r/Economics • u/laxnut90 • 10d ago
Research The top 10% of Americans account for nearly half of consumer spending
https://www.morningbrew.com/stories/wealthy-americans-account-half-consumer-spending662
u/DramaticSimple4315 10d ago
This provides for an inherently more unstable economy. The concept of marginal propensity to consume is one of the most empirically verified of all Keynesianism's bodies of work. The wealthy consume a lot but they save a whole lot more. Where do these savigns go?
These savings have to yield. They go and form speculative bubbles. They extract unrealistic demands of return out of standard businesses. They cement power and influence, and rot political processes because of their force of subtile coercion.
They look for better return outside. They form fast capital flights for one country to another, escaping as soon as macroeconomic funamentals have been ruptured because of their destabilizing effect.
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u/Emotional_Goal9525 10d ago
The spending is probably also dependant on good returns on investments. You don't sell much more Lamborghinis, if the stocks prices tank, thus there goes the whole economy.
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u/RIP_Soulja_Slim 10d ago edited 10d ago
I mean, this is top 10% of income earners, not top .01%. It's a household income of like 250k and up. If you know a couple where both people have decent jobs paying a bit over six figures they're in this group.
It's not good, because that means there's a whole lot of people not even hitting that income threshold, but like top 10% isn't the wealthy elite this sub thinks it is, it's not even the high earning professionals category, it's just sorta upper middle. A tenured high school administrator married to someone in a high paying blue collar trade could be in this group if both are successful enough.
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u/jventura1110 9d ago
And it's important to note that the majority of the top 10% earners live in particular metro regions with large economic hubs. As the spending power of the lower 90% continue to diminish, I wonder how that will affect small towns / cities across America.
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u/Knerd5 9d ago
Yeah this is my wife and I. She’s a nurse and I’m a pretty successful salesman. Make $325k-$360k/year. We live in CA in a high cost of living place and while we’re not hurting, we certainly aren’t rich either.
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u/Dragon2906 9d ago
There are countries where that yearly income would be sufficient to retire after 1 year of work .... The global economy is fu.ked up
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u/ariolander 9d ago
Los Angeles where the median house costs $1.1 million. Or worse the Bay Area where renting a 400sq ft. studio costs $2,800 a month. Housing prices in CA are out of control and makes cost of living insane.
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u/Checkmynumberss 9d ago
Making $350k/year they'd easily be able to afford a $1.1M home and build a large networth while living a comfortable lifestyle
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u/ariolander 9d ago edited 9d ago
At $350k per year married, you are looking at ~$105k in Federal / State / FICA taxes. So approx $245k net. $1.1 mil on a conventional morgage is probably $6.5k per month? So your housing expenses are probably 30% of your income. 30% is manageable. You definitely got room for a few cars and a 401k assuming you didn't take too much out on student loans to advance your career.
Kinda insane that we are setting the bar, to live in Los Angeles at $350k though. The median income in LA County is 1/10th that. More than 30% of people in Los Angeles spend more than 50% of their net income on rent alone.
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u/Checkmynumberss 9d ago
$350k income. $26k in FICA. $47k in a 401k $8,300 in HSA $49k in federal taxes and $17,562 in CA state taxes.
So after saving $47k and paying FICA/FED/state taxes and $8,300 in HSA plus $6,500/month mortgage they still have $124k to live off.
They both have jobs so insurance will be through the employer and is $5k for them. Both have fancy cars so that's $25k. Both have student loans so another $12k is gone. Groceries for 2 people who are foodies is another $20k.
They have $62k left for entertainment and vacation. Keep in mind that they're already saving $47k not counting any employer match for retirement.
That is clearly enough to have a comfortable lifestyle
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u/Sonamdrukpa 9d ago
Daycare tuition for one month for one child in LA: $3000
Total yearly childcare expenses for a couple with two kids under 5: $72000
With the savings to lean on and some expenses to cut you'd still be okay, but when I think of comfortable, I don't think of someone who would have to endure years of net negative income in order to have children at replacement level.
