Americans spending more with income almost flat

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  1. #1
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    Americans spending more with income almost flat

    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

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    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

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    Quote Originally Posted by irish_2003 View Post
    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
    If you strike me down(ban me)I'll become more powerful than ever.. Don't say i don't warn you.


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    Quote Originally Posted by Dark Geared God View Post
    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

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    Quote Originally Posted by irish_2003 View Post
    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
    If you strike me down(ban me)I'll become more powerful than ever.. Don't say i don't warn you.


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    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.,
    It's an accurate statement that our current spending will not be increasing the debt We've stopped spending money that we don't have.

    -- Jack Lew, then director of the Office of Management and Budget, in Feb. 16, 2011 testimony before the Senate Budget Committee.

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    Quote Originally Posted by irish_2003 View Post
    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.
    Last edited by LAM; 10-30-2011 at 12:38 AM.
    William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

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    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)

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    Quote Originally Posted by irish_2003 View Post
    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.

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    Quote Originally Posted by Zaphod View Post
    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......

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    Quote Originally Posted by irish_2003 View Post
    .....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.
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    Quote Originally Posted by irish_2003 View Post
    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
    Last edited by LAM; 10-31-2011 at 06:26 PM.
    William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

  14. #14
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    Quote Originally Posted by Dark Geared God View Post
    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!

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    Quote Originally Posted by sofargone561 View Post
    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
    If you strike me down(ban me)I'll become more powerful than ever.. Don't say i don't warn you.


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