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Bottom 80% of US Households Persistently Dissaves-Spending More Than Income

56 points by slowhand09 3y ago

groseje 3y ago
Possibly the impact of extremely low interest rates for so long (Thanks FED). I would expect it to fade away slowly since the behavioral changes need time.
- ljf 3y ago
  Only if we return to higher rates of interest fr a long period. Here in the UK the desire seems to be to return inflation and interest rates to approx 2%. Rates of 2% and inflation of 2% means there is little incentive to save.
  - nick7376182 3y ago
    How are they going to control both at the same time. Govt underwriting high risk retail loans, quantitative tightening?
    - ljf 3y ago
      The theory is that high interest rates will bring inflation down - once they are down the market is already predicting that rates will drop to 2% - so the era of cheap money will continue... It seems to be working, but no better here than it is on the continent and USA, where inflation is already lower.
- andsoitis 3y ago
  Vanguard talks about this in terms of “return of sound money” in their 2024 outlook: https://advisors.vanguard.com/insights/article/vanguards-economic-and-market-outlook-for-2024 https://advisors.vanguard.com/insights/article/vanguards-eco...
- aantix 3y ago
  I feel like it's grocery prices.. We are a family of 6. Our grocery budget is consistently between $2500-$3000 a month. We shop at Aldi.
  - deleted 3y ago
    [deleted]
  - onion2k 3y ago
    A week? Seems high.
    - busterarm 3y ago
      It's high for shopping at Aldi... But as an individual I'm probably spending 500-600/mo between Publix and Food Lion...so it kind of tracks.
  - Y_Y 3y ago
    Per year? Thats pretty reasonable I'd say.
    - aantix 3y ago
      A month.
      - tekla 3y ago
        Thats stupid insanely high and hilariously out of line w/ normal consumption Choosing a very high COL area (Westchester), the expected food costs for a family of 6 is 1.7k according to the EPI
        aantix 3y ago
        Buying fresh everything? Real food? Not 100 boxes of Hamburger Helper with a shelf life of 6 years for $100.
chrsw 3y ago
I was in my local market, one of the value ones, nothing fancy like Whole Foods, and a no-frills pack of bacon was over $10.
- deleted 3y ago
  [deleted]
- candiddevmike 3y ago
  Speaking locally, my "low cost of living" area is now quite in line with most "high cost of living" areas when it comes to buying things, maybe even higher for food items as I recently experienced while traveling (it was cheaper in a big city!). Sure, rent and mortgages are still low (for now), but they're creeping up pretty fast too. Wages here are abysmal because it's "low cost of living", but it's really not these days...
  - rvnx 3y ago
    Well that is the consequence of ZIRP-policy + randomly printing unlimited free money during COVID (to support businesses). If there is more money in circulation, but the same amount of goods, of course the price of goods is going to increase.
  - busterarm 3y ago
    It's been driving me crazy how much I see in media this narrative being pushed that the economy is really doing great and that it's only smelly conservatives that think times are bad. I keep seeing supply chain shocks in poultry and dairy still, food and fuel prices aren't coming back down, every company I know anyone working for is in the middle of a sales & hiring slowdown and scores of my friends in tech have been out of work six months or more.
- kccqzy 3y ago
  Grocery stores and food suppliers are raising prices to enrich their own shareholders. Simple as that. Search for "greedflation"
  - 3y ago
epa 3y ago
[flagged]
- gcgbcfy 3y ago
  Why should I work when other people can inherit money?
- noboostforyou 3y ago
  The article makes a pretty direct claim as to what is funding the dis-savings and it doesn't appear to be government "handouts" that you are seemingly disparaging. > overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
- nine_zeros 3y ago
  Why eat when one can hand that money to a landlord or the bank?
fakedang 3y ago
Bottom 80% of US households persistently forced to dissave - spending more than income. There, corrected it.
wiremine 3y ago
Here's the quick quote from the article explaining why this is "sustainable" over a long-period of time: > "While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%."
- silisili 3y ago
  It's unclear to me what gains they are actually talking about here. Are they selling stock? Taking money out against their rising house value?
burkaman 3y ago
