General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWe're Spending Down Our Savings to Prop Up Our Economy
http://www.motherjones.com/kevin-drum/2012/04/were-spending-down-our-savings-prop-our-economyConsumer spending can increase if (a) wages go up, (b) borrowing goes up, or (c) savings are spent down. Jed Graham reports that last quarter it was Option C that saved the day:
'U.S. households saved just 3.9% of disposable income in Q1, the lowest since the last cycles peak in Q4 2007. In fact, the decline in saving from 4.5% in Q4 financed half of all personal consumption gains in Q1, adding one full percentage point to real GDP growth.'
Needless to say, saving rates can't decline forever, and borrowing isn't likely to increase much either. That leaves disposable income as our main hope for future economic prosperity, and with job growth picking up, so should disposable income. So why isn't it?
This time, government policy is the main culprit. Real disposable income growth has trailed real private wage growth by nearly 3% the past two quarters as fiscal stabilizers have gone into reverse....The drag on disposable income comes, in large part, from three factors: flat total wages for government workers; roughly flat government social benefits; and a normal cyclical boost in income and payroll tax payments (up a combined $151 billion from Q1 2011).
....The bottom line is that fiscal policy is leaning too hard against recovery based on present conditions. The question is whether such austerity is avoidable right now amid trillion-dollar deficits and pressure from the ratings agencies.
Oh, I think it's avoidable. The problem isn't either short-term deficits or Standard & Poors. It's an excess of politicians who don't really care much about the real-world economy. There's no point in trying to blame anyone else.
orpupilofnature57
(15,472 posts)into a vacuum.
HiPointDem
(20,729 posts)I think the goal is to take money from the masses to give to the rich. That's what the cutbacks in public jobs, the cutbacks in public spending, the global austerity program is all about.
It's deliberate policy.
sendero
(28,552 posts)... but since we are spending 40% more than we are taking in (and that could well include only "on the books" spending, there is a lot of prestidigitation going on with the numbers) just how much more do you think we can spend?
Should we just print a few trillion more dollars and expect the world to continue to honor our dollar as the worlds reserve currency?
I just have a fundamental disagreement with folks that think there is some easy way out of the mess we are in. There is not. At its root the problem is that we don't produce much any more and the "service economy" idea is an epic fail.
We can and should raise taxes on the rich but that will help only a little.
So what is the answer?
Egalitarian Thug
(12,448 posts)Give China 20 more years and they could step in, but right now they can't and nobody trusts them enough to make that leap. India lacks the natural resources and social stability, and the EU is an economic basket.
Like the time honored pseudo-fear that China can call in their loans, this is just another manufactured lie thrown out there to distract us from what they're actually doing.
sendero
(28,552 posts).... 20 years, it is already happening. The dollar is getting cut out of a lot of oil trading already.
If you really think that you can print money into infinity with no consequence, I have a bridge to sell you.
Egalitarian Thug
(12,448 posts)it will remain as strong when they inevitably float it? Would you be comfortable with your nation trying its entire monetary system to the Chinese government?
Forgot the conclusion; So, "printing money" is not yet the crippling issue you and the the vultures try to make it out to be. Have you ever heard the saying, "when the U.S. sneezes, the world catches cold"? It's just as true today as it has been for the last half century. The next decade or two is our very last chance to get this nation back on its feet, and all this pseudo-economic BS serves only to limit alternatives and to hinder that process.
canoeist52
(2,282 posts)They want us to spend and save at the same time? It's always our fault either way. How about blaming the 10 major corporations, instead of the government, for holding back wages? Our government is only at fault for not breaking up and regulating the hell out of these conglomerates.
nanabugg
(2,198 posts)He was correct. Put simply, here is why:
People's greatest investment and most important to them is a roof over their head.
When people can live in affordable housing (whether renting or buying) they feel comfortable and spend money on other things.
It's the "other things" that keep the economy going because the sheer numbers of "things" that have to be made in order to meet demand of buying things (household items, clothes, accessories, computers, phones, vacations, and all the things related....lots of stuff!) Sure, a lot of stuff is made in other countries but the stuff is sold here creating jobs in distribution, sales, advertising etc.
If the "rent is too damn high" spending on other stuff virtually stops except for the very wealthy and they simply do not have the numbers and can't spend enough to keep an economy booming. It is simply an inverse pyramid with households of working citizens on the top as far as importance to the economy. The wealthy don't spend money, they invest money, and the money simply either grows or rots in the banks. The wealthy have lately become irritated with the rest of us so they don't care if they over charge small businesses for rent, and its the rent costs that are driving many small businesses out of business...not taxes!!! Check it out is you don't believe me. Find out why so many of those strip mall stores and mega mall stores keep closing shop.
It's really not all that complicated. THE RENT IS TOO DAMN HIGH!!
RobertEarl
(13,685 posts)The economy rides on the back of the working person. The least of our workers is the first when it comes to feeding the economy.
If it wasn't for Social Security recipients spending their cash this economy would have gone totally flat.
And in that regard what the Democrats did when they cut SS payroll taxes just recently, was de facto SS spending. Giving a boost to the economy via "lowering the rent" charged to working people.