Number: RL34538
Title: Rising Household Debt: Context and Implications
Authors: Brian W. Cashell, Government and Finance Division 
Abstract: Most studies of the relationship between household debt and economic growth suggest that rising debt is not a threat to economic growth. Rather than a harbinger of economic hard times, increases in the dollar value of household debt have been associated with a growing economy. Changes in consumer debt tend to be a leading indicator of consumer spending and thus of overall economic growth. One reason may be that increases in consumer borrowing are an indication of confidence in the economy, both on the part of borrowers and lenders. Moreover, what is a burden for borrowers is income for lenders. As long as borrowers are able to meet their debt obligations, payments are simply a transfer of income. Although such payments may constrain the discretionary spending of borrowers, they increase lender resources.
Pages: 16
Date: June 17, 2008