During the 1980s, private-sector borrowing expanded to such an extent that many analysts became concerned that the accumulated debt would be a drag on spending, making the recession worse if and when it occurred and slowing the ensuing recovery. This article examines the role of private nonfinancial debt in the U.S. economy. After putting recent debt trends in perspective and discussing the economic role of debt, Carlson considers the macroeconomic effects of debt. He finds that economic activity almost always leads the debt cycle; debt seems to respond to the business cycle rather than the other way around. Furthermore, movements in total spending do not appear to have been systematically related to debt/income ratios over the past 40 years.