Debt As The American Way
Where I live, a local country radio station was apparently not doing so well and was sold to another company, which continued to run country music on the station, but introduced a new twist. Their “hook” to get you to listen was that they were commercial-free country. That’s right, they ran no commercials on the station at all. And they didn’t fill up the space with pleas for donations - they didn’t ask for donations at all. They just promoted themselves as commercial-free country and played more music per hour than their major competitor.
I did give some passing thought to how this was possible. I don’t have a degree in economics or know much about the tax law, so I don’t know if there were major tax benefits that allowed them to do so. I assumed they must be losing money, because radio stations cost money to run, and wondered a few times if this was some very wealthy person’s pet project of some sort or some weird tax shelter.
And then one day, there was this little blurb from one of the on-air DJs that said that a lot of people call the station asking how they are able to be commercial-free, and the answer is that “We took out a loan. We’re going into debt. It’s the American way!”
The buyout happened in early 2007 and in 2008 they started running advertising (which they call “limited” but I haven’t done any statistical analyses to see if that is true) so I guess the American Way wasn’t working out for them quite like they had planned. In fact, I’m still not sure what the plan was, or if there was even a plan. But I digress.
When did debt become the American Way? I know it can’t have always been like this. Is it when the government started accruing debt they couldn’t pay off? Was it when home prices became high enough to standardly require mortgages? Was it because of the introduction of credit cards? If so, thanks a lot Diner’s Club. But somewhere, somehow, debt did become not only an accepted but an expected part of living the American Dream.
A house, two kids, a white picket fence, and SUV with a loan on it (or leased) and a wallet full of credit cards that carry a balance. Oh, don’t forget the second mortgage.
I know that not everyone is in that position. I’d guess that a significant portion of my readership does not accept debt as a way of life, even if they are still in debt themselves. There’s an awareness of alternatives and the knowledge of the stress and heartache debt can cause. But American society as a whole? That I’m not so convinced of. There are lots of ways that debt seems completely accepted, and many transactions in which it seems expected. I remember when I was in my PhD program and the professor that was my advisor bought a new car with cash. First of all, all the grad students and techs we all in awe that someone could actually do that. And second of all, he told us how the dealership was confused, surprised, and then incredulous, it just wasn’t done. Not that he’s the only person to buy a new car with cash in the history of the world of course, but for where I lived it was outside the realm of normal experience.
Debt as the American Way. Significant debt as a means to live the American Dream. When did things come to this?
As an additional note, a few of my fellow bloggers wrote just yesterday on the effects they see of government as well as consumers choosing debt as the American way, check out their perspectives:
- DebtFREE Revolution: Too Much Debt.
- Credit Withdrawal: Are You Mad at the FED? Good! But Be Mad For the Right Reasons!
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March 20th, 2008 at 7:08 am
To answer your question, I’d guess consumer debt became widespread after WWII when buying household goods on credit was introduced. When Levitt invented the suburbs, I think it also became more common.
What’s worrisome to me is the acceleration of consumer debt. People owe more and more money.
March 20th, 2008 at 7:43 am
Thanks for the link!
I’ve got another article out today talking about what I think is the next big bubble to come up, Consumer Credit Card revolving debt. It’s getting bigger, and could be worsened by the various other economic problems preceding it.
March 20th, 2008 at 8:56 am
It is accepted and expected far too often. I come across the same *surprise* looks and comments when I pay cash for things too. Almost like people think those that DON’T borrow are crazy for not doing so. I don’t know how or when it started. I just hope it stops.
March 20th, 2008 at 9:36 am
Since Ronald Reagan, the United States has had a “credit” society. Reagan urged us to use deficit spending to support his policy agenda, and demonstrated it to us on a federal level. G.H.W. Bush, did the same thing, to a lesser degree. We had a short break where our leaders tried to impose fiscal discipline and then our latest president came along and said “Deficits don’t matter. We can spend our way out of anything.” Hence, the $10 Trillion national debt and spiralling deficits.
What is the latest answer to the economic problems of our nation? “Spend our way out of it.”
March 20th, 2008 at 9:37 am
I have a Dave Ramsey window sticker on my car that reads
Debt is Normal, Be Weird!
We have been pre-conditioned to think that debt is normal or okay, but it is not!
March 20th, 2008 at 10:03 am
OOOH… JD blogged about this today over at Get Rich Slowly! It started in the 20s, according to the article. Here is a link:http://www.getrichslowly.org/blog/2008/03/20/the-negative-saving-rate-and-the-age-of-easy-credit/
March 20th, 2008 at 10:13 am
This is definitely something that has me confused. Sure, I have debt. Even after my husband and I pay off the loan we have, I’m still going to be swimming in my student loans for a few years. I’m glad I found my way into the PF blog community, because I’ve learned that debt doesn’t have to be a way of life. I don’t need to make payments forever, I just need to make debt reduction a priority now so I can enjoy things later. Personally, I’m looking forward to being debt free.
Great to know there’s a little community out here though that supports a different lifestyle, even better to be a part of it!
