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Americans seem to be maxed out on debt

Washington Democrats have been insistent about this: They will cut spending only if

Republicans agree to give them an equal amount in new revenue.

That's taxes to you.

Bill Wilson, a member of the board of Americans for Limited Government, points out gently that the people may not like this "more revenue" idea.

They're still feeling the strain of the Great Recession.

About 71 percent of the $16 trillion U.S. Gross Domestic Product is the result of Americans' personal consumption.

There are signs that U.S. households are cutting back:

* Consumption spending ebbed in April by $20.5 billion, the Bureau of Economic Analysis reported. It was only a 0.2 percent drop, but it's a caution flag.

* Personal income also declined by 0.1 percent in April.

* Disposable income dropped by 0.1 percent in April.

* Personal savings as a percent of disposable income is rising after hitting a six-year low of 2.1 percent in January - almost as low as the 2 percent level when the economy tanked in 2007.

* Manufacturing output just hit a four year low.

* The level of household debt relative to median income, which stood at 150 percent in 1999 and peaked at 235 percent in 2007, is still above 200 percent.

"This indicates that consumers are still overleveraged almost five years after the financial crisis," Wilson wrote.

"With Americans still maxed out on debt, once personal savings are exhausted - as appears to have happened in January - then one would expect a slowdown or contraction in consumption to follow."

It doesn't sound like a good time to be roaming the country selling tax increases in an effort to get re-elected.

Perhaps Democrats should rethink their product line.

 


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