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American Debt Returns to Pre-Pandemic Levels, Lower Costs Ahead
January 2, 2024
An increase in late credit card payments in the U.S. and other factors seem to suggest that American debt is inching closer to its pre-pandemic levels. This observation comes from Jared Bernstein, the top economic adviser to President Joe Biden. Bernstein, who is a strong proponent of Biden’s financial strategies as the president eyes a potential second term in 2024, points to recent increases in wealth, a strong job market, and a rise in real wages last year as signs of the U.S.’s steady recovery from an inflation spike that has negatively impacted Biden’s popularity.
Meanwhile, as the financial relief measures from the pandemic era have decreased, consumer debt has increased. Recent data from the Federal Reserve in New York shows a 4.7% increase in credit card balances, adding up to $48 billion in the third quarter and pushing the total to $1.08 trillion, a record figure since 2003.
Despite this surge in credit card debt, Bernstein believes it’s merely a return to normal debt levels seen before the pandemic. He also highlights that, despite rising interest rates, individuals are still managing their debt servicing costs effectively. The economic adviser also credits a 3.7% increase in disposable income over the past year for boosting consumer spending.
With a decline in inflation, economists are growing more confident that the Federal Reserve has finished its cycle of interest rate increases and may even begin reducing borrowing costs next year. A recent consumer sentiment survey from the University of Michigan shows a five-month high in December, and Americans’ optimism about the inflation outlook is at its highest since 2021.
Bernstein asserts these positive economic indicators are what the White House is relying on to convince voters of Biden’s competent handling of the economy. Discussing Biden’s economic plans for 2024, Bernstein emphasized the critical goal of reducing costs. This means continuing efforts to lower expenses for necessities like insulin, prescription medication, and healthcare, as well as reducing the so-called junk fees Americans encounter on everything from banking activities to concert tickets.
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