It's little wonder that the American consumer is tapped out. Between 1980 and 1989, household debt grew about 50 percent faster than disposable income to a hefty $3.5 trillion. This may be the debt problem most worth worrying about. Consumers generate roughly two-thirds of the economy's spending. If buying suddenly collapses -- as people concentrate on repaying debts -- the current slowdown will quickly worsen.

The first signs of this have already appeared. Worried about their debts, consumers started to curb borrowing and spending in 1989. Car sales are running 11 percent below 1988 levels. Pre-Christmas retail sales are sluggish. But the rise and fall of consumer credit is a standard feature of business cycles, and the crucial question is whether the retrenchment now will be especially severe.

Contrary to popular wisdom, Americans are not a nation of credit junkies. Most people do not deliberately overborrow. What mainly fosters overuse is the eager merchandising of loans, and there's no doubt that credit got easier in the 1980s. Maturities on car loans were extended to 60 months; in the early 1970s, the maximum was typically 36 months. Home-equity loans (essentially second mortgages) exploded. The relentless growth in credit cards continued. In 1988, they totaled 860 million, or about five for every American over 20.

Economists such as Robert Pollin of the University of California (Riverside) predict trouble. Among the poorest two-fifths of Americans, rising debt will further increase personal bankruptcies, he says in a study for the Economic Policy Institute in Washington. For wealthier families, declining home values and stock prices will make them feel poorer -- and therefore make their debts feel heavier. They will react, he suspects, by restraining spending.

All the 1980s' spending and borrowing have also left many families semi-glutted with new cars, VCRs and appliances, warns Susan Sterne of Economic Analysis Associates in Stowe, Vt. There's little immediate need to buy more. Sterne believes that consumer spending is now declining and will rebound only weakly in mid-1991. A recession has started, she says, and will be a bit worse than the mild downturn commonly forecast.

But examined differently, the consumer borrowing boom looks a little less fearsome. What really pinches people are monthly payments of interest and principal. And debt service hasn't risen nearly as rapidly as total debt. In 1990, Sterne estimates debt service at 13.8 percent of disposable income -- not up that much from the recent low of 11.5 percent in 1983. The main reason for this is that much of the 1980s' new debt came as mortgages or home-equity loans. Typically, these loans have lower interest rates and longer maturities than credit-card or installment debt.

What's also important to grasp is that the greatest increases in consumer loans have occurred among the middle class and well-to-do, not the poor. The richest two-fifths of Americans account for about three-quarters of all consumer credit, Pollin estimates. The poor have always needed credit and have often had to accept it at exorbitant rates. Just after World War I, a fifth of families used credit, and the poor used it most, reports Martha Olney, an economic historian at the University of Massachusetts (Amherst). In the 1920s, effective interest rates on installment loans often exceeded 30 percent.

The big change since World War II is that the stigma against credit gradually declined among upper-income groups. Borrowing became respectable and even a sign of financial sophistication and personal success. But the more consumer credit became middle-class, the more credit terms were relaxed. Over the decades, down payments and interest rates have declined. Penalties for delinquency and default have weakened. If you defaulted on an installment loan in the 1930s, the finance company simply repossessed whatever you had bought with the loan -- say, furniture -- even if only one payment remained.

"When people started buying things like washing machines with credit cards, you're not going to lose it {if you don't pay}," says Olney. "It lessens the consequences of default."

How consumer debt will now affect the economy depends on the peculiar reaction of two opposing forces: the increase in wealthier borrowers should mean that people can better handle their debts, but the relaxation of credit standards should mean that loans are riskier and that consumers are more vulnerable. Some sloppy lending practices occurred in the 1980s. The telemarketing of home-equity loans is a good example. Banks and other lenders are now tightening credit standards.

Defaults and loan losses will rise. They always do in a slump. Just last week, Citicorp announced higher losses on home mortgages. These inevitable increases are sure to feed today's fashionable fears that the economy may face a general credit crisis, which would trigger a major depression. As unemployment rises -- the theory goes -- more consumers won't meet their loan obligations. The defaults will compound banks' other losses on real estate and business loans. Banks will then reduce lending further, and scarce credit will worsen the economic slump.

Although this could happen, the odds are against it. Only rarely does the economy go into a prolonged free fall. It's easy to mistake distant possibilities for realistic probabilities. For example, the annual foreclosure rate on mortgages is now running at only 0.31 percent of all loans. A doubling of foreclosures would still affect less than 1 percent of total loans. Another favorable factor is that more consumer loans (home-equity loans and variable-rate mortgages) have adjustable interest rates. If interest rates drop in a recession, so will debt repayments.

In general, recessions tend to generate forces for recovery. Not only do interest rates fall, but debts are repaid. Excessive inventories are sold. Inflation abates. This lesson is often forgotten. The mood of economic commentary is now shifting from the view that "we would never have a recession to the opinion that we will never get out of this one," as Sterne says. We need to beware of these mood swings. They usually go to extremes.