Consumers Spooked By Debt, Foreclosures.

Washington -- A Center for American Progress report finds that as the housing crisis is getting worse with third quarter of 2007 featuring "the highest foreclosure rate on record - 0.8% of all mortgages foreclosed - after six consecutive quarters of rising foreclosure rates," American consumers continue to add on already record amounts of debt and have less disposable income than ever before.

According to "Debt is Haunting the American Consumer and Harming the Economy," by CAP senior fellow Christian E. Weller and CAP special assistant for economic policy, Amanda Logan, in the third quarter of 2007, total debt stood at 133% of disposable income, the highest in the country's history. In addition to personal debt, bankruptcies in general "are rising alarmingly" as "in less than two years the bankruptcy rate grew by 85.2%, with 2.8 bankruptcy cases per 1,000 people in the third quarter of 2007."

At the same time, income growth and real wage growth is slowing. The report found that in October 2007, income growth (adjusted for inflation) was 3% higher than in 2006, down from 4% year-on-year growth in September and 4.6% year-on-year growth in August. Also, between October 2007 and October 2005 real wage growth fell by 51%, which explains why Americans are spending less as shown by census data, which indicate "a deceleration in the retail sales growth over the past several years."

The report notes that with slow income growth, "which will likely" occur in a slowing economy, consumer debt will further increase. "And with less access to home-equity ...