Business Week gives this article, but it also has a report about the prospects for falling auto sales.
Don't Sweat the Debt With housing markets booming, consumer mortgage debt has soared almost 70% since 1995, according to the Federal Reserve. The share of disposable income going to pay mortgage debt has risen, too. Many economists worry that this debt burden will crimp consumer spending, which has given the recovery what little momentum it has. However, the burden of mortgage debt isn't as heavy as it seems, according to a study by William C. Natcher, an economist at National City Corp., a Cleveland-based bank. Natcher observes that a rising percentage of Americans own their homes. As people switch from paying rent to paying a mortgage, that increases the national-debt burden automatically and boosts the overall amount being paid on mortgages. Yet people who buy a home for the first time are spared paying rent. Once you account for the fact that more people own homes, the average share of household income dedicated to mortgage payments this year is almost exactly the same as it was in 1995, says Natcher (chart). The current adjusted level of 5.94% is well below the peak of the last 15 years--6.5% in 1991. Similarly, Natcher believes concern over swelling credit-card debt is exaggerated because credit cards have increasingly replaced cash as the most convenient way to pay for things. Many people who pay their cards off in full each month nevertheless show big balances on their cards during the month, and that's partly what shows up in the aggregate data. Overall, says Natcher, "Rising debt is an issue, but it's not as big as everyone thought.... We think the consumer has some lasting power." -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
