Wealthy People Holding Onto Money, Dragging Down Consumer Spending

(VIDEO) Michael Bloomberg Says, He’ll Take Money From the Poor Because “They Will Live Longer”
(VIDEO) Michael Bloomberg Says, He’ll Take Money From the Poor Because “They Will Live Longer”

(PatrioticPost.com)- Much of the focus of economic stimulus packages during the coronavirus pandemic has been getting money into the hands of people who need it the most.

From a business standpoint, that has meant giving forgivable small business loans to companies that have been dramatically affected by state restrictions and closures. From an individual standpoint, that has meant $1,200 stimulus checks and boosts to unemployment benefits.

But as states begin to reopen, one concern is the frugality that the richest Americans are currently showing. That’s because the United States economy desperately needs the wealthiest 25% of Americans to spend.

According to an NPR report, Harvard researchers have found that people near the bottom of the income bracket are now spending almost as much as they did before the coronavirus outbreak. Spending from the wealthy is still far off, though.

As the co-founder for the Opportunity Insights research team and Harvard economist Nathan Hendren said:

“When the stimulus checks went out, you see that spending by lower-income households went up a lot. For higher-income individuals, that spending is still way far off from where it was prior to COVID and it has not recovered as much.”

Almost two-thirds of the total decline in consumer spending since January has been because of the lack of spending from the wealthiest individuals in the U.S. Harvard economists did their research by tracking spending on credit card data.

The problem, of course, isn’t that these wealthy people don’t have money. It’s that the places where they used to spend their money have been severely affected by the coronavirus pandemic. This includes travel sectors such as airlines, rental cars and hotels, as well as spending at theaters, high-end restaurants and other entertainment.

This trait of the current recession makes it a lot different than ones in the past. Typically, it takes longer for spending from the wealthy to taper off, as they can still afford their lifestyle. But that isn’t happening now, especially as many of these places still have restrictions from opening.

Jerome Powell, the chairman of the U.S. Federal Reserve, believes that efforts from the Fed to boost the economy are doing a good job. However, this week, he warned members of the Senate Banking Committee that personal services businesses may take quite a while to recover still.

That could mean struggles ahead for business owners and workers who are employed at places the wealthy frequent. In fact, many lower-income individuals who work in wealthy neighborhoods could find themselves out of a job for a while as that spending doesn’t return.

As Hendren said:

“From the perspective of people who are not living paycheck-to-paycheck, the main concern here is really fighting the virus. Unless we remove the threat of getting sick or getting your family members sick, it’s hard to imagine that that spending will recover to the pre-COVID levels.”

Powell is particularly concerned that people who work at businesses that primarily serve the wealthy could need extra help from the government, saying:

“There are going to be an awful lot of unemployed people for some time.”