Households Un-borrowed $261 Billion Last Quarter

A blog about business and economics.
Dec. 6 2012 12:27 PM

Households Un-borrowed $261 Billion Last Quarter

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The Federal Reserve is out with its latest Flow of Funds report and it shows that deleveraging was hot for households in the third quarter. Households didn't just borrow less money than they did in the second quarter, they un-borrowed money. 

The federal government, meanwhile, is still borrowing a ton. But it, too, is deleveraging. That $690 billion is down from $1.2 trillion in the second quarter, which was down from $1.4 trillion in the first quarter. In Q3 of 2011, the federal government borrowed $1.3 trillion. Everyone in DC is supposed to be alarmed by all that borrowing, but for households to engage in this savings behavior somebody has to borrow money from them. And the federal government can right now borrow money for super-cheap. Under the circumstances, levvying taxes on households (reducing their incomes and hurting the macro-economy on both the supply and the demand side) in order to reduce federal borrowing is truly perverse. We desperately need to save the payroll tax holiday.

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