Americans spending more with income almost flat

**Curt James** · 10-29-2011, 05:48 PM

Oct 29, 12:33 AM EDT

Americans spending more with income almost flat

By MARTIN CRUTSINGER and CHRISTOPHER S. RUGABER
AP Economics Writers

WASHINGTON (AP) -- Americans are making a little more money and spending a lot more.

Under normal circumstances, that would be a troubling sign for the economy. But a closer look at some new government figures suggests another possibility: People are saving less money because they're earning next to nothing in interest.

Saving is already difficult because of more expensive gas and food. It's even tougher because of the lower returns - the flip side of super-low interest rates that the Federal Reserve has kept in place since 2008 to help the economy.

Critics say the Fed is punishing those who play by the rules - those careful enough to set aside money for savings or people who built up a nest egg and are living on fixed incomes that depend on interest.

Americans spent 0.6 percent more in September, three times the increase from the previous month, the government said Friday. Spending was especially strong on durable goods - things like cars, appliances and electronics.

At the same time, what they earned was mostly flat. Pay increased 0.3 percent, and overall income just 0.1 percent. After deducting taxes and adjusting for inflation, income fell for a third straight month.

So to make up the difference, many have cut back on savings. The savings rate fell to its lowest level since December 2007, the first month of the recession - and right about the time the Fed started its dramatic series of interest-rate cuts.

Considering how little you can get for parking your money at a bank, it hasn't been a tough choice.

"Consumers have hit a level of saturation in their savings," said Marshal Cohen, chief industry analyst with market research firm The NPD Group. "The propensity is to spend."

The annual yield on six-month certificates of deposit was unchanged this week at 0.23 percent, according to Bankrate.com. Five years ago, it was 3.62 percent. If you put your money in the six-month CD today, you'd make about enough to buy a burger.

Paul Ashworth, chief U.S. economist at Capital Economics, said the trend could mean more spending by Americans. But it will take robust personal spending - along with improvement in the depressed housing market - to get the economy going again.

Ashworth said his firm is not too concerned with the decline in savings because it partly represents "a sharp decline in debt servicing costs." In other words, low interest rates mean it's cheaper to borrow money.

The Fed began cutting interest rates four years ago at the start of the financial crisis. The rate cuts took the federal funds rate, the key for short-term interest rates, from 5.25 percent down to near zero, where they have stayed since December 2008.

The central bank has said it will keep rates super-low into 2013 as long as the economy stays weak. While that means low returns for savers, it is designed to encourage people and businesses to borrow more.

Many borrowers tend to be young families who are spending most of their income anyway. The loss in interest income tends to hit older households, which are saving for retirement and counting more on bonds and other fixed-income securities.

Consumer spending is closely watched because it accounts for about 70 percent of economic activity. A sharp rise in spending over the summer helped the overall economy grow in July, August and September at the fastest pace in a year.

Still, the economy would have to grow twice as fast to put a dent in the unemployment rate, which has stayed near 9 percent since the recession officially ended more than two years ago.

At the same time savings accounts and other fixed-income investments are paying less, the cost of food and gas has gone up.

Elizabeth Smith, who works in teacher education at the University of Arkansas, has cut her monthly contribution to her retirement savings in half to meet necessities.

"Every time I go to the store, butter, cheese and milk are more expensive," she said. Child care costs for her two children have also risen this year.
On the other hand, Smith has benefited from lower interest rates. She and her husband refinanced the mortgage on her home a year ago, which lowered their monthly payments by $200, freeing up more cash.

The Fed's policies are "designed to reward spending and effectively punish

AP Business Writers Anne D'Innocenzio in New York and David Pitt in Des Moines, Iowa, contributed to this report.

News from The Associated Press

**irish_2003** · 10-29-2011, 05:52 PM

this goes against everything LAM is about.....people spending more than they can afford? so it's not that we're not being taxed enough, incomes aren't rising enough, or that there aren't enough "freebies" - i mean social programs.....it's that the PEOPLE are f'n up......yep, pretty much what conservatives have been saying all along

**Dark Geared God** · 10-29-2011, 08:16 PM

Originally Posted by irish_2003

this goes against everything LAM is about.....people spending more than they can afford? so it's not that we're not being taxed enough, incomes aren't rising enough, or that there aren't enough "freebies" - i mean social programs.....it's that the PEOPLE are f'n up......yep, pretty much what conservatives have been saying all along

i can't wait for my welfare check to spend on booze

**irish_2003** · 10-29-2011, 08:28 PM

Originally Posted by Dark Geared God

i can't wait for my welfare check to spend on booze

and with all the money i'm saving by having gov't pay for my house, i can wear more gucci, bling, and all dat shit yo

**Dark Geared God** · 10-29-2011, 09:36 PM

Originally Posted by irish_2003

and with all the money i'm saving by having gov't pay for my house, i can wear more gucci, bling, and all dat shit yo

Now u be getin it dawg

**Big Smoothy** · 10-29-2011, 11:30 PM

Curt's OP article is correct.

