There is little doubt that we live in an era where assuming debt is an integral part of our nation’s culture. Over the last few decades, both public and private debt levels have increased at a staggering rate. In the early 20th century, U.S. citizens were wary of debt and considered it a personal shortcoming if one succumbed to it’s temptations. Attitudes have gone full circle and today’s finance based U.S. economy is heavily dependent upon debt at both the public and private levels.
Public Sector Debt
Currently the U.S. government outstanding federal debt is over 14 trillion dollars, with 1.3 trillion being added in each of the last two fiscal years (2010 & 2011). The level of indebtedness of the federal government works out to $50,000 for each U.S. citizen, and nearly $132,000 on a per household basis. If one includes so called “unfunded liabilities”, such as Social Security, Medicare, and federal retiree and veteran’s benefits, the numbers rise to an astonishing level of nearly $200,000 per person. Interest on the federal debt is consuming an ever increasing share of U.S. budget expenditures.
Thankfully, interest on federal debt is at historical lows, with the 10 year treasury note yielding a skimpy 1.7%. There is widespread concern that if interest rates rise significantly, the borrowing costs of the U.S. government would explode and blow a even larger hole in the federal deficit. State governments have also been struggling to meet budgetary shortfalls, with 2013 projected deficits of nearly 54 billion dollars.
Estimated overall household debt is currently around 13 trillion dollars, which is actually approximately 4% lower than the financial crisis levels of late 2008. A significant portion of that reduction has come via foreclosures, and businesses writing off debt balances. According to Federal Reserve data, the average credit card debt per household is nearly $16,000. The average American has 3.5 credit cards, and roughly 26% admit to not paying debt on time.
Accounts receivable management has become an increasingly higher priority of U.S. companies, and many are turning to firms like Cavalry Portfolio Services for assistance in managing their consumer loan portfolios.
The combination of high consumer debt levels, coupled with stubbornly high levels of unemployment, makes for a challenging environment for businesses with consumer debt exposure. Find a financial advisement service that offers professional accounts receivable collection programs that can assist your business in managing cash flow.