Americans Saved $1.1T Less Than Previously Thought from 2017-2022
bloomberg.com
bloomberg.com
This requires you to have the discipline to not spend your emergency fund on Christmas shopping. It's for emergencies.
Also we somehow owed over $6000 in taxes this year despite me increasing how much money was set aside each paycheck by $250 per paycheck after the same thing happened the previous year.
We still have an emergency savings, but wow is life working hard to keep depleting it. There's a chance I might have to liquidate some investments to pay for everything this year.
If insurance doesn't cover it, I'm expecting to pay over $10k for the roof.
Doubly so if the HVAC system's intake is down there.
We rented a dumpster and tossed most of what was in the basement (various things were on shelves or in the elevated crawlspace and didn't need to be tossed, like my old NES games), ripped out the carpet, and hired a mold remediation company that ripped out the bottom two feet of our drywall. And we will replace the sump pump soonish, although it hasn't had a problem since.
It's fine down there now. Wasn't cheap to get it to that point, though. Especially since our insurance company doesn't cover sump pump failures unless you have a specific rider, which apparently we didn't have.
Still might not be good enough for you, and that's fine. But I suspect you wouldn't notice if you went down there and didn't know it had once flooded beforehand. About the only telltale thing down there is a bump here and there where the seam of the bottom two feet of the new drywall is.
Anyone who finds it important and has the means to do so is—in general—likely saving more than a token amount. 10% is a good start and enough to be noticeably worth the effort. And then of course you have the FI/RE crowd who (while rarer) push their savings to anywhere from 30–50%, or even higher.
Also, a lot of people have equity in their homes. I don’t know if that counts as savings, but is money that can be accessed with HELOC or sale.
We have friends and acquaintances in the same income bracket and many are leveraged to the gills, don't fund their 401k, don't have any emergency savings, etc... Hell, they're often using margin for risky investments.
There is for most people little reason to keep much money in a savings account. They don't earn much interest.
Unless you've made a typo and you mean 20 years? (in which case, now 300k is below maxing out, but slightly closer (although with returns it should be a good bit more))
You’re right…but that’s not what was said. After 2 years, all they had was $13K. But if they’d been contributing for 20 years like they should have been doing (because they’re 40, not fresh out of college), they’d have $300K.
IOW, $13K is nothing to brag about if you’re 35 and working software jobs your whole career. At least that’s how I read it.
This is a bit of an aside, but… this isn't quite correct.
Your (combined) individual contribution limit to a Traditional 401(k) and Roth 401(k) is $22,500 for this year. That doesn't include employer contributions. It also doesn't include after-tax contributions. The total combined limit for all contributions from all sources is $66,000 this year. So you could max out your Traditional 401(k), have your employer contribute $4,000, and then contribute an additional $39,500 to the after-tax portion.
The after-tax portion has no advantageous tax treatment whatsoever. It's identical to putting that same amount into a brokerage account… except for one detail. If you employer has a plan which allows for in-service distributions, you can immediately roll over after-tax contributions into the Roth portion of your account. This enables individuals working for companies with very good benefits packages to save an incredible $66,000/yr into tax-advantaged retirement accounts.
So assuming no growth, you can actually legally put $132,000 into a 401(k) in two years.
It is thoroughly fucked up that the majority of Americans who don't work for giant companies with gold-plated benefits packages only have access to $6,500 in tax-advantaged savings through IRAs.
But, the second most popular option was to pay via credit card, and this does not preclude having the money in savings. Given the popularity of credit cards in the US, this makes sense too. If faced with a sudden large expense, I too would put it on credit and pay it off at the end of the cycle instead of pulling from savings, despite being able to afford the latter.
Similarly, the third most popular option was to pay the bill and cut other expenses, which also doesn't exclude savings and would be a pretty normal thing to do too.
IIRC only ~15% said they'd take a loan or borrow from friends/family.
> Lawmakers who opposed the bankruptcy bill cited a 2005 study by Himmelstein, Thome, Warren, and Woolhandler finding that approximately half of bankruptcies were medical-related. Supporters of the bankruptcy bill countered with a court record analysis conducted within the Department of Justice (DOJ). According to the DOJ analysis, over half of the sample (54%) had no medical debt at all, the average medical debt among those with any such debt was under $5,000, and medical debt comprised only 5.5% of the total unsecured debt of the sample.
https://www.bankrate.com/banking/savings/emergency-savings-r...
