Student Loans, Other Debts Are Stressing Americans More Than Ever

The American Psychological Association (APA) and the Federal Reserve Bank of New York aren’t working together on the mental and fiscal health of America — but they certainly could.

The APA released its annual “Stress in America” survey on Feb. 11 and noted a slight increase in stress levels in 2013. The first uptick since the survey started six years ago.

A week later, the Federal Reserve released its quarterly report on household debt and credit.

That report also showed a slight jump in consumer debt for 2013. It was the first boost since 2008.

As anyone dealing with the stress of debt can attest, the two are very much related.

Debt Rises for First Time in Five Years

There was definitely more debt in America in 2013, specifically in the last two quarters of the year. Total debt over those two quarters increased $368 billion.

That reversed a trend where consumers had reduced their debt in 18 of 19 quarters from the end of 2008 to the summer of 2013. Debt dropped an astounding $1.35 billion during that time and so did stress levels, as measured by the APA.

The APA’s “Stress in America” survey uses a 1 to 10 scale, with 1 representing no stress and 10 being extreme stress. Levels peaked in 2007 at 6.2 and declined every year when it reached 4.9 in 2012. The level jumped slightly to 5.1 in 2013.

“I think it is safe to say that being in debt is a stressful circumstance,” said Stuart Vyse, author of “Going Broke: Why Americans Can’t Hold on to Their Money” and professor of psychology at Connecticut College.

He says that once you achieve a certain standard of living, “it’s difficult to change and adapt to a simpler life. People continue to live beyond their means rather than reduce expenditures to meet their income and that can be very stressful.”

Student Loans Are Biggest Contributors to Stress

Total debt in America rose to $180 billion in 2013. It was down $188 billion the first two quarters of that year. It’s also the first year total debt jumped since 2008.

Overall, the total debt in America is $11.52 trillion, according to the Federal Reserve, well under the peak of $12.68 trillion after Q3 of 2008. Most of that drop is attributed to reduced credit card spending.

Student loan debt, which has soared from $579 billion in 2008 to $1.02 trillion at the end of 2013, accounts for the bulk of increased debt over the last five years. Approximately 70 percent of college students owe money at graduation, with an average student loan debt of $26,600.

That could explain why young adults, ages 18 to 33, showed the largest increase in stress levels recorded by the APA survey.

“As long as people are carrying large amounts of debt, they will continue to experience stress,” Vyse said. “And when there is uncertainty about the economy and employment, there is going to be even more stress.

“That’s why money is and always will be at or near the top of the list of stressors in the United States.”

Financial Forecast for 2014

The economy and the thousands of components that go into it — interest rates, unemployment, government spending, foreign trade, stock markets, start-ups and shutdowns — will be in the news every day in 2014 because we all want to know if we’re going to be better or worse off than last year.

Hopefully, better.

How that plays out will be determined by things we can control like work habits, personal spending, personal saving, education, willingness to change, and things we can’t control like Obamacare, debt reduction, military spending and the debt ceiling. Oh yes, there is also the matter of whether China and Japan turn a feud over some uninhabited islands into something nasty that will be much worse for everyone in the global economy.

With that in mind, here are five things that will continue to make some news in 2014:

1. How Do I Get My Hands on a Bitcoin?

It’s hard to say whether the fad money of 2013 will become a legitimate form of currency in 2014, but it certainly bears watching. China, the world’s second-largest economy, already has said no to Bitcoins, banning companies from using them for business transactions. Still, there are a lot of companies in countries all over the world ready to accept some of the 12.2 million Bitcoins in circulation. The alleged value of Bitcoins soared from $10 to more than $1,200 and back to somewhere around $500 in 2013. No one ever clearly answered what the value was based on and how an economy can function when the market price for the currency changes 10 percent to 20 percent in a day. That is why we’re skeptical about the future of Bitcoins, but a virtual currency has to happen someday, doesn’t it?

2. Give Them Credit

Americans are getting comfortable again with having multiple credit cards and using them to buy anything and everything. Credit card usage is up again after declining dramatically from 496 million open accounts in 2008 to 378 million in 2010. The number jumped back up to 391 million in 2013, and the card companies are laying out incentives to keep that number – and the debt associated with it – moving forward. Enticements included no interest charged the first year, no fees and cash back rewards, bonus mileage points for frequent flyers, cash back on groceries and gas and many more. Consumer debt from credit cards reached $672 billion — still far below the record of $866 billion in 2008 — but the number has been trending upward over the last two years, and no one seems concerned about the mess we got into with credit cards five years ago.

3. More Jobs and Higher Wages

That constant dripping noise you hear is the unemployment rate slowly being reduced from 10 percent in October 2009 to 7 percent in November 2013. The fact that it’s dripping — and not flat-out dropping — tells you that businesses still are not all that confident about adding a lot of new jobs to a recovering economy. About 200,000 jobs a month were created in 2013, not nearly enough to accommodate all the graduates, who want to work off some of their student loan debt. Those who do land a job, mostly fall in low-paying service industry work. Minimum-wage earners are trying to unionize because wages are not high enough to sustain a family, unless they receive government assistance. Nobody likes that scenario, but it’s real and growing.  More jobs vs. higher pay will be a story to watch in 2014.

