PoliSci 101 - Economy Weakens As Wealthy Spend Less

[AZGrizFan]

http://www.azcentral.com/news/articles/ ... l#comments" onclick="window.open(this.href);return false;

WASHINGTON - Wealthy Americans aren't spending so freely anymore. And the rest of us are feeling the squeeze.

The question is whether the rich will cut back so much as to tip the economy back into recession - or if they will spend at least enough to sustain the recovery. The answer may not be clear for months. But their cutbacks help explain why the rebound could be stalling.

The economy grew at just a 2.4 percent rate in the April-June quarter, the government said Friday, much slower than the 3.7 percent rate for the first quarter.

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

These shoppers have retrenched as their investment values have sunk and home values have languished.

In addition, the most sweeping tax cuts in a generation are due to expire in January, and lawmakers are divided over whether the government can afford to make any of them permanent as the federal budget deficit continues to balloon.

President Barack Obama wants to allow the top rates to increase next year for individuals making more than $200,000 and couples making more than $250,000. The wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes.
The Standard & Poor's 500 stock index has tumbled 9.5 percent since its high-water mark in late April.

Home values fell 3.2 percent in the first quarter, according to the Standard & Poor's/Case-Shiller 20-city home-price index.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

Earlier this year, gains in stock portfolios had boosted household wealth. And the rich responded by spending freely. That raised hopes the recovery would strengthen.

No longer. The dizzying plunge on Wall Street in May and June and lingering stock-market turbulence have shrunk Americans' wealth. The Dow fell 10 percent for the April-June quarter. The broader Standard & Poor's 500 index dropped 11.9 percent. And the rich are once again more cautious about spending, economists say.

The affluent went back to tightening their belts in June after months of vigorous showing.

Data from MasterCard Advisors' SpendingPulse showed luxury spending fell in June for the first time since November. The decline followed a solid rise in sales revenue earlier in the spring.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

At the same time, government reports show shoppers as a whole cut back on their spending in both May and June.

You fuckin' donk idiots who can't understand this plainly simple concept shouldn't be allowed to vote.

[blueballs]

It isn't just consumer spending, it is the liquidity that fuels capital for growth, innovation, new business startups, venture capital, etc... That liquidity that would greatly speed the recovery is sitting on the sidelines while the administration and the president figure out how to stick it to those who control that liquidity.

[AZGrizFan]

It isn't just consumer spending, it is the liquidity that fuels capital for growth, innovation, new business startups, venture capital, etc... That liquidity that would greatly speed the recovery is sitting on the sidelines while the administration and the president figure out how to stick it to those who control that liquidity.

The wealthy are the main engine of the economy....and donks are working feverishly to pour sugar in the gas tank.

[Ivytalk]

You'll also see an unprecedented rush by the rich to collect income this year, so they won't have to pay the confiscatory Obama rates on income and capital gains next year. And the Roth IRA conversions this year will be epic in scope.

Suck it, Barry Sortero!

[Skjellyfetti]

George W. Bush's greatest (only?) domestic policy accomplishment is about to be worthless.

Awesome. Worst President in modern history.

[houndawg]

http://www.azcentral.com/news/articles/ ... l#comments

WASHINGTON - Wealthy Americans aren't spending so freely anymore. And the rest of us are feeling the squeeze.

The question is whether the rich will cut back so much as to tip the economy back into recession - or if they will spend at least enough to sustain the recovery. The answer may not be clear for months. But their cutbacks help explain why the rebound could be stalling.

The economy grew at just a 2.4 percent rate in the April-June quarter, the government said Friday, much slower than the 3.7 percent rate for the first quarter.

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

These shoppers have retrenched as their investment values have sunk and home values have languished.

In addition, the most sweeping tax cuts in a generation are due to expire in January, and lawmakers are divided over whether the government can afford to make any of them permanent as the federal budget deficit continues to balloon.

President Barack Obama wants to allow the top rates to increase next year for individuals making more than $200,000 and couples making more than $250,000. The wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes.
The Standard & Poor's 500 stock index has tumbled 9.5 percent since its high-water mark in late April.

Home values fell 3.2 percent in the first quarter, according to the Standard & Poor's/Case-Shiller 20-city home-price index.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

Earlier this year, gains in stock portfolios had boosted household wealth. And the rich responded by spending freely. That raised hopes the recovery would strengthen.

