Consumer Debt May Jumpstart U.S. Economy

As the U.S. faces higher prices and adjustable mortgage rates, expect consumer spending to slow, economist Nigel Gault told “Morning Call.” But he also predicted that the slowdown may furnish some surprising benefits to America's economy.

Gault, chief economist at Global Insight, said lower consumer spending growth will “translate into slower growth in imports.” That will help turn the trade deficit to the U.S.' advantage. He also expects real income growth to beat consumer-spending growth in the next years.

But Christian Weller, senior economist at the Center for American Progress, fears that income growth will hold at 2% levels.

And Weller blames the market for pushing consumers into higher-cost credit: “That ultimately spells trouble for the economy, because we lived well beyond our means for the last five years, and now we have to start repaying those loans either through foreclosures or digging deeper into our pockets.”