The source of their statistics, which has a separate section which clearly asks about how much savings people have (granted, in terms relative to their living expenses instead of absolute numbers), rather than pulling 56% out of the statistic about how they would pay for an expense: https://www.bankrate.com/banking/savings/emergency-savings-r...
This finds that ~22% of Americans don't have emergency savings. Which is still a lot, but certainly not as crazy and eye catching as 56%.
Note that the second link is the 2023 version, CNBC references the 2021 stats, but those don't seem to be accessible anymore (which is a strange arrangement).
>When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). The remainder said they would have paid by borrowing or selling something, or said they would not have been able to cover the expense.
https://www.federalreserve.gov/publications/files/2022-repor...
Per another Federal Reserve study I saw, the percentage of the population where income does not exceed necessary expenditures -- people with no income surplus, latent or otherwise -- is something like 12%. Which sounds about right and is still a lot of people.
...the 2022 SHED included a new question asking what is the largest emergency expense people could handle using only savings. Sixty-eight percent of adults said they could pay an expense of at least $500 using only their current savings (table 12). This is a somewhat larger share than the 63 percent of adults who said they would pay an unexpected $400 expense with cash or the equivalent, suggesting that some people do choose to pay with other methods, even if they have cash savings available to them.
The median US household entering retirement age has saved about $120k-$150k. That is, over 50% of people are more or less 100% reliant on social security to get by in retirement.
The mean US household savings at retirement age is like closer to $500k, because it's overwhelmingly top heavy in the 1%/0.1%/etc of people.
Consider that this reporting is/was complete bullshit intended to get clicks. More critically, that headline gobbled up answers like "I would put this expense on a credit card" into "people have no savings to pay for things" when it's extremely common for people to pay for things with a credit card and have 30 days to settle their balances for the month.
We often hear this "all over the map" blamed on the "1%" (that's a lot of people in the US). Not so. A police officer is not expected to be a rich career, but it's one where it's easy to put in lots of high-paid overtime and like in any other job, invest a lot from early on. It's a short career that leaves time for a second one afterwards. It's easy to finish with a high pension in addition to high investment. Obviously not all cops will do that but it's possible. Investing is also well understood by many people so you see teachers ending up with very nice piles. Nothing to do with "1%" or income inequality.
The US make it also easy - well, maybe not easy but not uncommon - for a cliché "Wall Street lawyer" to end up broke.
We were discussing the awesome breadth in outcome in the US.
Heck, I do the same thing. I have a predefined amount that goes into my various accounts each paycheck. The rest is used for the mortgage, bills, other monthly expenses, etc...
It is much easier to adjust your 401k, Roth, HSA and Brokerage account transfers than to get a raise.
I don't even see the money that goes into my savings--it happens automatically before I even get paid. What's left over is a small, small percentage of my actual after-tax pay, and that has to somehow stretch to the next paycheck, which is not always easy.
Relying on a 401k alone means that in the best case scenario means you're all but guaranteed to work until 60. Being on this site, you're statistically likely to be a person that can retire on great sums long before 60 and be both financially secure and have many healthy years to enjoy your life.
This isn't actually true. I don't mean to suggest that the GP is good advice, but:
1) Many companies offer "mega-backdoor Roth" 401k, with in-service conversion from regular after-tax dollars to Roth after-tax, meaning you can contribute a total of ~$53k annually or whatever the number is now.
2) When you separate from your employer, you can roll over your Trad and Roth 401k into Trad and Roth IRAs.
3) After 5 years (which clearly won't be an issue), the principal contributed to a Roth can be withdrawn tax and penalty free even before retirement age.
4) You can always convert Trad IRA dollars to Roth IRA dollars by paying tax. These dollars become principal in the Roth and therefore eligible for early distribution.
Assuming you haven't retired incredibly early or made highly unusual gains, a combination of continued Trad->Roth conversion and Roth principal distribution can get you to retirement age even without any additional savings.
This sounds like really bad advice. 401K limits are 22.5K this year. If you are making 100K and you are able to put away over 20% of it, maybe that gives you a reasonable probability of maintaining your lifestyle in retirement. If you're making good money and you're only saving 22.5K, you are probably going to take a serious hit whenever your income stops.