No longer. The dizzying plunge on Wall Street in May and June and lingering stock-market turbulence have shrunk Americans' wealth. The Dow fell 10 percent for the April-June quarter. The broader Standard & Poor's 500 index dropped 11.9 percent. And the rich are once again more cautious about spending, economists say.

The affluent went back to tightening their belts in June after months of vigorous showing.

Data from MasterCard Advisors' SpendingPulse showed luxury spending fell in June for the first time since November. The decline followed a solid rise in sales revenue earlier in the spring.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

At the same time, government reports show shoppers as a whole cut back on their spending in both May and June.

You ****' donk idiots who can't understand this plainly simple concept shouldn't be allowed to vote.

I understand it; it doesn't affect me. Good luck.

[ASUG8]

George W. Bush's greatest (only?) domestic policy accomplishment is about to be worthless.

Awesome. Worst President in modern history.

So you're saying that the worst President in modern history is about to have his best accomplishment rescinded by Obama? Hate to use the transitive property here, but I don't think that casts terribly positive light on the head socialist in office currently - at least, not among those of us who believe in democratic systems.

[houndawg]

George W. Bush's greatest (only?) domestic policy accomplishment is about to be worthless.

Awesome. Worst President in modern history.

So you're saying that the worst President in modern history is about to have his best accomplishment rescinded by Obama? Hate to use the transitive property here, but I don't think that casts terribly positive light on the head socialist in office currently - at least, not among those of us who believe in democratic systems.

Rescinded? I thought the tax cuts expired on their own?

[ASUG8]

So you're saying that the worst President in modern history is about to have his best accomplishment rescinded by Obama? Hate to use the transitive property here, but I don't think that casts terribly positive light on the head socialist in office currently - at least, not among those of us who believe in democratic systems.

Rescinded? I thought the tax cuts expired on their own?

Ignored, allowed to expire - pretty much the same impact.

[kalm]

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

It would be helpful if the article cited some "economists" other than the chief economist for the highly respected ICSC (who obviously has no axe to grind).

And what about the the other 86% of consumer spending? Consumer spending is roughly 2/3 of GDP, but the 14% of that 2/3's is what really matters?

The engine that drives the economy is wages. Since higher paying wages are driven by manufacturing jobs, blueball's point about liquidity is far more interesting than this article.

Oh, and btw, did consumer spending (including the wealthy) go up or down after Clinton raised taxes?. Did the economy go deeper into recession?

Swing and a miss Z.

[Skjellyfetti]

Rescinded? I thought the tax cuts expired on their own?

Ignored, allowed to expire - pretty much the same impact.

Not Obama's fault Bush and his Republicans failed at their effort to make the tax cuts permanent.

[ASUG8]

Ignored, allowed to expire - pretty much the same impact.

Not Obama's fault Bush and his Republicans failed at their effort to make the tax cuts permanent.

...but completely within his and his party's power to renew them......

[D1B]

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

It would be helpful if the article cited some "economists" other than the chief economist for the highly respected ICSC (who obviously has no axe to grind).

And what about the the other 86% of consumer spending? Consumer spending is roughly 2/3 of GDP, but the 14% of that 2/3's is what really matters?

The engine that drives the economy is wages. Since higher paying wages are driven by manufacturing jobs, blueball's point about liquidity is far more interesting than this article.

Oh, and btw, did consumer spending (including the wealthy) go up or down after Clinton raised taxes?. Did the economy go deeper into recession?

Swing and a miss Z.

Nice Kalm, as usual. Z a fucking lizard brained cobra, striking indiscriminately at everything that moves, including a lawmower. Blueballs (and Baldy) on the other hand is motherfucking killing machine, half super computer, half thresher shark. Dude always is on top, like you. Enjoy reading both your shit.

[ATrain]

Clinton's policies coincided with the dot-com bubble, a paradigm shift that was far more significant than any tax policy. The bubble burst before Bush 43 got into office, as the new millionares realised just what Clinton's tax policies meant to their wallets and pocketbooks. Also in the meantime, the fed employed quantitative easing to spur inflation and economic development.