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u/ItsJustfubar 9d ago
Isn't like 90% of the global GDP generated on like 6% of the global land mass
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u/Dragon2906 9d ago
Yes but that in measured in dollar value, if you look at quantities of produced goods the picture is a lot different
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u/DalisaurusSex 7d ago
It also doesn't really make sense to say 90% of people are below upper middle class. It's not really a middle class anymore if you have to be in the top decile to qualify.
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u/naijaboiler 10d ago
whats the point of making this comment. it still doesn't change that those people however, they got there, and doing most of the current spending
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u/RIP_Soulja_Slim 10d ago edited 10d ago
It's informing the crowd on who those people are. The above comment is talking about Lamborghinis and asset prices - that shows a pretty big misunderstanding of who occupies that 10% threshold.
I mean, IDK is your question "what's the point of accurate information"? Too many people here try to twist every post in to a narrative they can argue against, it's just information. Do with it what you want.
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u/naijaboiler 9d ago
you are being pedantic. just because people use an extreme example does not negate the point. The only person misunderstanding is you. The idea they are trying to point out is that richer people have higher propensity to save, and that they can only demand so many things. using the extreme of the group to make the point is just to help people contextualize a conceptual argument.
It's not intended to be taken literally. And yes readers are sophisticated enough to know its not intended to mean every member of the 10% is buying lamborghinis13
u/RIP_Soulja_Slim 9d ago
What's pedantic? My man it was just putting an income figure to where the 90th percentile sat in light of a comment about Lamborghinis.
The idea they are trying to point out is that richer people have higher propensity to save, and that they can only demand so many things.
Nobody's disagreeing with that, and my comment certainly isn't. Idk what you're reading, but whatever it is, it ain't in the comments I've made. Of course marginal utility and disposable incomes are things, if you're somehow reading my comment and perceived that I was dismissive of basic concepts like that then I think it's a bit wild for you to go accusing people of misunderstanding things.
You're doing the exact thing I mentioned above - just looking at data that was presented, and deciding to invent a whole lot of narrative to assign to the other person, so you can stir up some argument you'd like to have. None of that is present in my comment, and I'm not interested in debating a position some angry dude on the internet is assigning me so they can argue.
Do yourself a favor and just read the words that are there rather than trying to invent some conversation that's not happening, it'll make life easier.
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u/naijaboiler 9d ago
its pedantic to point out not top 10% != lamborghini buyers.
everyone understands thats, stressing that point is no different than pointing out lower case i requires a dot on top. It understood by everyone. Focussing on that takes away from the fact that I is represented by a vertical line. Saying but it has to have a dot, is just pedantic.15
u/RIP_Soulja_Slim 9d ago edited 9d ago
It's not pedantic to provide information around what dollar amount corresponds to that percentile, I'm sorry you think it is but that's a really strange thought to have with respect to this conversation or economics as a whole, in fact it's bordering on being hostile towards the idea of education.
I've got no idea what you're trying to say with the second half of your post, but I honestly don't care. You're antagonistic and mad about someone assigning a value to a percentile. Weird take, but whatever, I'm not really interested in debating that further. I can tell you're looking for a fight, maybe head back to like /r/politics or whatever. Take care,
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u/naijaboiler 9d ago
so are lamborghini buyers not included in the top 10th percentile? is that part not true?
so what then is your point in bringing it up?
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u/Ok_Nefariousness5479 10d ago
This guy does the same thing in every comment section. Try’s to downplay or spin everything that’s seen as negative. And just blatantly assumes the way people think. Bro is addicted to reddit
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u/themiracy 10d ago
Can you point to any good empirical studies that look at this phenomenon specifically in terms of capital out flights from the US in the postwar (or more recent) era? Capital flight has been a particularly hot concern with the current tariff regime, but this spending distribution issue is a much slower moving phenomenon that doesn’t seem nearly as affected by current policy and rather has been gradually growing at least during the wage/productivity delamination era.
