WASHINGTON -- The United States is making progress in paring back corporate and individual debt, but repayment burdens are likely to continue impeding economic growth for several years, Federal Reserve Board Chairman Alan Greenspan said Friday.
"The 50-mile-an-hour headwinds which troubled greater growth several years ago have now come down to perhaps 20 or 25 miles an hour," Greenspan told the National Italian American Foundation in a luncheon speech.
The result, he said, is that companies and households are required to divert a smaller share of cash resources for debt. And, he told the group, the drop in home market values has "largely dissipated."
Still, Greenspan cautioned, "While [there has been] substantial progress in reversing balance sheet strain in the late 1980s, there is obviously more to come."
Greenspan said companies and individuals will remain conservative in their financing activities, which affect spending and investment patterns.
He predicted that companies will continue to lay off workers as they restructure and modernize operations to compete in tough and rapidly changing markets. "The process will almost surely persist for some years to come," he said.
But Greenspan said the United States is further along than Japan and several other nations in terms of balance sheet repair. And he said that over the long term, reduced debt burdens will enhance productivity and living standards.
