Published January 1979 — Download PDF of the original newspaper column
Byrd's-Eye View By U.S. Senator Robert C. Byrd America on a Spending Spree There are indications that, despite high inflation, many Americans may be sliding too deeply into debt. At the end of October, Americans owed a total of $265 billion on installment loans, an increase of nearly 20 percent from the year before. Savings, on the other hand, are down to 5.1 percent of disposable income, compared to 1973, when people saved an average of 7.8 percent of their income. Auto sales climbed to a record high in 1978, and sales of such luxury items as jewelry, art, boats, and European vacations also have increased. The real estate market is booming, despite the fact that interest rates on borrowed money are high. Outstanding mortgages are close to 48 percent of Americans' combined disposable income, compared with 41 percent in 1975. Thus far, consumers apparently have been able to service their debts with little problem. However, economists are concerned that household indebtedness could constrain future spending and contribute to a recession, causing more widespread financial difficulties. Inflation, historically, has acted as a brake on spending. For reasons that economic analysts cannot entirely explain, inflation is not functioning in the traditional manner today. However, analysts have offered several explanations for the country's current spending spree: credit terms are relatively easy; people apparently expect prices to rise even further so they buy now, and an unusually high proportion of the population is in the age group that is normally debt-prone. Since 1972, the number of people 25 to 44 years old has been increasing at seven times the rate in the 1946-71 period. People in this age group are furnishing houses and raising families. They are more apt to borrow on the expectation that their incomes will increase later on. Changes in credit laws have made credit easier to obtain, and many people like the convenience of revolving credit in the form of credit cards and bank overdraft privileges. People are also taking larger loans at lower rates for longer periods. The standard car loan now runs for four years instead of three. Credit, no doubt, has helped many people build better lives, but simply because it is readily available, we must guard against mortgaging ourselves beyond our ability to pay.