Our brain nearly broke looking at this graph the New York Times published this weekend called How Americans Spend Their Money (click to enlarge). By the looks of it, poor people spend twice as much as they earn in taxable income. Rich people outspend the middle fifth on financial stuff by a factor of ~20:1. What the middle fifth and the lowest fifth spend on goods and services is closer than what the middle fifth and the highest fifth spend. The lowest fifth financial flows are very much in the negative. And that’s about all the staring at a crazy graph we can do for the moment. What other trends can you see?
You Are What You Spend [NYT]
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@hwyengr: That number for minimum wage is too low. Not many people make that number outside of college kids on jobs. That still equates to over 10k. No way does the bottom 20% make this. No way.
@Superborty: I think the reason it’s so slow is because the lowest 20% would include people who have no income ( like retirees ) so a bunch of people with 0 income would really skew that number.
@TechnoDestructo: Only if you count “Social Security” as welfare. Remember that this is a measure of income, not wealth. So, if you’re retired and drawing down on your 401(k) plan and savings, you’re going to show up on the bottom quintile, even if that 401(k) happens to be worth several million dollars.
This graph is just another view of the stuff I see on a regular basis. There are people who live in houses with NO furniture, getting a minimum wage pay to take home and yet there’s a BIG SCREEN television in the living room. Also, 10k sounds about right and spending twice as much on entertainment than education looks right too. People are more willing to rent a movie or buy entertainment than read a book or just sit with family and talk.
Those with money are always encouraged to spend it to drive the economy, but they are always STRONGLY encouraged to invest and save their money too. Where as those on the bottom and middle fifth are more prone to just get encouragement to save money, but almost never told to invest it. So I think that tends to gear people in the bottom and middle fifth to just spend and spend.
@TechnoDestructo: I would have to say the greater portion of those on the bottom fifth are probably on welfare.
@cef21: i think what i was trying to say (it was yesterday after all) is that the rich (over $1M in this case) can and do matter. If the mean changes 3%, then revenue should change accordingly if we use a flat tax. The fact that we have a progressive tax means that the change should be greater than the 3%
@ARP: I think the idea of supply side economics is not that if the rich have more money they will buy more stuff (which trickles down somehow?); but instead, that if the rich have more money, they will invest in factories and companies, which create jobs, which allow the poor to work.
I agree with your overall point, but this is a common misunderstanding when discussing supply side economics.
@UpsetPanda: Um, you guys, a household of 2.5 people does not mean two adults and one small child. It means two households – one with two people and one with three. It is more accurate to talk about the two groups in that mix – the 50% who have two people, and the 50% who are two people plus one child.
This is an oversimplification, of course, but when you are talking about disposable income, and purchasing priorities, there are important differences, e.g. one household will spend more on diapers and formula.
@cef21: Yes, but! Remember that the rich now have a whole new class of goods that the middle class do not. Think large gifts to universities to virtually guarantee placement for their children; yachts/sports cars; second/third homes.
Check out the book “Richistan” for some entree into the new world of the rich. While some products are now mass-comsumptive, the rich will always be able to distinguish themselves by “having” more stuff.
Of course, the point is not that the rich have more, but that today’s poor have more than yesterday’s poor. Which is a great thing!
Remember those pictures of Robert Kennedy on the campaign trail in 1968, visiting poor Southerners? Really harrowing stuff by today’s standards.
@unklegwar: Hm, I think this is an oversimplification. Maybe where you are (and where I am, for that matter) you are not rich (nor am I, despite the income charts suggesting otherwise).
But remember, you and I spend a lot of money on things that most people would consider luxuries, or at least unnecessary. I am thinking of name brand suits, which may be a necessity according to the social structure of your business officer, but can’t really be considered “necessary spending” by most people’s definition.
@Mojosan: Um, I agree with your point, but government most certainly CAN reduce taxes on people that do not pay (income) tax (remember, the poor still pay all kinds of consumption and property taxes!)
That’s why we have negative numbers. Government can make transfer payments to people that pay absolutely no tax, thereby making their tax burden -5%, -10%, or any other negative percentage.
I notice that there ARE two Americas:
One pays 79% of taxes, the other pays 21%
John Edwards was right. But wrong…
My wife and life in DC. Our AGI this year was 153K. So we’re rich, right? Not in DC where we pay $4 grand in mortgage a month for a townhouse and $3.40 for a gallon of gas.
But we pay an assload of taxes though.
This graph is crap.
@Mojosan:
Preach on, bro! Couldn’t have said it better myself!
@WillScarlett:
Sure – but then who picks up that burden? The “wealthy” who are already paying a disproportionately high tax?
Tell you what, I’ll sweeten the pot. I’ll just go ahead and GIVE half of the income that I bust my ass for to people who are poor.
Why don’t we just adopt socialism while we’re at it?
@Joafu: I didn’t know that anyone was still seriously advocating a flat tax. Even Mike Huckabee has morphed the flat tax idea into the “Fair Tax”.
A flat tax is not fair to the poor because the poor spend a higher percentage of their income on basic needs (as this graph reinforces!)
And, if you are a doctor earning over $100,000, and you don’t have a very good accountant, I would suggest you are being irresponsible with your own money.
@AndyRogers: Isn’t is obvious – it is added to our national debt! No need to take anything away from the rich, just keep on letting it accrue to future generations.
@enm4r: it would target EVERYONE proportionate to what they consume. wealthy people GOT that way by saving rather than buying the latest flat screen. should they be PENALIZED for having sense to save and invest? a Flat Tax would ALSO target illegal immigrants and drug dealers, etc (anyone who operates on the black market) which would bring in FAR more money to compensate for that ‘lost’ by the rich not spending their hard earned cash.
I feel like insulting you right now, but will exercise my right to refrain. cheers.
@cef21: The oil companies get a lot of money from the government. And all the contractors in Iraq are being paid with tax dollars. They have no-bid contracts, which is how a contractor can make ten times what an American soldier makes for doing the same work. Maybe they are not “subsidies” in name, but they are getting paid with public funds. I would call that welfare.
@WillScarlett:
Spoken like a true liberal!
@AndyRogers: Huh? I am not a liberal…I am actually a moderate.
If you recall, it was the economic conservatives that were the thorn in George W. Bush’s side when creating the Medicare prescription drug benefit – because of their concerns about the long term increase in the national debt!
There is no serious debate in Washington about the need to increase revenues to the federal government AS WELL AS reign in costs on entitlement programs.
Your knee-jerk reaction leads me to recommend this website for your hubris:
[www.republicansforhumility.com]