You are also completely undervaluing having "dry powder." Let's say interest rates go through the roof and "nobody" can afford to take out a mortgage, being the one guy with cash-on-hand will let you capture some once-in-a-lifetime real estate deals.
Also, freedom. Under your scenario, someone working a decade will have saved 220K in their 401k and that's it. Now they want to quit their job and start a business. They have to cash out their 401k just to sustain ~1 year of them not drawing a salary. Who's gonna do that? Versus, imagine the same person has a ton of additional savings - they can take the risk because it's a much smaller risk to them (longer runway)
// if there is money left over after paying for normal life enjoy it as you can't take it with you
You are probably undervaluing the "enjoyment" people get out of deep financial safety.
In short, saving taxed income is a form of diversification.
The key is to save all a long. If you start saving for retirement at 50, even with catch up contributions you are probably not going to have a nice retirement.
So let's say your number is 2x optimistic and someone retires with 4M instead - whatever that means in a bunch of decades from now. Then you pay tax. Depending on where you live, between federal, state, and city that can be close to 50% especially if rates go up. So that leaves you with 2M. Then say you end up living to 90, that's like 71K per year take-home. I guess you can live on that today. But for example my taxes for the house are like 20KL. So almost a 1/3 of your take-home goes to that. it's not SOOOO cozy.
2023 - $293,319.96
Federal minimum wage 2013 - $7.25 an hour
Federal minimum wage 2023 - $7.25 an hour
- You will live to see tomorrow.
- If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
- Location variance makes it really hard to find comparable intel online for a right path. Cost of living, job market / income levels, family situation and size, etc...
- Although sometimes extreme, the Bogglehead and FI/RE communities are great.
> You will live to see tomorrow.
statistically yes, but there are outliers who won't.
> If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
Sure, but few people are that high. Even of those who are, 22k (adjusting upward every year) from 25-65 is a lot of money. You can save a little more if you want to retire early, but you are only young once and your time is better spent enjoying youth while you have it.
The only thing to keep in mind is that debts like that contribute to negative net worth/retirement savings. If you have 200k in student loan debt, you have a -200k net worth (even if it costs ~250-300k to pay off due to interest...)
The path to freedom is max, not min or mean.
Are you claiming that many people you know who are maxing out their 401k, HSA, and Roth IRA literally speak the words "paycheck to paycheck" to describe their financial situation?
I'm not high-net worth, but I suspect that a lot of the same vacation forces are at play in that community as well, particularly during the pandemic.
There is a good methodological discussion on the merits of this change, published back in May by the BEA [0].
> "At the same time, the inclusion of capital gains dividends, which flow to households, biases upward the estimates of personal income and saving from current production for the household sector.
> Under the new treatment, BEA will remove income from capital gains from dividends paid by REITs (and, for consistency, from dividends paid by other corporate real estate businesses). This change will generally result in downward revisions to REIT dividends paid and offsetting upward revisions to undistributed profits of REITs, and thus business saving. This change will lead to similar downward revisions to dividends received by shareholders (households), to personal income, and to personal saving."
0: https://apps.bea.gov/scb/issues/2023/05-may/0523-ric-reit.ht...
This is adjusting the inflows not the outflows of rich people (and thus low marginal propensity to spend) people. So while every revision teaches us more things, this doesn't isn't really hitting "where the action is".
Remember that in macroeconomics, saving is the break, and spending is the gas.
Obviously that isn't true on smaller scales, living paycheck to paycheck isn't considered a good thing.
It just means it is nuanced to discuss these problems from a Macroeconomic perspective. On the one hand saving a little is good for individuals on the other spending is better for the "economy".
So, from the perspective of economic growth, we want people to spend as much as possible, not save.
Beyond the money itself that is spent that spurs growth, you also can add on the fact that people with minimal savings are forced to work to survive. People with lots of savings are more inclined to lounge around and be unproductive.
Of course, one could also argue that people with minimal savings are less creative, because they're in constant survival mode and grinding out the style of work they've always done.
That feels like a perversion of the credit industry. We can clarify that we want people to have as much excess income as possible, spending a fair percentage of it. If they're spending more than a sustainable amount, they are incurring excess and efficiencies and/or deficit spending which will have a suppressive effect on spending over the long term.
