"The average American household has spent next year's entire income, and that's unprecedented in our history." -- Jim ClaytonJim Clayton is accustomed to being a lone voice in the wilderness. That's because he thinks the historian's duty is to alert the public to potential problems. He believes "the past is still the best guide to the future, a way to help people understand contemporary problems."
In the 1970s, Clayton, who calls himself "a Cassandra rather than a Pollyanna," was an outspoken dove on the Vietnam War, which he still considers "a huge mistake."
Moreover, Clayton estimates that it takes well over a century to pay for the typical American war. "The total cost of the Vietnam conflict will be in the range of $900 billion, and it will be paid for in about 100 years."
In a 1976 lecture called "A Farewell to the Welfare State," Clayton questioned "the benefits of big government, especially rising entitlement costs and the growing federal and state deficits."
Well, he's at it again.
Clayton, a popular professor of history and formerly provost and dean of the Graduate School at the University of Utah is now predicting a "global debt bomb." His book manuscript by that title, due to his New York publisher by the first of February, is almost certain to make a splash.
It's Clayton's thesis that public and private debt is now the most compelling international issue. The 1991 slump in Japan, Asia's biggest economy, has deepened the economic crisis in neighboring countries from Indonesia to South Korea. Seven years later, the Japanese economy is still grim. There are reports of increased suicides, rising homelessness, broken families and child abuse.
It is not farfetched, in Clayton's opinion, to imagine a similar economic downturn here. He is distressed that almost no one in the United States saves any money any more. "Our savings rate is very, very low. A couple of weeks ago, it went below zero. That has not been true since the 1930s."
Those who have taken economic history classes from the Cornell-trained Clayton say he is virtually without parallel in his ability to stimulate thinking. When he rails against debt in his Carlson Hall office on the U. campus, he is energized and eloquent.
Clayton is troubled that "frugality is now a thing of the past, and deficit financing in the public sector and very high debt levels in the private sector" are taken for granted.
"Back in the 1950s, 30 percent of your disposable income was debt," he says. "Now 92 percent of your disposable income is debt. The average American household has spent next year's entire income, and that's unprecedented in our history."
Clayton adds that most people are not making more money in real dollars. The average hourly wage, he says, is the same now as it was in the mid-1960s, meaning purchasing power has not increased in 35 years.
Yet, says Clayton, most married adult women are working full time -- in Utah, 72 percent of adult Utah women are in the work force. "But you can't do that again," says Clayton. "Most people only have one spouse."Dr. James Clayton, Professor of History, University of Utah
Taking into account the fact that bankruptcies have increased by 300 percent in the past two or three years, Clayton estimates that a recession now at the nation's high rate of indebtedness would be disastrous.
"All indicators suggest," says Clayton, "that we're way stretched out. At some point we're going to have a recession."
FRAGILE ECONOMY -- During the October LDS General Conference, President Gordon B. Hinckley warned church members to "get their houses in order. So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings."
He spoke of the "wide and fearsome markets" in the world and warned that "the economy is a fragile thing." President Hinckley said, "Self-reliance cannot obtain when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others."
According to President Hinckley, the LDS Church is financially solvent and committed not to borrow money anytime in the future. "What a wonderful feeling it is to be free of debt, to have a little money against a day of emergency put away where it can be retrieved when necessary."
TIMELY ADVICE -- Clayton was impressed by Hinckley's address. "I think his advice is very timely. I was amazed. I just sat there dumbfounded, agreeing with every sentence. . . . I was delighted to hear that the church is out of debt. He's been working on that for some time, so when he speaks, it is not hypocritical. He's setting a good example."
Clayton says Alan Greenspan and the other governors of the federal reserve system have "been singing the opposite tune, saying that debt is fine, that default on the corporate level is very low, public bankruptcy rates are not something to be concerned about. It's all very soothing. Then comes along this Mormon prophet who says everything ISN'T fine. His is a very unusual voice. Yet it's a voice of great moderation and common sense."
Great American figures of the past have often renounced "the evils of debt," suggesting that the closer one gets to the depth of the debt cycle, the more evidence there is of chicanery and swindle. Thomas Jefferson, says Clayton, "believed that debt was the most corrupting thing there was in society, and he knew a lot about it. He was in debt all of his life, and he died bankrupt."
No wonder Clayton tries to live frugally himself. "The more historians study the past," he says, "the more they are influenced personally by what they study. They become more skeptical, more cautious. . . . I was awfully happy to pay off our house and get out of debt."
But Clayton notices no widespread interest by others to emulate him. Some may even think him naive. "I have colleagues now who are my age, 65, who are buying houses on 30-year mortgages. To me, that's the height of arrogance. How do they know they're going to live for 30 years?"
In fact, Clayton maintains that "the stigma of high personal indebtedness has virtually vanished. I believe household debt is our most serious short-term problem."
Clayton warns that accumulating debt and playing the market will eventually have severe consequences.
"Booms are always followed by busts," he says. "I don't think we'll change until we suffer some pain. I think pain is a wonderful lesson. Touching a stove is a great lesson not to touch it again. Little kids only need to learn that once. It's painful, and they get blisters. . . . We tend to forget, but history does not forget."
Clayton is not an extremist. He thinks it is necessary to go into debt for a home, but he says "a 15-year-mortgage is a whole lot better than a 30-year mortgage."
He believes a person can logically go into debt for a first-rate education -- such as Harvard or Stanford -- but not for a second- or third-rate education. You need to go into debt to establish a business.
"But I'd draw the line right there, meaning no consumer credit debt at all. Not that you can't have a credit card. I think they're convenient, and it's nice to have built-up credit -- but under no circumstances should you let it go beyond 30 days, because at 18 percent, it's impact is horrendous."
Clayton complains about the billion credit cards mailed across the United States each year, fueling public reliance on plastic. In fact, 80 percent of Americans today carry credit cards.
Debt and deficits are so acceptable in our society that people like Clayton are derisively called "debt heads." Clayton says, "You're a heretic if you suggest there ought to be a point where you say, 'Hey, that's enough. I don't need any more. I can only consume so much.' Happiness doesn't increase whether you're driving a Camry or a BMW. The more money you've got, the more you spend. Get bigger houses. Get them gated. Get guards. Buy fancy wine. You never run out of ways to spend it."