This headline is pretty misleading, to me at least. "Bottom 80%" implies the poorer 80% of Americans, but it is actually referring to the bottom 80% strictly in terms of (apparent) savings. > Personal Income isn’t the only source of household assets. The two big missing pieces are holding (capital) gains on assets, and borrowing (which adds both assets and liabilities, in equal amounts, to household balance sheets). Adding these two additional measures does shift most bottom quintiles from spending deficits to asset surpluses in most years. > While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%. So this is actually mostly explained by richer people who have significant investments in addition to their normal income. Edit: The BEA says Personal Income "does not include realized or unrealized capital gains or losses." So if you sell stocks, a house, pull money out of a 401k, none of that is included in Personal Income. Also, I think like ~20% of Americans are retired? Presumably most of them would be considered dissavers here, except for those who retired with almost no savings and are living solely on Social Security.
- noboostforyou 3y ago
  This got me confused as well. I read the claim and thought "how does the bottom 80% of income in the US also have a bunch of disposable income via capital gains?" Misleading title indeed.
- zirror 3y ago
  As a non-native speaker, I have never heard of dissaving. Is it a common word?
  - burkaman 3y ago
    No, it might be common in economic circles but I've never heard it either.
  - nu11ptr 3y ago
    No. I've been a native English speaker my whole life and it was a very weird sounding title IMO.
Log_out_ 3y ago
This is what the world subsidized by choosing to trade in us currency-and honestly I'm okay with that. The isolationist Maga has turned over the multipolar rock and revealed the ExEmpire crawling beneath. It could be so much worse..
bell-cot 3y ago
Is this evidence for: A) Marketing efforts aimed at getting people to spend are far better-funded and more effective than those aimed at getting people to save B) Relentless increases in the cost of living, vs. steady-at-best sources of income, have pushed most Americans into net-spending mode C) The long-term future is regularly portrayed as being bleak enough that many people have stopped caring much about their long-term solvency D) All of the above
- InitialLastName 3y ago
  E) The headline is misleadingly written and this is actually mostly people living off of asset appreciation in a society that is swiftly tilting towards a surplus of retirees.
- burkaman 3y ago
  None of the above, it is evidence that the US Bureau of Economic Analysis Personal Income metric "does not include realized or unrealized capital gains or losses." So for example if you sell some stocks for a profit and then spend that money on something, this blog post would consider that "dissaving", because the money you made on the sale isn't part of your Personal Income.
  - bell-cot 3y ago
    I'm thinking that "sell some stock for a profit" is really not an option for most of America's less-well-off. Similar for unloading one of their nice houses, or part of their art collection, or ...
    - burkaman 3y ago
      Well something like 50% of working age Americans have some kind of retirement account, and taking money out of that usually involves capital gains. Two thirds of households own their own homes, and it doesn't matter how nice the house is, if you sell it and move that's a big chunk of money in your bank account that didn't come from Personal Income. You're right that a lot of people don't have any kind of investments or houses to sell, and I think most of them are in the 20% here that spends less than their Personal Income.
gumby 3y ago
A nice reflection of how we all live better than the kings of old -- really this is a democratization of « Après nous, le déluge »
jhp123 3y ago
Another way to look at this is "households save less while making bottom-80% income vs. top-20%". Many of the top 20% income earners transition to bottom-80% retirees. As far as I can tell this data is not tracking the same households over time longitudinally.
strulovich 3y ago
Isn’t this ignoring all black market income? Which is obviously more meaningful to the bottom 80%. Remember: If the numbers don’t add up, first check what you’re missing.
zzzeek 3y ago
I took ECO-101 in 1987, among other basic tenets I learned that wealthier people have more / a majority of their money in savings, poorer people necessarily have to send the money they make back out to buy things. Things are very expensive and wages are not that great for most people, so there you go. nothing "eye-popping" about this. What's "eye-popping" is that it's more effective for economic stimulatory actions to put money in the hands of lower income people, where that money goes right back into circulation providing sales tax revenue at the state level and federal tax revenue at the merchant income level, rather than in the hands of wealthy people / billionaires, where that money sits in an account in the Cayman Islands and does mostly nothing in comparison.
darth_avocado 3y ago
