Debt as a way of life

Here's Margaret Webb Pressler of The Washington Post tut-tutting about young people's cavalier attitudes about debt:

… a generation of consumers … have embraced and used debt in a way that no generation has before. The polar opposite of the postwar generation, which feared debt, today's young adults view credit cards as a welcome and easy path to the lifestyle they see around them.

"What's extraordinary is how quickly it's changed," said Robert Manning, a professor at the Rochester Institute of Technology and author of "Credit Card Nation." "Now credit is an entitlement – it's not connected to having a job and being a producer and understanding how much debt one can afford."

Financial experts are alarmed about this carefree use of plastic because the debts that many twentysomethings are incurring are stacked on top of towering levels of student loans. Yet these young consumers often seem oblivious to the harm that could follow the spending they're doing today.

In a limited sense, Pressler's right. Young people are not immune or exempt for our national malady of buy now, pay later. The statistics on young people and debt are sobering:

According to a study done last year by Nellie Mae … the typical student graduating from a four-year college has close to $19,000 in student loans. Just five years earlier the average was $11,400. …

Nellie Mae's credit checks on student loan recipients showed that in 2002, 83 percent of college students held credit cards, compared with 67 percent in 1998. The average student's balance was $2,327 in 2001, up 24 percent from the average balance of $1,879 in 1998. The average graduating senior carried credit card debt of $3,300.

But Pressler's finger-wagging is completely out of context. She writes as though younger people's embrace of debt as "a way of life" somehow makes them exceptional here in America, when really all it shows is that they have learned their lessons well from their elders and, especially, their prodigal president.

Overall consumer debt is at an all-time high in America. So is the federal budget deficit, the national debt, America's trade deficit and the deficit at the Pension Benefit Guaranty Corp.

But the thing that really makes our transition to a culture of debt complete is our newfound willingness to embrace future debt to fund everything. From Medicare to NASA, our subprime president has sold us everything on a high-interest credit card with no payments due in the first 4-5 years, after which payments kick in with a vengeance. Yet somehow, our adolescent-in-chief escapes Margaret Webb Pressler's scolding.

Her lecture is worth reading, but wherever she mentions "young people" substitute "America" or "the Republican led Congress" or "President George W. Bush" and you'll get a sense of just what has been going on in this country over the last three years:

It's not that young consumers don't know they're in a bit of a bind. But many just assume they'll eventually have the money to pay their bills. …

They get by, but they have no room for life-altering events, such as pregnancy, job loss or severe illness.

"If you're maxed out on your debt, you have nowhere to run, no savings, no additional capacity to borrow, and you're cooked," said Lewis Mandell, a professor of finance at the State University of New York at Buffalo. "This is the real problem of being young and in debt."

"Debt as a way of life" — that's the real state of the union.