A year into an economy-shattering pandemic, did we learn anything about debt?
As the economy continues to recover from the COVID-19 pandemic, we will have to account for the massive debt we’ve assumed.
A year ago this week, after meeting with worried officials from Salt Lake International Airport, I tried to convey the mood of the day:
“As you see color coded maps on television showing which states have declared emergencies and which have experienced deaths; as you watch the stock market snap like a bungee cord; as you see basketball games without fans and hear of church services, conventions and trade shows canceled, you may feel like peasants hunkering down in the face of an advancing hostile army,” I wrote in a column.
Today, that invasion seems to be on its last legs. In Utah, everyone 50 or older is eligible for a vaccine, and state lawmakers have set the random date of April 10 to end the mask mandate for all but gatherings of 50 or more.
It’s almost time to climb out of our foxholes and tally the damages. Time to see how many changes we endured will last. Time to write down lessons for the next time.
On that score, things don’t seem as bad as many predicted. Utah lawmakers this year faced an enviable $1.5 billion surplus. They cut taxes. The state’s unemployment rate is 3.1%.
Amazingly, Utah isn’t alone. From March to December, 20 states saw increases in state revenues. Six — Utah, Vermont, Idaho, South Dakota, Colorado and Alabama — saw them jump more than 3%, according to the Wall Street Journal. Nationwide, state revenues fell, but only by a combined 1.8%.
At the same time, Americans started saving. A survey by bankrate.com in January found that 54% of people nationwide said they had more in emergency savings than they owed in credit card debt. That was 5% higher than the previous year and 10% more than in 2019.
Wallethub.com followed that with a report this week saying Americans paid off a record $82.9 billion in credit card debt during 2020.
Add to this a recent New York Times report that said economists are beginning to talk about “a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth,” and things look much better than they did in that meeting I attended a year ago.
Which is why I hesitate to throw some cold caution on it all. Things may not be entirely as they seem.
First, those great state budget figures and low unemployment rates were not all the result of great leadership at the state level. The first rounds of federal stimulus, either through direct checks to people or loans to businesses, likely kept things from getting worse, even as they kept some businesses afloat and some renters in a home. Those are good things, especially if they help fuel a strong recovery, but they come with a cost, and the need for the most recent stimulus was not as clear.
Second, that positive savings data is much stronger among some demographics than others. While it’s true every demographic had more people with savings than credit card debt, the figure was lowest among Black respondents and among millennials.
Third, we paid down credit card balances, but Wallethub said the average household still owes $8,089 on credit cards.
Fourth, while the economy may boom coming out of the pandemic, the nation shouldn’t ignore the gigantic debt it rang up trying to keep it alive. The national debt passed $28 trillion, and that doesn’t include the latest round of stimulus spending.
I have heard learned economists say it’s important to deficit spend during hard times in order to stimulate economic growth. What I don’t hear, especially among politicians, is a detailed plan for how to pay down that debt during good times.
It’s hard to be the party pooper as the nation’s economic locomotive builds pent-up steam and readies to roll. The past year has been hard on just about everyone, especially the more than half million Americans who perished and the loved ones who mourn them. We need some good times.
That’s probably what folks said a century ago as they emerged from the last big pandemic, and they got it, at least until a certain Tuesday in 1929.
Two days before meeting with those airport officials a year ago, I was with legislative leaders at Utah’s Capitol, talking about a potential tax cut while, around the room, people were staring down at phones, watching the stock market crash in the face of a pandemic. It was a sickening feeling.
If things do boom, Americans will have a chance to be smart and pay down debt, on individual credit cards and in Washington, to make sure history doesn’t continue repeating itself. Will they?