Monday, November 25, 2013

Bankrate: Americans still struggling to pay debts

Ordinary Americans are still de-leveraging after the Great Recession. Their continued debts are hurting consumer demand, which in turn is hurting employment and investment because companies don't want to produce or sell what people don't have the money to buy.

What can politicians do to ease the pain and get our economy going again?  Republicans' knee-jerk reaction is to cut taxes. Yet... the same folks struggling to pay their bills are the same "47 percent" of "entitled" moochers who already pay little or no income tax. And corporations are more profitable than ever, with billions of cash on hand. Meanwhile, Republicans urge fiscal austerity -- mainly by cutting "welfare" like WIC, food stamps and unemployment benefits for these same struggling Americans.

Something's gotta give. The Fed's continued quantitative easing is not reaching average Americans. If their struggles continue, then we can anticipate another decade of economic malaise: the "secular stagnation" theory.  In this context the risk -- the temptation, for some -- is to blow up another asset bubble to give the economy the appearance of health and spur consumer confidence, thus consumer spending. But we know that such bubbles burst eventually, leaving those same working-class people worse off.  

It's a shame our leaders can't come up with anything to break this vicious cycle, besides yet more asset bubbles that benefit business insiders, and free money for Wall Street banks that don't need it and doesn't "trickle down" in the form of loans to Main Street Americans.

By Polyana da Costa
November 25, 2013 | Bankrate

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