Incomes are down and have been declining.

Fixed expenses have been rising for years and are rising still.

Interest rates for saver are basically 0%. Housing. Etc.,

**LAM** · 10-30-2011, 01:19 AM

Originally Posted by irish_2003

t......yep, pretty much what conservatives have been saying all along

conservative that live in rural areas, to bad 80% of the US population lives in the metro area, where all the jobs are and the cost of living is substantially higher.

try living in a major metro on 20K a year like you can in some small towns, that doesn't even cover your rent for the year...you can be making 75k a year in some metros as a single person and after paying rent and other cost of living expenses, etc. you are just about living pay check to pay check.

from inside the state the metro areas carry the rural areas and from the national perspective the northern and west coast states carry the southern states as all the data from the tax foundations shows. so in some ways conservatives are right but for all the wrong reasons.

if you had a wife and 2 kids on your income you would be in debt as well, you talk a lot shit for a single guy with no dependents that works in healthcare that pays some of the highest wages right now. healthcare costs being the #1 highest cause of personal bankruptcy's in the US right now.

**irish_2003** · 10-30-2011, 10:05 AM

LAM most of my income DOESN'T come from wages in my field......does this mean i'm a bad guy? or just smart enough to make the right choices and make my money work for me?......you could honestly say my wages are more like a second income right now......i've always stated that you don't succeed financially with only one stream of income....you need multiple streams (just in case on doesn't do well)......and believe me, i've been dirt poor several times in life....i don't ever wanna go back....i believe what i learned is what motivated me to make the right moves and never look back.....so i don't have any sympathy for those staring opportunity in the face and choosing not to succeed.....fuck 'em

and as far as living in a metro area.....Madison has some of the highest taxes in the nation versus wages (which are actually low for many medical jobs versus other areas of the country).....i'm still looking to move to florida within the next couple years but with all the growth in the medical community in my area and new clinics and hospitals being built it's going to be a very tough choice then.....my girlfriend is a state hospital worker so i'm learning the flip side of the politics from her point of view (although i still strongly support my gov and his actions.....i just can't discuss it around her or i won't get any nookie)

**Dark Geared God** · 10-30-2011, 02:34 PM

**Zaphod** · 10-30-2011, 04:57 PM

Originally Posted by irish_2003

this goes against everything LAM is about.....people spending more than they can afford? so it's not that we're not being taxed enough, incomes aren't rising enough, or that there aren't enough "freebies" - i mean social programs.....it's that the PEOPLE are f'n up......yep, pretty much what conservatives have been saying all along

Of course people are spending more. Prices keep going up. Duh.

**irish_2003** · 10-30-2011, 05:03 PM

Originally Posted by Zaphod

Of course people are spending more. Prices keep going up. Duh.

they're spending more, because of the credit boom during the clinton years....people spend other people's money too easily now and use credit forgetting that it has to be paid for......"free money or funny money" is what everyone has been using and it has to be paid for......

**DFINEST** · 10-30-2011, 07:42 PM

Originally Posted by irish_2003

.....my girlfriend is a state hospital worker so i'm learning the flip side of the politics from her point of view (although i still strongly support my gov and his actions.....i just can't discuss it around her or i won't get any nookie)

I thought conservatives don't hide from their principles,
no matter what. Does this mean you are whipped?
Honestly, I don't blame you though bro.
HER NOOKIE or MY PRINCIPLES, hmmm, this could
be a tough decision.

**LAM** · 10-31-2011, 07:02 PM

Originally Posted by irish_2003

they're spending more, because of the credit boom during the clinton years....people spend other people's money too easily now and use credit forgetting that it has to be paid for......"free money or funny money" is what everyone has been using and it has to be paid for......

credit boom during Cinton years? bullshit...more like the credit boom that occurs during every Republican presidency when banking deregulation always occurs such as during the 80's with Reagan, early 90's with GHB and the 2000's under GWB..

the IMF report showed that heaving banking deregulation during GWB's presidency was a major contributing factor to the banking collapse in the US which spread across the globe. the World Bank reports states the same.

Every-time the GOP gets control of the white house tax cuts enacted by them make the US tax code less progressive, shifting more of the tax burden onto those that make the least. obviously causing people to rely more on debt and borrowing.

it's one of the reasons why the share of the national income that goes to labor decreases during every republican presidency since Reagan.

