Well, the first thing I'm seeing is that it might be incredibly difficult to live within your means if the average low-income household consisting of two (1.7?!) people is only $10k. A full time job at Wal-Mart pays $16k, correct? Who gets $10k?! But even if it really did happen, I can see how it is easy to overspend because regardless of your income level, some things can only go so low. You might not have car insurance or health insurance, but gas is still $2.xx wherever you go, and public transportation is the same as well.

It's also a cycle...poor nutrition leads to health problems, which leads to doctors visits, medication, etc., and that can cause problems with work productivity, which affects your ability to make money, but all of it requires money to fix...what to do?

My head hurts....

I see we spend twice as much on Entertainment then we do on Education...

One thing I noticed is that the graph seems to counteract Supply-side (trickle down) economic theory. The wealthy do spend more on most things, but not in proportion to their greater income. Most of their money seems to go to taxes and investments. There's nothing wrong with investments (we should all invest) but the theory is supposed to be that if we give them more money, the rich buy much more stuff, which helps the overall econonmy. Here, they're buying SOME more stuff, and socking the rest away. So wealthy are not using the tax savings to consume and drive the economy.

@xQuizx: I saw that too, but even for a household of 2.5, where .5 might be a small child, education doesn't factor into it yet. It can be said that for the majority of full-time workers with a household, either they have finished college, or they didn't go to college and their high school education is done. So since entertainment is a consistent expense, education (while being a larger sum) is paid all at once, or contained within a loan.

I can't believe that education number is so low. My brother and I both went to public universities, but my parents still spent way more than that. Only thing I can think is if they only count tuition, not room and board as an education cost. I could see arguments both for and against counting room and board towards education costs though.

@UpsetPanda: Wal-Mart has full-time employees?

Those are very cool graphs.

The same percentage of hhs have the internet as do a dishwasher. I'd love to see a median age for that chart too, but it might make someones head explode.

Whether you're rich or poor is a function of what you HAVE, not what you earn.

The reason that the people to the left on this chart spend so much more than they make is because this is where many retired people and people in-between jobs are. Some portion of this number is people who, for example, went back to school to get an MBA. They live off their savings, not off their earnings.

There's an op-ed by two prominent economists, also at the NYT, explaining why the chart actually shows a good thing: [www.nytimes.com]

If you want the compete graph, look at the one I linked to, not the one in the article. It shows that many items of consumption are more more evenly distributed than they were 40 years ago. In 1970, only about 1/2 the people had A/C or Color Television; in 2005, nearly everybody did. Those things used to be the exclusive domain of the rich; now everybody has them.

The wealthy do spend more on most things, but not in proportion to their greater income.

That's exactly why a flat consumption tax would disproportionately target those with a lower income. The contention isn't that they don't consumer more, they obviously do. This chart helps illustrate that it just isn't proportionate to their income.

Wait, does "before taxes" mean it's not counting certain government transfers (like EITC payments)? There's something strange about the bottom quintile.

I am most shocked that the $150K household income is considered "rich"!!!!

Maybe it's where I live, but I certainly don't feel so rich!

Of course, as far as the wealthy socking money away, how do you think they get wealthy. There are so many things that people blow money on, that they don't even remotely need (iPhones, iPods, other frivolous crap). If everyone would get a grip on their "ooh shiny, I want!" urges, a lot more people would be able to sock money away and move up the chart.

@ARP: You have the supply-side theory wrong. The supply-side idea is that by allowing wealthy people to keep more of their money, they will *invest* it, and those investments will have a trickle-down effect. So, for example, if I have a few hundred thousand, I may open up a hardware store that employs 10 people.

There's no such thing as "socking away." If I buy stock from a company, that company then uses the money to employ people, buy equipment and generate power. If I put the money in a savings account, the bank lends it to somebody so they can buy a new house or to a company so it can open a new store. The idea behind supply-side economics is that it's easier to make those sorts of investments when you have a concentration of capital. If I had $1M, I might open my own company. But, if I only have $100K, I'm much less likely to get together with 9 other people to open the same company.

