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Drudge Retort: The Other Side of the News
Wednesday, June 17, 2020

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.

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I suspect the rich are staying home, they aren't traveling, they aren't eating in expensive restaurants, going to expensive clubs, they aren't taking cruises. So now I can say, I'm living life as a rich lady....except for the hours I'm at work but when I'm home I stay there.

#1 | Posted by danni at 2020-06-17 01:21 PM | Reply | Newsworthy 1

Basic economic theory (and common sense) dictates that lower income people spend because they have to, upper income people spend because they want to.

#2 | Posted by leftcoastlawyer at 2020-06-17 02:08 PM | Reply | Newsworthy 3

The rich need:

Petroleum products
Utilities
Clothes
Insurance
Food
Transportation
Healthcare
Hardware/software/games/broadband and accessories for computing
Entertainment
Sports and exercise

#3 | Posted by LesWit at 2020-06-17 08:53 PM | Reply | Funny: 1

They found that people at the bottom of the income ladder are now spending nearly as much as they did before the coronavirus pandemic.

Did they, really? By definition, lower-income people are spending much higher proportion, if not all, of their income for essential basic needs and necessities - rent / shelter, utilities, food, clothes, transportation etc.

That's called research? That's Econ101. "Rich" tanked the economy? How many middle class people who, again, spend a higher percentage of their income on some discretionary expenditures than rich after the basics are taken care off, have been laid off and couldn't afford discretionary spending any more, while rich have still been buying and selling multimillion homes and $100M art pieces?

The whole parts of the economy (like leisure and non-essential farming, manufacturing, education and other production has stopped dead in its tracks) but garbage "research" is still going on.

Shame on Harvard and NPR for promoting this "research."

#4 | Posted by CutiePie at 2020-06-18 12:20 AM | Reply

The rich have been tanking the economy since 1975.

#5 | Posted by snoofy at 2020-06-18 01:02 AM | Reply | Newsworthy 1

Shame on Harvard and NPR for promoting this "research."

#4 | POSTED BY CUTIEPIE

Why?

Think outside the box a bit. Go beyond the stated conclusions.

What this is saying is that our economy is way way worse than we thought. It's apparently so dependent on decadent, frivolous consumerism that even with the core 80% (more?) of the population spending the same because their survival depends on it it still is not enough to tread water.

Our economy is so hollowed out by excess and greed it can't be supported and maintained by the majority of the country maintaining their ways.

That's an extremely valuable insight and well worth the research that was done to bring it to NPR for reporting to the people.

#6 | Posted by jpw at 2020-06-18 02:11 AM | Reply | Newsworthy 4

#6 | Posted by JPW at 2020-06-18 02:11 AM

Think outside the box a bit. Go beyond the stated conclusions.

I usually do, but stated conclusions were exactly the point of the research and article, and on top of that they were based on data which is upside down, i.e., cause and effect were reversed (as I will show) which makes this research is even worse than useless.

"The Rich Have Stopped Spending And That Has Tanked The Economy" - that's right off the bat, in the title and through the article, so that was the main conclusion that research wanted and made it a point to make. IOW, the "research" was only there to support the original premise / conclusion, so they tried to fit the data to it, and made a horrible job of that, too.

What this is saying is that our economy is way way worse than we thought.

That's a given, only it's not worse than we thought, it's worse than the usual cheerleaders, in government and media, are telling us it is - but we can see that from standard economic data, not that there is anything about it in the article - it's not the point of this "research" as they made it obvious.

e.g., 30% of people have missed mortgage / rent payments in June alone - no, things are far from great, but that's not what research is trying to prove.

... even with the core 80% (more?) of the population spending the same
... maintained by the majority of the country maintaining their ways.

That's not the number they could possibly mean by "people at the bottom of the income ladder."

It's accepted that 70% of the GDP ("economy") is driven by consumers, then 30% is business financial services, manufacturing and B2B services not directly involving the consumer - much of both stopped functioning normally, i.e., this is not a demand-driven recession (people still wanted to consume services), it's a supply-driven recession - transactions and services people and/or businesses usually consume or exchange in, were simply shut down.