4. Shop from Your Desktop

The most obvious feedback from the 2013 holiday season is that the day is quickly coming when Americans choose to sit in front of a computer and shop at home rather than get behind the wheel and drive to a store. Online sales exceeded $1 billion for the first time Thanksgiving Day and rocketed to $2.29 billion on Cyber Monday. Amazon sold 36.8 million products on Cyber Monday — 426 items per second! – and sales jumped 46 percent. Sales at were up 30 percent. Even Walmart, the granddaddy of brick-and-mortar, admitted that it reached online sales record that day. The final numbers for last-minute online shopping aren’t in yet, but the fact that UPS delivery system collapsed under the weight of hundreds of millions of orders, should shout to retailers to stop building stores and start building web pages.

5. How Much Money Was Made on Wall Street?

Warren Buffett made $37 million a day in 2013. Jeff Bezos, CEO of Amazon, made $11.3 billion. Bill Gates is now worth $72.6 billion, after making $11.5 billion on investments in 2013. You and I didn’t make anywhere near that much, but if we invested in any of the major stock indexes, like Dow Jones, Nasdaq or S&P 500, we should have made something. Stocks on the Dow Jones hit record highs 52 times in 2013, gaining 3,638.55 points — up 28.1 percent. The S&P 500 also set records almost every week, hitting record highs 45 times in 2013. For the year, the S&P gained 445.93 points and was up 31.8 percent. The Nasdaq still can’t catch its record high of 5,132.52 set in 2000, but it’s closing in. Nasdaq finished 2013 at 4,176.59, a 41.1 percent gain.

Can they do it again in 2014? That depends on whether investors pour all the money they made in 2013 back into the market in 2014? Will the Fed keep interest rates at record lows? Will Congress made a significant move to deal with the budget deficit or debt limit? Will Obamacare turn the insurance or medical professions upside down?

Stay tuned. We’ll let you know in 2014.

Top 10 Debt-Related Stories of 2013

Some phase of the economy is the No. 1 news story almost every year, but 2013 offered an interesting twist: It was possible to argue that nearly every financial story had equal parts good and bad news attached to it.

It all depends on how you view things.

For example, the unemployment rate fell from 7.9 percent in January to 7 percent at the end of November. That meant that 1.3 million Americans found work in 2013, which is good. It also meant that 10.9 million were still out of work, which is bad.

The story is the same with consumer debt, which declined by 0.7 percent in 2013. That’s the good news. The bad news is that most of that was because of foreclosures in the housing industry, thus reducing mortgage debt. Credit card debt was up for the first time since 2008, rising from $850 billion to $858 billion, and student loan debt soared past $1 trillion, up 12.3 percent for the year.

The good news and bad news continued on virtually every story. Here is a look at the 10 most impactful stories from 2013, from Debt.Org’s perspective:

10. Boomers Stampede Across the Finish Line

The baby boomer generation, as is its custom, is cutting a wide swath across all segments of the economy. Boomers are retiring at the rate of about 10,000 a day, which leaves a lot of job openings to fill. Unfortunately, about 18 percent of them continue to work beyond 65, causing a logjam among young workers looking to move up. The good news is that the tidal wave of retirees is creating business opportunities in senior housing, health care, travel and recreation. The bad news is that there are so many of them – the senior population will double over the next 15 years – that they will become a huge burden on government resources.

9. JPMorgan Chase Settles for $13 Billion

When JPMorgan Chase agreed to pay $13 billion for its huge role in the mortgage-backed securities fraud of 2008, it was greeted with cheers. The big boys were finally made to pay for their role in crippling the U.S. economy. On the other hand, not one JPMorgan official will go to jail, which proves once again it’s safer to steal billions from American consumers than it is to steal $100 from a 7-Eleven. Oh, and homeowners, including many who dealt with JPMorgan Chase, owe $913 billion more than their homes are worth.

8. Government Wins, Graduates Lose

Does it pay to have a college degree? It certainly does for the federal government. The feds make loans to just about anybody and everybody who wants to go to college, and the profit on that investment was $41.3 billion in 2013. Only Exxon Mobile ($44 billion) and Apple Inc. ($41.7 billion) earned more. Many of the nearly 70 percent of college graduates who took out loans are wondering about the return on their investment. They took out an average of $29,400 in student loans to get a diploma, and many still don’t have their first full-time job.

7. Hello, Social Media

Companies got several examples of how valuable a platform social media is for communicating and advertising with audiences. In April, a hacker broke into the Associated Press account and sent a fake tweet saying there were two explosions in the White House and President Obama was injured. The Dow Jones index plunged 149 points in just two minutes, but gained 142 points back three minutes later after the AP tweeted back that the story was false. Four months later, investor Carl Icahn tweeted that he had taken a “large position” in Apple Inc., and the company’s stock jumped 5 percent almost immediately. On the other hand, Snapchat investors have to wonder what management was thinking when it turned down a $3 billion offer from Facebook and a reported $4 billion offer from Google.

6. Welcome Home!

The housing market, dead and buried under the rubble of the Great Recession, continued its quiet comeback in 2013. U.S. homes gained $1.9 trillion in total value this year, the biggest jump since 2005. Home builders are confident the surging market will continue in 2014. The confidence index for home builders was at 58 this month, the highest it’s been in eight years and 11 points higher than it was just a year ago. As one business owner put it: “When the housing industry perks up, every industry perks up with it.” The bad news? Americans still owe $913 billion more than their homes are worth.

