Personal finance: How to handle household debt

“The debt party is back on in the U.S.,” said Jeff Cox in CNBC.com. Consumer credit passed the $3 trillion mark earlier this year, and total household debt, at $13 trillion, is “nearly back to its precrisis level in 2007.” After spending the last five years climbing out of a massive hole, American consumers are finally willing to borrow again. That may be a sign of the economy’s return to normalcy, but the trend is still so fragile that rising interest rates “could force borrowers back into their foxholes.”

Most of us can, in fact, afford to loosen up, said Susan Tompor in the Detroit Free Press.The recent upsurge in household debt comes primarily from student loans, which affect only a small slice of the population. Overall, consumers “seem far more on track than before the recession.” Credit card companies have stopped issuing cards with “outlandish credit limits,” and while consumers may be borrowing to replace a broken refrigerator, they’re no longer “taking on a large amount of credit card debt to simply upgrade all the appliances.”

That’s not nearly enough restraint for Dave Ramsey, “the most important personal finance guru in America,” said Helaine Olen in Pacific Standard. Ramsey reaches at least 6 million people a week on his radio show, and thousands pay to hear him in the flesh preaching his financial gospel that the indebted are “weak-willed, self-indulgent, and stupid.” For Ramsey, almost any debt—let alone bankruptcy—is inexcusable; there’s always another rice-and-beans meal to be eaten, “always another job that can be scraped together.” He doesn’t seem to realize that bankruptcy courts aren’t filled with overstretched purchasers of “65-inch flat-screen televisions and designer linens,” but rather with people buffeted by forces beyond their control, starting with job loss and astronomical medical bills. “The economic fortunes of ordinary people like those in Ramsey’s audience are stagnating,” and that plight can’t be relieved simply through “self-control over our wallets.”

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True enough, said Felix Salmon in Reuters.com. But “if America is going to become a more financially healthy country, it is going to have to address its money problems on both the individual and the policy level.” Blaming society for the parlous state of America’s lower-middle class doesn’t “actually do anything for the individuals being pinched.” They need a way out of debt, and Ramsey’s—“based in the Bible and self-reliance”—makes a lot of sense. His advice may be simplistic, but it’s helping millions of American households get out of debt—“which has got to be a good thing.”