A Nation Addicted to Oil -- and Debt

The United States is addicted to oil, President Bush warned Americans last week in his State of the Union address.

But what's likely to hurt us more in the long run -- our addiction to oil or our addiction to debt?

The oil addiction we share with the rest of the planet. Debt addiction isn't our issue alone among major nations, but as the world's biggest economy our fearless embrace of debt in recent years has created risks that are global in scope.

We can cut back on oil consumption. Even if we stop borrowing tomorrow, however, our outstanding debt still must be repaid or refinanced.

And those bills will come due in the next 20 years concurrent with 79 million baby boomers reaching retirement age. In theory, at least, they're going to take more from the economy than they contribute, stretching already leveraged resources.

The problem with any discussion of U.S. debt levels is that the nation has largely become inured to the topic. Warnings about excessive debt have been a staple on Wall Street since the early 1980s. Yet stock and real estate prices have soared and interest rates have plunged since then.

What's more, whether our debts really have become excessive depends on what you measure them against. By some standards they don't look so onerous, particularly if you assume the economy keeps rolling along.

What we do know for certain is that the U.S. has been on a borrowing binge in this decade. The federal debt, for example, now is $8.2 trillion, up from $5.5 trillion just seven years go.

This week, the Treasury will issue 30-year bonds for the first time in more than four years. Uncle Sam will sell $14 billion of the securities Thursday. The return to the market of the 30-year bond is another sign of how dramatically the nation's debt picture has changed since 2000, when the government actually was running a budget surplus for the first time since the 1960s, and was paying down debt.

U.S. household debt, including mortgages, jumped from $6.4 trillion at year-end 1999 to $11 trillion by the end of the third quarter last year, a 72% increase, according to Federal Reserve statistics. The growth rate in household borrowing has reached double digits in recent years, a pace not seen since the mid-1980s.

The pace of borrowing by state and local governments also has accelerated sharply since 2000; lately it has picked up in the corporate sector as well.