If you’ve been paying attention to any conversations about debt in America lately, you’ve no doubt heard phrases like “moral hazard” or “moral obligation” thrown around.

American individuals and families owe a collective $11 trillion in consumer debt, including car loans, mortgages, credit card bills and more.

At the same time, a recent analysis by USA Today showed that the U.S. government owes an unprecedented and unfathomable $62 trillion. For those of you keeping track, that means each household’s share of the national debt now stands at a whopping $527,000.

All of these debts will never be — and in fact, can’t ever be — repaid. Not in this lifetime, nor in the next. The interest payments alone are enough to render us all technically bankrupt.

That’s just one reason why U.S. politicians are toying with the idea of a “technical” debt default. They’re wrangling over whether or not to lift the debt ceiling, and trying to figure out what should be done about the country’s exploding debt levels.

If we’re to be truthful about the entire debt crisis in America, at some point we’ll have to ask — and answer — some pretty tough questions. Not the least of these is: Who, if anyone, has a “moral” obligation to repay their debts?

Increasingly, cash-strapped individuals are being labeled as “lazy” or “financial deadbeats” if they even remotely explore the option of not paying a legally owed debt. This is certainly the case for people considering bankruptcy, a legal safety net that nevertheless carries huge emotional baggage and a personal stigma for many. The name calling and moral judging is even worse for consumers grappling with homes that are underwater, or worth far less than the outstanding mortgage.

Walk away from a home loan these days, and you’re almost sure to be branded as financially “irresponsible,” a “scum bag” — even just a flat-out “immoral” person. The same thing goes for individuals who try to get from underneath defaulted student loans, excessive credit card debt and enormous tax bills.

At the same time, there are a growing number of institutions — including banks, employers in all industries, and even government agencies — that are routinely not paying their obligations or living up to their financial promises. Some of these institutions rely on financial safety nets — specifically, the government and U.S. taxpayers – even as they condemn consumers’ rights to use safety nets or look out for their own best interests.

The Real Moral Hazard

Take certain elements of the banking industry, for example.

Let’s not rehash the whole bank bailout drama. But who can forget that at the height of the Great Recession in 2008, Congress gave the OK to a $700 billion rescue plan for the banking and financial services industry?

The money was supposed to help banks and Wall Street firms “deleverage” and clean up their balance sheets – in other words, unwind bad debts and not take such a huge financial hit on mortgage-backed securities, investments whose value had became virtually worthless.

That $700 billion, of course, was taxpayer money. So it’s quite ironic that banks continue fighting tooth and nail to avoid any kind of real “bailout” for struggling homeowners. For instance, the idea of modifying mortgages by reducing the principal owed on those loans is completely taboo to many bankers. Indeed, most banks will resort to the “moral hazard” argument in a heartbeat in their efforts to defend why they refuse to write down the mortgage balances for underwater homeowners or those facing foreclosure.

Of course, the real “moral hazard” was a banking system lacking in lending standards and abundant in greed; a system that previously issued loans of all kinds and sizes to virtually anyone with a pulse.

Everything was going great during the real estate boom. But then conditions changed and home prices started falling — hurting homeowners and ultimately banks too as their own mortgage-backed investments soured.

As they were out there, on the brink of financial collapse, bankers lined up in droves to get an economic handout. Not a single bank executive dared utter the phrase “moral hazard” regarding their own actions.

Adding insult to injury, the bailout money was supposed to help ease the flow of credit to U.S. consumers. That was another broken promise that simply never happened.

Double-Dealing by U.S. Employers and Local Governments

It’s not just banks, of course, that have been guilty of double-dealing when it comes to honoring their obligations.

At the corporate level, consider how employers have almost completely abandoned even the ruse of pretending they will keep long-standing obligations and commitments made to provide health care, pensions and other benefits to workers.

Instead, when companies get in a financial bind or want to appease Wall Street, the businesses simply go to their workers each year — or to their unions — and renege on financial promises. A variation on this theme is for companies to suddenly (or annually) insist that employees kick in ever-larger financial contributions for costs employers previously agreed to bear. We’ve seen this in industries ranging from transportation to health care.

Then there are city, county and state agencies around the country failing to repay their debts — leaving government employees, local businesses and a rash of suppliers and vendors in the lurch.

Municipalities across the U.S. — ranging from the tiny city of Maricopa in Southern California, to Newark, New Jersey, the Garden State’s largest urban city — are broke, facing debt, and unable to pay for basic city needs like police and fire services. Newark recently had to borrow to make required sick-leave payments — even after slashing jobs to balance its budget.
Meanwhile, in California, the government furloughed employees, forcing them to take time off from work just so the Golden State could try to right its finances. California even issued IOUs to workers, vendors and creditors, telling them to wait to get paid – something no individual could ever get away with, at least not without serious risk to their credit rating and overall finances.

Republican Newt Gingrich has even proposed legislation that would allow state governments to go bankrupt as a way for them to avoid making pension payments to workers.

Again, since individuals aren’t always able to avoid repaying their debts, they often struggle year after year under the weight of these obligations.

When it comes to college, for instance, African-Americans are racking up high levels of student loan debt — a form of debt that can’t be written off in bankruptcy court. A 2010 study from the College Board revealed that 27 percent of black bachelor’s degree recipients in 2008 borrowed $30,500 or more, versus 16 percent for whites, 14 percent of Latinos and 9 percent of Asians.

