Consumer Debt And The Economy Needing Help
Q: If I can trust what I've read (and remember it correctly) the current dogma goes like this: 1. The US economy needs more consumer spending to rev it up. 2. A lot of consumer debt may be bad for individuals, but the economy would be better if more people ran up their credit cards. If this is all true, why does the new budget decrease tax rates (and provide the rebate) rather than just returning the full (or maybe a partial) tax deduction for nonmortgage interest? Doesn't the amount of consumer debt (and of course the underlying spending)increase when the cost to consumers for that debt decreases?
A: High consumer debt is not in general a good thing, though it can provide a temporary boost. If you subsidize credit card debt you'll get more of it, and it's not a good thing in general, only in small amount .