Here is one example of upside-down data in the research : FTA : ... before the pandemic were spending a significant chunk of that going to nice restaurants, the theater, or traveling and staying in nice hotels."

It's not that "rich" (they are for some reason defined as whopping 25% of population) got greedy and didn't want to spend this money on nice restaurants or theaters - they couldn't because of lockdowns. And by the way, it's not just specific or limited to the U.S., the same story was everywhere else in the world where lockdowns were the norm... would be interesting to compare this to Sweden or Iceland, for example where lockdowns didn't occur and they tried "herd immunity" experiment which didn't seem to work well, as they now acknowledge.

FTA: "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. - Well, duh! $1200 is not really a "stimulus" for someone "rich" but for someone who lost income it is money that could be spent on necessities.

Then there also needs to be taken into account that sharp drop in the market rendered someone "rich on paper" due to accumulated stock wealth, like in 401(k), IRA or options-based "pension" plan, and/or possibly with a mortgage or student debt and potentially at risk of losing their job would not consider themselves "rich" any more - any financial uncertainty would close the wallets to discretionary spending.
(continued)

#7 | Posted by CutiePie at 2020-06-18 06:00 AM | Reply

#6 | Posted by JPW at 2020-06-18 02:11 AM

(continued)
FTA : It spells trouble for the people who work in those nice restaurants or other service-oriented businesses. Hendren's team found big job losses specifically among workers, many of whom don't make a lot of money but who worked in high-income neighborhoods.

Yes, again, nothing to do with the "rich" (most dine-in restaurants include big chains and family places that cater mostly to middle class, not the very rich) and they were all shut down, and many (current estimates are 25% to 50%) will not survive. Some exist on takeouts, delivery and pickups, but may not last beyond 60 days. Most high-end restaurants are still shut as there is no economic sense for them to operate at less than 85% capacity.

FTA : That makes this very different from an ordinary recession, when spending on higher-touch services doesn't dry up so quickly.

Sure, but we already knew that, but it's no fault of the "rich" not wanting to spend money who, according to this research, "tanked the economy" - it's just that the nature of the economy itself changed very drastically and very fast, primarily due to the governments' (mostly states, muni and also federal) actions and mandates - not that I blame them, though it might have possibly been handled less heavy-handed or restrictively - maybe a little less NY or CA and little more Sweden, or some different mix, or maybe little less TX and FL and little more CO, or maybe in the U.S. and federalism, it's impossible, therefore the economy's recovery is / will be "uneven" as Fed's chair Powell conceded?

If authors made this research about the changes in "discretionary spending" behavior (on any income level) instead of the "rich" not wanting to spend and thus "tanking the economy" it would be different, because that's where the percentages and the difference between the "essential" and "non-essential" spending shows up - in their data as well as all other data.

But it seems they wanted to make a clumsy point, blaming the "rich" for the problems in economy.

BTW, economy was not that great even before COVID-19, as I posted several times on this site, despite glowing pronouncements about "best economy in generations" or supposedly great unemployment numbers, while the very nature of "gig economy" made those economic numbers unreliable and misleading as was obvious from declining average hours worked, productivity and some other, little more obscure economic indicators.

#8 | Posted by CutiePie at 2020-06-18 06:01 AM | Reply

The Rich have been taking the money
and running to the banks since
Reagan and Trickle Down Economics in
the 1980's. I know, I've lived through
the whole period and have watched it.

That being said, it is pathetically
sad that the GOP have given up (lock, stock,
and barrel) on the Social Contract in America.
It used to be, that the rich (at least some
of them) cared for the rest of us, and
would throw us a bone every now and then.
But w Trickle Down, and the rise of Ayn Randian
philosophy (step on the lesser folk) on the
Right, and with the death of Compassionate Conservatism,
the Social Contract between the Haves and the Have Not's
is dead in this country. Can it be resurrected?
That depends on the rich actually wanting to go through
a bit of pain (in the form of actually paying more taxes)
to help right the American Ship, which has foundered badly.

I'm not going to hold my breath. From what I've seen,
the vast majority of the rich are in it only for themselves.
They have gutted and ruined this country. And the GOP, the,
ultimate enablers and sycophants to the rich, have allowed
them to do so, EVERY STEP OF THE WAY.

