The Slow Recovery Is Due To Americans Paying Down Personal Debt

Last updated on June 10th, 2012 at 03:16 pm

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I have said this many times before when conservatives say President Obama's economy is too slow. The average American citizen is paying down existing debt right now. This is the reason consumer demand is not where it should and or where it would force businesses to hire.

According to Rex Nutting over at MarketWatch and The Wall Street Journal, U.S. debt load falling at fastest pace since 1950s. This fact brings to light two issues, the need for the government to plug the demand side gap and force private businesses to hire. It also brings to light the false economy America has experienced in the last 30 years.

You see, since Reagan was in office the economy has grown dramatically, but it was at a great cost. This cost was our future private debt. When wages are stagnant, as they have been for 30 years, any increase in demand did not come from direct wages, but future wages. To put this simply, the television you bought in 2005 took away consumer demand today. The deregulation of credit cards and easing of credit to average American was what spurred the Reagan economy.

Today we do not have this luxury. Today Americans are paying off this debt. Credit, due to the financial crisis under George Bush, was completely cut off. This is why President Obama had to loan money to GM, because private equity, IE Romney's Bain Capital was not lending money out.

Another interesting statistic from the article by Rex Nutting was, corporate debt. "Nonfinancial corporate debt has fallen to 77% from a peak of 83%. Financial sector debt has plunged from 123% of GDP to 89%. Public debt has risen to 89% from 56%."

What this shows is, debt is how the world works. The conservative Republicans like to tell you, we need to run America like a business. Well, corporate debt was pretty high and still remains pretty high. Corporate debt was 83%, obviously not as high as the US debt, but deficits don't matter, as per Dick Cheney.

Presidential candidate Mitt Romney made his fortune by leveraged buyouts. What is this? Essentially, Romney would borrow money and use the bought out company as collateral for the debt. So, without credit and DEBT Mitt Romney would be nothing more than a janitor at Bain capital.

So going forward, once the American people feel more comfortable with their personal debt level, the economy will begin to take off. They will spend more and business will be forced to hire. Until them, the federal government needs to step in and fill this gap in order to get people back to work. HEY, debt held by Romney created 100,000 jobs according to him. Why wouldn't it work for the country.