Summary: Debt is a perennial worry. It's a natural human tendency is to think of debt as bad, that by incurring debt we are living beyond our means. But much of what you hear about debt in the US is hyperbole. Here are the facts:

Household debt has fallen in the aftermath of the Great Recession: on a per capita basis, it's back to the same level as 14 years ago. Households' debt relative to their net worth is as low now as in 1985. For all the consternation about the threat posed by student loans, their default rates are actually falling.

Corporate leverage today is not materially different than it was in 1993 or 2003, i.e., early in two expansion cycles. The delinquency rate on corporate loans is lower than at any time during the prior three expansion cycles. High yield spreads are falling and default rates are well below average.

The "tax reform" bill signed in 2017 is forecast to further expand the federal debt. But examples from around the world do not show a strong correlation between federal debt and economic growth over the next 5-10 years. For all the hand wringing about high federal debt, the interest cost of that debt is just 1.3% of GDP, as low as during the halcyon days of Eisenhower and Elvis.


Like most people, you're probably worried about the amount of debt in the US. We seem to be going broke. Enlarge any chart by clicking on it.



This magazine cover is from 1972. The ones below are from 1984, 2001 and 2008, respectively.

Debt is a perennial worry. At the dawn of the massive global expansion in the early 1980s, there was ubiquitous concern about deficits and leverage. That was also true 20 years ago, 10 years ago, and today.