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AP Admits: ‘The Rich’ Drive The Economy

In the rush of events, we almost missed this startling admission from the redistributionists at the Associated Press:

As spending by wealthy weakens, so does economy

By Jeannine Aversa, AP Economics Writer Sun Aug 1, 2010

WASHINGTON – Wealthy Americans aren’t spending so freely anymore. And the rest of us are feeling the squeeze.

The question is whether the rich will cut back so much as to tip the economy back into recession — or if they will spend at least enough to sustain the recovery.

The answer may not be clear for months. But their cutbacks help explain why the rebound could be stalling. The economy grew at just a 2.4 percent rate in the April-June quarter, the government said Friday, much slower than the 3.7 percent rate for the first quarter.

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans — those earning at least $207,000 — are buying less. They account for about 14 percent of total spending. These shoppers have retrenched as their investment values have sunk and home values have languished.

In addition, the most sweeping tax cuts in a generation are due to expire in January, and lawmakers are divided over whether the government can afford to make any of them permanent as the federal budget deficit continues to balloon.

What a laugh. The obvious question is whether the government can afford not to make them permanent. As this very article demonstrates, you need to keep this money in the private sector to created jobs.

President Barack Obama wants to allow the top rates to increase next year for individuals making more than $200,000 and couples making more than $250,000. The wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes

How irresponsible of them. They should spend this money immediately, then borrow to pay their taxes.

Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride

Who has taken over Jeannine Aversa’s body? Are all of the AP’s editors on vacation? How did such a reactionary paragraph ever see the light of day?

The affluent went back to tightening their belts in June after months of vigorous showing. Data from MasterCard Advisors’ SpendingPulse showed luxury spending fell in June for the first time since November. The decline followed a solid rise in sales revenue earlier in the spring.

"It isn’t a good omen for the consumer recovery, which cannot exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.

At the same time, government reports show shoppers as a whole cut back on their spending in both May and June.

Companies have responded by refusing to step up hiring. The housing market is stalling. And Americans are seeing little or no pay raises. It adds up to a recipe for a grinding recovery to slow further.

And it helps explain why economists expect the rebound to lose momentum in the second half of the year. Especially if the rich don’t resume bigger spending.

"They are the bellwether for the economy," says Mark Zandi, chief economist at Moody’s Analytics. "The fact that they turned more cautious is why the recovery is losing momentum. If they panic again, that would be the fodder for a double-dip recession."

That’s because whether they’re saving or spending, the wealthy deliver an outsize impact on the economy. What’s not clear is whether they will remain too nervous to spend freely again for many months. That’s what happened when the recession hit in December 2007 and then when the financial crisis ignited in September 2008.

As their stock holdings and home values sank, the affluent lost wealth. Their jobs weren’t safe, either. Bankers, lawyers, accountants and mortgage brokers were among those getting pink-slipped. Those who did have jobs feared losing them. Neither group spent much.

Instead, Americans’ savings rate spiked. And most of the increase came from the richest 5 percent, according to research by Moody’s Analytics

Of course, ultimately the AP might just be trying to find a way to blame the damn rich for the failure of the ‘Summer Of Recovery.’

But to get to that point they have to admit some pretty amazing facts along the way. They even come precariously close to saying that raising taxes on the rich will hurt the economy across the board.

Perhaps we really are in the ‘end times.’

This article was posted by Steve on Tuesday, August 3rd, 2010. Comments are currently closed.

6 Responses to “AP Admits: ‘The Rich’ Drive The Economy”

  1. chainsaw says:

    And so it goes, sound economic theories (the Laffer curve) are once again proven correct. Actually, on Wilkow’s show yesterday, Arthur Laffer coined it “common sense”.

  2. Liberals Demise says:

    Ali oBama and his den of thieves would have us all believe it is the rich who haven’t paid their dues.
    For AP to admit that the rich drive the economy is mind boggling. AP has known all along this fact but swept it under the carpet so they could prop up their shiny, magic Halfrican American (?) who could never be wrong. Even if it meant the undermining of this nations principles and economy.

    It is my humble belief that tomorrow, one unlucky journo-list will be scanning the Help Wanted ads. (Welcome to the real world, comrade)

  3. Petronius says:

    Rich? What rich?

    The only rich people around anymore are the Liberal parasites in Nerobama’s regime who are sucking the life’s blood out of the American people.

    There is a lot happening out there right now, but it is important for us to keep our eye on the ball –– the wreckage that Nerobama and Pelosi are inflicting on the economy and the political system.