In other news, water is wet. For the bottom 50 (less than the median income, which is $76k/year), post tax income would be less than 4.5-6k/month depending on where you live. Median rent in the country is 2k and median cost of ownership was also near that number. If you include cost of vehicle ownership, health insurance, childcare etc., it really shouldn’t be surprising that people spend more than they bring in. (Keep in mind, the 76k is the absolute top income for the bottom half households.)
5350-uiop-1130 3y ago
so "holding gains" means the assets they hold keep going up in value, which offsets their spending? americans are so ridiculouosly rich compared to the rest of the world. probably helps that their govt is expert at continuously inflating the value of their assets with financial stimulus. and also basically forces the rest of the world to use their currency for buying and selling their own productions.
rconti 3y ago
> Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save. How is this data different from other data on the same matter? It's not like nobody's known the personal savings rate in the US until today.
basil-rash 3y ago
The article nots this is only true when you exclude capital gains from Income. I don’t see how this is newsworthy, I’ve been “dissaving” for years now (selling stocks to cover monthly deficits after I moved from full time FAANG to occasional contract work), and I currently have more “net worth” than I ever have. All in all a bizarre metric.
- bluGill 3y ago
  Generally when I see something like this I assume that someone is trying to create propaganda to advocate for how their political view (in this case likely for communism of some sort - but the right has their own ways to distort data) is best or the US is really bad (since the rest of the world isn't included). Just remember that life savings it a zero sum game: in the end everyone ends up at 0 (there are a few religions that claim you can take it with you - I believe they are wrong, but I guess I can't prove it). If you die with a lot of savings or a lot of debt it doesn't matter - either way you are at 0 the moment you die. If you have savings it goes to someone else. If you have debt someone else just lost money. As such savings is only useful in that it can enable your future life in a rainy day. Thus I'm not convinced this is bad. Figure out how you will handle old age when you may have medical bills and no ability to earn. You may want to save for a retirement. There are people who retire and discover they miss going to the office so they unretire. You may choose to spend more now when you are young and can enjoy it as opposed to when you are old and your body couldn't go on long hikes. I may choose something different, but I can't really judge.
jldugger 3y ago
So... this post introduces a new "fact" then debunks its own headline, using a phenomenon already well known to economists: the wealth effect[1]. This feels less like an economics blog and more like a social media Rorschach test -- do you read the article, and its footnotes, or just respond to headlines? [1]: https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
- embersbreaking 3y ago
  The wealth affect literature is skimpy and not very good, and heck, the Keynesian consumption function that pretty much every model uses doesn’t even have a wealth term.
DaleNeumann 3y ago
[flagged]
- rconti 3y ago
  https://www.econlib.org/library/Topics/Details/comparativeadvantage.html https://www.econlib.org/library/Topics/Details/comparativead...
  - DaleNeumann 3y ago
    Banks transfer liabilities to there customers who in turn transfer there newly found assets to the stock market. Banks get a monthly interest Stocks get more liquidity You get a combination of assets and liabilities. Your just a middle man assuming that your investments can do better then you and the bank.
al_borland 3y ago
The government has certainly set a fine example for everyone.
lumost 3y ago
This type of imbalance is necessary provided that wealth is unevenly distributed. Either interest rates fall to zero/go negative - or individuals must borrow progressively more capital.
- al_borland 3y ago
  There are a lot of people choosing to live beyond their means. If interest rates are defining if a person is saving or not, they are already not saving, and worrying about interest rates when looking at a monthly budget already implies money is being borrowed to make ends meet. Sure, when interest rates are low that can mean a better mortgage rate, but the response to this should be buying less house, or putting more money down. This might mean spending some more time saving before buying. It doesn’t mean person is forced to spend so much on their mortgage that they can’t afford the other areas of their life.
  - lumost 3y ago
    That is true in a micro-economic sense. However, consider what happens if everyone saves? My point was that to continue driving asset appreciation for a small portion of the population - everyone else must become a progressively larger debtor.
    - al_borland 3y ago