Also, "if we give them more money" is just factually incorrect -- this is money they generally earn themselves; I think you mean "if we don't tax away most of their money."

@unklegwar: I agree, that's how you get rich. But my point was that all the right-wing politicians justify disproportionately reducing taxes on the wealthy because (the theory goes) that they'll buy more stuff and help the overall economy. That's what supply side/trickle down/voodoo economics is all about. Well, this shows that they don't buy (much) more stuff. So the primary underlying reason for their economic policy doesn't pan out here.

>>>>>>>
But my point was that all the right-wing politicians justify disproportionately reducing taxes on the wealthy because (the theory goes) that they'll buy more stuff and help the overall economy.
>>>>>>>>

Please show us where all the "right-wing politicians" justify disproportionalty reducing taxes on the wealthy.

You won't be able to, because it doesn't occur.

You can't reduce taxes on the 40% of American's who don't pay taxes.

Maybe if people spent more effort on working and bettering themselves, as opposed to petty covetousness, they'd be in a better financial position.

@cef21: Thanks, I wasn't aware that investment was considered just as large of a driver of the economy as buying things. GWB always says we can help the troops and help the economy by going shopping. So, does he have it wrong? So, how is providing the wealthy with more money (via reduced taxes) more beneficial to the economy than providing the poor with more money? Is it your posulate that concentrating wealth will allow for more efficient use?

One thing that would make this graph more interesting is if the costs were displayed as a percentage of their income instead of actual dollars. We all know that rich people spend more than the lower earners, but it would nice to compare how much of their income goes to different places.

@ARP: I see double spending for a 0.5 increase in household size. More consumption per person seems to me like a genuine increase in consumption instead of a shell game.

@unklegwar: the median of the 5th quintile is possibly due to the small percentage of people who have huge incomes. Since you're dealing with the top quintile as a whole, the much larger number of people at the low end of the quintile affects the average... this is how Bush was able to lie about the average income of those who benefited from the tax cuts, including the median figure would be useful here.

@ARP: Yes, the President does have it wrong. The current stimulus package is basically just an example of the "if there's a drought, you better do a rain dance" theory of politics. (If it rains, you can take credit; if it doesn't, you can always say you tried. But, if you don't, you'll be blamed for doing nothing.) The people who recognize it as a charade are not generally up for re-election this year.

>>>>>>>>>
GWB always says we can help the troops and help the economy by going shopping
>>>>>>>>>

Can you provide a cite for the President stating "We're helping the troops by going shopping"?

>>>>>>>>
So, how is providing the wealthy with more money (via reduced taxes) more beneficial to the economy than providing the poor with more money?
>>>>>>>

You're not "providing" the wealthy with more money. It's theirs, not yours.

Also, how much of your money have you provided to the poor. Surely you're not only proposing that other pople give up their hard earned income...you do the same, right? We could all learn by your example. So, do you give an extra 5%? 10%. More? Please enlighten us.

@GearheadGeek: d'oh... should be "the average of the 5th quintile" and not mention median until the end of the post. damn the lack of edit after posting.

They need to add 'lottery investing' as a category.

Keep in mind that the "investment" also includes mortgage principal, which I imagine makes up a large portion of that little arrow.

I agree, though, I can tell you from perspective, $150k does not feel even remotely rich to me.

@ARP:
increasing consumption increases size of the current "pie" (or even for a few years) but investment increases the size of the "oven" and "pie dish"... er....if that makes sense.

Higher income brackets may spend more money but save a great deal more, too. How do you think they became so properous in the first place? (Hint: Not all rich people draw their salaries off the backs of the poor; most just know how to work hard and spend less).

Also, why do people think that a flat tax would be scamming the poor? Yeah, slummy CEO's get out of paying their taxes because they can afford laywers who can find loopholes for them; your average doctor, college professor, engineers are considered 'rich', but pay most of their wages back in taxes pays easily . Whether a man makes $10,000 or $100,000 should make no difference in how much he 'owes' the government; skim an equal percentage off the top off all workers for the government, and I mean a *skim* amount.

