Debt

I’ll never forget my grandfather’s amused disbelief as he wondered at the mountain of sparkling gifts piled underneath our Christmas tree. Most years you could hardly see the tree, masked as it was by ski equipment, games, clothes, books and more, lovingly placed there for myself, along with my sisters and brother.
My grandfather didn’t often speak about his teenage years in West Texas during the Depression but one year he told us about the thrill of receiving a single bright orange from Santa Claus on Christmas Day.
I remember telling him that we got oranges too. He just smiled at me.
Whether this is a short economic downturn or something more serious, it has me thinking about ways to tighten my financial belt and how past generations of Americans have lived.
By and large, it seems Americans in the past have succeeded when they lived out of debt—they bought what they could afford, when they could afford it and they lived without some of the luxuries.
That changed in the 1920s when cheap credit abounded and lots of people and businesses spent money they didn’t have in the bank. By 1930, price deflation occurred and people started saving their dollars to meet the payments on debt they’d accrued. As people spent less, manufacturing and construction fell off and the country sank into a recession that led to the Great Depression. Between 1929 to 1933, unemployment rates skyrocketed to 25 percent, and incomes dropped 20 to 50 percent. It took ten years and a major war to recover.
As the American economy slows, congressionally approved fixes are on the way. The economic stimulus checks heralded by politicians as a method to stave off recession should start arriving in local mailboxes this week. Electronic deposits have already begun and paper checks were starting to be mailed to American households on May 9.
Initially, President Bush had expressed hopes that Americans would take the cash and spend it on electronics, clothing and more frivolous items to spur growth in the retail sector. He backed off that statement in late April, acknowledging that many Americans could use the funds to relieve debt and combat the rising cost of gasoline and groceries.
Recent studies confirm President Bush’s acknowledgement. On Tuesday, May 13, MarketWatch reported that a May 5 Harris Poll found 38 percent of respondents would use their rebate to pay off debt, while 35 percent said they’d put the money into savings. According to a CBS News/New York Times poll conducted in April, half of those expecting a rebate say they’ll pay bills with the cash, 27 percent say they will save or invest it and 18 percent plan to spend it.
This may or may not be a recession—they’re typically not declared until after they’re over—it might just be a reality check.
Either way, one positive point of an economic downturn may be that it gives us the smallest taste of the discipline that shaped our parents and grandparents’ generation. In facing the shakiest of economic times, they were able to build up America with the characteristics of frugality, planning, sacrifice, conservation, and national pride. Those are words that seem to rarely come into the national dialogue. But as we ponder how this economic situation will affect each of our families, I have a feeling those ideals are becoming even more a part of the dialogue around the dining room table.
-Aleesha Towns