5. Obamacare Limps Out of the Gate

The Affordable Care Act – better known as Obamacare – made a lame debut in October., the government’s website to sign up for insurance, couldn’t handle the volume of inquiries and was shut down for repairs and upgrades. The staggered rollout earned a loud “I TOLD YOU SO!” from critics of the plan. Though sign up is progressing, most Americans can’t meet the Jan. 1 deadline originally established. This will be a story – good or bad — throughout 2014 It would be no surprise if it moved up to No. 1 a year from now.

4. Consumer Financial Protection Bureau Flexes Muscle

Consumers may not know much about the Consumer Financial Protection Bureau (CFPB), but credit card companies and lenders are getting all too familiar with the agency. The CFPB obtained orders for Discover Bank to refund $200 million to customers for deceptive marketing practices with its credit card: $16 million against Capital One for misleading consumers about its credit cards; $112.5 million against American Express Centurion Bank for deceptive practices; $19 million against Cash America for overcharging military service members and their families for payday loans; and the list goes on and on. Memorize the CFPB acronym. The agency is very aggressive. You likely will see it a lot in the news.

3. An Actual Budget

Congress actually doing its job and producing a federal budget should never be a big story, but since it hasn’t happened in four years, it was a big deal when House, Senate and president agreed on one. Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., compromised enough on both sides of many issues to get the budget through Congress and avoid another government shutdown. Some Republicans don’t think there were enough programs cut, and some Democrats didn’t think there was enough revenue raised, but most of their constituents were happy that the posturing about which side was right, is over.

2. Let the Bull Run

The stock market barreled out of the gate the first trading day of 2013 and shattered records the rest of the year. The Dow Jones industrial average was up 308 points on Jan. 2 and gained more than 3,000 points heading into the final week of trading. That is a phenomenal 23.5 percent gain. The S&P jumped 36 points the first day and gained 397 points during the year, a 28 percent jump. The NASDAQ was the biggest winner, starting with a 93-point gain on Jan. 2 and piling up a 1,039-point gain for a 34.4 percent jump. And this comes after a remarkable run in 2012, when the Dow added 7.3 percent, the S&P 500 jumped 13.4 percent and NASDAQ was up 15.9 percent. How much longer can this run last?

1. Shut It All Down

This shouldn’t be the No. 1 story, but anytime the government puts itself out of business, it affects nearly every area of the population. Republicans in the U.S. House said they wouldn’t support any legislation funding the government after Sept. 30 unless it repealed or delayed the president’s health care law. Democrats refused to budge, and the federal government shut down on Oct. 1. This led to furloughed workers, interrupted paychecks, and the closing of parks and national monuments. The Republicans took the blame for forcing the shutdown. Polls showed the party’s favorable rating dropped to an all-time low. On the other hand, most of America didn’t seem to mind doing without a few weeks of government. Maybe we can make this happen for two weeks every year!

Holidays a Tough Time to Reduce Debt

The inevitable collision between year-end spending and budget restrictions is making this an uncomfortable holiday season for two vital groups in the American economy: Consumers and the federal government.

American consumers, still wary of carrying debt — especially credit card debt — are spending at the lowest level in five years. Holiday sales were off by $1.8 billion after the Thanksgiving weekend, but jumped on Cyber Monday when online buyers spent $2.3 billion, a record for the digital shopping holiday.

The retail industry expects total holiday sales to reach $604 billion, or 2.4 percent more compared to 2012. That increase represents the smallest growth since 2009. Most major retailers are forecasting sales increases of 1 to 2 percent. JCPenney, which expects a 10 percent growth, is the only major retailer seeing a significant gain over last year.

The federal government, meanwhile, is wrestling with familiar spending problems of its own. Funding for the government runs out Jan. 15, and leaders from both parties are rushing to get something done before the U.S. House takes off for the Christmas holidays Friday.

Neither Republican nor Democratic leaders want to be held responsible for another government shutdown like the one that closed some federal offices in October, but there are significant obstacles to overcome to avoid a repeat.

“The Senate and the president continue to stand in the way of people’s priorities,” House Speaker John Boehner, R-Ohio, said in a speech on the House floor. “When will they learn to say ‘yes’ to common ground? When will they start listening to the American people?”

Slow Start for Holiday Spending

The season got off to a slow start over Thanksgiving weekend when shoppers did more browsing that buying. An estimated 141 million people were in stores, 2 million more than a year ago, but they spent $57.4 billion — down 3 percent in comparison.

Spending on electronics is the hot item, especially for adults with children. A Harris Interactive poll of shoppers indicates that more than 20 percent of adults with children under age 18 purchased smartphones, tablets or computers.

Buyers are reluctant to use credit cards for their holiday shopping. A survey by the National Retail Federation said 29 percent of shoppers are using credit cards. Forty-four percent said they would be using debit or check cards, and the rest are paying with cash.

Debt Rises Every Day in Washington

Just the opposite sentiment prevails in Washington, D.C., where Congress continues its tiresome approach to paying for anything. The federal deficit is up to 17.4 trillion and increasing every day. Republicans say they want to reduce the deficit by cutting spending. Democrats say they’ll agree to some cuts — as long as it includes tax increases.