Spending more that they earn is all too easy when it comes to the lower 5th. Payday lenders, rent-to-own furniture & appliance assholes will get their hooks into the poor and bleed them dry. It's not all "So shiny-I gotta have it!". I'm sure that's a part of it. A large part of it, though, is "I gotta have a working stove/fridge/car" period.

my mom and I lived on around $9,000 for a few years. I had no idea she made so little, I had assumed $20k was the least anybody made, since that was the lowest check box on most forms. It's surprising how little you can get by on.
@Mojosan: You're wrong. If you don't have a proper argument, don't just start attacking people. That's just like people who say John Edwards is wrong for caring about poverty because he lives in a big house. The rich are the biggest recipients of government subsidies under Bush. OUR TAXES GO INTO THEIR POCKETS. Maybe they don't need to be so filthy, obscenely rich in order for millions of real working people can live a better life.

@Mojosan: Shhhh, that's a democrat secret! You don't want to air their dirty laundry, do you?

@ltlbbynthn: What subsidies? I hear this repeated a lot, but having a tough time locating any. (The exception may be farm subsidies, which seem to go all over the place.)

@UpsetPanda:

Pre-school teachers make below $10,000 a year...Now generally that's not their sole source of income, but my boyfriend's mom is a preschool teacher, and she grossed $8,000 last year. Sad that people entrusted with early education are paid half of what a wal-mart clerk earns.

That number that the bottom 5th are earning 10k a year. BS to that one. Please. Are they including high school kids with summer jobs? Nobody working full time or close to it earns 10k.

@Smackdown: I dunno, I used to make around that amount in a state I absolutely hated. I could bank an entire paycheck based on my expenses then. I guess it all depends on your budget.

@ltlbbynthn: The tax regime is part of the picture, but one of the reasons "the rich" are so many times richer than the average now as compared to 50 years ago is the exremely nonlinear way that compensation goes up in the corporate world, especially when the compensation isn't justified when looking at company performance. What really skews the statistics is not the successful small businessman netting $200k/year from his hard work, but the corporate officers netting 10x and 50x that with no real risk, since they'll get their money even as they drive their companies into the ground.

@Mojosan: GWB said this: "I ask your continued participation and confidence in the American economy" during a speech given soon after 9/11. Here's the link: [www.time.com]

Or you can just do what I did: Google "Bush + speech + shopping." That will lead you to plenty of links in which President Douchey McDumbass made the statement.

And LTLBBYNTHN - Yes. I agree.

I'm curious what this chart would look like in percentage format. The poorer fifth appear to pay a higher percentage of their income on everything except taxes - but does this include tax write offs, benefits from business ownership, etc? The pooerest fifth even give a higher percentage income to charity than the wealthiest 5th. Dollars are meaningless, percentages matter.

@GearheadGeek: The CEOs of the Fortune 500 made, on average, about $10M/yr in '06 -- a total of $5.4B. In 2004, those with incomes over $1M made a total of about $86B, out of a total pot of $2.4T. (This is based on federal tax returns, so doesn't include those who paid no tax.) Even if you could take away ALL of the money these people make, there would be no real dent in the budget. (But, of course, you can't -- the instant you try, they stop making it.)

Those CEOs make up such a tiny portion of the total that they don't do a whole lot of skewing.

To those who are asking who makes only $10k, does this include those who are retired? If so it would also skew what it shows they are drawing from savings and retirement plans.

@K-Bo: Always count Room and Board with your education costs. The colleges do. Trust me. It all goes into the same pot, shaken up, and poured out where needed (or wanted).

Think of it like Taxes. You have Federal & Social Security. Separate taxes on paper but they tend to get combined somewhere along the line. Sort of.

The same can be said of most 'fees' you might pay. Tech fees. Admissions application fees, graduation fees, transcript fees, late fees, drop fees, withdrawal fees, parking fees, God I love working in Higher Ed.

Oh, and btw, don't forget campus dining halls. Wow. Money makers! I'm not going to touch that one.

All this said, higher ed does need more cash from states. Just because someone nickel and dimes you doesn't mean they don't need the coin.

Can you spare a dime?

