Rising Household Debt: Context and Implications (CRS Report for Congress)
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| Release Date |
June 17, 2008 |
| Report Number |
RL34538 |
| Report Type |
Report |
| Authors |
Brian W. Cashell, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
Most studies of the relationship between household debt and economic growthsuggest that rising debt is not a threat to economic growth. Rather than a harbingerof economic hard times, increases in the dollar value of household debt have beenassociated with a growing economy. Changes in consumer debt tend to be a leadingindicator of consumer spending and thus of overall economic growth. One reasonmay be that increases in consumer borrowing are an indication of confidence in theeconomy, both on the part of borrowers and lenders. Moreover, what is a burden forborrowers is income for lenders. As long as borrowers are able to meet their debtobligations, payments are simply a transfer of income. Although such payments mayconstrain the discretionary spending of borrowers, they increase lender resources.