The key budget issues still to be resolved before the Jan. 15 deadline include:

  • Democrats want to extend long-term unemployment aid that expires on Dec. 28 for 1.3 million workers who’ve been jobless for longer than six months.
  • Republicans are pushing a measure to prevent a 24 percent drop in Medicare payments to doctors. The cost is estimated at about $8 billion.
  • Both sides are attempting to pass a Farm Bill, which sets priorities for food policy. It has existed for two years on a series of short-term extensions. If a bill is not approved, milk prices could double to more than $7 a gallon.
  • The Food Stamp Program is part of the Farm Bill and the divide is huge there. Republicans want to cut funding by $40 billion over the next 10 years. Democrats want it reduced $4 billion over the next decade.

If the two sides can’t get things together fast enough, then Boehner says he will push to pass legislation that retains automatic spending cuts passed as part of the 2011 agreement. If nothing is resolved, sequestration goes into effect, automatically clipping $110 billion from the federal budget.

Amount of debt in the United States by president

Timeline of U.S. Federal Debt Since Independence Day 1776

As we get closer to marking our 237th year of independence, we felt it was a good time to reflect on how debt is woven into our country’s fabric.

As our Founding Fathers developed the original Thirteen Colonies into the independent United States of America in 1776, debt already was a reality for the fledgling nation. Even from this early time, leaders financed wars by borrowing.

Shortly after the American Revolutionary War (1775-1783), public debt grew to more than $75 million and continued to swell considerably over the next four decades to nearly $120 million. However, President Andrew Jackson shrank that debt to zero in 1835.

It was the only time in U.S. history when the country was free of debt.

More than 200 years after the inception of our country and several wars, stock market crashes, powerful companies suffering from failed investments, rising unemployment rates, the famous bursting of a tech bubble and most recently the bursting of a housing bubble, federal debt stands at $16.7 trillion.

Amount of debt in the United States by president

The national debt between the Ronald Reagan era and Bill Clinton’s administration slowly increased, but it nearly doubled during the presidential term of George W. Bush to more than $10 trillion.

Here, then, is a brief timeline of how American debt has grown since John Hancock signed the Declaration of Independence on July 4, 1776.

Revolutionary War Kicks Off U.S. Debt

Wars were always a major debt factor for our nation. Congress could not finance the Revolutionary war with large tax raises, as the memory of unjust taxation from the British stood fresh in the minds of the American public. Instead, the Continental Congress (made up of delegates from the Thirteen Colonies) borrowed money from other nations.

The founders led negotiations with Benjamin Franklin securing loans of over $2 million from the French Government and President John Adams securing a loan from Dutch bankers. We also borrowed from domestic creditors. While the war was still going on, in 1781, Congress established the U.S. Department of Finance.

Two years later, as the war ended in 1783, the Department of Finance reported U.S. debt to the American Public for the first time. Congress took initiative to raise taxes then, as the total debt reached $43 million.

President Andrew Jackson Cuts Debt to Zero

The War of 1812 more than doubled the nation’s debt. It increased from $45.2 million to $119.2 million by September 1815. The Treasury Department issued bonds to pay a portion of the debt, but it was not until Andrew Jackson became president and determined to master the debt that this “national curse,” as he deemed it, was addressed.

By selling federally owned western lands and blocking spending on infrastructure projects, Jackson paid off the national debt after six years in office. This actually created a government surplus that Jackson divided among indebted states.

The time of prosperity was short-lived, as state banks began printing money and offering easy credit, and land value dropped.

Recovery from the Civil War

The Civil War (1861-1865) alone is estimated to have cost $5.2 billion when it ended and government debt skyrocketed from $65 million to $2.6 billion. Post-Civil War inflation along with economic disturbance from Europe’s financial struggles contributed to the vulnerable economic climate of the late 19th century.

The collapse of Jay Cooke & Co., a major bank invested in railroading, caused the Panic of 1873. Nearly a quarter of the country’s railroads went bankrupt, more than 18,000 businesses closed, unemployment hit 14 percent and the New York Stock Exchange began sinking.

This period of deflation and low growth continued for 65 months making it the longest depression, according to the National Bureau of Economic Research. During this time the government collected less money in taxes and the national debt grew.

Great Depression and Stock Market Crash

People started investing heavily in the stock market in 1920 unaware that Black Tuesday would dawn with an $8 billion loss in market value when the stock market crashed on October 29, 1929. The United States relied on the gold standard and raised inflation, rather than lowering rates to ease the burden of inflation.

During the following era, income inequality between classes grew. More than 25 percent of the workforce was unemployed, people made purchases on credit and were forced into foreclosures and repossessions.

President Franklin D. Roosevelt developed programs for unemployment pay and social security pensions, along with providing assistance to labor unions. Although Roosevelt addressed many problems in the U.S. economy, the funding for his programs grew the national debt to $33 billion.

World War II Debt

During World War II (1939 to 1945), the U.S. lent Britain and other countries money to help pay for military costs, and spent a great deal for their own military. By the end of that war, U.S. debt reached $285 billion.

