Grasshoppers Or Ants

GRAND RAPIDS — Big cars, big houses and bigger debt: With Americans spending billions of dollars more than they earn, what does it mean for the economy?

George Erickcek, W.E. Upjohn Institute senior regional analyst, addressing the Holland Area Chamber of Commerce recently, said the United States is a “nation of grasshoppers,” referring to the fable about the hard-working ant and freewheeling grasshopper.

“We spent $121.3 billion more than we made — nationally,” Erickcek said.

But while some debt can be damaging, not all debt is negative, local economic and financial officials say.

“I think it does make sense for people to have debt, like when they buy a house,” said William Bjork, financial consultant and vice president of investments for A.G. Edwards.

Bjork said people should always try to spend less than they make, except in circumstances such as buying a house, paying for education or making a career change.

“I look at those times as times in a person’s life when they’re doing something strategic to improve their situation,” he said.

Dan Giedeman, assistant professor of economics at GrandValleyStateUniversity, agreed with Bjork, saying that going into debt for a house or for a similar situation is understandable.

“The main question is, when I’m going into debt, do I have a clear plan of how this is going to be paid off,” he said.

Giedeman said many people are optimistic when they take on debt, assuming that times will get better or a business will succeed.

“Debt can be good if you have a very clear plan for how you’re going to pay it back, but if you don’t, then you should be concerned,” he said.

The number of U.S. families with credit card debt rose from 44.5 percent to 46.2 percent from 2001 to 2004, but that does not necessarily present a nationwide economic problem, Giedeman said. Statistics show that of the 46.2 percent of families in America with credit card debt in 2004, less than half had more than $2,200 on their cards, he said.

Nicholas Danner, credit counselor with GreenPath Debt Solutions, said credit cards, cash advances and payday loans can cause a problem if they create a cycle of dependency.

“That can definitely be a debt that you don’t want to have,” he said.

Other debt to be cautious of is unpaid utility bills and medical bills that may go to a collection agency, he added.