    Knowing that Liberals hate facts, I offer a few tidbits for them to chew on. Let’s review :

    •  official US unemployment 14.2M Americans
    •  actual unemployment 25M
    •  new jobs being created fall well short of the number needed to offset new entrants due to immigration or to roll back the 8M jobs lost in 2009
    •  Americans on food stamps 41.3M
    •  public debt per citizen $175K
    • personal debt per citizen $52.5K
    • savings per citizen $1,060
    •  bankruptcies 1.4M (2010)
    •  mortgage foreclosures 974K (2010)
    •  house prices continue to fall
    • new housing construction, sales, and mortgage originations also falling despite historically low interest rates
    • commercial real estate market is in even worse condition
    •  credit continues to contract
    •  retail sales dropping in June
    •  the stimulus has failed
    •  stock market hanging by a thread
    • the bond market is holding firm only because investors have no place else to hide
    • only about 40% of us pay taxes; the other 60% saddle us and ride on our backs
    • Bush tax cuts about to expire
    • when they do, life is going to become harsher for the 40%
    • higher taxes are likely to precipitate a double-dip recession
    • Obamacare is creating confusion in the health care industry
    • America has turned its back on its senior citizens
    •  Obamacare will set off a new round of job cuts, taxes, and increased health costs
    • financial “reform” is creating confusion in the finance sector and for farmers
    •  the oil drilling moratorium will result in more uncertainty, fuel shortages and higher prices
    • oil price shocks are always followed by a recession
    • several blue States poised on the verge of bankruptcy
    • the Fed cannot hold interest rates near zero forever
    • there is not enough available capital in the world to absorb the amount of US government debt that is being presented
    • government spending (Federal, State, local) now accounts for nearly half of GDP
    •  the government will have to bleed the US private sector dry just to pay the interest on the national debt
    •  Democrat policies are spreading fear and confusion in the business community
    • American businesses are hunkered down in a cautious, belt-tightening, wait-and-see mode
    • Some American businesses are leaving the US and relocating abroad
    • the regime is determined to double-down on the policies that have brought us to this crisis
    • continuation of the regime’s policies will push America into a depression
    • oddly enough, as the political drumbeat for austerity is building, at this stage a shift to austerity is likely to further damage consumer confidence and strengthen the forces of deflation
    • a sustained crash in US asset values will wreck the global economy
    • anyone with a memory knows that meaningful budget cuts are never going to happen
    • recession/depression means political pressures will build to sacrifice the dollar to inflation
    • the stage has been set for a Zimbabwe moment

    On 4 Nov 2008, one-half the American people put a ballot in their mouth and pulled the trigger.

    The capitalist economic model that supports our republican form of government has been grievously wounded.

    The new Liberal model is to issue massive public debt to finance the incomes of government employees and transfer payments to Democrat Party constituents. As John Hathaway has observed, “Income created by political largesse has become a cornerstone of the American economy.”

    If America continues its imprudent experiment with Liberalism, things are going to get ugly.

    Come November, America must decisively reject Liberalism once and for all. But even then, it may already be too late. We may, as a matter of sheer economic survival, be forced to reconsider some of our most cherished principles and traditions.

    • proreason says:

      great list, Petronius.

      The core of it goes something like this. Super rich are <1% of the population and control about 25% of the wealth in the country; tax rate – somewhere between 0 and 5%, all in. Middle class has about 60% of the population and control about 65% of the wealth in the country; tax rate – from about 15% at the low end (FICA) to about 65% at the top end. Lower classes has about 40% of the population and controls less than 10% of the wealth (but growing). The working lower classes pay about 15% in taxes (FICA). The rest pay 0%.

      The ruling elite has promised to redistribute the middle class's 65% of the wealth to anybody that signs onto the redistribution class action suit. So far, about 45% are all-in (which includes the lower and upper reaches of the middle class. Another 10% are sorely tempted.

      Nobody in the all-in group except for a sliver thate considers itself weathy and safe, know anything about the history of the ism's. It all sounds like free candy to them.

      Everyday, everybody reaching working age has been taught the same thing. Socialism is free stuff. The wealth of the "rich" (actually, the upper middle class) is inexhaustable. A "just" society takes from the rich (i.e., "them") and give to the "poor" and / or righteous (i.e., "you").

      The only people who know the truth are pople older than 50, and a tiny handful of free-thinking yourger people.

      If the Ruling Elite isn't stopped NOW….i.e., this year…..they won't be stopped, ever. The knowledge about what is happening is perishing at an accelerating rate. The pipeline of serfs at the input end are throughly brainwashed and admire Lady Gaga's political savy.

      It's now or never.

      But really, who cares? Your kids will learn to adapt, won't they? And it will take years to play out, anyway. Chance are that if you are over 50 you will get your fair share, just as you deserve. The Ruling Class would never screw you, would they? You can trust them on that.

  4. Right of the People says:

    Thank you Disassociated Press for finally stating (or coming very close at least) the effing obvious.

    Government has never created wealth, never created jobs that help the economy, never “stimulated” the economy. All guvmint has ever done is been a drag on the economy.

    Government has limited purposes, providing for national security and making our borders safe and they are doing a woeful job on the later since the men and women of DHS are not being allowed to do their jobs and keep the illegals out.

    Maybe if the O’ster and his mob took a minute to read the Constitution instead of using it to wipe their backsides with they’d understand this.

    November can’t get here soon enough.

  5. canary says:

    Walmart’s price gauging for example.


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