The logic of the economic recovery isn't working—or, at any
rate, not well. By that logic, over-borrowed Americans would
repay loans and replenish depleted savings, creating a temporary
drop in consumer spending and economic activity. But once
savings increased and debt declined, consumer buying would
strengthen. It would replace the Obama stimulus program. Hiring
would improve; the recovery would become self-sustaining. We're
still waiting. Just last week, economic growth for the second
quarter was revised down to a meager 1.6 percent annual rate.
Why is the recovery faltering? There are many explanations: a
depressed housing market; weaker-than-expected exports; cautious
corporations. But consumers, representing 70 percent of the
economy's $14.5 trillion of spending, are the crux of the
matter. It isn't that Americans aren't behaving as anticipated.
They may actually be outperforming. "Consumers are deleveraging
(reducing debt) . . . and rebuilding saving faster than
expected," writes economist Richard Bern