The coronavirus brought an end to the longest economic expansion in U.S. history, but that’s wasn’t the only problem: When the U.S. barreled into the deep downturn that followed, it was laden with debt, according to a Wall Street Journal analysis. All told, the borrowing, spurred by years of low interest rates, adds up to $64 trillion in consumer, business and government debt, more than triple the country’s gross domestic product. The series of charts below illustrate how we got here and what it means for any recovery. The most important piece of a recovery is consumer spending, which accounts for nearly 70% of the U.S. economy. High household debt levels tend to lengthen recessions and amplify their severity, according to a study of advanced economies over 30 years by researchers at the International Monetary Fund. Economic growth over the past decade — including big gains in the stock market and in U.S. home prices — has benefited wealthier households the most, while those with lower incomes fell behind. Real median household income fell after the financial crisis and didn’t surpass the inflation-adjusted 1999 record of $61,526 until 2016. Mortgage debt, mostly held by better-paid workers, hasn’t changed much. Lower-income households, by contrast, have increased their borrowing with auto loans, student debt and credit cards. Before the pandemic, the percentage of delinquent auto-loan balances had nearly reached levels last seen in the financial crisis. Businesses have also borrowed at a record pace in recent years, leading some economists to raise alarms last year that high levels of corporate debt during a recession could force companies to slow spending and hiring to repay what they owe — or get simply overwhelmed by their repayments. Rather than use cash to invest in their businesses, many companies bought back stock to boost share prices. Buybacks hit a record $806 billion in 2018, following the tax overhaul that lowered rates for many companies.
