We are Sinking in Debt, Right?

If you listen to the media, you would tend to believe that America is a nation on the brink of financial disaster. The average American family is deep in debt and there is no hope for this country so we are told.

Do a google search under "consumer debt" and you will find all types of alarmist scenarios. A question needs to be asked: Is that accurate?

I don't think so. I am going to lay out some reasons why.

I want to start by saying that getting debt free is an admirable goal. I encourage my clients to do so and am working to do so personally. Romans 13:8 instructs us to let no debt remain outstanding except the debt to love one another.

The Christian who is debt free can be in a position of less stress when poor economic times come. He/she is also in a strong position to help others who need financial help if all debts are paid. But of course it is nearly impossible to eliminate monthly obligations. If you live in a home or apartment, you will have to pay for utilities. If you drive a car, you must pay for gas and insurance. The list goes on.

Aside from the biblical call to be a pilgrim on this earth and not entangle yourself with lots of financial obligations, is this country in a terrible financial situation? I say don't believe the mainstream thought on this issue.

Here are the facts:

1. The US debt as a percentage of GDP (Gross Domestic Product) is 37%. This ranks us 65th out of 126 nations included in the CIA World Factbook. Japan by comparison has debt that is 194% of their GDP. They have problems. We are not a nation drowning in debt.

Chuck Bentley- CEO- of Crown Financial Ministries sent out a newsletter highlighting this fact. Chuck also presented a chart that compares our current debt level to 1946 when we were at 122% of GDP. Chuck's conclusion, "Our ultimate preparedness is to avoid fear or panic, reduce our vulnerability created by debt and remain dependent on Christ who is the never-changing constant in an ever-changing economy."

2. The Net Worth of Americans is increasing, not decreasing. Sure, it will decline some during recessions as it did from 2000-2002. But we remain in a strong financial position as a country. It would take a whole lot of bad scenarios for many years to reverse that. Debt matters. But debt/asset ratios are more important.

3. Debt can often be an effective utilization of money especially in a low interest rate environment. Consumer debt on depreciating assets or no assets is foolish (credit cards, auto loans, etc...). Debt to expand businesses or increase future income may be wise stewardship. Obviously, it should be entered into prayerfully. But it is wrong to say all debt is evil.

For example, one of the most proven ways to help impoverished countries raise their standards of living is to provide access to loans for businessmen/women. These are often called micro loans. The lack of capital in these countries often dooms them to poverty. When access to banking services is provided, the countries tend to be on a road to greater prosperity provided that there aren't corrupt governmental influences to impede business.

Ken Fisher wrote an article a year ago making the case that our nation is not in enough debt. I don't agree with that conclusion. But his point that stock markets perform best when budget deficits have been highest is certainly interesting.

The point is, our nation is not on the brink of financial disaster. You may sound smarter when you are pessimistic. But you have certainly been rewarded for being in the optimist camp over time as the US economy has continued to disappoint its critics and climb upward over many walls of worry.

For His Glory,

Ashley Hodge