Demos, the New York think tank and public policy group, also reports that 84 percent of black households carry a revolving balance on their credit cards, compared with 54 percent of white households.

The Federal Government’s Risk of Default

At the federal level, the U.S. Postal Service recently warned that because it’s bleeding red ink, it won’t be able to pay $6.8 billion required this year to cover employee retirement benefits and workers’ compensation costs.

And that’s not all. There are growing concerns over the risk of the U.S. defaulting on its debt if the $14.3 trillion debt ceiling isn’t raised.

So far, Social security represents perhaps the biggest broken promise yet by U.S. government. It’s clear that something must be done to fix Social Security — if not the Social Security Trustee says the system will go bust by 2036.

But when elderly Social Security recipients living on a fixed income — who now get a paltry $1,000 a month or so on average – are asked to believe they can’t get a cost of living increase on their Society Security checks because allegedly there’s “no inflation” in America, that flies in the face of logic, is offensive to anyone dealing with real-world costs, and masks the true underlying issue.

The real issue is that the U.S. government can no longer afford to keep financial promises previously made. We all know this deep down, even though we haven’t yet agreed on a solution to the problem.

Without a fix, Social security will run out of money in 25 short years due to a host of unexpected events. Poor choices and some degree of fiscal mismanagement by the government are partially to blame. Plus, high unemployment means fewer people are paying taxes into the Social Security system.

Additionally, thanks to advances in science and medicine, people are living longer than ever before, putting a serious drain on Social Security. The average 65-year-old woman in the U.S. can now expect to live until at least age 85. Such longevity was never anticipated when the Social Security system was created back in 1935.

None of these unexpected events make the bitter pill — namely, the growing recognition that the government can’t and won’t repay its debts — any easier to swallow. That’s why the idea of asking future Social Security recipients to work longer (i.e. by pushing the mandatory Social Security age back from 65 to 67, and moving it again later to God knows what), is yet another slap in the face.

It’s the equivalent of asking tens of millions of people to let the federal government off the hook financially — in other words, to not repay its debts.

Working adults who paid into Social Security system for decades are ultimately going to get short-changed for a host of reasons, not the least of which is that circumstances have changed.

Yet who among us would deny that over the years, Democrats and Republicans alike have made bad spending choices, engaged in runaway borrowing, and otherwise been less-than-perfect in their fiscal decision making, leading us into the current financial mess we face?

How is that different, at the core, from what individual Americans in debt are facing?

I would argue that in many ways the situations are quite similar. We can all agree that many financially burdened consumers made poor choices. But so did companies and government agencies. Remember also, however, that not all consumers are in debt due to unbridled spending or fiscal mismanagement.

As I explained in my book, Zero Debt, millions of Americans are deep in debt due to a change of circumstances in their lives, particularly what I call the “Dreaded D’s:” downsizing, divorce, a death in the family of the main breadwinner, disability, or disease.

Unlike most consumers, however, companies and governments have the short-term advantage of being able to borrow their way out of trouble. Needless to say, that strategy will backfire in the long run.

So why is it that consumers are held to a higher standard than these institutions?

It’s as if the weight of the entire U.S. economy was resting on the backs of the American consumer.

Well, actually it is — sort of.

Consumer spending accounts for two-thirds of the U.S. economy. But if politicians, economists and others are counting on consumers to spend our way out of the nation’s financial problems (using credit cards no less), they’re not just out of touch – they’re living in fantasyland.

Times Have Changed

Just like circumstances have changed for institutions struggling to repay their debts, so too have time changed for individuals and families.

When institutions don’t repay their debts, they say it’s because they’re fighting for their very existence. Doesn’t the same logic hold true for people fighting to keep a roof over their heads or to feed their families?

It’s my belief that we should all work hard and do our very best to repay what we owe. However, when circumstances change so dramatically that repayment is clearly not possible — or it would threaten your ability to stay afloat – then it’s not unreasonable to explore other options.

Please don’t mistake this viewpoint as me giving “irresponsible” consumers a pass. Anyone who knows my story, and how I was once buried in $100,000 in credit card debt yet managed to pay it all off in three years, knows that I truly value personal responsibility.

But my point is: if we’re going to insist that consumers be “morally” obligated to repay their debts, shouldn’t we ask the same thing of institutions?

Don’t banks have a moral obligation to keep their financial agreements — and live with the consequences of their bad choices too?

Don’t companies have a moral obligation to pay for health insurance benefits and other perks at the level originally promised to employees?

Don’t governments have a moral obligation to pay their debts too?

So the next time you hear about a laid off, divorced, credit-card charging American trying to make ends meet, and thinking about bankruptcy, or about a homeowner contemplating a short sale or walking away from their property because it’s now lost 50 percent of its value, can we cut out all the name-calling, finger-pointing and holier-than-thou attitude spat toward these people?

At the very least, can we dispense with the false notion that a failure to pay one’s debts is a phenomenon unique to individuals — and that it represents a “moral” shortcoming?

Otherwise, we have to call a spade a spade. And in this case, that would mean calling virtually the entire U.S. not just financially or technically bankrupt, but morally bankrupt too.