Young Borrowers Face A Life of Debt

Financial insecurity is one of the staples of American life, and fuel for our nation's politics as well as cable TV shows. Once the elderly worried endlessly about money matters, athough now people over 65 count as the wealthiest group of Americans. Rather, today the biggest worriers about what's euphemistically called our "financial future" are the young, and especially people under 25 years old.

For new college graduates and people out of school for only a few years, financial worries are enormous. Home prices, even if they are starting to fall, remain very high relative to ordinary incomes, and higher mortgage rates are no balm to money worries either. All Americans carry more debt on average than in the past but the increase for young people is most striking since young workers generally earn the least. Between college loans and car loans, people in their 20s are amazingly burdened financially compared to earlier generations, especially compared to my own generation of late-stage baby-boomer.

If in the 1960s and early 70s, my college friends and new graduates shouted, "Burn baby burn," to signify their desire to tearing down the status quo, youth today embrace the credo, "Borrow, baby, borrow" because of their dependency on cheap credit without which their chances of building a decent middle-class life seem poor to none.

If you wonder why borrowed money fuels the lifestyles of all ages, turn on a new documentary, "In Debt We Trust," by the veteran dissenting TV journalist and media critic, Danny Schechter. "In Debt We Trust" vividly shows how Americans get ensnared in a web of debt spun by a "credit industrial complex" that almost seems to function like a conspiracy to drive people into financial servitude. Schechter's central insight is bold, provocative and timely. As he quotes a Brooklyn consumer activist, "Debt is profitable."

Out of this kernel of truth comes Schechter's fascinating tour of the various ways that lenders earn money, chiefly through short-term loans through credit cards. While the abuses of card companies are well known, Schechter sheds light on some emerging credit practices that will inspire outrage in his viewers. One of the most insidious is a service by H. & R. Block to loan money against future tax returns at very high rates.

In narrating the 90-minute documentary, Schechter generally maintains an even tone, cogently making the case for how credit-card companies promote "excessive debt" and the costs of becoming addicted to revolving-credit, whereby a customer pays off only the interest on a loan each month. He also smartly finds common ground between progressives and conservatives who both preach against the perils of dependency on borrowed money. There really is bi-partisan support for clamping down on companies that suck the financial blood of debt-ridden consumers. And more broadly, the perils of too much debt are real, both for individuals and the national government, whose borrowings have reached record levels and continue to mount because of supersized-budget deficits greatly worsened by unwise tax cuts.

A day of reckoning is not out of the question; the debt bomb may yet explode, taking American prosperity with it. Housing values are falling, most everywhere now, and that's perilous for American consumers who, as "In Debt We Trust" shows, have used home-equity borrowing as a piggybank for years. On a national level, the bubble can burst too. The size of the federal debt, and the growing dependence on China to cover this debt through purchases of Treasury Bills, could lead to a collapse in the value of the dollar and a sharp, steep rise in interest rates, choking off the very lending that fuels economic activity and bringing about severe economic contraction, along with job losses and wage declines.