Is Debt the New Safety Net? Examining the Relationship Between Personal Debt and Social Policy

During the past thirty years in the United States, household consumption has outpaced income in the United States, with the bottom 60% of households spending all or most of their income on expenses of daily living. The use of credit, acquired both through mainstream channels (credit cards, credit lines, bank loans, and mortgage loans) and through the fringe credit market (pawn shops, car title loans, refund anticipation loans, payday loans and rent-to-own furniture), has risen exponentially during this same period of time. Credit has become easy to obtain through the liberalization of credit markets and is a culturally acceptable way of providing for consumption. At the same time that policy and culture have converged to create a landscape where debt is acceptable, encouraged, and perhaps necessary, the social safety net has changed considerably with the elimination of open-ended entitlements and growth in block grants. Policy changes that facilitated liberalization of credit products for the general public have coincided with a general fraying of the social safety net to produce a social reliance on credit. In this way, personal debt may have become a social safety net, providing resources that are unattainable through the welfare state or employment in the market. The phenomenon of a debt has been framed in the social work literature as an individual problem instead of one that is rooted socially, historically, economically and politically. This roundtable will provide an opportunity to explore the associations between recent trends in U.S. social policy and levels of personal debt, with a focus on the implications of this relationship on the poorest Americans. Drawing on welfare state literature as well as literature on personal debt, the presenter will pose the following questions for examination: How does personal debt act as a safety net during market shocks? How might welfare spending and the nature of welfare programs act as a moderating effect on the relationship between personal debt and market shocks? And finally, what can be theorized about the relationship between changing conditions of capitalism, the social safety net/welfare state, and the accumulation of personal debt? The goal of the roundtable is to stimulate discussion about the intersections between debt and social policy in order to advance the research agenda in this important field of overlap.