      I think there is a middle ground to be had. Instead of someone immediately going into debt as soon as they turn 18, they could take some time to get some kind of emergency fund in place, and dedicate a percentage of their income to savings. This doesn’t mean they will never spend money, it just means they will do it more responsibly and sustainably. I didn’t get my first credit card until I was almost 30. I was still buying MacBook Pros, Playstations, iPhones, and TVs in my 20s… but was saving until I had the cash to afford them. And that savings was after contributing to my 401k and keeping a buffer of cash to avoid needing to lean into debt. My thought was, if I can’t pay for it today, what makes me think I’ll be able to make the payments on it next month. It seemed like a risky bet I didn’t want to take. Obviously there are people who get a bad roll of the dice early in life, but with 80% in this situation, it’s a lot of bad money habits. I’m not saying never buy stuff, just wait and bit and be more selective, especially while young. Save then buy, instead of buying and then paying back. Stuff still gets bought. Will this mean fewer trillion dollar companies? Perhaps. $1T in spending would be taken off the table vs what’s been done right now. But slower sustainable growth seems like it would be preferable to the exponential growth we’ve seen, and allow companies to focus more on the products and long term health of the company, rather than milking consumers for profit until things collapse in on themselves. How are people supposed to buy more stuff when 100% of their income is going to pay off old debts and they can’t even afford to make all the minimum payments? Borrowing at 0% interest to make those payments kicks the can down the road and shifts more and more risk to the banks, and that can only last so long, as we saw in 2008. In this scenario, only those saving to buy will still be spending money.
deathanatos 3y ago
I'm so lost in this article. How can the bottom 80% be subsisting off capital gains? And is that table saying they're netting 300+% YoY in capital gains? That number is pretty squarely in the "that can't be right" territory for me?¹ Even if I reinterpret "bottom 80%" as "top 80%" and assume we've somehow inverted everybody because it's the rich that would be spending more than their income, as they'd have significant gains … I'm still lost? Do 80% of Americans have investments? The feeling I get talking to people is that most people don't, outside of a 401k, but they wouldn't be spending from the 401k (unless they were in retirement … but that brings us back to 80%). ¹… except 2018, where they got only 7%? … and yeah, that was a bad year…
- embersbreaking 3y ago
  Might read the title of that table again.
- jhp123 3y ago
  Pretty sure it's retirees. They have low income because they are not working. But many of them are very well off. The rich retirees skew the average up even though most of the bottom 80% have little investment income.
  - embersbreaking 3y ago
    Interesting, I just pulled this the other day. Average (mean) bottom-20 household has 18 K in checking deposit assets and 200 K in total assets. even while that quintile’s income caps at $32K. America is a very rich country…
    - acdha 3y ago
      Do you remember where you saw that? The Census figures are much lower: $11k total assets at the 25th percentile, $-1.5k at the 10th. https://www.census.gov/content/dam/Census/library/publications/2022/demo/p70br-181.pdf https://www.census.gov/content/dam/Census/library/publicatio...
jandrewrogers 3y ago
To put some additional context around this, per the US Bureau of Labor Statistics, the median US household has ~$12,000 per year of excess income after all ordinary expenses -- which includes buying iPhones, nice cars, healthcare, etc. The percentage of US households with no capacity to save at all is <15% in US Federal Reserve studies. Americans just have relatively poor savings behavior. They've always had the ability to save much more than they do. I think this partly follows from the reality that the US has not had a genuinely bad economy since the 1930s. It is a long unbroken chain of prosperity with the occasional minor blip, which changes the culture's relationship to money.
- embersbreaking 3y ago
  If you’re looking at the consumer expenditure survey, it’s tally of household expenditures this is about 40% of BEA personal consumption expenditures. And it’s surveyed income measures are also dicey. It’s excellent for knowing which income quintiles do which shares of consumption, though.
- araes 3y ago
  > no capacity to save at all is <15% Those 15% are on food stamp SNAP benefits. https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assistance_Program#/media/File:SNAP_Program_Participants.png https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assista...
marcusverus 3y ago
Common definitions of 'income' exclude wealth transfers, including cash transfers like refundable tax credits. The data don't make sense because the data are intentionally obfuscated.
more_corn 3y ago
Wait so if you spend more than you earn you tend to not save?! That’s crazy talk.

