What If the Fiscal Cliff Is the Wrong Cliff?

[xchrom]

http://www.theatlantic.com/business/archive/2012/12/what-if-the-fiscal-cliff-is-the-wrong-cliff/265964/

I don't mean "What if public debt isn't a problem?"--because it is, and I don't doubt that addressing it in some measure is a good idea. I mean: What if public debt is such a small part of the problem that we're setting ourselves up for pain followed by disappointment? What if we'll make lots of budget cuts, dampening economic activity in the short term, only to find that the long-term benefits, while real, are dinky in the scheme of things, and there's a much bigger problem that's been left unaddressed?

That's the view of some analysts whose voices aren't getting much airtime amid all the freaking out about the fiscal cliff. They say that private debt--mortgages, credit card bills, business loans, etc.--is a much bigger problem than public debt, and we're going to have to confront it before we truly recover from the great recession.



That's the view of some analysts whose voices aren't getting much airtime amid all the freaking out about the fiscal cliff. They say that private debt--mortgages, credit card bills, business loans, etc.--is a much bigger problem than public debt, and we're going to have to confront it before we truly recover from the great recession.

This summer my Atlantic colleague Steve Clemons published a report on this subject--co-authored with entrepreneur Richard Vague, and based on data Vague had collected. It makes for bracing, and sometimes scary, reading. Especially when you realize that, as Financial Times columnist Edward Luce notes in discussing the Clemons-Vague paper, private debt is "higher as a share of America's GDP than anywhere in Europe."

[1StrongBlackMan]

1. Private debt ...

in relation to GDP, is a problem; but that is trending downward. And would accelerate, with more stimulus spending, as the middleclass tends to pay down debt (with the exception of educational debt) as they get money in their hands.

[lonestarnot]

2. Eggzactly!

[xchrom]

3. i tend to agree with you -- i would point out --

americans have used to debt to make up for pay raises they didn't get, to resolve medical crises, education{as you pointed out}.

americans need cash flowing to them --

[1StrongBlackMan]

4. Yes ...

we do!