from Hacker News

Bottom 80% of US Households Persistently Dissaves-Spending More Than Income

by slowhand09 on 2/5/24, 5:02 PM with 113 comments

• by burkaman on 2/5/24, 5:36 PM

  This headline is pretty misleading, to me at least. "Bottom 80%" implies the poorer 80% of Americans, but it is actually referring to the bottom 80% strictly in terms of (apparent) savings.

  > Personal Income isn’t the only source of household assets. The two big missing pieces are holding (capital) gains on assets, and borrowing (which adds both assets and liabilities, in equal amounts, to household balance sheets). Adding these two additional measures does shift most bottom quintiles from spending deficits to asset surpluses in most years.

  > While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.

  So this is actually mostly explained by richer people who have significant investments in addition to their normal income.

  Edit: The BEA says Personal Income "does not include realized or unrealized capital gains or losses." So if you sell stocks, a house, pull money out of a 401k, none of that is included in Personal Income.

  Also, I think like ~20% of Americans are retired? Presumably most of them would be considered dissavers here, except for those who retired with almost no savings and are living solely on Social Security.

• by jandrewrogers on 2/5/24, 6:16 PM

  To put some additional context around this, per the US Bureau of Labor Statistics, the median US household has ~$12,000 per year of excess income after all ordinary expenses -- which includes buying iPhones, nice cars, healthcare, etc. The percentage of US households with no capacity to save at all is <15% in US Federal Reserve studies.

  Americans just have relatively poor savings behavior. They've always had the ability to save much more than they do. I think this partly follows from the reality that the US has not had a genuinely bad economy since the 1930s. It is a long unbroken chain of prosperity with the occasional minor blip, which changes the culture's relationship to money.

• by wiremine on 2/5/24, 5:35 PM

  Here's the quick quote from the article explaining why this is "sustainable" over a long-period of time:

  > "While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%."

• by deathanatos on 2/5/24, 5:59 PM

  I'm so lost in this article. How can the bottom 80% be subsisting off capital gains? And is that table saying they're netting 300+% YoY in capital gains? That number is pretty squarely in the "that can't be right" territory for me?¹

  Even if I reinterpret "bottom 80%" as "top 80%" and assume we've somehow inverted everybody because it's the rich that would be spending more than their income, as they'd have significant gains … I'm still lost? Do 80% of Americans have investments? The feeling I get talking to people is that most people don't, outside of a 401k, but they wouldn't be spending from the 401k (unless they were in retirement … but that brings us back to 80%).

  ¹… except 2018, where they got only 7%? … and yeah, that was a bad year…

• by jldugger on 2/5/24, 5:43 PM

  So... this post introduces a new "fact" then debunks its own headline, using a phenomenon already well known to economists: the wealth effect[1]. This feels less like an economics blog and more like a social media Rorschach test -- do you read the article, and its footnotes, or just respond to headlines?

  [1]: https://en.wikipedia.org/wiki/Wealth_effect

• by bell-cot on 2/5/24, 5:38 PM

  Is this evidence for:

  A) Marketing efforts aimed at getting people to spend are far better-funded and more effective than those aimed at getting people to save

  B) Relentless increases in the cost of living, vs. steady-at-best sources of income, have pushed most Americans into net-spending mode

  C) The long-term future is regularly portrayed as being bleak enough that many people have stopped caring much about their long-term solvency

  D) All of the above

• by chrsw on 2/5/24, 5:16 PM

  I was in my local market, one of the value ones, nothing fancy like Whole Foods, and a no-frills pack of bacon was over $10.

• by basil-rash on 2/5/24, 5:43 PM

  The article nots this is only true when you exclude capital gains from Income. I don’t see how this is newsworthy, I’ve been “dissaving” for years now (selling stocks to cover monthly deficits after I moved from full time FAANG to occasional contract work), and I currently have more “net worth” than I ever have.

  All in all a bizarre metric.

• by jhp123 on 2/5/24, 5:41 PM

  Another way to look at this is "households save less while making bottom-80% income vs. top-20%". Many of the top 20% income earners transition to bottom-80% retirees. As far as I can tell this data is not tracking the same households over time longitudinally.

• by marcusverus on 2/5/24, 7:01 PM

  Common definitions of 'income' exclude wealth transfers, including cash transfers like refundable tax credits. The data don't make sense because the data are intentionally obfuscated.

• by rconti on 2/5/24, 5:43 PM

  > Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save.

  How is this data different from other data on the same matter? It's not like nobody's known the personal savings rate in the US until today.

• by groseje on 2/5/24, 5:05 PM

  Possibly the impact of extremely low interest rates for so long (Thanks FED). I would expect it to fade away slowly since the behavioral changes need time.

• by strulovich on 2/5/24, 5:42 PM

  Isn’t this ignoring all black market income? Which is obviously more meaningful to the bottom 80%.

  Remember: If the numbers don’t add up, first check what you’re missing.

• by lumost on 2/5/24, 5:52 PM

  This type of imbalance is necessary provided that wealth is unevenly distributed. Either interest rates fall to zero/go negative - or individuals must borrow progressively more capital.

• by zzzeek on 2/5/24, 5:42 PM

  I took ECO-101 in 1987, among other basic tenets I learned that wealthier people have more / a majority of their money in savings, poorer people necessarily have to send the money they make back out to buy things. Things are very expensive and wages are not that great for most people, so there you go. nothing "eye-popping" about this.

  What's "eye-popping" is that it's more effective for economic stimulatory actions to put money in the hands of lower income people, where that money goes right back into circulation providing sales tax revenue at the state level and federal tax revenue at the merchant income level, rather than in the hands of wealthy people / billionaires, where that money sits in an account in the Cayman Islands and does mostly nothing in comparison.

• by more_corn on 2/5/24, 8:40 PM

  Wait so if you spend more than you earn you tend to not save?! That’s crazy talk.

• by darth_avocado on 2/5/24, 5:42 PM

  In other news, water is wet. For the bottom 50 (less than the median income, which is $76k/year), post tax income would be less than 4.5-6k/month depending on where you live. Median rent in the country is 2k and median cost of ownership was also near that number. If you include cost of vehicle ownership, health insurance, childcare etc., it really shouldn’t be surprising that people spend more than they bring in.

  (Keep in mind, the 76k is the absolute top income for the bottom half households.)

• by al_borland on 2/5/24, 5:50 PM

  The government has certainly set a fine example for everyone.

• by gumby on 2/5/24, 5:39 PM

  A nice reflection of how we all live better than the kings of old -- really this is a democratization of « Après nous, le déluge »

• by mouzogu on 2/5/24, 5:42 PM

  so "holding gains" means the assets they hold keep going up in value, which offsets their spending?

  americans are so ridiculouosly rich compared to the rest of the world.

  probably helps that their govt is expert at continuously inflating the value of their assets with financial stimulus. and also basically forces the rest of the world to use their currency for buying and selling their own productions.

• by Log_out_ on 2/5/24, 5:36 PM

  This is what the world subsidized by choosing to trade in us currency-and honestly I'm okay with that. The isolationist Maga has turned over the multipolar rock and revealed the ExEmpire crawling beneath. It could be so much worse..

• by fakedang on 2/5/24, 5:33 PM

  Bottom 80% of US households persistently forced to dissave - spending more than income.

  There, corrected it.