Following that war, the U.S. economy grew, but the trend of a post-war reduction of national debt did not continue. Within a few decades, the Vietnam War and programs to help the poor, fund education and improve transportation increased debt further.

Debt Grows into the Trillions During 1980s and 1990s

At the start of the 1980s, an increase in defense spending and substantial tax cuts continued to balloon the federal debt. The national debt at the end of the Ronald Reagan era was $2.7 trillion.

The era under President Bill Clinton was marked with tax increases, reductions in defense spending and an economic boom that reduced the growth of debt, but it still reached a staggering $5.6 trillion by 2000.

Amount of U.S. federal debt by decade

The increase in federal debt between 1990 and 2000 was minimal when considering how it more than doubled in 2010 to $13.5 trillion.

The Great Recession

Debt in the new millennium exploded with the September 11, 2001 terrorist attacks. Spending on homeland security and the Iraq War increased and the economy stalled. Also, a large portion of the federal debt stemmed from money borrowed by the government from Social Security and Medicare.

By 2005, the federal deficit was at more than $8.1 trillion.

The U.S. experienced a recession from December 2007 to June 2009 characterized by high unemployment rates, the burst of the housing bubble and major government bail-outs.

Housing prices prior to 2008 were dwindling and subprime lending for mortgages was prevalent. But suddenly, adjustable rates on mortgages increased and doubled or tripled mortgage payments. Homeowners defaulted on their loans and hundreds of banks failed.

The government bailed out several major companies, including American International Group (AIG) Financial Products, which was the country’s biggest insurer, Fannie Mae and Freddie Mac (government sponsored mortgage entities). Within only a few years, housing prices dropped by around 20 percent and unemployment nearly doubled from 5.8 percent to 9.3 percent.

President George W. Bush passed the Troubled Asset Relief Program in 2008 to help the economy recover. That program cost around $700 billion. President Barack Obama later passed the American Recovery and Reinvestment Act of 2009, costing around $831 billion.

By the end of 2009, the federal debt had grown to $12.3 trillion.

Today’s National Debt

June figures show the national debt at $16.7 trillion.

Unemployment remains a problem and the number of underemployed workers also remains high, requiring government spending for programs to assist those with great financial burdens.

Government expenditures are the highest for Social Security, Medicare, Medicaid and national defense. Unrest in the Middle East may cost at least $3.7 trillion by the time the conflicts end, according to estimates from a Brown University study.

The $1 trillion in student loan debt, which surpassed credit card debt for the first time, is not a good sign for America. That means students desperately trying to repay their loans might retreat from the housing and auto market, causing a greater drag on the economy.

While debt has been an issue since the inception of the U.S., its rapid growth will continue to challenge lawmakers into creating better programs to reign in expenditures, as well as American consumers who must develop improved way of managing their personal debt.

Amount of personal debt in the United States by student loans, mortgages and auto loans

Is Debt Affecting our Economic Freedom?

As we approach July 4, the 237th anniversary of our nation’s independence, it’s also worth noting that our country is in its fourth year of a sluggish recovery from the Great Recession — our most severe economic contraction in generations.

So even as we celebrate America’s freedoms — and especially the economic advantages we all enjoy — we should also take stock of the system’s built-in limitations and challenges.

While our national economy has made some positive gains over the past few years, most tellingly in the areas of corporate profits, housing prices and a rising stock market, it is just as true that many fellow Americans have not shared in those achievements, nor recovered lost wealth, homes, jobs or opportunities for future advancement.

When taking stock of America’s fiscal health, it’s a good time to see how the two main categories of debt — personal and national— affect our daily lives, economic freedom, and ability to prosper and grow as individual citizens and a nation.

Personal Debt

First let’s look at personal debt. Personal debt can hinder one’s actual freedom (ask someone who can’t afford a lawyer), but mostly it constrains one’s economic freedom, especially if there is too much of it.

And today, many Americans are heavily in debt.

Here’s a breakdown of personal debt stemming from mortgages, home equity, student loans, credit cards and other high-debt items.

Amount of personal debt in the United States by student loans, mortgages and auto loans

Student loan debt in the nation, which reached $1 trillion in 2012, surpassed the $850 billion debt stemming from credit cards for the first time.

For many Americans, the monthly mortgage payment takes the greatest slice out of their budget. With the collapse of the housing market five years ago, many homeowners found themselves “underwater” – meaning that they owed more on their mortgages than their homes were worth. Some 10.8 million homes, or 22 percent of all mortgages in the country, are currently underwater.

These homeowners are much more likely to default on their loans and are less able to refinance at today’s lower rates, which, if they could, would help them reduce their monthly mortgage costs. In addition, many of these underwater home owners who are still unemployed cannot sell their homes in order to move where they might find jobs. Clearly their economic freedom is being compromised since they are tethered to underwater homes and expensive mortgage payments.

The growing student loan debt is also crippling many of our young Americans as they leave college. Students who borrowed money and have just graduated in the Class of 2013 will exit school with more than $32,000 in debt. That number is destined to rise by thousands of dollars and affect a quarter of all new student borrowers, unless Congress acts to minimize or reverse the recent doubling of interest rates on the federal government’s subsidized Stafford Loan program.

The consequence: Former students are not buying as many cars or homes as previous generations were able to. Their economic freedom, therefore, is compromised severely by their heavy student debt load.