What is the source of this data? Less than $10K income for the lowest quintile? According to [factfinder.census.gov], 8% of households make <10K. Also note that "non-family households" are in this bracket at a rate greater than 3x that of "families". Are there college students in this group, perhaps? It just seems so out of whack to me.

@cef21:
it's a lot more complicated, which you obviously realize, but i wanted to point out that disregarding outliers, if they're extreme enough, can significantly change the distribution. Given your $86B and $2.4T, and assuming those making over $1M are the top 1%, the mean shifts 3% if you take them out. Not saying they are 1%, but the point it, extreme outliers can make a difference.

@Superborty: $5.75/hr x 2080 hr/year = $11,960.00/yr.

@cef21: Back in the olden days, the absolute highest tax bracket was ~90%. Paying off the debt is a straw-man, but you can build and maintain a lot of roads with an additional annual 77.4 billion in the coffers.

Striking thing:
Po folks pay over 50% of their earnings in rent. General guidelines suggest not to go over 30%.

Non-surprising, yet still mystifying thing:
Po folks give approximately 10% of their pre-tax earnings to charity. Lemme repeat that with numbers:
Po Folks: Avg income: ~$10,000
Po Folks: Avg charity donation: ~$1,000

Rich folks, and median folks are giving out much lower percentages, and also have positive capital flows. Either the church or their community values are keeping them down as much as The Man is. Take that $1000 back, right now. If you get the Earned Income Tax Credit, DO NOT GIVE MONEY TO CHARITY. YOU CANNOT AFFORD THIS LUXURY! LUXURY should be in 72pt, bold type, with flashing lightbulbs around it. I know that poor people give more than rich people, in terms of marginal dollars. I will never understand it, even with Bill Clinton's help.

Unsurprising, and disappointing thing:
Mid level people spend no more on education than po folks. Now, this is probably reflective of the high cost of private/parochial education in K-12 rather than college costs or school supplies, but, me as one of those non top 20% people, if I had kids (god forbid), I'd maybe get them some fencing lessons or chinese lessons or something extra. Afterall, I have all this income sitting around (strong argument against kids is the amount of income you wind up having sitting around). May as well put it towards getting my kids closer to the golden land of living in the black zone.

@ARP: I don't think that this graph proves or disproves supply side economics... all it shows is how spending varies by household income. In order to examine whether or not supply side economics is working, wouldn't you have to look at the effect of each dollar spent by the rich, and how many times that dollar gets spent in the economy as a whole?

Maybe I am wrong... it has been years since I cracked open the econ text book.

@Mojosan: Here is what he said on 01/14/03:

"As we work with Congress in the coming year to chart a new course in Iraq and strengthen our military to meet the challenges of the 21st century, we must also work together to achieve important goals for the American people here at home. This work begins with keeping our economy growing. … And I encourage you all to go shopping more."

@princess_peach: Martin Cripps, my econ professor at the Olin School of Business, Washington Univesity in St. Louis (I want to make sure we're clear that he's an econ guy at a business school, and not a communist in the econ department), with bach, masters and doctorate from the LSE, when asked about supply side economists said, in his daftest englishman accent, "They're not economists, and supply side is not economics."

I don't think you can get more equivocal than that. Despite what the republicans would have you believe. It's the creationism of economics.

@Elcheecho: Oh, I agree that they can make a difference in the mean (in reality, it appears that they don't; those making over $10M accounted for about $18B in 2004). But, it's really beside the point. A lot of people complain about what "the rich" get, but ignore that there are really very few "rich" and they, cumulatively, don't really matter that much. There are just too few of them to worry about.

@hwyengr: Except that nobody paid the 90% tax rate. Why bother putting in the effort when Uncle Sam is going to take away 90 cents out of every dollar?

Reminds me of a great story my econ teacher sent out to us...

Bar Stool Economics
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20."
Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.

But what about the other six men - the paying customers?
How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33.
But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20,"declared the sixth man. He pointed to the tenth man," but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him.

But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, ladies and gentlemen, journalists and college professors, is how our tax system works:

The people who pay the highest taxes get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

So the entire lowest fifth is on welfare, then?