Almost in immediate response to yesterday’s news that domestic spending by consumers went up 2.5% yesterday the Economist magazinedelivers the ultimate downer. They have produced a handy chart showing how the real reason the economy is doing so poorly isn’t just because Americans are out of work, although that is part of it. The larger reason is because our spending on extras has gone down as those who are out of work spend less, and those who are employed get worried that a pink slip might be right around the corner.
The chart shows nominal spending in light blue and ‘real spending’ – what people are actually doing – in dark blue … and the areas where real spending have dropped are pretty significant.
Americans are eating out less, spending less on hobbies and most of all, getting more out of clothes and furniture rather than buying new things. Now: is an American public that is more frugal, more selective about spending and making better use of items really a bad thing overall?
In the grand scheme of things: no. As the chart shows, things like public transportation expenditures going up has a positive environmental and economic impact on most cities. However the overall American economy isn’t geared towards conservative spending and repairs, it’s geared towards blowing wads of cash on disposable goods and using credit to buy the rest. So while politicians in Washington try to figure out how to stimulate the economy as a whole, they might want to figure out how to pry dollars out of the pockets of regular people, too. It turns out that might be where the real stimulus lurks.
This article originally appeared on Politic365.com.