It is why I am planning for an ex-pat retirement, and why
I have told my son to look towards Canada and Europe for
possible employment after graduation.

#9 | Posted by earthmuse at 2020-06-18 10:29 AM | Reply

Woah, wait a second. So now people are understanding how trickle down works and that it DOES have an impact on our economy? This is amazing. It's not saying that the rich not spending could cause a slight impact. It's saying that the rich not spending can actually impact our entire economic landscape.

"That depends on the rich actually wanting to go through
a bit of pain (in the form of actually paying more taxes)
to help right the American Ship, which has foundered badly."

For years the Libs have tried to demonize the rich for everything. Now you want to depend on them to right the ship? Please. There isn't one element of human nature that doesn't include some form of grudge defense. Not saying they shouldn't be doing more but based on the discrimination they've received from half of the US citizens, expecting them to love you enough to help your situation is absurd. But none of this matters, trickle down doesn't work, right?

#10 | Posted by humtake at 2020-06-18 12:20 PM | Reply

My son works on yachts for a living, big yachts. He's mentioned to me the amounts on the invoices, the rich spend so much money just maintaining those boats that it just boggles my mind. Don't get me wrong though, I'm glad they do. My son earns a very nice living, his boss is a multi-millionaire. My job is also related to the boating industry as are many people here in Ft. Lauderdale.

#11 | Posted by danni at 2020-06-18 04:17 PM | Reply

"For years the Libs have tried to demonize the rich for everything. Now you want to depend on them to right the ship? Please. There isn't one element of human nature that doesn't include some form of grudge defense. Not saying they shouldn't be doing more but based on the discrimination they've received from half of the US citizens, expecting them to love you enough to help your situation is absurd. But none of this matters, trickle down doesn't work, right"

That was you dumbest post ever. Oh, boo hoo, let's all cry for the rich. Go read or listen to some speeches by FDR and learn how he talked about the, and he, himself, was rich. It is just something we have to do whether or not they like it. Just like we did when FDR was President. We had very little national debt until Ronald Reagan slashed taxes and it has just piled up since. Even Clinton and Obama didn't raise taxes enough, they need to be a maximum marginal tax rate of at least 50% and probably closer to 70% as it was lowered to by Kenned. The rich still got richer just not quite as rapidly as they do today. Jegg Bezos is on a path to become the first trillionaire for crying out loud.

#12 | Posted by danni at 2020-06-18 04:22 PM | Reply

"I'm not going to hold my breath. From what I've seen,
the vast majority of the rich are in it only for themselves.
They have gutted and ruined this country. And the GOP, the,
ultimate enablers and sycophants to the rich, have allowed
them to do so, EVERY STEP OF THE WAY."

Abslutely true and we should thank our supreme court for that. The idea that corporations are people and that money is free speech have destoyed our middle class. The 1$ just buys as many politicians as they need. I'm sure you've heard the suggestion to have members of Congress wear uniform with patches advertising who their owners are on them, like NASCAR drivers do. Of course though the uniforms would have to have very big pockets to hold all the cash they get every day.

#13 | Posted by danni at 2020-06-18 04:26 PM | Reply

"For years the Libs have tried to demonize the rich for everything. Now you want to depend on them to right the ship?"

It's their ship to right.
You'd understand that if you weren't economically illiterate.
Since 1975, practically all the gains in household income have gone to the top 20% of households.

#14 | Posted by snoofy at 2020-06-18 04:32 PM | Reply | Newsworthy 1

Not saying they shouldn't be doing more

Ok.

Then shut up.

#15 | Posted by JOE at 2020-06-18 04:43 PM | Reply

well, the Democrats are the Party of the Rich. so blame the Democrats

#16 | Posted by Maverick at 2020-06-18 05:00 PM | Reply

well, the Democrats are the Party of the Rich. so blame the Democrats

#16 | Posted by Maverick

The dems are the party of rich people who care about their society who vote to raise their own taxes and help the less fortunate. Repubs are the party of rich people who only care about themselves.