March 20th, 2008 at 11:08 am
Twice now I have purchased a computer with my tax refund. (I know, I know, I should have withheld less, but that’s not pertinent just now.) The second time I did it I was at Micro Center and you should have seen the cashier’s face. On top of it all the manager stepped up and thanked me for buying the computer and gave me his business card! I still don’t know quite what that was about, whether he did it for all computer purchasers or saved it for people who would not cost his company collection fees later, but it was an interesting sort of positive reinforcement.
As for that deejay, I suspect he was being a tad sarcastic. I mean yeah, I think he was telling the truth, but I’m pretty sure he wasn’t all that thrilled about it. That kind of corporate behavior puts employees’ jobs at risk.
March 20th, 2008 at 11:13 am
@Dana - what the DJ said was some kind of script they were supposed to say, I think, because in the months after that, I heard it a few other random times on that station. So it was the “message” that corporate wanted to spread.
It is still odd to me, but they do run commercials now. 8 an hour, in comparison to 18 an hour by the other country station in town (according to them at least). lol
March 20th, 2008 at 11:23 am
My blog post yesterday was also about debt being the American Way! I have had that post sitting as a draft for a few weeks and finally got a chance to finish it up.
March 20th, 2008 at 11:46 am
Debt is not my family’s way of doing things. Nope. I did that once and will never ever go back. The only thing we owe is our mortgage. If we don’t have the money in the bank. . we don’t buy it. Plain and simple. We keep one credit card with a zero balance just in case. But we have always found other ways of handling our needs without going into debt. I love living this way!
March 20th, 2008 at 12:31 pm
I could be wrong, but I believe “wide-spread”, “every-day joe” credit “DEBT” started in the early 70’s. That’s when grocery stores and other main-stream consumer businesses started accepting credit cards as a “convenience” for their patrons. Of course, once the snowball starts heading down the hill…
(Side Note: Way back when, in the good ol’ days, most working people paid their accounts off, usually the next pay-day or the end of the week; it was considered an absolute and one would never carry personal debt. It was a reflection of one’s character and being behind in your accounts was embarrassing and humiliating.)
March 20th, 2008 at 8:22 pm
Interesting topic.
Have you ever seen: http://www.storyofstuff.com
It touches upon this issue from a global perspective.
March 20th, 2008 at 9:46 pm
Debt has always been part of the American way, even when America was a colony.
March 20th, 2008 at 9:58 pm
Yesterday I heard on NPR that the average American has $17,000 in credit card debt.
Since the readers who frequent these PF sites probably don’t carry balances that large, that must leave all the more debt for the rest of our fellow citizens, eh?
Frankly, I think it may be a little eccentric and nerdly to NOT have debt. How many people do you know who aren’t running a credit card tab or a store credit account? And how many folks can manage to buy a car without going into debt?
If we count taxes, mortgages, and rent payments as debt (yes, when you sign a lease you indebt yourself for the amount you agree to pay)…well, precious few Americans are fully free of indebtedness.
I can remember when credit cards came into being. It was about 1966. One of the neighbors in the dorm-like apartment building where I lived came around and offered to sign me up for an amazing new concept called a “Master Card.” She worked for a bank and would get a bonus if she got enough people to sign up. Oohhh what a deal! You could use it as an ID card. That’s what I did use it for–in those days, to cash a check you had to show two forms of ID; a credit card and a driver’s license did the job nicely.
Being a stodgy young thing, the daughter of parents who paid cash for everything and wouldn’t have dreamed of racking up ANY debt (my father did not buy a house or a car until he had the actual cash in hand to pay for it), it never occurred to me to charge anything on the Master Card. After about six months, I got a call from the bank. They wanted to know if something was wrong. Why wasn’t I charging things on the card?
LOL! Well, they don’t ask me that any more!!! But I’m sure I annoy the dickens out of them by paying off each month’s charges in full.
March 21st, 2008 at 4:12 am
Are you guys forgetting “It’s a Wonderful Life”? It was a battle of bankers, between the nice banker and the mean banker. People bought groceries on credit, even before credit cards, because stores gave credit. ALL stores gave credit to some people. For the rest, there was layaway.
Debt is the American way, because we’re a heavily capitalist society. The rule is simple: you will get not much more than you put in, and you will pay for everything individually. What you pay for, you own. Debt is the way this ethos can be preserved, when it’s impossible for people to always have enough money to purchase things.
In a heavily socialist society, it’s very different. Education is paid for in common. Sometimes, housing is paid for partly in common. Medical care is often paid for in common. Taxes are high, and how much you get out of the system depends on how much of the services you can consume. Debt, however, is lower because you’re not paying off a student loan, or high rents, or medical debts.
March 21st, 2008 at 9:56 am
I believe there is a difference between “credit” and “debt”. Which one are we talking about?
March 21st, 2008 at 3:57 pm
Since the readers who frequent these PF sites probably don’t carry balances that large, that must leave all the more debt for the rest of our fellow citizens, eh?
I’ll bet a lot of readers of PF blogs have much larger balances…they are turning to PF blogs to find paths out from under their debt.
March 22nd, 2008 at 1:54 pm
Aren’t credit and debt are two sides of the same coin?