Saturday, July 17, 2010

The Spending of the Top 5%

This is from the New York Times:

... The Top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers — defined as those earning $90,000 or more — surged to an average of $145 a day in May, up 33 percent from a year earlier.

Then in June, that daily average slid to $119. “I think a lot of that feeling that the worst was over has sort of abated,” said Dennis J. Jacobe, Gallup’s chief economist.

Although real estate brokers in Manhattan and the Hamptons report that buyers at the high end have returned, and Mercedes sales in the United States are up 26 percent this year, other indicators suggest a slowdown.

$210,000 a year is not enough to insulate you from economic changes. It's doctor or lawyer money, an upper middle class income.

My new dentist is in southwest Minneapolis. I get down there, and the people look different. Most of the women and girls are blond; and most people have that golden glow that comes from a lifetime of good nutrition, good health care, good education and fairly solid financial security.

I figure I am looking at the upper middle class, who look different from most of the people I see.

But the kind of income that gives this golden glow is not the kind of income that allows you to buy a two-bedroom apartment in Manhattan or a house in the Hamptons.

(I checked. One million dollars will get you a one-bedroom apartment (750 to 1,000 square feet) in Manhattan below 34th Street. Houses in the Hamptons vary, but most of the ones I saw listed were well over a million dollars. At the height of the real estate boom, you could buy a house valued at more than five times your income. But can you now?)

What the Times is probably saying, though I am not sure, is that the upper middle class is worried and cutting back on spending, while the rich -- the people who buy apartments in Manhattan and houses in the Hamptons -- are still laying out money. But the Times is being very fuzzy in the way it does not divide the upper middle class from the rich and super rich.

Does any of this matter? Maybe not to most Americans, who are not upper middle class. That golden glow that come from $210,000 is as unobtainable as an income of tens of millions of dollars.

But fuzziness is one of ways that American society avoids thinking about class. We fold the working class into the middle class, then fold the middle class in with the rich, so we are all one social mass, except for the irritating poor.


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