U.S. Economy Endangered By Enormous Debt

An article in the September 13, 2004 issue of the weekly web magazine News Informant warns that the accumulated personal and government debt threatens creates a risk of economic turmoil. U.S. household debt has reached record levels this year and the federal deficit has reached its highest historical amount. This debt bomb" could halt the current recovery or even lead to recession in the next few years, according to some reputed economists. The current soft patch" increases the likelihood of such an eventuality. What makes the situation worse is that consumer spending, which has sustained the U.S. economy for the past 15 years, appears to have reached its relative limit.

Chicago, IL (PRWEB) September 14, 2004 -- The News Informant article, entitled 'Debt Bomb" Becomes Grave Threat To U.S. Economy," explains that this spring, total U.S. debt grew to twice the gross domestic product (GDP), a record high. In addition to personal debt, the U.S. needs to worry about the budget deficit, that the Congressional Budget Office now estimates to be a record $422 billion for the coming fiscal year. Taxpayers will have to pay off the government deficit, one way or another," explains News Informant editor Bernard Perlstein. They will either have to increase taxes or diminish government payments on programs such as social security and Medicare to pay off this debt," he adds.

To some degree, increased debt is expected when the cost to pay off the debt is less, Perlstein noted. But as interest rates rise, the cost of paying off some of this debt will rise," he remarked. Meanwhile, our national debt is being financed inexpensively because China and Japan want to buy up dollars to maintain low values for their currencies. However, this could change, not only leading to a higher cost for paying off the federal debt, but also likely to higher interest rates on personal debt," Perlstein added.

What makes the record debt rate a greater concern currently, is recent evidence that consumer spending may finally not be able to bail out the U.S. economy. U.S. consumer spending has not experienced a serious slowdown in the past 15 years, almost unprecedented for its duration. Several economic forecasts state that the current recovery has peaked, and will not improve in the near term. However, not all economists agree with this assessment, and there are several other market factors that will most likely determine the state of economy for the next 2-3 years.

The News Informant article in its entirety, and its sources, can be found on the web at: http://www.newsinformant.com/articles/2004_09_13/000782.php . A free registration is required to view the article.

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About News Informant Inc.: News Informant Inc. publishes News Informant, a weekly U.S.-based web news magazine focusing on news analysis of important domestic and global issues that are not sufficiently covered by the U.S. media. The magazine uses primarily respected worldwide online source material to render original information and perspectives. The periodical follows the slogan, Its Not Just the News -- Its Whats Behind the News."

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