The Rich Have Stopped Spending And That Has Tanked The Economy

[IronLionZion]

https://www.npr.org/2020/06/17/878946307/the-rich-have-stopped-spending-and-thats-tanked-the-economy



The wealthiest American households are keeping a tight grip on their purse strings even as their lower-income counterparts are spending a lot more freely when they emerge from weeks of lockdown. That decline in spending by the wealthy could limit the whole country's economic recovery.

Researchers based at Harvard have been tracking spending patterns using credit card data. They found that people at the bottom of the income ladder are now spending nearly as much as they did before the coronavirus pandemic.

"When the stimulus checks went out, you see that spending by lower-income households went up a lot," said Nathan Hendren, a Harvard economist and co-founder of the Opportunity Insights research team.

However, the wealthy are not matching them. "For higher-income individuals, that spending is still way far off from where it was prior to COVID and it has not recovered as much," Hendren said.

That's potentially crippling because consumer spending is a huge driver of economic activity. In fact, so much of the country's economy depends on shopping by the top income bracket that the wealthiest 25% of Americans account for fully two-thirds of the total decline in spending since January.

Our economy needs to trickle up from lower income consumers. Not down as rich GOP politicians keep telling us.

[BeyondGeography]

1. Maybe they need another tax cut

[Under The Radar]

2. 40 million unemployed probably more of a factor

[hunter]

12. My wife and I are sending money we don't spend on movies, eating out, etc., to the food bank.

We've also been helping out relatives who have seen their work evaporate because of this virus. We're lucky that's not us. Our adult children are lucky as well since their work is largely accomplished over the internet. The shift from working at the office to working from their homes wasn't traumatic; no worse than cats or dogs getting between them and their web cams.

I've worked at home for a long time, my wife is working at home now one or two days a week, which is new to her. Alas, she is a front line medical professional and still has to touch many people who may be infected with this virus. When she gets home from work she throws her clothing and stuff in the "biohazard" bin and heads straight for the shower.

People who are unemployed because they worked in these movie theaters, restaurants, etc., are getting food at the food bank. They are sheltering with, or they are being subsidized by, people who haven't been unemployed by the virus.

It's the same food and shelter either way so that's a negligible factor so far as "the economy" goes. People have to eat, people have to have shelter. The people who are just scraping by will continue to scrape by, unemployed or not. They are not "the economy."

The impact to the economy comes when some very affluent person indefinitely postpones a seven day luxury class Disney World vacation, shopping for a new boat or car, flying to Paris, etc..

My wife and I haven't had a credit card for many years now, not since we were crushed by medical bills and almost lost our house. Yes, we did have "good" health insurance then, and we do now again, but it was no fun running a COBRA to the bitter end.

It took all the fun out credit cards after I foolishly brought one to a Hospital Emergency Room. I'll never forget that, thus I am not party to this credit card statistic.

[Under The Radar]

13. Admirable, you are so correct, default rates should be alarming for banks right now

[Phoenix61]

3. Those at the bottom are spending on what they

need. People at the top shop for fun. A lot of them have bailed from the cities and are at their vacation homes or out of country. It’s why trickle down economics doesn’t work (one reason).

[bucolic_frolic]

4. Wealthy people use assets to protect their own wealth

They only spend from the profits that flow through their businesses. They are concerned about inflation, the stock market, and physical assets - their homes and precious metals.

[Midnight Writer]

5. This is exactly why tax cuts for the rich don't help. Working people spend every dime.

By increasing available capital to working folk, through pay raises, benefits, affordable health care, etc., more money goes into driving the economy forward.

Giving money to the rich just means the rich accumulate more money, with relatively little economic stimulus value.

[Newest Reality]

6. I am very concerned.

Is there anything more we can do to help the wealthiest. I mean, our wealth has been gushing up to them in their giant, TaxBreak Hoover, but maybe that's just not enough?