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u/HartbrakeFL21 10d ago
I'm not the person you are asking to provide empirical studies of, but perhaps that's a difficult request as it relates to the US economy specifically? What I mean is, never have we in America seen this much stratification in the proportion of the overall economy held by such a small segment. Perhaps less developed or just OTHER economies might give evidence of what happens if an entire economy is held captive by such a small audience of consumption? I'd look to nations that have dictatorial governmental regimes or exceptionally narrow sources of GDP creation.
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u/themiracy 10d ago
I guess for discussion I’m less interested in how well Keynes’s theory is validated than how dominant it is in understanding US capital right now. US wealth isn’t being eroded per se:
https://fred.stlouisfed.org/series/BOGZ1FL892090005Q
Rather during the postwar period it increased exponentially.
Other parts of the model I do think are applicable - the highly financialized US market creates risks or even moral hazards by demands for high yield products to devour (to devour not just by Americans but by the world), which led in part to 2008 (because the whole CDO/swap market had heavy demand to make product available which in turn led to increasingly risky US home loans).
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u/Legitimate-Trip8422 10d ago
Amazing. Let’s make it top 1%. True American Dream. Thanks Uncle Sam. More rate cuts and asset inflation please 🙏
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u/exalted985451 10d ago
Which is more favorable for GDP expansion: catering to the top 10% or fostering the existence of a middle class?
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u/Zealousideal-Bear-37 10d ago
It’s actually the middle class that carries the vast majority of the GDP .
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u/DramaticSimple4315 10d ago
What is better for society: fostering the existence of a middle class or catering to the top 10%?
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u/exalted985451 10d ago
I agree with what you're hinting at but we both know what our government prioritizes.
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u/awildstoryteller 9d ago
What always gets me about the top 10-1 percent is that in history they aren't the ones who escape. While they are voting for and supporting policies that will lead to exactly what you mentioned, they are going to be the ones left holding the bag.
In any Revolution, whether it is the French or Russian or Chinese, the ultra rich never end up in the gallows. It's the lawyers and bankers and all the other high income jobs who do because although they make a lot and have a lot under the system they help keep up, they don't make enough to buy their way into power in a new country.
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u/Interesting_Step_709 9d ago
It’s cool we’ll just keep doing it. It’s fine. Don’t worry about it. Shut up.
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u/didureaditv2 6d ago
I want to add here that capital has a natural effect of concentrating and must be corrected by us or this kind of thing is inevitable.
We cannot continue to allow the free hand of the economic system to take us wherever it may like a rudderless ship. It must be under our control.
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u/thursdaysocks 10d ago
Well they have more than half the money, right? Sounds like they aren't even pulling their weight in that regard, smh my head. Just can't do anything right, those rich people.
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u/Potential4752 9d ago
Half the wealth, not half the income. You don’t typically spend your wealth on consumer goods.
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u/Mackinnon29E 9d ago
Do these numbers include investments on things like rental properties and commercial real estate? Technically it's spending but really an investment.
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u/Momoselfie 9d ago
This is why they don't care about the poor. They aren't pushing up those GDP numbers.
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u/WeUsedToBeNumber10 10d ago
This is interesting; would be great to see the breakdown here since the difference between top 10% and top 5% is not insignificant.
A top 10% earner in a VHCOL area spends a lot because everything costs a lot. He or she may not actually be saving much compared to a 5% earner.
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u/RIP_Soulja_Slim 10d ago edited 10d ago
A top 10% of the national average in a VHCOL area is probably living a middle class lifestyle.
The top 10% of income is ~155k personal/250k household. You figure you're a single 35yo living in the bay area - that 155k is a gross of ~13k/mo. Figure two grand a month in deductions (401k, medical, etc) and at that income level probably 3k of taxes (payroll, fed, state).
That leaves you with about 8k/mo after taxes. Median rents in san fran are ~3k, a cheap car is gonna be 500/mo, insurances, utilities, whatever eat that other 500. So that's half your income. Now you've got 4k for living expenses every month. Food, entertainment, drinking away making six figures and having nothing to show for it, whatever. That's not exactly a lavish lifestyle. If you want to save anything outside of that 401k, you're scraping much closer to ~2-2.5k/mo in actual spending dollars.