Holding that $5 prevents any business to business transactions and possibly causes the company to constrict employees economy mobility or requires laying people off.
By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.
If money simply rotates between customer and employee, that business never existed in the first place - because somebody had to invest in the first machine, coffee, location, etc.
1) That's not what the parent meant by "holding that $5." They didn't mean investing it, they meant electing not to spend it. It isn't used to buy coffee, not is it put in the bank, it is put under the mattress (per say).
2) That is not how modern investing works. If you invest $5 into a company, that company does not get $5 to grow their business. Modern investing is quite different than the idea many of us were taught as a kid. Angel and seed investing are more related to this concept you are implying, but not the type of investing most people do: i.e. buying something on the NYSE. That kind of investing has extremely different metrics for success that do not necessarily rely on generating better products or even a "better business." (different metrics are often used to define this -- state yours and you'll start a hot thread -- so quotes)
I don't have statistics on how much money is "under the mattress". I expect little enough that I don't need it. All the more so when our oh-so diligent govt mostly doesn't care either and navigates based on "money supply" actually in circulation. Happy to be corrected if someone has data.
"Spending $5 on coffee ... lets that business ... re-invest ..." means I'm giving them $5 and they are choosing to hold or they reached their tipping point of saving and can initiate a re-investment. That $5 could be used as simple as replacing a broken electrical outlet cover or fund constructing a drive-though. Could also go to funding the employee pizza party to invest in employee satisfaction.
Just like cars, some business investments are fully paid off and are now just there for utility. Only need operations and maintenance costs. Investment does not mean you need to by another car or build another location.
Is that a more clear?
Everyone stepping on the brakes means no one is going any where. Just like everyone stepping on the gas means no one is going any where. Wouldn't the 2007-2008 financial crisis be a good example of both? Didn't too many people overspending, which originally looked good on paper, turned out to become a head on collision causing too many stepping on the brakes because they could not afford the gas?
Your previous post contrasted spending $5 on coffee as letting that business operate, versus holding the $5 as not allowing that.
I pointed out that there is no such thing as merely withholding the $5. That is, in the real economy, the $5 that is not spent in day to day operation is instead invested. The choice is not between buying the coffee and doing nothing. The choice is between buying the coffee and leaving the $5 either for you or for someone else to invest (through your bank). Either way it's getting invested. THAT $5 is what created a coffee house in the first place. I was pointing out the fallacy of these $5 being somehow idle and out of the game. Sure a little money is out of the game (perhaps under a mattress) but not much.
I agree with gas vs brakes analogies in the economy. Even if I have a hard time with yours. Economic policy and overall mood can push people to spend more or save more (which gets invested). That investment activity can be very productive or not very. In extreme cases it's really but really not productive - just the best that people can think of. In some cases it's a bubble which seems like a good, productive idea at the time - and then isn't. Sure. And all economies need both spending and at least long term investing.
You introduce something new in this response (I think) "some business investments are fully paid off and are now just there for utility." I don't think that's correct. Money / capital has an opportunity cost. Either that business produces now (dividends or value increases) or it's held in the hope that soon it will, or it's sold to someone who thinks they can do better and the money redeployed somewhere else. More so if it's actively losing money. Holding the business is an active management decision for that capital at each moment. Even when that decision is "no change, carry on". "Paid off" would be about what happened 20 years ago and usually never even gets looked at. It's rarely relevant. See also "sunk cost fallacy".
This is assuming zero govt. corruption.
Also, the 1% don't save. They invest. Which would have created the coffee shop in the first place.
There's really no need to blame the 1% for your coffee shops.
You think those are the only kind of investments? The local small businesses don't get loans? The local small businesses don't depend on other businesses?
I guess you are not from the US but I really am a fan of better economics and financial education worldwide.
There are no Scrooge McDucks hoarding gold coins in a vault.
The Scrooge McDucks are landowners who disproportionately benefit from low property taxes relative to the security they receive from the rest of taxpayers paying for police/courts/etc. For example, a coffee shop or whatever business built on someone else’s land might as well just be a job you bought for yourself, because the landowner is going to come for the extra profits at some point.
The US does allow for copyright/IP though, which adds an additional asset to rent seek from.
asking as someone who's never owned property.
https://en.wikipedia.org/wiki/Land_value_tax
Also, get rid of 1031 exchange.
https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_...
