American Households Are Not "Loading Up On Debt"

A blog about business and economics.
Feb. 24 2012 5:15 PM

American Households Are Not "Loading Up On Debt"

From Reihan Salam's suggested speech for Mitt Romney:

Two things are happening. The first is that after a brief uptick in the savings rate after the crisis, the savings rate is once again trending downward. American families are loading up on debt to make up for an economy that isn’t growing fast enough. The second is that American companies are finding customers overseas, in fast-growing countries where poverty-stricken populations are making their way into the middle class.
Advertisement

Here's debt service payments as a share of disposable income:

1330121704560

But is that just a question of ultra-low interest rates? Well, the household debt as a share of GDP dataset in the FRED database doesn't go back very far, but:

1330121727529

I think it's safe to say that families "loading up on debt" is not what's driving recovery winter. It's true that consumer credit is expanding, but the credit used to buy automobiles becomes the income of the people who make the automobiles. An expansion of the overall quantity of credit is simply another way of describing what economic growth looks like in a modern economy. If the debt is growing faster than incomes, then you have a sustainability problem. But it's not.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Two Damn Good, Very Different Movies About Soldiers Returning From War

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Students Aren’t Going to College Football Games as Much Anymore, and Schools Are Getting Worried

The Good Wife Is Cynical, Thrilling, and Grown-Up. It’s Also TV’s Best Drama.

  News & Politics
Weigel
Sept. 19 2014 9:15 PM Chris Christie, Better Than Ever
  Business
Moneybox
Sept. 19 2014 6:35 PM Pabst Blue Ribbon is Being Sold to the Russians, Was So Over Anyway
  Life
Inside Higher Ed
Sept. 19 2014 1:34 PM Empty Seats, Fewer Donors? College football isn’t attracting the audience it used to.
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 19 2014 4:48 PM You Should Be Listening to Sbtrkt
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Medical Examiner
Sept. 19 2014 5:09 PM Did America Get Fat by Drinking Diet Soda?   A high-profile study points the finger at artificial sweeteners.
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.