Maybe we can sell all of our stuff and send the money to them? Perhaps several GoFundMe's could be started to get an emergency fine wine and expensive cheese fund going right away?

I also imagine that, if we all sell our blood plasma, skip meals and forgo any "poor people" luxuries, we could somehow manage to compassionately quell their addiction, I mean economic misery to some degree. This will have to be a national effort and it might be time for a No Taxes for the Wealthy, (at all) bill to be written and passed. It's a dire emergency for sure, and hey, we are more like cattle, so what do we matter?

Important people must be treated importantly and with the obvious priorities observed. No time to waste!

[customerserviceguy]

7. If the only part of the economy to tank

was the fashion-and-frills industry, that's fine by me. No one needs to spend hundreds of dollars for a purse.

[ProfessorGAC]

9. Don't Forget $2,000-3,000 Shoes

And that's not the Jewell encrusted mega shoes.
Just shoes in a box.
I saw a pair of men's low instep laced, natural tan shoes. $2,999. If those aren't coming off the shelves, that's fine.

[customerserviceguy]

14. OMG!

I get my shoes from Big 5 sporting goods, when I'm out in the Pacific Northwest, about $30 a pair. Wow, can people piddle away money!

[unblock]

8. this is why giving money to the poor is far better at stimulating the economy

giving money to the rich can be helpful, but only in very specific situations involving a shortage of investment capital, which isn't usually the problem.

each dollar given to the rich adds a fraction to the economy because some they save, some they send overseas.

each dollar given to the poor adds around more than two dollars to the economy because they spend all of it, and mostly locally, where it is then spent again.

[Blue_true]

15. The correct term is not "giving more money to the poor".

That sounds like working poor people are not busting their asses for meager salaries. The correct term is pay people more for helping to produce wealth, accept that paying one's fare share of taxes not only help's society, but actually make rich people richer as people spend money of the products and services that rich people make or provide.

[unblock]

16. Agreed, my shorthand was sloppy

I'll go one further -- rich people hardly make or produce anything. The rest of us do.

The vast majority of further wealth rich people accumulate is from charging economic rents on their assets and leveraging their power and status.

Their most productive contribution is innovation and distribution, not invention or manufacturing.

[Blue_true]

18. Agree with all, in particular the last sentence.

Money dominates innovation and distribution. Invention is not the same as innovation, invention is a clean break to something new, innovation is better tweaks off a defined base.

While I agree with the gist of your last sentence, my argument is that money controls all four, and therein lays society's problem. Money can fund many tweaks that allow it to control industries. Money controls distribution, a person can have invented the greatest new thing, but unless money gets behind that, the most likely outcome is failure and obscurity, there are periodic exceptions to that, where an invention is so earth shattering that the inventor can muscle his or her way into markets.

[unblock]

19. If you want to get depressed about it, read up on the invention of intermittent windshield wipers

Genius invention, every driver who's ever been in the rain loves it. But how to make money off it? You can't without agreement from the car makers who control the only platform where it has value.

They used his invention and it helped sell millions of cars and he couldn't get paid for over a decade. And this engineering genius had to spend his time as an amateur litigator to get what he got.

[House of Roberts]

11. I'm not spending much at all.

"...even as their lower-income counterparts are spending a lot more freely..."

Until I hear more unemployment is in the pipeline, or I get a direct-hire job, I'm hanging onto every dime I can. Groceries are starting to be a little cheaper, and gas is still low, but I have nowhere to go.

I mow my ex's yard every couple of weeks, but even then the trip gets combined with a trip to get groceries.

[roamer65]

17. Higher taxes on the wealthy.

Return to the top rate from 1982.

50 pct.

[erpowers]

20. I Am Not Buying This Talking Point

I am not buying the idea that the economy is struggling because rich people have stopped spending. I think the economy is struggling because middle class people have less money to spend.

[IronLionZion]

21. That is the point

The wrong people got bailed out with trillions in stimulus