We are told that household debt is a crushing burden in the United States. The statistics do not bear this out.
Average household credit card debt is about $7,000. Half of Americans have zero credit card debt. For those American households that have credit card debt, the figure is $15,000. But this is down from $19,000 in 2009. See the chart here:
We are told that total household debt – mortgages and revolving credit – is high and rising. On the contrary, it is low and falling. If you look at the statistic that families look at, it is this one: the percentage of disposable (after-tax) income devoted to debt repayment. It never goes above 13%. These days, it is under 10%. The chart is here:
Do not pay attention to forecasters who say that household debt is a terrible burden. It isn’t. Corporate debt may be too high. Federal debt is clearly too high. But households have things under control. This is not other people’s money.
Then there is this slogan, heard every four years. “Federal taxes are going to go up if [some politician] is elected President.” Taxes go up, no matter who is elected. But they do not go up faster than GDP goes up.
The ratio of tax revenues to GDP has only gone above 20% once in American history, in 1944, the last full year of World War II. It reached 21%. It went below 21% in 1945, and it has never exceeded this since. The chart is here:
What do these three charts tell us? First, most Americans are sensible about personal debt. They understand that the must make monthly payments. They do not let their debt get out of hand.
Second, voters have Congress on a tight leash. Congress does not have the courage to hike taxes above 20% of GDP. If Congress wants to spend more, it must borrow.
Don’t worry about rising household debt and the ability of the federal government to increase its share of GDP through direct taxation.