We all love to rail against the government for overspending and overtaxing. We repeat the common mantra that government should live within its means, just like the average American household, and cut back on all unnecessary spending in order to pay its bills and balance its budget.

It sounds so simple, so basic, we wonder why Congress has such a hard time with this concept. But as it turns out, more than a third of Americans have trouble with it as well.

More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study released Tuesday by the Urban Institute. These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid, potentially hurting credit scores and job prospects, Caroline Ratcliffe, a senior fellow at the Washington-based think tank, told the Associated Press.

"Roughly, every third person you pass on the street is going to have debt in collections," Ratcliffe said. "It can tip employers' hiring decisions, or whether or not you get that apartment."

The study found that 35.1 percent of people with credit records had been reported to collections for debt that averaged $5,178, based on September 2013 records. The study points to a disturbing trend: The share of Americans in collections has remained relatively constant, even as the country as a whole has whittled down the size of its credit card debt since the official end of the Great Recession in the middle of 2009, the AP reports.


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As a share of people's income, credit card debt has reached its lowest level in more than a decade, according to the American Bankers Association. People increasingly pay off balances each month. Just 2.44 percent of card accounts are overdue by 30 days or more, versus the 15-year average of 3.82 percent.

Yet roughly the same percentage of people are still getting reported for unpaid bills, according to the Urban Institute study performed in conjunction with researchers from the Consumer Credit Research Institute. Their figures nearly match the 36.5 percent of people in collections reported by a 2004 Federal Reserve analysis.

As with Congress, we might wonder why these people have trouble living within their means. Couldn't they simply cut back on their spending or get a second job to support their lifestyle?

It's not quite that simple, argues Jeff Reeve, editor of InvestorPlace.com.

"The realities of paying for a house or college education show the stark choices facing many Americans trying to move up," he wrote in an opinion piece for MarketWatch. "But sadly, debt also is a necessity for families simply trying to hang on to what they have, mostly because one in four Americans have literally zero savings. And a big reason for that is because these families barely make enough in wages to cover day-to-day expenses."

The Urban Institute's Ratcliffe said stagnant incomes are key to why some parts of the country are struggling to repay their debt. Wages have barely kept up with inflation during the five-year recovery, according to Labor Department figures. And a separate measure by Wells Fargo found that after-tax income fell for the bottom 20 percent of earners during the same period.

Citing figures from the Brookings Institution, Reeve said there are 25 million people in the American middle-class (what's left of it) living paycheck to paycheck. They have decent jobs, but their expenses equal what they earn, so these families live without room for error.

"This is America in 2014 -- a country full of people who are one blown transmission or one leaky roof away from a serious financial crisis," Reeve said. "So before you judge the fragile finances of Americans as a matter of choice and proof of their irresponsibility, remember that some people have no choice but to rack up debt."

Perhaps the same is true for the federal government. Everyone agrees that spending needs to be cut back, but no one can see eye-to-eye on what programs to reduce or eliminate. Occasionally Congress will find common ground on some budget trimming proposals here and there, but then along comes a natural disaster like Superstorm Sandy or a humanitarian crisis like child immigrants pouring over the border, and we're right back where we started.

Of course, there is one key difference between the federal government and the rest of us: We can't print our own money or force our employer to increase our income (i.e. raise taxes) if we fall behind on our bills.