#17 | Posted by SpeakSoftly at 2020-06-18 05:16 PM | Reply

#10 | Posted by humtake at 2020-06-18 12:20 PM
So now people are understanding how trickle down works and that it DOES have an impact on our economy?

It's kind of ironic, isn't it? The researchers set out to "prove" that the "rich" (the 25% of population, top quartile!) "tanked the economy" by not spending on discretionary items, by choice (bad, bad rich!) - yet they actually made the case for supply-side economics (since it's a supply-driven recession, unlike mostly demand-driven recessions in the past)... and also that we may be seeing the actual snippet of "John Galt" phenomena (though indirect) - this involves loss of discretionary spending in economy, as well as loss of "essential talent" when people shut down their SMB businesses, or some which we may never know / learn about, as is the case in immigration, for instance - how many first or second/third generation immigrants started small to large businesses employing (some say "exploiting") millions of Americans.

#18 | Posted by CutiePie at 2020-06-18 05:20 PM | Reply

Democrats are the Party of the Rich. so blame the Democrats
#16 | POSTED BY MAVERICK

If you think about it, that means the republicans are even stupider for continuing to support tax cuts on the rich.

Because, they're supporting Democrats.

BushJr and Trump (not to mention Reagan) handed the rich the biggest tax cut presents.

No matter how you spin it, republicans are morons.

#19 | Posted by ClownShack at 2020-06-18 05:22 PM | Reply

I am by no means rich, but I am spending no more than absolutely necessary until things with the virus and the economy settle down, and until after Agent Orange is evicted from the WH.

#20 | Posted by _Gunslinger_ at 2020-06-18 05:59 PM | Reply

Everyone posting here should just hush up. the Job Creators will be by any minute now with great jobs for everyone. Any...minute...now...

#21 | Posted by catdog at 2020-06-18 06:08 PM | Reply

Democrats own the Network News, Hollywood, TV programs, Cable News network, Cable programs, Music (except for country), Sports, Wall Street, Tech Companies, Walmart Companies, Heinz, Warren Buffet (holy batman look what he owns!!), etc....

Democrats are the Party of the Rich

Trump has fought hard to get a "even deal" with China to bring home good UNION JOBS back home. But the Left keeps fighting him, every step of the way. now why do Unions vote Dem? not many do anymore, but the Dems still get the Union money.........more money to feed the Rich Democrats WTF

#22 | Posted by Maverick at 2020-06-18 08:07 PM | Reply

Now follow the money. why do Democrats fight an even trade deal with China?

#23 | Posted by Maverick at 2020-06-18 08:09 PM | Reply

CLOWNSHACK. so you agree the Dems are the party of the Rich. then why do you support the rich?

Tax Cuts? the Dems never have a problem with them..........they say don't, but that is only to pander to the sheep.

#24 | Posted by Maverick at 2020-06-18 08:16 PM | Reply

CLOWNSHACK. so you agree

That Republicans are morons? Absolutely.

That there are more wealthy Democrats than Republicans?

Depends what range we're talking about.

The wealthier one gets the less it is about being in one political party and more about having control of both.

#25 | Posted by ClownShack at 2020-06-18 08:28 PM | Reply

Now follow the money. why do Democrats fight an even trade deal with China?

#23 | Posted by Maverick

Guess you missed the revelation Trump was 'negotiating' with China on behalf of his own reelection interests, not ours as a country.

#26 | Posted by americanunity at 2020-06-18 09:09 PM | Reply

I had no idea that the Walton family were Democrats. I actually find that surprising.

#27 | Posted by REDIAL at 2020-06-18 09:16 PM | Reply

"You'd understand that if you weren't economically illiterate."

You're absolutely adorable.

Maybe wait until you've taken an econ course before you call anyone else out as being economically illiterate.

#28 | Posted by madbomber at 2020-06-19 12:29 PM | Reply

"The Rich Have Stopped Spending And That Has Tanked The Economy" - that's right off the bat, in the title and through the article, so that was the main conclusion that research wanted and made it a point to make. IOW, the "research" was only there to support the original premise / conclusion, so they tried to fit the data to it, and made a horrible job of that, too.