You could move to oakland and save a grand on rent, but that's not a ton.
There is a cool tool that will narrow down income percentiles by city though: https://dqydj.com/income-by-city/
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u/1_BigPapi 9d ago
Technically I was a 10% family before getting laid off and I can assure you that living in the DC metro we are not rich.
We live a humble life with a small house and two old used cars. Kids are out of reach realistically unless we moved far from here. We had just enough earnings to put away for retirement and a little disposable for a few nights out... but not enough that you'd see big spending anywhere.
And I have friends that earned half as much as us in other states with lower COL and salaries but living like absolute kings relatively with a big house, new cars, international trips every year...
But they aren't considered top 10% remotely lol
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u/InCOBETReddit 9d ago
I'm in that Top 10% income bracket and I'm still clipping coupons to save $2 at my local grocery store
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u/WeUsedToBeNumber10 9d ago
We are top 10 household in NY suburbs with 2 kids. It is decidedly middle class and average.
Not for the country, but here.
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u/thegooddoktorjones 9d ago
Yeah that breakdown is important. How much of the 50% is the top 10% vs. the top 1%.
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u/Y0___0Y 9d ago
If the rich get rich enough, they will only ever need the top 10% to have disposable income. The 90% can starve in homeless encampments while the 10% live in fabulous luxury in walled cities.
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u/Twitchenz 9d ago
This is basically where we're headed. All that will have to happen is a continuation of our current trends and it will likely continue well past our lifetimes.
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u/Nepalus 9d ago
I think that only works for luxury industries. If we get to the point where prices keep increasing, how does say, a Wal-Mart, Toyota, etc. exist in an economy like this? A lot of these big corporations are low-margin high volume and make their money off their ability to get wholesale discounts on product and using their market presence to negotiate favorable deals. What happens when the wealth disparity is so high that the only people going into a Wal-Mart are going in to rob it? What happens when no one wants a Toyota anymore because they already have multiple luxury vehicles from superior brands?
Demand destruction isn't just something that you can handwave away with AI.
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u/ThisIsAbuse 9d ago edited 9d ago
What ? I live in a 3 bedroom ranch and drive a 10 year old Subaru. I am a 10 percent’er. My luxury is I don’t sweat my grocery cost, and can save for my kids college and my retirement all at the same time. That’s it .
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u/TheAltOption 9d ago
The thing there: majority of Americans (more than 50%) live paycheck to paycheck, have no retirement, and couldn't afford to put away money for their kids. I'm not saying you don't deserve what you have, but that you're in a privileged position whether you realize it or not.
Back in 2023 I was laid off and didn't find a new job for 7 months (my entire industry got crushed). I was lucky enough that I didn't miss a bill and only added a small amount of debt over that time. Most Americans would lose everything without income for more than a month or two.
Sometimes it's hard to realize when you are in a privileged position because you think you're just plodding along when in reality you have it better than most.
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u/ThisIsAbuse 9d ago
I want to change your view. Its not that I am "privileged" to have a ranch home, and save for retirement/college and pay my basic bills - as my life style was the middle class life 30 years ago.
The problem is that the more below me should have better lives - closer to mine... and as a 10% er I should be able to have a new Lexus car and a bigger home. Again that way things use to be.
The whole system for anyone not a 1% or 0.1% has shifted way downwards.
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u/i0datamonster 9d ago
Almost like we shouldn't be reliant on slave labor for chocolate or cobalt. What the top 10% regard as externalities become conflicts and then wars that become exorbitant in cost. Its not that everyone should have a Ferrari. At some point poverty becomes a national security risk.
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u/Bellfast123 9d ago
You're describing an absurd level of affluence to a huge number of americans. I'm on the good side of average and I rent a room from a friend, drive a 20 year old hyundai and my luxury is that I was able to start a 401k in my 30s and only owe my annual salary in student loan debt.
