Who cares how the rich spend their money? Well, perhaps everyone should these days. Consumer spending accounts for roughly two-thirds of U.S. gross domestic product, or the value of all goods and services produced in the nation. And spending by the rich now accounts for the largest share of consumer outlays in at least 20 years. By contrast, the bottom 80% by income account for 39.5% of all consumer outlays.
What is surprising is just how much or our consumer economy is now dependent on the rich, and how that share has increased as the U.S. emerges from recession. In the third quarter of 1990, the top 5% accounted for 25% of consumer outlays. That held relatively steady until the mid-1990s, when it started inching up past 30%. It dipped in 2003 and again in 2008, but started surging in 2009 amid the greatest bull market rally in history, with the Dow Jones Industry Average rising nearly 50% in the last nine months of the year.
Mark Zandi, chief economist for Moody's Analytics, cites two main reasons for the increase. First, the wealthy panicked during the financial crisis and stopped spending. When markets rebounded, they came out of their shells and started spending again. "I think that pent-up demand was unleashed," he said. "It was an unusually high rate of spending."In fact, the recent spending of the wealthy may be unsustainable. Their savings rate has gone from more than 26% in 2008 to a negative 7% in the first quarter of 2010, according to the Moody's Analytics data. They still have lots of savings. But the massive draw on that in the past two years is unlikely to continue at the same pace.
So, the rich have been SO maligned by leftwingers, including the Obama Administration (I guess his wife's trip to Spain doesn't count as "something only the rich do"), that people could see this information and just PILE IT ON THE RICH! But, CAN WE? What's WRONG with people working hard and investing, spending, playing $?
Is this the time to tax MORE? Is this the time to make vulnerable those people who hire and buy? (To say nothing about their PAYING MOST OF THE TAXES, of course.)
"I think we're already seeing a slowdown in spending by this group," Mr. Zandi says. Yes! Why SHOULD they, how CAN they spend when they can't depend on the economy and hear nothing but HIGHER TAXES COMING?