Thanks to a booming housing market, low inflation and the democratization of debt, which has made credit more readily available to low-income people, overall consumer liabilities have been rising faster than income.

Consumer debt totaled $12.2 trillion in 2005, up 11 percent from the prior year, according to the Federal Reserve. Moody's Economy.com expects 2006 to be another record year, with debt growing 10 percent, though growth in 2007 is forecast to slow to 5 percent, reflecting the softening housing market. As home sales continue to weaken, economists are paying close attention to default rates for any signs that the consumer, who has been the main driver of the economy, is starting to feel the strain.

Another sign of trouble is the sub-prime mortgage market, where delinquencies have soared to 12.6 percent in the third quarter from 10.3 percent, at the end of 2004, according to the Mortgage Bankers Association.

And debit card overdrafts are believed to be rising, according to Moebs Services, which forecast that $52 billion in fees will be paid in 2006, about $4 billion more than last year.

But before sucking on that tailpipe, it's worth remembering that as long as job and income growth remain strong, the American consumer will be in good shape.

Still, after the last few go-go years of rising home prices, the likely momentum going forward, said UBS economist Jim O'Sullivan, "is downward."

Source: Suzanne Kapner - New York Post, December 26, 2006