You're conflating the headline of a mass media article with the headline of the actual research article.

That's a given, only it's not worse than we thought, it's worse than the usual cheerleaders, in government and media, are telling us it is - but we can see that from standard economic data, not that there is anything about it in the article - it's not the point of this "research" as they made it obvious.
e.g., 30% of people have missed mortgage / rent payments in June alone - no, things are far from great, but that's not what research is trying to prove.

I think you missed my point.

The point is that there is no "our" economy for the 80-90% fodder class. As such, we're being lied to every time we're told the economy is great, the economy is going to improve our lives blah blah blah.

Yeah, this isn't some deep new insight that couldn't have been stated before this, but when has there ever been a clear instance where this was actually observed? What other time has shown that 80-90% of the country living life as normal isn't enough to maintain the status economic quo?

As a scientist I frequently read findings where the reaction is "no duh, I can't believe nobody has every actually demonstrated that before". This is one of those instances IMO and it's a huge leap from an assertion based on circumstantial evidence to one based on actual observation.

Here is one example of upside-down data in the research : FTA : ... before the pandemic were spending a significant chunk of that going to nice restaurants, the theater, or traveling and staying in nice hotels."
It's not that "rich" (they are for some reason defined as whopping 25% of population) got greedy and didn't want to spend this money on nice restaurants or theaters - they couldn't because of lockdowns.

No offense, but you're overthinking it.

Doesn't matter why the luxury spending is gone, what matters is that it is. And without it, the necessity spending by the vast majority isn't enough to keep our economy afloat.

#29 | Posted by jpw at 2020-06-19 12:32 PM | Reply

"So now people are understanding how trickle down works and that it DOES have an impact on our economy?"

If you had stopped right there, that would have been enough. Ponder that for a moment. Danni even admits that frivolous spending on crap by the wealthy feeds her and her kid.

LOL

#30 | Posted by eberly at 2020-06-19 12:41 PM | Reply

Yes, again, nothing to do with the "rich" (most dine-in restaurants include big chains and family places that cater mostly to middle class, not the very rich) and they were all shut down, and many (current estimates are 25% to 50%) will not survive. Some exist on takeouts, delivery and pickups, but may not last beyond 60 days. Most high-end restaurants are still shut as there is no economic sense for them to operate at less than 85% capacity.

In my anecdotal experience a lot of places in my little middle class enclave have done quite well on takeout and curbside only. Why? Because there's no limit on the number of orders that can be cooked and served. There is no capacity limit.

The only limit is time. Some people simply choose to not order because they're so far down the queue they don't want to wait 1.5 hours for their meal. Which is usually a good thing because we in the kitchen (I moonlight as a line cook) don't want to stay 30-45 minutes past kitchen close to keep cooking and serving. We'd rather be cleaning and closing and leaving.

Anecdotal I know, but there's a significant number of place in my town that have adapted to that business model and have remained open. In fact, it's even been tough balancing reopening because takeout orders haven't really slowed but we now have dine in and patio seating that opened.

As far as those that will close, so what I say. If they were run in such a way that they couldn't survive then that's the way the market crumbles, right? Somebody will lease the space and open a new restaurant eventually.

But it seems they wanted to make a clumsy point, blaming the "rich" for the problems in economy

I would find the actual research before laying those intentions at the author's feet. Media is usually extremely poor at accurately presenting the much drier, less opinionated findings of research of any field.

BTW, economy was not that great even before COVID-19, as I posted several times on this site, despite glowing pronouncements about "best economy in generations" or supposedly great unemployment numbers, while the very nature of "gig economy" made those economic numbers unreliable and misleading as was obvious from declining average hours worked, productivity and some other, little more obscure economic indicators.

#8 | POSTED BY CUTIEPIE

I'm well aware. As are many on this site.

But we tend to be much better informed than the average person who actually does think the markets are an indicator of overall economic health. There's a reason Trump uses that metric as frequently as he does...

#31 | Posted by jpw at 2020-06-19 12:41 PM | Reply

Woah, wait a second. So now people are understanding how trickle down works and that it DOES have an impact on our economy? This is amazing.

That's not what trickle down (supply side) says.