Once land is properly taxed, supply of housing units will increase to limit its price.
Precisely why the LVT is inherently flawed and regressive, and prone to abuse and exploitation by the rich and powerful, instead of being dictated by the aggregate market demand of regular citizens.
>Empirical data from the US and France, however, indicates that ownership of land value (in absolute terms) is negatively correlated to the social welfare weight. Middle income households would pay relatively more land value taxes than high income households, but less in absolute terms.
Unfortunately, the "relatively more" aspect (to one's income) is what matters.
LVT is predicated on this idea landowners will be forced to "make efficient" land for common good, as an empty lot is taxed the same as the skyscraper. In practice, this just makes desirable areas unaffordable for the middle class and completely forces out the lower class. e.g. it _makes explicit_ into the tax laws, what is already happening in practice with property tax.
property taxes in a desirable area say "sorry you're poor and your house isn't nice, but you pay less tax than your rich neighbor". LVT says "don't let the door hit you on your poor ass on your way out, but if you want to stay you can pay the same tax as Mr Moneybags next door".
Not to mention the irony that LVT actually decreases the value of the land.
>If buyers know that they’ll have to pay £10,000 in tax on a piece of land they valued at £100,000, they’ll only be willing to pay £90,000 for that land. The tax lowers the returns from land ownership which is reflected in the value of the land. The current owners of land are the ones who bear the full cost of future tax bills.
Again this disproportionately affects the middle class landowner and unceremoniously kicks the lower-class former-landowner who inherited the property out of the landowner class.
LVT is ultimately the billionaire's dream. It's a dressed up neo-Eminent Domain, pretending to be progressive while being punitive to those without means.
Worst of all* is the suggestion LVT it discourages land speculation - it actually does the exact opposite. It severely exacerbates speculation, akin to how people scalp concert tickets or limited edition Jordan shoes today.
*there's also countless issues with trusting the government to evaluate the land; the issue of value vs. area; subjectivness of varying types of land value from agricultural farmland vs. industrial land vs. service-oriented vs. transport/logistics vs. inherent value from resources, but "make the poor family living in a shack pay the same tax as the rich guy who build a skyscraper" is sufficiently flawed without going in depth into those issues.
One is incentivizing land to be used more productively, for example for public transit, higher density housing, so that more people benefit.
Another is a too large rich/poor gap.
The latter problem requires a different solution, which is taxes to redistribute wealth.
Where are the 1% most likely going to invest to maximize profits? More likely with stocks or areas with a higher yield. Sticking with coffee, very unlikely that they will invest in the shop down the road. More likely in Starbucks. Yet franchises actually slowly siphon out the local economy. Unless there is a means to bring wealth back in the community, it will slowly die.
When was the last time you saw Starbucks investing in the community, such as helping finance / sponsor the local boys and girls baseball teams? Would it be more likely that local coffee house or business will be doing just that versus Tesla? Is that not an economical investment, one in the community, where the local food truck can benefit from those local baseball games?
This weekend I dined at a restaurant where the bartender was living out of his car for a portion of his life. Talking with him I also found out, he is going to school for botany. Turns out he taught himself how to grow and maintain exotic plants. Going there and tipping is an investment in him and those around him in my community. A social economic investment as such is very unlike going to be from 1% wealthy that are looking an a pure financial gain.
An unbalanced economy where the wealth are very top heavy prevents local investments. For example, lets say the taxation is cut for them and thus needs to cut funding for Mental Health Facilities. That reduced the probability to invest in people that could be assisted in becoming a more stable part of society. Doesn't a dramatic cut in education speeding reduce the ability for a more talent pool of people in the community? This type of investment must be long term and equivalent to R&D in a company. It does not pay off right away but done the road it has a high potential.
Economic abuse can be exacerbated by large economic inequality. Take a bank, turns out that there are 100 deposits in the bank to fund the loans departments. One person's account contains 90% of all funds. Now that one person closes their account and the bank becomes defunct and all others loose. With enough wealth people can concluding to make this happen. Lets conclude to invest in a bank, that has stock in the market, though deposits. We become over 60% of the loan department. We wait a while and then start shorting the bank stock. Pull our money out and make money on other people misery. Where a well balanced economy would prevent this ability and create a more long term stable economy.