Credit cards and automobile loans generally charge higher interest rates than all other categories of borrowing. In addition, penalties and late fees can add to a borrower’s overall debt burden, making it more difficult pay off balances and stay out of the red.

Most people who seek the help of debt relief companies do so because they have trapped themselves in credit card debt and can’t climb out. Statistics show the average American household carries about $15,590 in credit card debt.

When the federal government needs money to pay its bills, it can borrow the money, raise it through taxation or increase the money supply by putting more currency directly into circulation. But when you and I need money, our options are more limited: Get a better paying job, sell material assets, borrow even more from willing lenders or win the lottery.

In most cases, though, we must make difficult choices between what bills to pay and what cannot be paid for. A budget can help show how much money is coming in and how it’s spent.

The National Debt

The national debt is money the federal government owes to its combined creditors. It’s a subject much discussed lately in the daily media, the halls of Congress, and in homes and businesses across the country.

The official debt of the United States government, as of June 1, stands at more than $16.7 trillion. Census figures show the U.S. population is inching past 316 million.

That means our total debt amounts to nearly $53,000 for every person in the nation or roughly $145,200 per American household.

The national debt can be broken down into two parts: The majority of it, nearly $11.9 trillion, is owned by the public in marketable U.S. Treasury bills, notes and bonds as well as in various non-marketable financial instruments. The remaining $4.84 trillion is money the federal government owes to itself in intra-governmental holdings, such as the Social Security Trust Fund.

Regardless of how it is sliced, $16.7 trillion is a lot of red ink.

Here’s a breakdown of some of the national debt that is held by foreign governments (which amounts to almost half of the owned debt), domestic entities like the Federal Reserve and state and local governments, and other institutional investors.

Amount of national debt by state and foreign governments, savings bonds and pension funds

More than a quarter of the national debt is held by foreign, domestic, and state and local governments, as well as mutual funds.

While some economists believe that the national debt, as big as it is, is not an immediate worry – historically, the nation has always been in debt, even in times of robust growth – many of the country’s elected leaders have used the size of the debt to constrain government spending on policies important to millions of Americans.

Thus, the current political reality has resulted in reduced spending on infrastructure, job creation, unemployment benefits, aid to poor children, and many other programs that might expand the overall economy and therefore extend the bounties of financial freedom to many more individuals and families.

Is Debt Limiting Our Freedom?

To sum up: Our national debt can be problematic, but history shows that a high national debt is not necessarily detrimental to our country’s economic freedom, unless the fear of it reinforces the notion that spending on important programs and policies needs to be restrained.

Likewise, personal debt, when managed well, can actually promote personal economic freedom because it allows borrowers to spend money they don’t currently have for important reasons like buying a home, a car, or going to college.

However, high or unmanageable debt is almost always a detriment to one’s personal economic freedom, because it limits choices, and constricts one’s ability to accumulate wealth and plan for the future.

There is little we can do as individuals to influence the size of our national debt, but we can certainly exercise some control over our personal ones.

While celebrating our country’s freedom, this July 4, we should also continue to strive to free ourselves from onerous debt and burdensome financial obligations.

U.S. Consumer Confidence Highest Since July 2007

The bull run on Wall Street and a continued surge in home prices pushed consumer confidence to its highest level in almost six years.

The Thomson Reuters/University of Michigan consumer confidence index jumped to 84.5, up more than eight points from April and the highest rating since July 2007.

It is being fueled by the stock market, which despite Friday’s downturn, had a banner month in May. The Dow Jones was up an amazing 414.62 points for the month, the S&P 500 improved 48.04 points and the NASDAQ gained 156.78 points at the close of markets Friday.

More fuel came from the rebounding real estate market. Home prices were up 1.1 percent in March, the latest month with data available, making 14 consecutive months where real estate values have risen. Nationwide, housing prices are up 10.9 percent over the past year.

“The surge in consumer confidence is exactly the type of economic jump-start the Federal Reserve intended to result from its aggressive policies,” chief economist and director of the Consumer Research Center at the University of Michigan Richard Curtin said in a statement.

Not All Business Sectors Are Keeping Pace

The economy grew at an anemic 2.4 percent pace the first quarter of 2013 and some analysts expect that number to drop to 2 percent in the second quarter. Part of that is tied to federal government spending, which has slowed as agencies deal with $85 billion in cuts forced by sequestration.

Consumer spending was down 0.2 percent in April, the first drop in 11 months. Much of that was attributed to a drop in disposable income (down 0.1 percent) and falling gas prices that resulted in less spending.

Nonetheless, the all-important consumer confidence index rose to levels not seen since prior to the Great Recession. The average rating in the five years before the recession was 89, but dipped to 64.2 during the 18-month slump that ended in June 2009.

It is easy to see why people are happy this year.

The Dow Jones Index soared 2011.43 points (15.35 percent) since the first of the year. The S&P 500 is up 204.58 points (14.34 percent) and the NASDAQ has gained 436.4 points (14.45 percent).

“That kind of performance by the market almost always leads to better feelings as a whole about the economy,” Matt Kelly, senior adviser at Morgan Stanley told “Consumers are certainly going to feel good about things when they look at their retirement investments and see the 5 or 10 percent jump in such a short period of time. That should make everyone feel good.”

