creating a recurring debt crisis when they both competed at curbing the troubling debt crisis. There has been an exchange of blame with Democrats accusing Republicans of the effects of the Bush tax cuts and the 2008 financial crisis, both of which led to reduced tax revenues. Their policies were aimed at stimulating the growth of consumer borrowing through tax cuts. This had the effect of boosting demand to spur economic growth and increase the level of GDP. In other words, this was the same strategy the U.S adopted to beat the effects of World War II. This strategy is what came to be known as the Keynesian economic theory. On the other hand, the Republicans implemented further tax cuts to stimulate the growth of the nation’s entrepreneurship and grow jobs. This is what economists would call supply-side economics. This is where the country lost its focus when it focused on debt instead of deploying strategies to spur economic growth.
Credit card loans have been on the rise and by the close of the third quarter in 2019 it crossed the $1 trillion mark to hit $1.08 trillion. As a revolving debt (since it is settled on a monthly basis), it only accounts for 26 percent of the nation’s total debt, compared to 38 percent in 2008.
But Why will the United States Go into Bankruptcy
The U.S. government has however invested a colossal amount of money to the tune of $5.1 trillion in order to avert the effects of the banking crisis—this is more than 30 percent of its annual GDP. This further increased the nation’s debt level, although this is not as worse as the one experienced in Iceland. With many people retraining from investing in the U.S. financial markets, there is a general slow economic growth. But is it not possible for the country’s economy to collapse? Not likely. This is because the U.S. economy is robust resilient and stronger compared to other countries that succumbed to a serious debt crisis.
What’s worrying is the fact that lenders are beginning to trade carefully by reducing access to credit. This means creditors are in need of higher yields to help them offset their risk. The import of this is that the country will need more resources to refinance its sovereign debt. Because it can no longer keep rolling over its debt, chances are it will risk defaulting. This is where investors are now beginning to fear to invest in a rather delicate market.
When the U.S government took control of the student-loan program in 2010 the education and cost of loans were cut and the availability of education assistance was increased. But what is worrying is that the student-loan debt default rate has been staggering.
After the passing of the Bankruptcy Protection Act of 2005, it became extremely difficult for individuals to file for bankruptcy. Many people turned to credit cards in an attempt to settle their bills, making credit card loans to soar to hit the all-time peak of $1.08 trillion by mid of 2008. However, this situation was reversed during the recession when credit card loans dropped by 10 percent in three consecutive months during 2009. Banks reacted as well by cutting back on consumer lending immediately the Dodd-Frank Wall Street Reform Act brought in more regulations discouraging credit cards. By the close of Q1 of 2011, credit card loans fell dramatically to $839.6 trillion. An average American still owes $8,398 in credit card loans.
Let Elite Document Services Help
If you’re grappling with debt, it’s important to take immediate steps to repay. Alternatively, you need to consult a debt expert lie Elite Document Services to help you figure out how best to put your debt under control. Elite debt management programs and financial solutions are designed with you in mind. You will let them take up the trouble of figuring out the best way of scheduling repayments for your creditors so you can focus on finding ways of investing for more to regain your feet.