A Look at Consumer Debt

The 2004 Survey of Consumer Finances (SCF) showed that the percentage of families holding debt rose from more than 72 percent in 1989 to just over 76 percent in 2004. The median value of the debt more than doubled during that time, from $22,000 to more than $55,000.

Engemann and Owyang noted that 56 percent of American families in 1989 owned at least one credit card. By 2004, that figure jumped to almost 75 percent. The authors' analysis shows that a higher percentage of single people and renters now have a credit card, as do workers with less job seniority, lower incomes and unskilled jobs. They also quoted statistics from the FDIC that showed that the total dollar amount of credit card loans and loans that are 90-days delinquent each tripled between 1992 and 2006.

In addition, the analysis indicates that payday loans have become an increasingly common form of short-term debt, especially among lower-income households. While payday loans are designed to lend small amounts of money for a short time (usually, about two weeks), one report indicates 90 percent of lenders' revenue comes from borrowers who have five or more loans per year, not one-time borrowers.

The key question posed by Engemann and Owyang is: Does this new behavior have detrimental long-term effects? They cited one economic study that said between 1980 and 2005, the amount of revolving debt per household -- especially credit card debt -- coincided with an increase in personal bankruptcy filings.

Another study found that payday loan applicants in Texas were six times more likely to file for bankruptcy between January 2001 and June 2005 than the general population of the Lone Star State.

"This shift toward more debt appears to have long-term ramifications for the U.S. economy," wrote Engemann and Owyang, "as evidenced by the growing number of personal bankruptcies over recent decades."