Uptick in Housing Industry

In the housing industry, increasing demand has pushed real estate prices higher every month, though they are well short of the peak numbers. Home prices are still down 28 percent from what they were at the peak in 2006, but the hardest hit cities are recovering some of their losses.

Las Vegas, Phoenix, San Francisco and Orlando are seeing double-digit gains in pricing – 22 percent in Vegans and Phoenix – as consumers take advantage of low mortgage interest rates.

There are warning signs, however, that cheap money for borrowing, may not last, or worse, may cause another bubble to burst on the entire industry. Mortgage rates have inched forward each week since bottoming out at 3.35 percent in early May.

The average rate for a 30-year loan was 3.9 percent at the close of business Friday, the highest it’s been in a year.  That may have influenced an 8.8 percent drop in mortgage applications and a 12 percent drop in refinancing.

U.S. Economy Is Slowly Improving

The snapshot of the U.S. economy in the first week of May looks unusually promising.

Almost every arrow economists want pointing up – home sales, auto sales, stock market – is up. Meanwhile, interest rates and unemployment figures continue to decline.

Whether that picture is a true reflection of an economy on the mend is still subject to interpretation and debate, says economist Jim Wilcox of the University of California, Berkeley.

“Yes things are better and the economy is motoring along, but slowly,” Wilcox told “Some of the key factors, like employment, are stuck in second gear, while business is in fourth gear. We want them both in fifth gear and it’s going to take a while for that to happen.”

The stock market began the week with the Dow Jones and S&P 500 on all-time highs. The Dow Jones traded briefly over 15,000 for the first time in history Friday before closing at 14,972.19. The S&P finished Friday’s trading session at 1,614.22. The NASDAQ also had a winning week, moving up 38 points on Friday to finish at 3,378.63

Unemployment down

The good news from Wall Street was fueled by a better-than-expected labor market report.  The U.S. Department of Labor reported the unemployment rate in April fell to 7.5 percent — the lowest it’s been in four years. The federal agency also showed that 165,000 jobs were added in April.

The number of people filing for unemployment benefits for the first time fell to 324,000, the lowest level since January 2008, records show.

The employment news contradicts popular sentiment that the job market would slow down as the economy felt the effects of sequestration, the $85 billion reduction in government spending.

Mortgage rates dropping

The housing industry is riding a long run of low mortgage interest rates. The 30-year fixed mortgage rate dropped to 3.35 percent, not far behind the all-time record low of 3.31 percent set on Nov. 21, 2012.

The 15-year fixed-rate was a record low of 2.56 percent — that’s down from 2.61 percent a week ago and lower than 3.07 percent in 2012. Adjustable interest rates also dropped. The one-year and five-year ARM rates are at 2.56 percent.  Federal Reserve officials have indicated the low rates will continue until the unemployment rate shrinks to 6.5 percent.

Those rates continued to fuel the rebirth of the housing market with more people buying homes. Prices on residential real estate have been the highest since May 2006. The S&P/Case-Shiller index of property values increased to 10.2 percent over the past year. Home values in Phoenix, Ariz. lead the way with a 23 percent jump from a year ago. Values in San Francisco were up 18.9 percent and Las Vegas advanced 17.6 percent.

Not surprisingly, the positive vibes from the housing industry have helped re-start the lumber industry.

The lumber industry, which did 37.5 billion board feet in 2012, is on pace to go over 40 billion in 2013. That is still a long way from the 65 billion board feet produced in 2005 at the height of the housing boom, but also is a considerable improvement from the 33 billion feet sold when things bottomed out in 2010.

“We’re probably doing double the construction we did at the depths of the recession and the interest rates are fueling more purchasing power, which is helping home sales rebound,” Wilcox said. “But remember, that is still far less construction than what we’d like in our economy. The housing boat has come off the ocean floor, but it still hasn’t broken the surface for where it should be.”

Boost in Auto Industry

The Big Three automakers – GM, Ford and Chrysler – saw their share of the car market increase 46.7 percent, up from 44.7 percent a year ago.

Truck sales led the way in April with 153,356 sold — that’s a 27 percent increase from 2012. It’s a sign that small businesses that depend on these vehicles as tools are replacing them as the economy improves.

“We’ll know the economy is really moving when the unemployment rate begins with 5-something,” Wilcox said. “Businesses are doing well from the standpoint of profits, but we’d like to see them put some of that money into hiring. When the unemployment rate hits 5-something, that’s a number this economy can safely and sensibly operate in.”

Despite Positive Economic Indicators, Consumer Confidence Continues to Decline

American consumers are a step slow in accepting the news that the U.S. economy really is on the mend.

Consumer confidence and retail spending dipped in March, while the rest of the economy puttered along at a good-to-great pace.

Housing starts in March were up 7 percent over February and leaped 46.7 percent over March 2012. Banking giants JPMorgan, Wells Fargo and Goldman Sachs reported significantly higher than expected earnings for the first quarter of 2013. And consumer prices, fueled by an 11-cents-a-gallon plunge in gas prices, dropped for the fourth time in five months.

Yet the Thomson Reuters/University of Michigan Consumer Confidence index reached a nine-month low in April, falling to 72.3 from 78.6 in March.  That was lower than all 68 estimates Bloomberg received from a variety of economists.

