But now it’s Congress’ job to pick up where consumer sentiment has left off and reduce our nation’s obligations once and for all, writes MoneyShow.com personal finance expert Terry Savage.

Can America have an economic recovery without strong increases in consumer spending? Can consumer spending rebound, given the jobless situation? And will consumers ever be willing to go deeply into debt again, to finance their spending?

Those are just some of the issues raised by the latest Heartland Monitor poll sponsored by Allstate and the National Journal.

As a panelist at last week’s unveiling of the poll data in Washington, DC, I was asked to comment on those issues, along with the ongoing implications of the housing crisis and political gridlock. Moderator of the event was Ron Brownstein, political director of the Atlantic.

This is the tenth in a series of polls that track overall consumer sentiment. Each poll also focuses on a specific headline topic—the current topic being consumer debt. Here are some of the headlines about consumer sentiment:

  • Americans’ pessimism is at its highest point since the first Heartland Monitor poll in April 2009—at which time the Dow had just fallen to under 7,000, and the economy was in the depths of recession.
  • Americans express little confidence that Washington will come to an agreement to reduce the Federal budget deficit. But Americans are overwhelmingly in agreement that such a deal would have a positive impact on the economy. That sentiment cuts across all lines of income, race, and education.

So far, no big surprises. But what is truly interesting about the poll, which can be found online here, is the extent to which the political impasse has impacted consumer behaviors.

In a word, what is lacking in the American economy is confidence.

  • The economic downturn has caused more Americans to pay off debt, rather than incur debt. That can be seen in the consumer savings rate, which early in 2005 had actually gone into negative territory as consumers borrowed on their home equity to finance their lifestyle.
  • When questioned about whether personal debt helps them reach the "American dream" or hinders them in that quest, the vast majority see debt as an obstacle to reaching their goals. Notably, more of those in higher income brackets tend to see borrowing against future earnings for worthy investments such as a home mortgage, an education, or a business as a worthwhile endeavor.
  • Nearly half of poll respondents said they were paying down their debt levels and not taking on new debt—even if that meant cutting back on spending.

Overall, the poll shows that Americans remain optimistic about the possibilities for reaching their American dream—if only their government could get its act together!

There was a small ray of optimism on that possibility when Congressman Chris Van Hollenback (D-Maryland)—a member of the deficit-reduction supercommittee—spoke about the progress being made to come to agreement before December 23, when lack of agreement will trigger automatic spending cuts in the 2013 budget.

He stresses that the committee is not practicing brinkmanship, and said he is "absolutely convinced that all 12 members of the group are working hard to reach agreement."

But he refused to handicap the odds of success, noting only that the committee would have to come to some agreement early in November to give the Congressional Budget Office time to "score" the proposed savings.

Finally, the real issue surfaced again: What should consumers do, and what will they do if Congress cannot come up with an agreement to deal with the budget deficit?

It is absolutely clear to me from this extensive Heartland Monitor poll that consumers who could spend have learned a life-changing lesson about the dangers of debt. And consumers who might be inclined to get the housing market moving again are buried under the weight of underwater mortgages

Unless our political process can create confidence in the future, while dealing with our current serious economic problems, the outlook for future economic growth remains dim. And it is only through growth that we can ultimately deal with our mountain of debt. That’s the Savage Truth!