Tuesday, May 15th 2001, 12:00 am
By: News On 6
Tuesday's interest rate cut is yet another effort to boost a lagging economy. One thing weighing on the minds of economists is the huge personal debt load American consumers are carrying.
As KOTV's Diane White explains, big debts and a weak economy can create an explosive combination. Robert Gotsch is updating his resume, looking for work. "Robert Gotsch, this is my life right now while Iâ€™m laid off." He lost a $40,000-a-year job this month when business softened at his employer. He and wife, Lynna are also suffering from large personal debts. "We have sold everything we can imagine, computers, my roller blades. We've gone to flea markets, sold clothes, done without cable, cut out, commuted together to save gas and car expenses, and are living with family." They've moved in with her grandmother to cut down their $120-thousand of debt, mostly from high interest credit cards. With sacrifices, they've knocked it down to $73-thousand.
It's a national problem, Americans borrowing more and more to support spending. That spending has kept the economy growing, but the debts make more and more families vulnerable when times get tough, a danger to the whole economy. Americans who once saved an average of 8% of their paycheck a few years ago, now spend about 1% more than they earn: a negative savings rate. Payments on personal debt, for things like credit cards and student loans used to consume less than 6% of our paychecks. Now, it's nearly 8%, the highest in more than a decade, and rising. It's not yet a crisis; most families are still financially solid. But economists say the debt burden does threaten to turn the current slowdown into a full-blown recession.
Martin Regalia with the US Chamber of Commerce says, "It's kind of like a room full of gasoline. As long as no one throws a match in, everything goes along just fine. But if that match or a spark shows up, then you have an explosion.â€ Meanwhile Robert believes he'll find work soon.
If you need help with getting control of your debt, you can call Consumer Credit Counseling here in Tulsa at 744-5611.