56 points by slowhand09 3y ago

Possibly the impact of extremely low interest rates for so long (Thanks FED). I would expect it to fade away slowly since the behavioral changes need time.

ljf 3y ago
Only if we return to higher rates of interest fr a long period. Here in the UK the desire seems to be to return inflation and interest rates to approx 2%. Rates of 2% and inflation of 2% means there is little incentive to save.
- nick7376182 3y ago
  How are they going to control both at the same time. Govt underwriting high risk retail loans, quantitative tightening?
  - ljf 3y ago
    The theory is that high interest rates will bring inflation down - once they are down the market is already predicting that rates will drop to 2% - so the era of cheap money will continue... It seems to be working, but no better here than it is on the continent and USA, where inflation is already lower.
andsoitis 3y ago
Vanguard talks about this in terms of “return of sound money” in their 2024 outlook: https://advisors.vanguard.com/insights/article/vanguards-economic-and-market-outlook-for-2024 https://advisors.vanguard.com/insights/article/vanguards-eco...
aantix 3y ago
I feel like it's grocery prices.. We are a family of 6. Our grocery budget is consistently between $2500-$3000 a month. We shop at Aldi.
- deleted 3y ago
  [deleted]
- onion2k 3y ago
  A week? Seems high.
  - busterarm 3y ago
    It's high for shopping at Aldi... But as an individual I'm probably spending 500-600/mo between Publix and Food Lion...so it kind of tracks.
- Y_Y 3y ago
  Per year? Thats pretty reasonable I'd say.
  - aantix 3y ago
    A month.
    - tekla 3y ago
      Thats stupid insanely high and hilariously out of line w/ normal consumption Choosing a very high COL area (Westchester), the expected food costs for a family of 6 is 1.7k according to the EPI
      - aantix 3y ago
        Buying fresh everything? Real food? Not 100 boxes of Hamburger Helper with a shelf life of 6 years for $100.

chrsw 3y ago

I was in my local market, one of the value ones, nothing fancy like Whole Foods, and a no-frills pack of bacon was over $10.

deleted 3y ago
[deleted]
candiddevmike 3y ago
Speaking locally, my "low cost of living" area is now quite in line with most "high cost of living" areas when it comes to buying things, maybe even higher for food items as I recently experienced while traveling (it was cheaper in a big city!). Sure, rent and mortgages are still low (for now), but they're creeping up pretty fast too. Wages here are abysmal because it's "low cost of living", but it's really not these days...
- rvnx 3y ago
  Well that is the consequence of ZIRP-policy + randomly printing unlimited free money during COVID (to support businesses). If there is more money in circulation, but the same amount of goods, of course the price of goods is going to increase.
- busterarm 3y ago
  It's been driving me crazy how much I see in media this narrative being pushed that the economy is really doing great and that it's only smelly conservatives that think times are bad. I keep seeing supply chain shocks in poultry and dairy still, food and fuel prices aren't coming back down, every company I know anyone working for is in the middle of a sales & hiring slowdown and scores of my friends in tech have been out of work six months or more.
kccqzy 3y ago
Grocery stores and food suppliers are raising prices to enrich their own shareholders. Simple as that. Search for "greedflation"
- 3y ago

epa 3y ago

[flagged]

gcgbcfy 3y ago
Why should I work when other people can inherit money?
noboostforyou 3y ago
The article makes a pretty direct claim as to what is funding the dis-savings and it doesn't appear to be government "handouts" that you are seemingly disparaging. > overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
nine_zeros 3y ago
Why eat when one can hand that money to a landlord or the bank?

fakedang 3y ago

Bottom 80% of US households persistently forced to dissave - spending more than income. There, corrected it.

wiremine 3y ago

Here's the quick quote from the article explaining why this is "sustainable" over a long-period of time: > "While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%."

silisili 3y ago
It's unclear to me what gains they are actually talking about here. Are they selling stock? Taking money out against their rising house value?

