Debts: US, its citizens living beyond means

All signs indicate that reliance on debt increasingly is a way of life in the United States, from ordinary families to the highest levels of government. Cries of outrage resound through the land each time Congress and the White House combine to raise the ceiling on the national debt, to allow a debt-ridden government to go on paying its bills.

Ronald Reagan has just sent an emissary to Capitol Hill to urge lawmakers to boost the debt ceiling above a trillion dollars, "to allow the Treasury to borrow the money needed to finance the government's operations beginning Oct. 1 ."

Spending beyond one's means, however, is scarcely limited to government. Says economist Walter W. Heller, writing in the Wall Street Journal:

"The federal debt today is roughly three times its size in 1950, while consumer installment debt is roughly 14 times, mortgage debt 16 times, [land] corporate debt 13 times."

American families and the companies for which they work roll up debt faster than the federal government, so often the target of citizen wrath over deficit spending.

From the smallest purchase to the largest, the American system encourages the use and expansion of debt as a way of doing business. Indeed, this principle is enshrined in tax law.

Interest paid by consumers on all purchases, from a tank of gasoline to a pleasure boat to a house, is tax deductible.Conversely, interest earned by consumers on bank savings traditionally has been taxed.

The 1981 tax bill provides ways for savers to escape taxes on some bank interest. Nonetheless, the till of tax law still favors taking on debt.

High-income people routinely are advised by financial experts to assume more debt, to reduce their tax load. Because of this interest exclusion, it often makes financial sense for upper-income families to buy cars on time rather than pay for them with cash.

Home mortgages also enjoy interest exclusions, but the principle underlying this "tax loophole" is different. Few families can afford to buy a house outright, expecially the first home.

A mortgage makes it possible for a young family to enjoy a home while paying for it gradually, saving money on taxes, and building up a nest egg of equity in the house.

Mortgages and car payments apart, it is the use of "revolving credit," or credit cards, that generates the most controversy.

Possession of credit cards is a great temptation to many people to "pyramid" their debt -- that is, to go on buying what they want and pay only the minimum each month, although this builds up heavy interest charges which later must be paid.

Finance charges on unpaid credit are creeping up from 18 to 21 or 22 percent, says Robert E. Gibson, as state legislatures either raise the allowable interest cap or remove it altogether.

"More people," says Mr. Gibson, president of the national Foundation for Consumer Credit, "are making minimum payments on their monthly credit card debt, stretching out the period of repayment. There seems to be a sense of immediacy as far as family finances are concerned. People are not looking down the road at what would happen to them, if they lost a job."

The record number of people filing for bankruptcy, says Mr. Gibson, "should be a red flag to society."

Some experts contend that the Bankruptcy Reform Act of 1979 is partly to blame, by making it easier to declare bankruptcy and retain one's home and other property.

A federal Reserve Board study in 1977 showed that nearly half of all credit card users pay up each month and accrue no interest. Visa and Master Card sources put the figure lower, closer to a third.

Nancy H. Teeters, a governor of the Federal Reserve System, agrees that during a period of economic stress many consumers stretch out their payments.

But, she says, almost all credit card holders "reach zero balance at some point du ring a year" -- that is, pay off their debts.

From all this, two conclusions emerge:

* Like it or not, the American economic system -- tax laws, the power of advertising, and rising consumers expectations -- propel the US into expanded use of debt, or credit.

Without the encouragement of credit use, almost certainly the vast US economy would not have grown to its present proportions after World War II.

* Somewhere along the line the rugged old ethic of paying one's way and avoiding debt was found to be -- or thought to be -- inadequate to the changing American scene.