Bush gets into office with a budget surplus, and enacts tax cuts. 9/11 happens, spurring on the recession, but the economy recovers as America goes to war against Afghanistan. Republicans, drunk with power controlling DC's 3 most powerful houses, forget their "Contract with America," that led to a alanced budget and cut taxes more than what the government could afford, and also taking on another war in Iraq, while the fed began quantitative tightening to control inflation as the economy began making a speedy recovery. The Euro becomes stronger than the dollar as trade and government deficits increase, and oil prices go way up. In response to rising interest rates from the fed, banks begin making irresponsible people homeowners with sub-prime loans in order to keep trying to grow their portfolio and profits. American consumers blindly follow their government's lead and run up credit card debt irresponsibly and the savings rate goes into the negative. Gas prices rise.

Fast forward to 2008, the economy crashes as it corrects its overvaluation and the overinflation. The dollar regain strength, oil and gas prices drop significantly. TARP is passed to bail out the irresponsible big banks, and the fed drops interest rates to near 0% to try and grow the economy. Obama gets elected, passes a stimulus package which allows the economy to jump up a little bit. Dollar goes down again, gas prices go up and unemployment remains relatively higher since Obama's election while the stock market retains it's overvaluation. New financial laws are passed that hurt smaller and more responsible community banks more than the big banks that should've been allowed to fail. With tax cuts about to expire and no significant amount of new millionares that won't have any idea what it'll do, the economy will contract again.

My point is, politicians from both the Bush and Obama presidencies have been absolutely clueless about how to sustain a growing economy.

[AZGrizFan]

Z a fucking cobra, striking indiscriminately at everything that moves

That's right, Iceman. I AM dangerous.

[Grizalltheway]

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

It would be helpful if the article cited some "economists" other than the chief economist for the highly respected ICSC (who obviously has no axe to grind).

And what about the the other 86% of consumer spending? Consumer spending is roughly 2/3 of GDP, but the 14% of that 2/3's is what really matters?

The engine that drives the economy is wages. Since higher paying wages are driven by manufacturing jobs, blueball's point about liquidity is far more interesting than this article.

Oh, and btw, did consumer spending (including the wealthy) go up or down after Clinton raised taxes?. Did the economy go deeper into recession?

Swing and a miss Z.

Damn, looks like Z's the one who has to give up his suffrage rights.

[AZGrizFan]

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans - those earning at least $207,000 - are buying less. They account for about 14 percent of total spending.

"It isn't a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

It would be helpful if the article cited some "economists" other than the chief economist for the highly respected ICSC (who obviously has no axe to grind).

And what about the the other 86% of consumer spending? Consumer spending is roughly 2/3 of GDP, but the 14% of that 2/3's is what really matters?

The engine that drives the economy is wages. Since higher paying wages are driven by manufacturing jobs, blueball's point about liquidity is far more interesting than this article.

Oh, and btw, did consumer spending (including the wealthy) go up or down after Clinton raised taxes?. Did the economy go deeper into recession?

Swing and a miss Z.

Funny. Comparing the '90's to what we're going through now. That's funny. There are so many more factors in play here...but I realize you'd rather keep it simple.

[OL FU]

In terms of consequences, there are six main findings. First, tax changes have very large effects
on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP
lowers real GDP by roughly three percent. Our many robustness checks for the most part point to a
slightly smaller decline, but one that is still well over two percent. Second, these estimated effects are
substantially larger than those obtained using broader measures of tax changes, such as the change in
cyclically adjusted revenues or all legislated tax changes. This suggests that failing to account for the
reasons for tax changes can lead to substantially biased estimates of the macroeconomic effects of fiscal
actions. Third, investment falls sharply in response to exogenous tax increases. Indeed, the strong
response of investment helps to explain why the output consequences of tax changes are so large. Fourth,
the output effects of tax changes are highly persistent. The behavior of inflation and unemployment
suggests that this persistence reflects long-lasting departures of output from its flexible-price level, not
large effects of tax changes on the flexible-price level of output.

Christine Romer, March 2007

Currently Barrack Obama's Chair of the Council of Economic Advisers

[AZGrizFan]

In terms of consequences, there are six main findings. First, tax changes have very large effects
on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP
lowers real GDP by roughly three percent. Our many robustness checks for the most part point to a
slightly smaller decline, but one that is still well over two percent. Second, these estimated effects are
substantially larger than those obtained using broader measures of tax changes, such as the change in
cyclically adjusted revenues or all legislated tax changes. This suggests that failing to account for the
reasons for tax changes can lead to substantially biased estimates of the macroeconomic effects of fiscal
actions. Third, investment falls sharply in response to exogenous tax increases. Indeed, the strong
response of investment helps to explain why the output consequences of tax changes are so large. Fourth,
the output effects of tax changes are highly persistent. The behavior of inflation and unemployment
suggests that this persistence reflects long-lasting departures of output from its flexible-price level, not
large effects of tax changes on the flexible-price level of output.

