WASHINGTON - December 20 - “Duh,” the defining word in an ever-present car ad this holiday season, also summarizes what is happening to holiday shoppers. It should be obvious to anyone paying attention and paying credit card bills that American consumers have amassed record amounts of debt and have less disposable income than ever before.

But what may not be clear to everyone except those trying to pay for holiday presents while failing to balance all their other debts payments is that consumers only have two choices: borrow less or go broke. Either way, more and more families will be joining those who are already slowing their spending as income growth slows and other means of borrowing shrink. If this does not happen during the 2007 holiday shopping season, it most likely will happen when debt bills come due early next year.

The facts tell a grim story:

· Income growth is slowing. In October 2007, income growth (adjusted for inflation) was 3.0 percent higher than a year ago, down from 4.0 percent year-on-year growth in September and 4.6 percent growth year-on-year in August.

· So, too, is wage growth. Between October 2007 and October 2005 real wage growth fell by 51 percent.

· Debt rates are rising. In the third quarter of 2007, total debt stood at 133.0 percent of disposable income—the highest level on record..

· Americans are spending less. Census data show a deceleration in the retail sales growth over the past several years.

· The housing crisis is getting worse. The third quarter of 2007 found the highest foreclosure rate on record—0.8 percent of all mortgages foreclosed—after six consecutive quarters of rising foreclosure rates.

· Bankruptcies are rising alarmingly. In less than two years the bankruptcy rate grew by 85.2 percent, with 2.8 bankruptcy cases per 1,000 people in the third quarter of 2007.

The basic economic arithmetic is clear. Without faster income growth, which will likely not occur in a slowing economy, consumers will ultimately max out on their debt. And with less access to home equity loans or other lines of credit, the implications are dire. A quick look at the data on income growth, family indebtedness, consumer spending, and bankruptcy filings tell the story.

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