Nonfarm Business Sector: Labor Share (PRS85006173)
http://research.stlouisfed.org/fred2/series/PRS85006173

**sofargone561** · 10-31-2011, 07:14 PM

Originally Posted by Dark Geared God

i can't wait for my welfare check to spend on booze

i just bought a brand new car and sat it on dem 28 inchers ya heard me? welfare and EBT fo life!

**Dark Geared God** · 10-31-2011, 07:28 PM

Originally Posted by sofargone561

i just bought a brand new car and sat it on dem 28 inchers ya heard me? welfare and EBT fo life!

get that EBT card goto the local getto mart buy 600$ worth of food get400 incash from them and let the, pocket 100$$ more charged to your ebt

**oufinny** · 10-31-2011, 07:37 PM

You ought to see how little people pay in Houston with their Lonestar Cards and the federal assistance, all shitty food and liquor 9 times out of 10 as well. It is sad.

**Dark Geared God** · 10-31-2011, 07:39 PM

Originally Posted by oufinny

You ought to see how little people pay in Houston with their Lonestar Cards and the federal assistance, all shitty food and liquor 9 times out of 10 as well. It is sad.

**Big Pimpin** · 11-01-2011, 04:13 AM

Originally Posted by LAM

credit boom during Cinton years? bullshit...more like the credit boom that occurs during every Republican presidency when banking deregulation always occurs such as during the 80's with Reagan, early 90's with GHB and the 2000's under GWB..

the IMF report showed that heaving banking deregulation during GWB's presidency was a major contributing factor to the banking collapse in the US which spread across the globe. the World Bank reports states the same.

Every-time the GOP gets control of the white house tax cuts enacted by them make the US tax code less progressive, shifting more of the tax burden onto those that make the least. obviously causing people to rely more on debt and borrowing.

it's one of the reasons why the share of the national income that goes to labor decreases during every republican presidency since Reagan.

Nonfarm Business Sector: Labor Share (PRS85006173)
Nonfarm Business Sector: Labor Share (PRS85006173) - FRED - St. Louis Fed

That's funny, I had never heard of a 125% mortgage re-fi until the Clinton era and I surely had never seen them advertised on TV every 15 minutes until the 90's either.

**Zaphod** · 11-01-2011, 06:22 AM

Originally Posted by irish_2003

they're spending more, because of the credit boom during the clinton years....people spend other people's money too easily now and use credit forgetting that it has to be paid for......"free money or funny money" is what everyone has been using and it has to be paid for......

How long ago was Clinton? That has no bearing on today. Especially with banks being so tight with credit.

**LAM** · 11-01-2011, 10:40 AM

Originally Posted by Big Pimpin

That's funny, I had never heard of a 125% mortgage re-fi until the Clinton era and I surely had never seen them advertised on TV every 15 minutes until the 90's either.

100% financing was not an option for CRA banks, which means not under the guidelines set by Fannie Mae or Freddy Mac.

I was a mortgage broker from the mid 90's to the banking collapse in 2007 and wrote thousands of loans during those year, I know all this stuff like the back of my hand.

In 2004 the Office of the Currency Comptroller, an obscure regulatory agency tasked with ensuring the fiscal soundness of America's banks, invoked an 1863 law to give itself the power to override state laws governing mortgage lending. The OCC told stated they could not enforce state mortgage-lending laws, and all banks would be subject only to less-strict federal laws. The Bush White House claimed that banks should “only be subject to federal laws regulating mortgage credit.” This allowed banks to issue "no-doc" and "low-doc" loans without verification creating a substantial additional capital pool for the derivatives market (no-doc sub-prime and subsidized sub-prime mortgages).

this is when the shadow banking system was formed on wallstreet, they were not regulated and were out of the arm of federal over-site. these were the wallstreet investment houses that turned into "banks" with phone calls made to regulators one sunday night when the CRA banks would not lower their credit or underwriting standards those laws were circumvented by shadow and ultimately caused the banking collapse.

**irish_2003** · 11-01-2011, 10:44 AM

so basically the 2nd term for GWB....you know, when he became bipartisan and when the republicans didn't have the majority anymore....yep, that's when things got really fucked up..........you just proved it (agains)

**oufinny** · 11-01-2011, 10:53 AM

Originally Posted by LAM

100% financing was not an option for CRA banks, which means not under the guidelines set by Fannie Mae or Freddy Mac.

I was a mortgage broker from the mid 90's to the banking collapse in 2007 and wrote thousands of loans during those year, I know all this stuff like the back of my hand.