burkaman 3y ago

This headline is pretty misleading, to me at least. "Bottom 80%" implies the poorer 80% of Americans, but it is actually referring to the bottom 80% strictly in terms of (apparent) savings. > Personal Income isn’t the only source of household assets. The two big missing pieces are holding (capital) gains on assets, and borrowing (which adds both assets and liabilities, in equal amounts, to household balance sheets). Adding these two additional measures does shift most bottom quintiles from spending deficits to asset surpluses in most years. > While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%. So this is actually mostly explained by richer people who have significant investments in addition to their normal income. Edit: The BEA says Personal Income "does not include realized or unrealized capital gains or losses." So if you sell stocks, a house, pull money out of a 401k, none of that is included in Personal Income. Also, I think like ~20% of Americans are retired? Presumably most of them would be considered dissavers here, except for those who retired with almost no savings and are living solely on Social Security.

noboostforyou 3y ago
This got me confused as well. I read the claim and thought "how does the bottom 80% of income in the US also have a bunch of disposable income via capital gains?" Misleading title indeed.
zirror 3y ago
As a non-native speaker, I have never heard of dissaving. Is it a common word?
- burkaman 3y ago
  No, it might be common in economic circles but I've never heard it either.
- nu11ptr 3y ago
  No. I've been a native English speaker my whole life and it was a very weird sounding title IMO.

Log_out_ 3y ago

This is what the world subsidized by choosing to trade in us currency-and honestly I'm okay with that. The isolationist Maga has turned over the multipolar rock and revealed the ExEmpire crawling beneath. It could be so much worse..

bell-cot 3y ago

Is this evidence for: A) Marketing efforts aimed at getting people to spend are far better-funded and more effective than those aimed at getting people to save B) Relentless increases in the cost of living, vs. steady-at-best sources of income, have pushed most Americans into net-spending mode C) The long-term future is regularly portrayed as being bleak enough that many people have stopped caring much about their long-term solvency D) All of the above

InitialLastName 3y ago
E) The headline is misleadingly written and this is actually mostly people living off of asset appreciation in a society that is swiftly tilting towards a surplus of retirees.
burkaman 3y ago
None of the above, it is evidence that the US Bureau of Economic Analysis Personal Income metric "does not include realized or unrealized capital gains or losses." So for example if you sell some stocks for a profit and then spend that money on something, this blog post would consider that "dissaving", because the money you made on the sale isn't part of your Personal Income.
- bell-cot 3y ago
  I'm thinking that "sell some stock for a profit" is really not an option for most of America's less-well-off. Similar for unloading one of their nice houses, or part of their art collection, or ...
  - burkaman 3y ago
    Well something like 50% of working age Americans have some kind of retirement account, and taking money out of that usually involves capital gains. Two thirds of households own their own homes, and it doesn't matter how nice the house is, if you sell it and move that's a big chunk of money in your bank account that didn't come from Personal Income. You're right that a lot of people don't have any kind of investments or houses to sell, and I think most of them are in the 20% here that spends less than their Personal Income.

gumby 3y ago

A nice reflection of how we all live better than the kings of old -- really this is a democratization of « Après nous, le déluge »

jhp123 3y ago

Another way to look at this is "households save less while making bottom-80% income vs. top-20%". Many of the top 20% income earners transition to bottom-80% retirees. As far as I can tell this data is not tracking the same households over time longitudinally.

strulovich 3y ago

Isn’t this ignoring all black market income? Which is obviously more meaningful to the bottom 80%. Remember: If the numbers don’t add up, first check what you’re missing.

zzzeek 3y ago

I took ECO-101 in 1987, among other basic tenets I learned that wealthier people have more / a majority of their money in savings, poorer people necessarily have to send the money they make back out to buy things. Things are very expensive and wages are not that great for most people, so there you go. nothing "eye-popping" about this. What's "eye-popping" is that it's more effective for economic stimulatory actions to put money in the hands of lower income people, where that money goes right back into circulation providing sales tax revenue at the state level and federal tax revenue at the merchant income level, rather than in the hands of wealthy people / billionaires, where that money sits in an account in the Cayman Islands and does mostly nothing in comparison.

darth_avocado 3y ago

In other news, water is wet. For the bottom 50 (less than the median income, which is $76k/year), post tax income would be less than 4.5-6k/month depending on where you live. Median rent in the country is 2k and median cost of ownership was also near that number. If you include cost of vehicle ownership, health insurance, childcare etc., it really shouldn’t be surprising that people spend more than they bring in. (Keep in mind, the 76k is the absolute top income for the bottom half households.)