Christine Romer, March 2007

Currently Barrack Obama's Chair of the Council of Economic Advisers

apparently they're not listen to her "advice".

[OL FU]

Christine Romer, March 2007

Currently Barrack Obama's Chair of the Council of Economic Advisers

apparently they're not listen to her "advice".

the interesting point is that the tax increase position is nothing more than class warfare politics. Forget what Geithner or others say, they know that the tax increase will slow an already slow economy. Therefore there is only one reason to do it now and that is politics. Otherwise, they would say let the economy get stronger and then we will pursue a higher tax on higher incomes. I read somewhere that the tax increase might raise $50B dollars compared to a $1.5T deficit. So the logic is we will spend $800B and hope for the best on unproven economics and bust the budget. But we are going to collect our extra $50B in tax which we know will have a negative impact on the economy which will then reduce tax collections farther.

[houndawg]

Clinton's policies coincided with the dot-com bubble, a paradigm shift that was far more significant than any tax policy. The bubble burst before Bush 43 got into office, as the new millionares realised just what Clinton's tax policies meant to their wallets and pocketbooks. Also in the meantime, the fed employed quantitative easing to spur inflation and economic development.

Bush gets into office with a budget surplus, and enacts tax cuts. 9/11 happens, spurring on the recession, but the economy recovers as America goes to war against Afghanistan. Republicans, drunk with power controlling DC's 3 most powerful houses, forget their "Contract with America," that led to a alanced budget and cut taxes more than what the government could afford, and also taking on another war in Iraq, while the fed began quantitative tightening to control inflation as the economy began making a speedy recovery. The Euro becomes stronger than the dollar as trade and government deficits increase, and oil prices go way up. In response to rising interest rates from the fed, banks begin making irresponsible people homeowners with sub-prime loans in order to keep trying to grow their portfolio and profits. American consumers blindly follow their government's lead and run up credit card debt irresponsibly and the savings rate goes into the negative. Gas prices rise.

Fast forward to 2008, the economy crashes as it corrects its overvaluation and the overinflation. The dollar regain strength, oil and gas prices drop significantly. TARP is passed to bail out the irresponsible big banks, and the fed drops interest rates to near 0% to try and grow the economy. Obama gets elected, passes a stimulus package which allows the economy to jump up a little bit. Dollar goes down again, gas prices go up and unemployment remains relatively higher since Obama's election while the stock market retains it's overvaluation. New financial laws are passed that hurt smaller and more responsible community banks more than the big banks that should've been allowed to fail. With tax cuts about to expire and no significant amount of new millionares that won't have any idea what it'll do, the economy will contract again.

My point is, politicians from both the Bush and Obama presidencies have been absolutely clueless about how to sustain a growing economy.

Thanks the "free market" synopsis.

[BDKJMU]

Christine Romer, March 2007

Currently Barrack Obama's Chair of the Council of Economic Advisers

apparently they're not listen to her "advice".

Not anymore, as she has decided to resign:
http://hotlineoncall.nationaljournal.co ... _leave.php" onclick="window.open(this.href);return false;

[OL FU]

I realize this isn't the right thread but did anyone see Geithner on Meet the Press a few weeks ago when he explained why the upper bracket tax rate decreases should expire. He used the Warren Buffett pays a lower percentage in taxes than his secretary argument. (First problem, people use ridiculous examples to prove their point. Everyone who makes over $250,000 is not Warren Buffett or Bill Gates. But I digress.) So he goes on to say that it isn't fair and the tax bracket needs to increase. Five minutes later he states his opposition to increasing taxes on dividend and capital gains above 20% which might do harm to investments growth. So let's see we need to raise the taxes on the upper brackets for income taxes because Warren Buffett pays a lower percentage of his income in taxes than his secretary, but we need to keep capital gains and dividend tax low which, of course, are substantially all of the taxes that Buffett pays.

One of the reasons I don't the Dick Gregory does a good job. He never should have got by with that line of reasoning.

Either Geithner is stupid or he thinks we are. I know which one I am picking.