Proponents of endless tax cuts rely on the claim that business owners having more money will invest the money in their businesses, build them, employ more people and, therefore, increase demand for labor and drive up wages.

It does not rely on the claim that if we hand 10% of the population 80% of the wealth and they spend 20% of it while squirreling away the remainder in offshore, tax free havens our economy does better.

Try again, Humtake.

#32 | Posted by jpw at 2020-06-19 12:45 PM | Reply

Trump has fought hard to get a "even deal" with China to bring home good UNION JOBS back home. But the Left keeps fighting him, every step of the way. now why do Unions vote Dem? not many do anymore, but the Dems still get the Union money.........more money to feed the Rich Democrats WTF

#22 | POSTED BY MAVERICK

Are we sure maverick isn't a bot?

His posts read like they were produced by a bulls--- generator...

#33 | Posted by jpw at 2020-06-19 12:46 PM | Reply

"The wealthier one gets the less it is about being in one political party and more about having control of both."

NW

Despite their stylish outward signs that indicate they lean one way or the other. IOW, privately, they are agnostic/pragmatic in this area . Publicly? Well, they choose to run in social circles requiring certain posture.

#34 | Posted by eberly at 2020-06-19 12:47 PM | Reply

You're absolutely adorable.
Maybe wait until you've taken an econ course before you call anyone else out as being economically illiterate.

#28 | POSTED BY MADBOMBER

You mean like the one you took where an elderly person on a fixed income or pension is as economically inert as a dependent child?

No thanks. I'd prefer not to waste my time being taught obvious trash.

#35 | Posted by jpw at 2020-06-19 12:47 PM | Reply

#35

Cool.

Then I would encourage you to support your position.

I agree that it exists...I just don't know if you're smart enough to define it.

But I would happily let you prove me wrong.

#36 | Posted by madbomber at 2020-06-19 02:34 PM | Reply

"So now people are understanding how trickle down works and that it DOES have an impact on our economy?"

It's been understood for years:

Since 1975, practically all the gains in household income have gone to the top 20% of households.

#37 | Posted by snoofy at 2020-06-19 03:10 PM | Reply

Cool.
Then I would encourage you to support your position.
I agree that it exists...I just don't know if you're smart enough to define it.
But I would happily let you prove me wrong.

#36 | POSTED BY MADBOMBER

You agree that a trash economics class exists?

#38 | Posted by jpw at 2020-06-19 04:35 PM | Reply

Awww that was sarcasm.

Dependent children don't generate or spend money/wealth. That's why they're "dependents".

Elderly have generated all their lives and are living off the fruit of that, which means they're still spending and spreading cash around.

To compare the two is ludicrous.

I'm sure you're expecting me to use a bunch of fancy terms you learned in econ class but I can say (gladly) that I never took one. Econ being called a "science" is a travesty and an affront to science.

#39 | Posted by jpw at 2020-06-20 12:31 AM | Reply

"I'm sure you're expecting me to use a bunch of fancy terms you learned in econ class but I can say (gladly) that I never took one."

I guess ignorance really is bliss.

#40 | Posted by madbomber at 2020-06-20 08:34 AM | Reply

You ain't need no larnin'

#41 | Posted by madbomber at 2020-06-20 02:06 PM | Reply

MadBomber has a MBA and he thinks it's an economics degree.

You have to go to college to learn to be that stupid.

#42 | Posted by snoofy at 2020-06-20 02:08 PM | Reply

Nun yew need no larnin...

#43 | Posted by madbomber at 2020-06-20 05:21 PM | Reply

What is amazing is that if 40% of households have lost a job and are still spending the same amount as pre-COVID we are seeing an economic restructuring that DOES NOT REQUIRE OR UTILIZE THE PRECIOUS PRECIOUS MIDDLE CLASS WHO DID GET STIMULOUS WHILE THE MAJORITY DID NOT.

DESTROY THE RICH. OBLITERATE THEM. UTTERLY AND COMPLETELY. They serve no purpose to the functioning economy.

Wall Street should become a hunting ground.

#44 | Posted by redlightrobot at 2020-06-20 05:41 PM | Reply

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