While total federal debt has skyrocketed to more than 100% of the nation’s GDP in 2012 (see top chart above), the burden of US household debt fell to its lowest level in third quarter last year in almost 30 years (see red line in chart). According to the Federal Reserve, household debt service payments as a share of disposable personal income fell to 10.61% during the July-September quarter last year, which was the lowest household debt burden since the fourth quarter of 1983. Household debt service includes payments for consumer debt like credit cards and payments for mortgages.
When other financial payments of households are included, like automobile lease payments, rental payments on tenant-occupied property, homeowners’ insurance, and property tax payments, households spent 15.75% of total personal income in the third quarter last year on all financial obligations, which was the lowest level since the first quarter of 1984 (see blue line in chart).
So while the ratio of federal debt to GDP is high and getting higher all the time, households are de-leveraging and have less debt relative to disposable personal income in a generation. What’s going on? Comments welcome.