In 2004 the Office of the Currency Comptroller, an obscure regulatory agency tasked with ensuring the fiscal soundness of America's banks, invoked an 1863 law to give itself the power to override state laws governing mortgage lending. The OCC told stated they could not enforce state mortgage-lending laws, and all banks would be subject only to less-strict federal laws. The Bush White House claimed that banks should “only be subject to federal laws regulating mortgage credit.” This allowed banks to issue "no-doc" and "low-doc" loans without verification creating a substantial additional capital pool for the derivatives market (no-doc sub-prime and subsidized sub-prime mortgages).

this is when the shadow banking system was formed on wallstreet, they were not regulated and were out of the arm of federal over-site. these were the wallstreet investment houses that turned into "banks" with phone calls made to regulators one sunday night when the CRA banks would not lower their credit or underwriting standards those laws were circumvented by shadow and ultimately caused the banking collapse.

Again, something I did not know. I do know my buddy got a loan in 2005 in 30 minutes for $160K or so, that was shocking to him to say the least. Irish it is convenient to say that LAM is playing the blame game but you can easily check his facts and dispute it with proof. The guy was in the industry, I am going to make the assumption he has a clue what he is talking about.

I will add a friend of ours is a mortgage broker and has clearly stated that getting a mortgage now is a very long process and the regulations are once again stricter than they were during the sub-prime lending boom (at least as he described it to us).

**oufinny** · 11-01-2011, 10:56 AM

Originally Posted by Dark Geared God

It is a generalization but I see it play out 2 out of 3 times every time I go to the grocery. Some parents with kids are a lot smarter and know they can't blow the assistance on frivolous crap and that is great they are looking out for their families, it is just far from the norm where I live. And I want to make this abundantly clear, race has nothing to do with it, I see it with all customers who have that white card out at the register to pay.

**irish_2003** · 11-01-2011, 10:58 AM

it has to be stricter now.....if nothing is paid back,then the problem continues......we def need to pass paul ryan's budget
\

and as far as the food allowance programs, i'm 100% for making it more along the guidelines of how WIC is.......

**LAM** · 11-01-2011, 11:00 AM

Originally Posted by irish_2003

so basically the 2nd term for GWB....you know, when he became bipartisan and when the republicans didn't have the majority anymore....yep, that's when things got really fucked up..........you just proved it (agains)

since the 80's the only thing the GOP has done to stimulate the economy has been banking deregulation and tax reform making it less progressive,, shifting more of the burden onto those that make the least.

maybe you can explain why the share of the national income drops substantially during each Bush presidency and why income inequality is increased during their presidency's?

Nonfarm Business Sector: Labor Share (PRS85006173)
Nonfarm Business Sector: Labor Share (PRS85006173) - FRED - St. Louis Fed

**irish_2003** · 11-01-2011, 11:16 AM

i have nothing to explain....my personal wealth is still growing!!!

**LAM** · 11-01-2011, 11:22 AM

Originally Posted by irish_2003

i have nothing to explain....my personal wealth is still growing!!!

really? at 30% a decade to compensate for inflation?...I highly doubt that

**irish_2003** · 11-01-2011, 11:27 AM

Originally Posted by LAM

really? at 30% a decade to compensate for inflation?...I highly doubt that

not comparing to other decades.....when you start out with zero or in the hole, and moving up from there.....i wasn't of working age 30-40 years ago, so that doesn't matter....plus incomes ARE more than double what they were back then and we DO HAVE many more choices of how and what to spend our money on.....STOP MAKING EXCUSES.....the right is RIGHT and the left isn't just wrong, but DILLUSIONAL

**Big Pimpin** · 11-01-2011, 11:38 AM

Originally Posted by irish_2003

i have nothing to explain....my personal wealth is still growing!!!

Me too. The problem is the fucking taxes that go with it. Hopefully I will have close to enough capital investments this year to even the score somewhat. Another problem was this October's sales beat last October's sales by $75K and normally October-December is my slow time of the year.

What's BS is, whether personal or corporate, there's no incentive to significantly save for a rainy day w/o getting your ass raped in taxes. Last year I mstakingly had $30K in the corporate checking account at the end of the year....35% tax rate on that alone. This year, I'm going to deposit checks only as needed after Dec 15th.

I'm the type of person who would love to stash money away for an unexpected slow period vs having to lay guys off but there's no incentive for me to do so w/o being taxed to hell and back.

**LAM** · 11-01-2011, 11:40 AM

Originally Posted by irish_2003

STOP MAKING EXCUSES.....the right is RIGHT and the left isn't just wrong, but DILLUSIONAL

the right has no concept of mathematics or the history of human behavior apparently....as the same thing happens every time banks are deregulated

my guess is you did not follow the baking collapse in Japan, the one that is exactly the same here in the US. delusion is the party that does not factor in the reality of human behavior

and there are 2x as many millionaires in blue states as red states, as would only be expected when just looking at education between conservative and liberal leaning states..

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