This article proposes more comprehensive debt to income ratios that take into account the substitution of home equity borrowing for consumer installment credit. The analysis indicates that, when total home equity lending is included in the measure of consumer indebtedness, the consumer debt ratio has not declined consistently during the last two years, and it is much higher than the ratio of consumer installment credit to disposable personal income. Moreover, the analysis indicates that the substitution of auto leasing for automobile loans causes an understatement in the real magnitude of automobile credit outstanding.

The evidence presented in this article suggests that the recent restructuring of consumers' balance sheets may not have been as significant as the traditional debt ratio indicates, and that the apparent improvement mostly reflects a reclassification of consumer liabilities among the different components of household debt. Furthermore, although the rate of growth of household debt has slowed in the early 1990s, the analysis indicates that the more appropriate measure of consumer credit has not declined dramatically since 1989, which also suggests that households might not be able to sustain higher levels of spending in the near future.