5350-uiop-1130 3y ago

so "holding gains" means the assets they hold keep going up in value, which offsets their spending? americans are so ridiculouosly rich compared to the rest of the world. probably helps that their govt is expert at continuously inflating the value of their assets with financial stimulus. and also basically forces the rest of the world to use their currency for buying and selling their own productions.

rconti 3y ago

> Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save. How is this data different from other data on the same matter? It's not like nobody's known the personal savings rate in the US until today.

basil-rash 3y ago

The article nots this is only true when you exclude capital gains from Income. I don’t see how this is newsworthy, I’ve been “dissaving” for years now (selling stocks to cover monthly deficits after I moved from full time FAANG to occasional contract work), and I currently have more “net worth” than I ever have. All in all a bizarre metric.

bluGill 3y ago
Generally when I see something like this I assume that someone is trying to create propaganda to advocate for how their political view (in this case likely for communism of some sort - but the right has their own ways to distort data) is best or the US is really bad (since the rest of the world isn't included). Just remember that life savings it a zero sum game: in the end everyone ends up at 0 (there are a few religions that claim you can take it with you - I believe they are wrong, but I guess I can't prove it). If you die with a lot of savings or a lot of debt it doesn't matter - either way you are at 0 the moment you die. If you have savings it goes to someone else. If you have debt someone else just lost money. As such savings is only useful in that it can enable your future life in a rainy day. Thus I'm not convinced this is bad. Figure out how you will handle old age when you may have medical bills and no ability to earn. You may want to save for a retirement. There are people who retire and discover they miss going to the office so they unretire. You may choose to spend more now when you are young and can enjoy it as opposed to when you are old and your body couldn't go on long hikes. I may choose something different, but I can't really judge.

jldugger 3y ago

So... this post introduces a new "fact" then debunks its own headline, using a phenomenon already well known to economists: the wealth effect[1]. This feels less like an economics blog and more like a social media Rorschach test -- do you read the article, and its footnotes, or just respond to headlines? [1]: https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect

embersbreaking 3y ago
The wealth affect literature is skimpy and not very good, and heck, the Keynesian consumption function that pretty much every model uses doesn’t even have a wealth term.

DaleNeumann 3y ago

[flagged]

rconti 3y ago
https://www.econlib.org/library/Topics/Details/comparativeadvantage.html https://www.econlib.org/library/Topics/Details/comparativead...
- DaleNeumann 3y ago
  Banks transfer liabilities to there customers who in turn transfer there newly found assets to the stock market. Banks get a monthly interest Stocks get more liquidity You get a combination of assets and liabilities. Your just a middle man assuming that your investments can do better then you and the bank.

al_borland 3y ago

The government has certainly set a fine example for everyone.

lumost 3y ago

This type of imbalance is necessary provided that wealth is unevenly distributed. Either interest rates fall to zero/go negative - or individuals must borrow progressively more capital.