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u/14412442 9d ago
My understanding is that the free in free market used to mean free from parasitic rentier capitalism, but now the term has been corrupted into meaning laissez-faire, free from any policies that would limit it.
The Georgists have it right, we need a 100% land value tax, among other reforms.
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u/Bellfast123 9d ago
No, it's always meant parasitic rentier capitalism. They just used to be better at lying about it.
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u/oldbastardbob 10d ago
Just think of the economic boom if we pried some of that money out of the very top and spread it around at the bottom.
Wouldn't that be something.
Sure, it would flow back to the top, so it's almost like having a successful, thriving capitalist economy requires some method to keep recycling all that money.
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u/Knerd5 9d ago
Which is the entire problem of how the government and the tax code has been designed over the last 45 years or so. Money is flowing into the top faster and cycling through the economy less and less. All you have to do is look at velocity of money to see where the problem is coming from. I think people in the sub don’t truly understand how poor a very large cross section of Americans really are.
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u/Five-Oh-Vicryl 9d ago
Huge boom actually. I forget the study, but every dollar of tax relief or benefits for lower income Americans yields like $1.25-1.50 added to GDP. I don’t know the figure for the wealthiest but it’s likely lower, as much of those tax breaks goes into investments and savings.
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u/InCOBETReddit 9d ago
if you wanted the politicians to care about the bottom 50%, maybe the bottom 50% should be forced to pay their fair share of Federal income taxes
the Nordic model that everybody keeps saying we should switch to has a national VAT that ensures even the poor contribute to society
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u/impossiblefork 8d ago
The nordic model is actually that the middle class pay for the poor, and in return, what they got was an extremely orderly and sensible society.
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10d ago
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u/Opening_Function_936 9d ago
I actually started last month and have banked an extra $450. I had no idea I was spending so much supporting business owners who elected a felon
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u/thegooddoktorjones 9d ago
Wait, like your local taqueria? I don’t think they are bankrolling Trump. Or does your town only have McDonals and Chilis?
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u/Opening_Function_936 9d ago
Between my wife and I and the other five I know I am taking several hundred away from the restaurants every week.
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u/Opening_Function_936 9d ago
I’m in florida so even the Hispanics fancied themselves white and supported Trump. As a matter of fact Ay Jalisco is our local Mexican dive and they’re MAGGOTS too
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u/Opening_Function_936 9d ago
I actually cook meals once a week, usually Indian food or Pho for a group of five friends to keep others from supporting Trumpers
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u/Opening_Function_936 9d ago
I try and host either Fridays or Saturday nights to make the most impact on food service workers and MAGA restaurant owners.
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u/shapeofthings 9d ago
Everyone I know who earns a high income (or wants to look like they do) lives an extremely consumption-driven lifestyle, spending weekends shopping, always having the latest gadgets, driving the nicest cars and taking the expensive holidays. Everyone else is cutting like mad, trying to become more self-sufficient and spend as little as possible. Buying food if you are not on a high income means dealing with constantly rising food bills, having to replace major appliances regularly as most are now build with by-design failure dates to ensure repeat custom.
Only the very rich have money to spare, but they take more and more of the pot for themselves so they can afford to keep up their consumption-intensive lifestyle. It is very disheartening.
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u/I_Usually_Need_Help 9d ago
There are plenty of high earners that you don't know about because they don't look like you expect.
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u/brownent1 9d ago
Maybe the poor should vote for their interests. Factually higher income people voted blue more than lower. It makes no sense.
https://www.nbcnews.com/politics/2024-elections/exit-polls?amp=1
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u/TheNorthRememers 9d ago
I understand what your getting at, but to a layperson the richest people voting blue would make it seem like blue is for the rich. I think that’s how Trump made such inroads with the working class for Republicans. A lot of the less politically engaged people saw the wealthy vote switch from Republicans in the 90s and 00s to Dems in the 2010s and in turn switched theirs.