“There is a wide disparity on how people view this recovery,” University of California-Berkeley Economics Professor Jim Wilcox told “There is considerable confidence in the business community that the economy is going to advance, though at a very moderate pace.

“That confidence hasn’t shown up yet in the form of re-employment for workers, and that’s a real mystery to everyone. Hiring has been hesitant. It’s moving a little too slowly, and that could be what is holding people back from spending in this economy.”

Housing, Banks Doing Well

The good news from the housing industry was tempered some by the fact that the big jump actually was more focused on multi-unit dwellings than single-family homes, which actually declined 4.8 percent.  While most builders are happy to be working again, there is concern throughout the industry that the rising cost of labor and materials is going to soften growth in the future.

The banking industry, by contrast, seems to have no worries. Goldman Sachs had a banner first quarter, earning $4.29 a share, 40 cents higher than analysts forecast. Profits at JPMorgan, the nation’s largest bank, were up $1.59 the first quarter, 21 cents higher than expected. Wells Fargo earned 92 cents a share, 17 cents higher than projected.

None of the good news showed up at retail stores, which saw spending drop 0.4 percent, the most in nine months.  This, despite the fact that the cost of clothing was down 1 percent, the biggest drop since 2001, and prices on clothing for infants and toddlers dropped the most since 1999.

What’s Your Economic Horizon?,

The resistance to spending could be a sign that consumers are starting to feel the effects of the 2 percent increase in payroll tax that happened Jan. 1 and worries about the effects of the government sequester.

“There is an enormous difference in people’s economic horizon — the amount of time they take to recover from significant news,” Wilcox said. “Some people will say things are better than they were three months ago, so they’re ready to get out and spend. Others will remember a year ago and though things have improved, they’re still conservative and only spend money on reducing credit card or mortgage debt.

“And then you have the people who still remember the disaster five years ago and are scared to spend at all. It’s a matter of a where your horizon is and how long you will take to make adjustments from it.”

Airline Ratings Are Up — So Are Complaints and Fares

The U.S. airline industry is coming off its second-best year ever in terms of customer service, but it comes with a price: Complaints were up, and so was the average fare for flying.

The Airline Quality Rating gave high marks to the 14 largest U.S. airlines for on-time arrivals, consumer complaints, mishandled bags and passengers who bought tickets but were turned away because of overbooking. The report, compiled by Wichita State and Purdue University, said satisfaction in those areas was the second-highest in the 23-year history of their survey.

The industry’s best rating came in 2011.

The report also said that passenger complaints were up 22 percent over 2011, but some of that could be attributed to easier access to technology for registering complaints. As for the price of flying, that increased, but only minimally. The average cost of an airline ticket was up 4 percent.

People are Flying

Still, according to the Department of Transportation, U.S. airlines had an 82.8 percent load factor, the highest for scheduled service since 1945. Airlines carried 736.6 million passengers, a 0.8 percent increase from 2011. That includes a record-setting 83.4 million international passengers.

“Airlines continue to provide affordable fares and reliable, on-time service,” Airlines for America Vice President and Chief Economist John Heimlich said in a press release. “Flying remains the safest mode of transportation, and airlines have shown stellar on-time and baggage handling performance.”

The Airline Quality Rating system ranked Virgin America No. 1 among domestic carriers, followed by JetBlue and Air Tran. The lowest ratings went to United, Express Jet and SkyWest.

On-time performance was up for seven of the airlines in the survey. The 14 major airlines were on time 82 percent of the time, versus 80 percent in 2011. Hawaiian Airlines was the best, getting there on time 93.4 percent of the time. Alaska Airlines (87.5 percent) and Air Tran (87.1) were next. American and Express Jet were the worst, hitting it just 76.9 percent of the time.

The mishandling of baggage improved overall, with 3.07 bags lost per 1,000 passengers, down from 3.35 a year ago. Virgin America was the best, mishandling less than one bag (0.87) per 1,000 passengers, while American Eagle was the worst, mishandling 5.8 bags per 1,000.

Complaint Department Busy

There were 11,445 complaints received by the Department of Transportation, a sizable jump over the 9,414 complaints received in 2011. Southwest Airlines, traditionally the industry leader in this category, was tops again with just 0.25 complaints per 100,000 customers. Alaska Airlines was next, at 0.51, and Delta was third, at 0.73.

United finished dead last, with 4.24 complaints per 100,000 passengers. Near the bottom were American Airlines (1.80) and US Air (1.74).

The grumbling from passengers had to do with the actual flight (32.7 percent), reservations and ticketing (14.6), customer service (14.3) and baggage problems (12.4). The price of flying was low on the list of complaints, accounting for only 4.4 percent.

The rise in the cost of flying has increased 26 percent since 2007, but has slowed dramatically the past year. Unstable jet fuel prices are one factor, and diminished competition is another. The recent mergers of some major airlines – Southwest and Air Tran in 2011; United and Continental in 2010; and Delta and Northwest in 2008 – has removed some of the competitive pricing wars and pushed fares slightly higher. The average ticket for the third quarter of 2012 was $380, $15 more than 2011.

It should be noted that federal taxes make up 20 percent of the cost of every airline ticket. That means that average ticket price of $380 includes $76 of federal taxes.