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The Sustainability of U.S. Household Finances

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Listed:
  • Daniel H. Cooper
  • Barry Z. Cynamon

  • Steven Fazzari

Abstract

The financial sustainability of U.S. households is usually proxied by intuitive measures, like the debt-income ratio, that are only loosely linked with a more rigorous definition of sustainability. We employ balance sheet and income date from the PSID to project lifetime resources and compare these resources with household consumption to assess household financial sustainability. Preliminary results show that while the vast majority of American households were sustainable in the mid 1980s, sustainability declined sharply through the early 2000s and remained low until the eve of the Great Recession. Sustainability improved modestly in the aftermath of the crisis, but remains well below levels from two decades ago.

Suggested Citation

  • Daniel H. Cooper & Barry Z. Cynamon & Steven Fazzari, 2016. "The Sustainability of U.S. Household Finances," Community Development Publications and Reports, Federal Reserve Bank of St. Louis, pages 1-44, October.
    • Handle: RePEc:fip:l00101:103205
    Note: The St. Louis Fed Center for Household Financial Stability and the Private Debt Project hosted three "Tipping Points" Household Debt Research Symposia, 2016-2018. All three sessions were centered on the question of "tipping points" in regard to debt: How and when does household debt move from being wealth-building and productive for households and the economy to being wealth-depleting and destructive for both?; Conference Materials: https://fraser.stlouisfed.org/title/tipping-points-i-mapping-understanding-impact-debt-household-financial-well-9372/session-list-685741; Conference Executive Summary: https://fraser.stlouisfed.org/title/tipping-points-i-mapping-understanding-impact-debt-household-financial-well-9372/executive-summary-685740; Tipping Points Conference Series: https://fraser.stlouisfed.org/series/tipping-points-conference-series-9375
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    References listed on IDEAS

    as
    1. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 59-80, Summer.
    2. Daniel H. Cooper & Byron F. Lutz & Michael G. Palumbo, 2015. "The Role of Taxes in Mitigating Income Inequality Across the U.S. States," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(4), pages 943-974, December.
    3. Cynamon Barry Z. & Fazzari Steven M., 2008. "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse," Capitalism and Society, De Gruyter, vol. 3(2), pages 1-32, October.
    4. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
    5. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
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