The Corporate State,Economic Performance,and Social Policy

We use the Survey of Consumer Finances to analyze changes in U.S. household debt between 1989 and 2013. We focus on how income and debt levels have changed, and what this means for future economic growth and living standards. Prior to the Great Recession, U.S. households had record high debt levels and record low savings rates. Highly leveraged consumption boosted economic growth. However, large debt burdens have led many families to deleverage. Our study finds that deleveraging has been insufficient. Although debt payments have fallen relative to household income, this is mainly due to low interest rates. Debt levels, especially for home mortgages, remain high by historical standards and portend continued stagnation due to lower consumer spending.