US households and corporations have a great deal of debt now, more than they've had for a long time. According to data from a recent Economist article, the US household debt went above 100% of disposable income around 1998 and is now at is now at around 106%. Around 1997, the US net private savings rate went negative and has been there ever since, having barely dipped negative in all the years between 1955 and 1997.
Despite the fact that interest rates have nearly halved in the past 1-2 years, corporate debt payments as a percent of profits have topped 50% recently and are at their highest point in the past 10 years. Enron and Kmart, two giant corporations, have filed for bankruptcy. It seems unlikely to me that households or corporations are going to be able to spend the US out of a recession. How to get out? Despite predictions by some that everything will be back to normal later this year, I'm not seeing the signs. I think there needs to be some government spending to get things going again. So I'm not against some deficit spending for the next few years. I only wish the government had done things right and actually made a big dent in the debt when the economy was booming (despite several years of surpluses, the US debt decreased very little, http://www.publicdebt.treas.gov/opd/opdpenny.htm). I think way it should work is: decrease the debt when the economy is booming, increase the debt when the economy is waning. So, since the economy is weak now, I'm not against some government spending. Traditionally, defense spending has been a decent way to help jumpstart the US economy. Maybe it will help. -- "Erik Reuter" <[EMAIL PROTECTED]> http://www.erikreuter.com/
