Real Time Economics - WSJ.
Personal income and spending exceeded expectations today and this article breaks down why. Of particular interest, almost all of the increase came from a one-time $250 stimulus related payment. That's good, right? But wait, most of it wasn't spent, thus personal savings increased to a 15 year high. Why was it not spent? Because if consumers anticipate having to pay that money back they will save it rather than spend it. Why would they anticipate having to pay it back? Because the government hasn't made it clear yet how it intends to fully pay for that payment. This suggests to me that most consumers expect to have to pay it back via higher taxes. They'll save the money so they can pay the tax later. Kinda makes it self-defeating doesn't it! Which is just what a lot of economists have been saying all along.
Personal income and spending exceeded expectations today and this article breaks down why. Of particular interest, almost all of the increase came from a one-time $250 stimulus related payment. That's good, right? But wait, most of it wasn't spent, thus personal savings increased to a 15 year high. Why was it not spent? Because if consumers anticipate having to pay that money back they will save it rather than spend it. Why would they anticipate having to pay it back? Because the government hasn't made it clear yet how it intends to fully pay for that payment. This suggests to me that most consumers expect to have to pay it back via higher taxes. They'll save the money so they can pay the tax later. Kinda makes it self-defeating doesn't it! Which is just what a lot of economists have been saying all along.