al_borland 3y ago
There are a lot of people choosing to live beyond their means. If interest rates are defining if a person is saving or not, they are already not saving, and worrying about interest rates when looking at a monthly budget already implies money is being borrowed to make ends meet. Sure, when interest rates are low that can mean a better mortgage rate, but the response to this should be buying less house, or putting more money down. This might mean spending some more time saving before buying. It doesn’t mean person is forced to spend so much on their mortgage that they can’t afford the other areas of their life.
- lumost 3y ago
  That is true in a micro-economic sense. However, consider what happens if everyone saves? My point was that to continue driving asset appreciation for a small portion of the population - everyone else must become a progressively larger debtor.
  - al_borland 3y ago
    I think there is a middle ground to be had. Instead of someone immediately going into debt as soon as they turn 18, they could take some time to get some kind of emergency fund in place, and dedicate a percentage of their income to savings. This doesn’t mean they will never spend money, it just means they will do it more responsibly and sustainably. I didn’t get my first credit card until I was almost 30. I was still buying MacBook Pros, Playstations, iPhones, and TVs in my 20s… but was saving until I had the cash to afford them. And that savings was after contributing to my 401k and keeping a buffer of cash to avoid needing to lean into debt. My thought was, if I can’t pay for it today, what makes me think I’ll be able to make the payments on it next month. It seemed like a risky bet I didn’t want to take. Obviously there are people who get a bad roll of the dice early in life, but with 80% in this situation, it’s a lot of bad money habits. I’m not saying never buy stuff, just wait and bit and be more selective, especially while young. Save then buy, instead of buying and then paying back. Stuff still gets bought. Will this mean fewer trillion dollar companies? Perhaps. $1T in spending would be taken off the table vs what’s been done right now. But slower sustainable growth seems like it would be preferable to the exponential growth we’ve seen, and allow companies to focus more on the products and long term health of the company, rather than milking consumers for profit until things collapse in on themselves. How are people supposed to buy more stuff when 100% of their income is going to pay off old debts and they can’t even afford to make all the minimum payments? Borrowing at 0% interest to make those payments kicks the can down the road and shifts more and more risk to the banks, and that can only last so long, as we saw in 2008. In this scenario, only those saving to buy will still be spending money.

deathanatos 3y ago

I'm so lost in this article. How can the bottom 80% be subsisting off capital gains? And is that table saying they're netting 300+% YoY in capital gains? That number is pretty squarely in the "that can't be right" territory for me?¹ Even if I reinterpret "bottom 80%" as "top 80%" and assume we've somehow inverted everybody because it's the rich that would be spending more than their income, as they'd have significant gains … I'm still lost? Do 80% of Americans have investments? The feeling I get talking to people is that most people don't, outside of a 401k, but they wouldn't be spending from the 401k (unless they were in retirement … but that brings us back to 80%). ¹… except 2018, where they got only 7%? … and yeah, that was a bad year…

embersbreaking 3y ago
Might read the title of that table again.
jhp123 3y ago
Pretty sure it's retirees. They have low income because they are not working. But many of them are very well off. The rich retirees skew the average up even though most of the bottom 80% have little investment income.
- embersbreaking 3y ago
  Interesting, I just pulled this the other day. Average (mean) bottom-20 household has 18 K in checking deposit assets and 200 K in total assets. even while that quintile’s income caps at $32K. America is a very rich country…
  - acdha 3y ago
    Do you remember where you saw that? The Census figures are much lower: $11k total assets at the 25th percentile, $-1.5k at the 10th. https://www.census.gov/content/dam/Census/library/publications/2022/demo/p70br-181.pdf https://www.census.gov/content/dam/Census/library/publicatio...

jandrewrogers 3y ago

To put some additional context around this, per the US Bureau of Labor Statistics, the median US household has ~$12,000 per year of excess income after all ordinary expenses -- which includes buying iPhones, nice cars, healthcare, etc. The percentage of US households with no capacity to save at all is <15% in US Federal Reserve studies. Americans just have relatively poor savings behavior. They've always had the ability to save much more than they do. I think this partly follows from the reality that the US has not had a genuinely bad economy since the 1930s. It is a long unbroken chain of prosperity with the occasional minor blip, which changes the culture's relationship to money.

embersbreaking 3y ago
If you’re looking at the consumer expenditure survey, it’s tally of household expenditures this is about 40% of BEA personal consumption expenditures. And it’s surveyed income measures are also dicey. It’s excellent for knowing which income quintiles do which shares of consumption, though.
araes 3y ago
> no capacity to save at all is <15% Those 15% are on food stamp SNAP benefits. https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assistance_Program#/media/File:SNAP_Program_Participants.png https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assista...

marcusverus 3y ago

Common definitions of 'income' exclude wealth transfers, including cash transfers like refundable tax credits. The data don't make sense because the data are intentionally obfuscated.

more_corn 3y ago

Wait so if you spend more than you earn you tend to not save?! That’s crazy talk.