Fraud is part of every Government and society. Some people just want to make as much money as possible as soon as possible. No matter how big or small the community is. Decent firewalls need to be put into place to prevent it and forensic accounts needs to be deployed to find it. Fraud is crime, is it not? Where does most crime take place? Probability states in larger populations such as California and Texas versus smaller ones such as Maine and Wyoming. Based of probability, wouldn't most fraud be from the more affluent individuals?
Look at Toyota vs Ferrari. Ferrari is priced for the rich and has the highest margin per vehicle between the two. Toyota is priced for the non-rich, produces the most cars, employees more people directly, and has more manufactures. Toyota is more of a driving force for the economy though initial sales and second hand market than Ferrari. Driving force of any economy is not dictated by the wealthy but by everyone else. Coffee is no different. 1% cannot economically support that coffee shop, it is the community with spending power that can.
*Fixed wording.
When it comes to talking about the wealthy I like to frame the problem a bit differently. Instead of focusing on the ceiling, it is better to focus on the floor. I don't care if there is an unbounded ceiling (that would be preferable if possible) but I do care about a bounded floor. There are many ethical reasons to care about the poor, but understanding capitalist economics as a river flowing, poor people are also sinks (like the rich). They too are not able to effectively spend money, or even generate capital in the first place (remember, this is a positive sum game where the point is to generate more capital[0] year over year). We don't actually want poor people, and we don't actually want less people. So the best solution is to make these people not poor. I don't know if the answer is through UBI or actually addressing the complex issues within our society that prevent people from climbing economic ladders[1]. Unless you believe that poor people are genetically different (no evidence) or that they're "too far gone" (extremely weak evidence and doesn't argue against fixing the new generation), then it makes sense to help these people out. After all, the government's role in economics (it is a player) is to prevent these types of pooling and to promote competition. It is really an extension of the ideas behind why we monopoly bust. Not because monopolies are always bad (sometimes they are good. Damn network effect), but because the power is abused in such a way that capital resources pool into a system that prevents the economic growth of the society as a whole.
The huge irony is that part about how helping the poor helps the rich. I'll put it this way: a king a few hundred years ago lived a worse life than many middle class people. They did not have plumbing or working toilets, as good of health care, could not travel around the world in hours, and honestly most probably did not have as good quality of food (new cooking techniques, accesses to new spices, access to goods throughout the year, overall variety, etc). These are not things you can directly "buy" but rather you have to let the chaotic nature of the system create these things. You kinda just got to throw money into the wishing well and wait for it to happen, but it happens faster when more people are not struggling economically. They can still be extravagantly wealthy while advancing this too. Let's be real, there's no way the top 50 richest people can spend their money in their lifetimes.[2] The truth is that going for the "highest score" is over-fitting to the metric and actually harms performance.
Weirdly the first part (depression paradox) of this point is made in a South Park episode: https://southpark.cc.com/episodes/9do3gw/south-park-margarit...
[0] Capital is a vague term. Using here vaguely to not just mean cash, but goods, innovation, research, etc. But do not confuse economics with a zero sum game (common). Most games are not zero sum except in very simplified cases or special cases (like an instantaneous snapshot).
[1] Nearly everything we oversimplify. The world is incredibly complex. First order solutions aren't good enough for this modern world. Stop using them. It isn't that they aren't "good enough" it is that in complex systems using a first order solution can actually take you away from the optimal solution, not just inefficiently towards it. If you think about it you'll be able to find some examples (best to do this thought experiment: think of a simple and reasonable solution to a problem that completely backfires. If you need help Google "Cobra Effect").
[2] It's important to remember that capital works differently for the rich. Since the capital is difficult to spend at a rate that greatly depreciates itself, the interest factor plays a dominating role. While you or I grow little interest on our money because our small principles, the rich have huge principles and even a small dividend on that is an absurd amount of money. E.g. if we had a billion dollars and got a 1% yearly return on it (for easy math) that's $10m/yr. It is definitely possible to spend that money in a year, but it is more difficult to spend that much every year.
If the economy is a car then people saving extra is the equivalent of hitting the brake pedal and people spending more is the equivalent of hitting the accelerator (or gas) pedal.
