WASHINGTON -- Cindy Campbell's attitude is at the heart of the nation's economic slump. The 28-year-old political organizer once was a "wild spender." Today, she and her fiance are reluctant to spend and don't want to borrow.

"Basically, we don't charge anymore unless it's a dire emergency," she said.

"We are trying to keep [spending] to a minimum. At this point we have zero balances on all of our cards. We are trying to keep it that way," added fiance Tim Hannegan, 29, who works for the General Accounting Office.

Such financial restraint, shared by millions of cautious, debt-burdened Americans, has made the penny-pinching 1990s strikingly different from the free-spending late 1980s. And that's a real downer on economic recovery.

Consumer credit is the wagon horse of the economy. It is the way big-ticket items such as cars, refrigerators and television sets are usually bought. And because consumer spending accounts for two-thirds of economic activity, the economy can go nowhere without it.

But the past two years have marked a social and economic watershed. For the first time since the 1950s, installment credit has declined, as consumers like Cindy Campbell and Tim Hannegan watch their budgets. The economy is suffering -- gross domestic product, the output of goods and services, increased at a slim 1.4 percent annual rate in the second quarter -- and Americans show few signs of spending more freely.

Consumer confidence plunged this month, hurt by anxiety about the weak economy and continued layoffs, a widely followed survey said last week. The Conference Board's Consumer Confidence Index showed its biggest month-to-month decline since the depths of the recession in October 1991.

In another measure, 78 percent of the people questioned by the latest ABC/Money Market Magazine poll said they viewed the current buying climate as negative.

"The economy is not likely to perk up until consumers feel confident that their credit problems are over," says Paul W. Boltz, financial economist with T. Rowe Price Associates Inc. of Baltimore. "The optimism born of seemingly endless prosperity in the 1980s allowed rapid growth in consumer debt that became an unwanted burden when the economy soured in 1990."

Ms. Campbell, of Bethesda, illustrates the trend. She used to spend and charge. "About two years ago, I was just a wild spender. All of it was on the charge cards," she recalled. Her "unwanted burden" reached the point last year where for every $70 she paid in installments, $50 went to cover interest costs.

When Mr. Hannegan proposed to her, their joint credit card debt was $6,000. They took out a bank loan for that amount and paid off all their installment debts. They now pay $250 a month to the bank.

"It made sense [to borrow from the bank] at 9 percent instead of 18 percent on the credit cards," said Ms. Campbell, who works for a non-profit research organization in Washington. "I think I would like to keep it so we never charge again or just when it's big purchases that we can't pay in cash."

She and Mr. Hannegan, who are saving for a deposit on a suburban home, now limit themselves to a weekly allowance out of their joint $80,000-a-year income.

They're not alone. Nationally, outstanding installment debt, excluding mortgages and equity lines of credit, is declining. In May, it declined to $721.4 billion, down from the $727.8 billion last December and $737.7 billion in November 1990.

The trend prompted Alan Greenspan, chairman of the Federal Reserve Board, to tell the Senate Banking, Housing and Urban Affairs Committee recently that as "the grip of debt-burden pressures begins to relax," economic growth will accelerate.

"I suspect, as far as consumers are concerned, we are getting reasonably close to where increased consumer spending will be a significant factor in the economy," said Mr. Greenspan.

But it will have to shrink a lot further before consumers are ready for some new serious spending, according to John H. Makin, resident scholar at the conservative American Enterprise Institute.

The key measure, according to Mr. Makin, is the ratio of total consumer installment debt to disposable personal income.

He has traced three long credit cycles since the early 1970s, keyed to recessions. The debt-income ratio peaked in 1974 at 16 percent. Then it dropped to 13.5 percent over the following year.

It rose steadily to 16.3 percent in mid-1979 and then fell over a three-year period to 13.5 percent at the end of 1982. By 1989 it was at a record high of 18.5 percent. Then came the latest recession. It has contracted to 16.5 percent, still above its previous two peaks.

Many consumers have shifted their borrowing habits from charge cards to bank lines of credit, such as home equity lines. In fact, the value of equity lines of credit taken out last year exceeded the total reduction of consumer installment debt -- opening the way to even more debt.

That worries John Gengler, education director of the Catonsville-based Consumer Credit Counseling Service of Maryland.

"That chicken has not come home to roost yet," he said. "A lot of credit card debt and what used to be unsecured loans is simply sitting in home equity loans now. The bad part is that people . . . now have their home up as collateral, and that could be a problem."

This year, the nine offices of the non-profit Consumer Credit Counseling Service of Maryland are experiencing record demand for advice from consumers who want to lighten their debt load. In the second quarter, 5,386 clients sought advice, compared with 4,307 during the same period last year.

Meanwhile, consumer confidence and spending aren't likely to improve until the job market takes off. They're being held back by a lack of real income growth, "a really alarming jobs market" and the realization that permanent dislocations are afoot, says Sandra Shaver of the Washington-based Futures Group consultants.

How bad is the job market? Fewer Americans signed up for unemployment benefits in the latest week available -- the lowest figure in more than 1 1/2 years, the Labor Department said Thursday. The government said 400,000 people filed for jobless benefits in the week that ended July 18, down from 421,000 the previous week.

Despite that fall, overall employment figures remain bleak. The latest monthly jobless figures show that U.S. industry is again cutting jobs, after payrolls grew in the spring. In June, 117,000 jobs were lost outside the agriculture sector.

John Tuccillo, senior economist with the National Association of Realtors, said, "My sense is that consumer balance sheets are much healthier than they were a year ago."

Until the Cindy Campbells and Tim Hannegans of the world become willing, the economic recovery will remain sluggish.

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