Yesterday, the Washington Post’s personal finance columnist Michelle Singletary published an interview with Barack Obama about fixes to consumer debt. As Ms. Singletary discovers, the candidate and his family know firsthand about the struggles of Americans dealing with high consumer debt and student loan debt: until Mr. Obama published his two books, the family was deep in debt themselves. While Mr. Obama mentions no particulars of his proposals in the interview — although he’s mentioned a five star safety rating system for credit cards in the past — one grets the impression that he’s ready to act.

Notably, Mr. McCain turned down Ms. Singletary’s multiple requests for an interview.

Ms. Singletary’s article is here, but here’s the poignant excerpt:

Obama ticked off a list of his proposed economic fixes: another stimulus package, a universal health-care plan and tax cuts for the middle class.

When discussing consumer debt, Obama had a story to tell that was similar in some respects to that of many people in the country:

Until a few years ago, the candidate and his wife, Michelle, were deep in debt. Together, they were carrying $120,000 in student loans they had taken on to pay for law school.

“We were making payments the size of a mortgage every month,” Obama said.

Although Obama acknowledged that he and his wife were blessed to have enough income to service that debt, it wasn’t until he wrote two best-selling books, “Dreams From My Father” and “The Audacity of Hope,” that the couple were able to pay it all off.

Were he to become president, Obama said he would initiate reforms to address “the whole debt industry that has really got people in a financial hole they never dig themselves out of.”

I believe that when Obama talks about his family’s situation, he gets that we must move away from an economy driven by debt-laden consumers.

Nonetheless, the problems are so large and the changes needed to correct them are so deep and far-reaching — requiring legislative reforms and shifts in people’s financial behavior — that even a self-proclaimed change-agent president would be sharply tested on this issue.

Baby Boomers seem to think that the reason that Generation Y is in so much debt is cultural. Baby Boomers were raised in the era of cash only. If you don’t have the money to buy it, then you can’t have it. Getting ahead is about saving: putting aside money for life’s large expenses, such as a downpayment on a home, a car to get you to work, or necessary appliances and items that help middle-class families run. This argument certainly has some merit.

But the reason that Gen Y is in so much debt is that (with apologies to Tamara Draut, from whose book “Strapped” I stole this line) as young adults work to get into the middle class, they’re being hit by a one- two punch: the economy no longer generates widespread opportunity, and our public policies haven’t picked up any of the slack. The price of almost all of life’s necessities has increased since Baby Boomers were Gen Y’s age. The cost of a college education has doubled many times over; getting a mortgage is more difficult; health care is a much bigger burden; and necessities such as gas and childcare are on the rise too.

 So as Gen Y’ers enter the workforce, up to 15 percent of their income goes towards paying off student loans. Homeownership isn’t possible until much later in life, especially in high-cost cities where jobs are most readily available. A college education isn’t worth as much, especially as manufacturing jobs that used to be widely available have vanished. And even jobs in high-tech professions that Gen Y’ers thought were a reliable bet — such as IT — are being shipped overseas. Many who were raised in middle-class suburbs by Baby Boomer parents are learning to live with less.

And it certainly doesn’t help that our nation’s most prestigious financial institutions make it very easy to get into debt. All the expenses that Gen Y can’t afford — what used to be standards of middle-class living — can now be swiped and put on a credit card.

walletwatch gives a big shoutout to conservative columnist David Brooks. In an October 2007 column, he says that the economic vise grip that Gen Y is stuck in is driving their culture — not that Gen Y’s culture of consumption is driving them further into debt. He writes that

During this decade, 20-somethings go to school and take breaks from school. They live with friends and they live at home. They fall in and out of love. They try one career and then try another.

While Brooks could have done a better job of describing these economic trends in more detail, he is spot on when he writes:

The job market is fluid. Graduating seniors don’t find corporations offering them jobs that will guide them all the way to retirement. Instead they find a vast menu of information economy options, few of which they have heard of or prepared for.

It’s possible to see that this period of improvisation is a sensible response to modern conditions.

The column is a great read.

Kudos to the folks at Demos, a New York-based think tank for not only documenting the root causes of debt but also offering solutions. Their new book “Up to Our Eyeballs” is a must-read for anyone studying the world of young Americans being in so much debt.

A summary in their words:

Up to Our Eyeballs is a lively and timely exploration of the causes and consequences of the explosive rise in consumer debt, and of the fast-spreading financial and economic crisis. After explaining how we got into our credit fix, the authors sketch out a plausible escape route, based on proven good ideas that our political and economic elites have temporarily forgotten, at the expense of the rest of us.

Particularly impressive was the authors’ documentation that the middle class of the 1950s-1980s — which is now being fractured by increasing wealth inequality — was built by deliberate public policies that are now being eroded. That is, the prosperity that so many families experienced during those decades was the result of public-sector programs such as the GI Bill that made college affordable, the Federal Housing Administration that made homeownership a reality, social security that made it easy to save for retirement, and so on. But as our economy started to change, these programs have slowed eroded, and in part have been deliberately shredded by conservative politicians.

While they make an excellent case for implementing a solution, the book is a bit thin on specifics. walletwatch was very impressed by the authors’ knowledge and categorization of recent legislative moves, and with their principles for reform. Specifically, they echo the call for a Financial Product Safety Commission, an idea put forward prominently by Harvard Law Professor and debt guru Professor Elizabeth Warren.

 walletwatch added this book to its Reading List (link above).