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For US and global economies, debt is a four-letter word

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"We're not in an easy position," says Desmond Lachman, an economist at the conservative American Enterprise Institute in Washington. "The policy options aren't that obvious, even if you didn't have the political constraint."

If not addressed, public- and private- debt levels will stand as an ongoing obstacle to growth in the United States, as well as Europe and Japan, concludes a September report by economists at the Bank for International Settlements in Basel, Switzerland.

Already, it's clear that the US economy has been weakest – both during and after the recession – in regions where household debts are highest. That's the conclusion of county-level analysis by Amir Sufi of the University of Chicago, working with Atif Mian of the University of California, Berkeley, and Kamalesh Rao of MasterCard Advisors.

Even after two years of recovery, debt remains the economy's major challenge, says Mr. Sufi.

Debt may be dampening growth in a variety of ways, including:

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