The U.S. Economy Depends More Than Ever on Rich People

Old_Joe

Following are excerpts from a current report in The Wall Street Journal:

The highest-earning 10% of Americans have increased their spending far beyond inflation. Everyone else hasn’t.

Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon. The top 10% of earners—households making about $250,000 a year or more—are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets.

Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to an analysis by Moody’s Analytics. Three decades ago, they accounted for about 36%. All this means that economic growth is unusually reliant on rich Americans continuing to shell out. Moody’s Analytics has estimated that spending by the top 10% alone accounted for almost one-third of gross domestic product.

Between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period.

Taken together, well-off people have increased their spending far beyond inflation, while everyone else hasn’t. The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. The top 10% spent 58% more.

The buying power of the richest Americans, who tend to be older and more educated, stems in part from the swelling values of homes and the stock market over the past several years. Rising asset prices are widening the gap between those who own property and stocks, and those who don’t.

During the pandemic, Americans across the spectrum saved at record levels. Then inflation struck, and prices rose sharply. Most Americans turned to their extra savings to keep up with their rising bills. But the top 10% of earners kept most of what they had saved up.

And with respect to that 90% who most likely are not MFO readers-

Following are excerpts, severely edited for brevity, from a current report in The Wall Street Journal:

President Trump cautioned lawmakers earlier this month about making cuts to Medicaid. But just after Trump left the room, one budget hawk remarked: “We could get $2.5 trillion if we cut Medicaid.”

House Republicans are deeply divided on Medicaid, split between spending hard-liners who want big savings and pragmatists who warn against angering voters. Steve Bannon recently warned about the dangers of cutting Medicaid. “A lot of MAGAs on Medicaid,” he said. “Just can’t take a meat ax to it, although I would love to.”

House Freedom Caucus members and other budget hawks successfully pressed for an amendment that directly ties $2 trillion in spending reductions over 10 years to the party’s tax-cut effort. Under that provision, the more the GOP pulls from Medicaid and other programs, the more financial room Republicans have.

States help fund and manage the program, which provides health insurance for roughly 72 million people, or about one in five Americans, including children and people with low incomes or disabilities. The federal government spends about $600 billion annually on Medicaid.

Republicans aren’t allowed to touch Social Security in the fast-track legislative process they are using, and Trump has said he opposes reducing Medicare benefits, leaving Medicaid as one of the remaining ways to significantly shrink spending. Within a 24-hour period, Trump stated that Medicaid shouldn’t be touched but also posted on X that he backs the House-led package that is likely to rely on cuts to Medicaid to meet its targets.

White House spokesman Kush Desai said that the Trump administration is “committed to protecting Medicaid while slashing the waste, fraud, and abuse within the program—reforms that will increase efficiency and improve care for beneficiaries.”

Some House Republicans say keeping Medicaid intact is essential if they want to hold the House majority in 2026. Some are privately warning party leadership that there are scores of members—including some in safe GOP districts—who oppose deep cuts. Rep. David Valadao (R., Calif.) argues that the Trump coalition now includes many Medicaid recipients.

The program is popular. A recent poll by the Kaiser Family Foundation found nearly 80% of respondents—and 65% of Republicans—think the federal government spends about the right amount or not enough on Medicaid. But budget hawks believe now is their best chance to address deepening federal deficits, which have ballooned the U.S. debt to $34 trillion.

Comment: So here we have yet another disconnect: the majority of voters are not in that lucky top 10%, and many within the Trump party that they voted for would cut their Medicaid so as to transfer even more wealth from the 90% to that top 10%.

Note: Text emphasis was added to the above WSJ reports.

Old_Joe

And a bit more on the Medicaid situation, from a current report in The New York Times:

Republicans have proposed lowering the federal share of costs for Medicaid expansions, which could reshape the program by gutting one of the Affordable Care Act’s major provisions.

House Republicans hunting for ways to pay for President Trump’s tax cuts have called for cutting the federal government’s share of Medicaid spending, including a proposal that would effectively gut the Affordable Care Act’s 2014 expansion of the program.

Cutting Medicaid spending, which is central to the budget bill that House Republicans may bring to a vote on Tuesday, could result in millions of Americans across the country losing health coverage unless states decide to play a bigger role in its funding.

Republicans are considering lowering the 90 percent share that the federal government is required to pay to states that enroll participants in the expansion. The change could generate $560 billion in savings over a decade, money that Republicans want to use toward extending Mr. Trump’s 2017 tax cuts, which are set to expire at the end of 2025. Extending the tax cuts is expected to cost $4.5 trillion, meaning Republicans will have to find savings beyond Medicaid from a long menu of options.

Medicaid expansion has become a deeply bipartisan project over the past decade, underscoring the Affordable Care Act’s reach in the American health system and its appeal even to Republican governors and state lawmakers who once opposed it. Much of the additional enrollment comes from Republican-led states where voters passed ballot initiatives to enact the program.

Jon Tester, the former Democratic senator from Montana, said that Medicaid cuts could have a more sweeping effect on rural America than urban areas because of how the program sustains impoverished areas with few health providers. “And that’s an interesting conundrum because most of rural America is a much deeper red than urban America,” he said... “If you take away health care, you can’t live there”.

Montana’s Medicaid expansion has been preserved in part because of strong Republican support in the state Legislature. One Republican state senator in favor of Medicaid expansion said that it was keeping the few hospitals in his rural district afloat.

Matt Regier, the Republican president of the Montana Senate, said that hospitals in the state had become too reliant on Medicaid, and that its expansion was “incentivizing people to not stand on their own two feet.”

“That’s the opposite of what a government safety net should be,” he said.

Note: The above excerpts from the NY Times report were severely edited for brevity.

hondo

People reading this thread should remember that Old_Joe is a left wing liberal that will repeat anything that he thinks will hinder our President from Making America Great Again.

Old_Joe

As usual, your comment has absolutely no connection or response to the presentation of factual information.

Your president king is self-hindered from making anything great unless he has permission from Charles Koch and Moscow. Quite a combination.

JD_co

Ironic that removing the Medicaid program would trash Dump's loyalists more than any other political group. MAGAts would have to re-configure it in their minds so that it was Biden's doing, somehow. Even though that makes no sense. Nothing has to make sense if you live in that world.

You just listen to their propaganda, the conspiracy theories and their stream of lies.
Living a delusional life - wearing a little red cap, following a con man and hating on anybody who has an IQ above 60.

Guess you'd have to learn to love Mother Russia, too. "Da"?

davidrmoran

hondo said:

People reading this thread should remember that Old_Joe is a left wing liberal that will repeat anything that he thinks will hinder our President from Making America Great Again.

God, so weak

Seriously? All you got? Nothing substantive?

Defend Medicaid cuts, come on

Crash

No shame. None. From every angle, the Oligarchy extends its influence in order to serve itself. De-fund everything, so then everything must be privatized. Then there's no accountability. Just moneymaking opportunities for those who already possess too much of it. ... And the Orange Sludge is owned by Russia. What else could explain the UN vote yesterday?