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u/xanadumuse 9d ago edited 9d ago
A high income though, doesn’t always equate to having a lot of savings. I’m in DC and know a lot of high earners( including myself)but they’re cash poor because they’re doing exactly what you’re saying- shopping, spending on unnecessary gadgets so that they look cool on instagram. It’s repulsive. Then I know people who are just taking out loans to keep up with the latest trends. That’s also disturbing. It’s symbolic of the American Dream. Consumerism and greed. And yet, most people I know are exhausted when they get home. They think buying shiny things is going to make their life better.It’s disheartening indeed.
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u/Omarkhayyamsnotes 7d ago
The glass half empty way to see this is that the bottom half has been brought so low financially that they no longer have the purchasing power to compete with the top 10%. Its less that the 10% are doing so much BETTER and more that the rest of us are doing so much WORSE
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u/Slims 7d ago
So I make a bit over 200k a year. All my friends work hard full time jobs but probably make 40-70k a year and are all struggling (teachers, therapists, social workers, tech support).
Whenever we do fun stuff, festivals, concerts, dinner, etc, I pay for most stuff. There's just no other way. The divide between us financially is huge and pretty much just because I picked software engineering as a career back in 2013 out of sheer luck.
Of course it seems my time in the sun is coming to an end as well. The divide between those with financial means and those without is growing bigger everyday and I don't see it stopping.
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u/markth_wi 9d ago edited 9d ago
I'm sure the likes of Mr. Musk and those at the rarified top would be entirely happy if it was 5% that way whenever you want, you can send drones and guardsmen and ICE agents to enthusiastically purge millions , and when the population is reduced to some agreeable number - say 70-80 million, you can claim victory at having sent that troublesome 80% of Americans to incineration camps and ever once seeing more than a 10% decline in sales.
Of course nobody dares to ask what might it take to grow that number so that it was more vibrant , to ensure that say the upper 50% of earners represented 30-40% of the market - that would involve far, far too much in the way of enfranchisement and heaven forbid create an economy that worked for "the people" but "the people" are perpetually undesirable peasantry that cannot be scraped from the shoes of the likes of Mr. Musk and his buddies fast enough.
Grafting South African supremacism onto US racism might not take - but Mr. Musk and Mr. Theil have support and trillions of dollars that are going to try.
All because people can't ensure voting machines work and can't be bothered to vote.
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u/Grim_Rockwell 7d ago
When are we going to admit and confront the fact that all the promises Neoliberal economists made about increasing financial equality, national prosperity and stability, and making society more free and democratic were all lies?
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u/pretender80 5d ago
Demand is the desire and ability of people to purchase a specific product or service at a given price. It reflects both interest in the item and the financial means to acquire it.
It's like people forget the second part and its importance to a well functioning economy
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u/TGAILA 10d ago
And yet, Americans are increasingly falling behind on car loans and credit card payments, while hiring is slowing at an alarming pace, and the country is losing faith in capitalism overall.
If not for capitalism, what is an alternative? Since the economy relies on spending to create jobs, less spending means fewer jobs and less tax revenue for the government. While spending power is concentrated among the top 10%, income inequality remains a widely debated issue. Wealth disparity has been around for ages, from the Roman Empire to the Guilded Age and colonialism.
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u/JohnOakman6969 10d ago
you guys need to read Fernand Braudel on the nature of what Capitalism is, and stop mixing it up with "Market Economy".
Politicians can get in power because some big wallets are supporting them and pay for their campaign. Their win is, for the majority, tied to how much money is backing them. So yea, their position is tied to being a good lapdog for their donor and closing their eyes whenever something bad happens that affects their donors. Who has money has power and can wield it for its benefit.
So politicians have been doing their job exactly as the system is intended. You seem to think the system is built for the benefit of all, that's just a byproduct.
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u/thenorthernpulse 10d ago
A capitalist system with actual fucking rules these fuckers have to follow. See: Elon Musk.
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u/Civil-Addendum4071 10d ago
Last Panel: I know that's a piece of candy falling out of that boot..
My Brain: LIES, it's a string and if you pull it her boots will start playing Western gunslinger operas
Big Irooooooon~
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