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b_b  ·  2953 days ago  ·  link  ·    ·  parent  ·  post: Everyone in America is More Broke Than You Think - What About You, Hubski?

    Saying "the spending power of the middle class is limited" suggests that individual members of the middle class have less power to spend when inequality grows. Can you back this up?

The most compelling argument I've heard is from Robert Reich. His reasoning is that about 70% of GDP is domestic consumption, most of which is derived from middle class spending. Given that income and wealth have accrued at the top fast than the growth rate of the economy, some of those gains have come at the expense of people lower down on the economic ladder. Therefore, an appreciable part of the increases in living standards over the last few decades have come as a result of debt fueled consumption, as opposed to real economic gains (even though productivity is much higher now than 30 years ago). Essentially, many people have had to mortgage their futures to keep their head above water. Here is the tl;dr of the books he's written on the topic.