So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s
I don't really understand how increasing corporate tax could encourage corporate spending. It seems to me the opposite is the obvious mechanism. The more money that goes to the government, the less money a corporation has to put into the economy. If the corporation is in a "save" mode, they're more likely to spend less if they are taxed more than they are to continue the same spending and save less.
Maybe that's not what you're saying or maybe the effect is different than I'd expect (economics is weird sometimes) but I don't get your point there.
Right now companies are saving up profits in their bank balances. I think if you increase the tax they pay then those balances will grow more slowly and the tax money will flow into the economy via the public sector. You think the companies will spend less but I'm not sure why companies would scale back operations?
Who would have thought that a couple thousand dollars of "stimulus" monies, your dollar being worth 20% less than it was a few years ago, record credit card debt, record wealth inequality between the have's and have-nots, and a completely screwed up housing market would lead to Americans saving "less than previously thought"...
Remember, the people making fiscal policy have been citing "savings accrued during covid" every chance they can. The same chattering donor class, bureaucrats, and politicians that insist the economy is doing better than ever. The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals. The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
That sounds pretty suspicious, except that this correction goes back well before covid, and the spike in 2020 and 2021 is just as huge with the new data.
> The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals.
Look, "two quarters of shrinking GDP" is a really easy rule to apply, but it's so dependent on timing and ignores everything around it.
Specifically, we had a single quarter with 7% growth, then two quarters that combined to 2.6% shrink, then a single quarter with 2.7% growth.
I think it's fair to say that was not a recession, and the weird result in 2020 with -28.0% immediately followed by +34.8% is important to mention but also not a recession, so 2008 was the last actual recession in the US.
> The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
What did you find questionable that was in addition to any overstatement of results?
And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
Not one single thing, but many straws that finally broke the camels back, as it were.
The speed at which it was developed and made "mandatory", for one. The release from liability granted to all the produces of said vaccine, for two (which I would be more sympathetic if not for #1).
The laughable "100% effectiveness rate" that was touted and walked back rather sheepishly.
The equally laughable assertion that the common flu just "took a year off" in 2020 and every cough and sniffle was COVID.
The outright hostility to _reasonable_ skepticism (i.e. "this technology is relatively new and could have unintended side effects so we should study it more", not "Bill Gates is putting microchips into the syringes to track your children").
Hospitals and media / government types deliberately conflating deaths _from_ covid and deaths _with_ covid. (It's this specific example that makes me suspect the redefinition of "recession" as a political exercise).
The outright lies surrounding how vulnerable children were/are vs the elderly, the latter being FAR more vulnerable.
The idea that the virus was created and escaped from a lab in Wuhan that was a conspiracy theory, until it wasn't.
Politicians and elites clearly not practicing what they preach, be it the governor of a state going out to a fancy restaurant with their buddies, unmasked, during the height of the crisis or those who enriched themselves and their businesses on relief funds.
There are more but it's actually pretty depressing to list.
> And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
Could have fooled me based on public statements made by pro-lockdown politicians at the time. "Fight the spread" was repeated ad-nauseam by those pushing questionable methods that many people knew were suspect to be begin with, yet were castigated as "killing grandma", "anti-science", "rubes" and every other name in the book rather than taking their concerns seriously.
Oh I thought you were talking about the vaccine itself, not the politics.
> the redefinition of "recession" as a political exercise
Hasn't the NBER been in charge of it for a very long time? Has the definition actually changed recently?
> rather than taking their concerns seriously.
Weird, I remember a ton of time devoted to taking the concerns seriously.
But "seriously" doesn't mean that if the same concerns get repeated over and over they become more correct. Some concerns were correct but most weren't. And if someone keeps talking about "shedding" or masks trapping CO2, even after multiple corrections, they deserve to be insulted.
Perhaps in your eagerness to get to the “deserved to be insulted” part of your response you missed that?
The speed and release from liability don't fit that.
The "outright lie that it was 100% effective" falls under overstated. So I wanted to know what you meant by "questionable" in addition to "overstated".
So no, I didn't miss that.
And I didn't write that comment in a rush, just to be clear.
This conversation is over. Have a pleasant evening.
You said a thing, I asked for clarification, your reply made me realize that I had misunderstood. Hence "oh I thought you were talking about".
I was happy at that point! Everything was settled!
I'm not trying to get you in any way at all. I just replied because you said I skipped things, but I didn't skip them.