Every year at this festive holiday season, we begin hearing the reports on consumer spending as we feast on turkey and finish with some pie. Will Black Friday help keep us in the black? Will consumers open up their wallets or, more likely, wear out the strip on their credit card(s)? Will there be injuries or even fatalities due to the incredible deals and out of control crowds? Here are some of the reports from this year’s Black Friday:
With shoppers scooping up discounted items, total sales on Friday rose a slight 0.3% over last year to $10.7 billion, while customer traffic increased 2.2%, according to ShopperTrak, which records sales and customer traffic at more than 70,000 stores and malls.
Even more encouraging for the economic outlook were the results from Cyber Monday Sales.
Americans spent more than $1 billion on Cyber Monday, making it the biggest online shopping day in history, digital marketplace research firm comScore said Wednesday.
Sales totaled $1.028 billion on Monday, a 16% increase versus a year ago, and a new one-day record.
Consumer spending is a huge part of our economy, and it is a strong indicator about the growth of our economy. The improved results from Black Friday sales also indicates that consumer confidence, in the economy and in their own personal finances, is improving.
Interestingly, it is the rise in high-end luxury spending that may show that a thaw in the stagnate U.S. economy is on its way. The LA Times ran an article, “Luxury Shoppers are making a Comeback,” that clearly highlights this reality.
U.S. retail sales overall are expected to rise about 3.5% this year, but the trend is even stronger at the high end, with a projected 7% jump over 2009.
That’s an encouraging sign for the overall economy because affluent shoppers wield outsized spending power. The richest 20% of households account for nearly 40% of total consumer spending in the U.S., said Michael Niemira, chief economist at the International Council of Shopping Centers.
This fact has become the dirty little reality that no one wants to acknowledge. Nancy Pelosi has her own view about which segment of society most spurs economic growth. You may remember her enlightening words of wisdom about economic growth delivered over the summer. Pelosi said unemployment benefits create jobs:
Former Secretary of Labor, Robert Reich, also holds tenaciously to Nancy’s argument. On November 28th Reich once again argued against tax cuts for the wealthy while emphasizing that it is the extension of unemployment benefits that will most stimulate the economy:
These families need the money. The rich don’t.
Moreover, extending the Bush tax cuts to millionaires won’t stimulate the economy. That’s because the well-off spend a smaller fraction of their income than everyone else. That’s what it means to be wealthy – you already have most of what you want.
People without jobs, and their families, are likely to spend every penny of unemployment benefits they receive. That will go back into the economy and save or create jobs.
However, the numbers clearly indicate that it is the “richest 20% of households” who are responsible for 40% of total consumer spending in the U.S. It only makes sense, then, that the fastest way to spur a lagging economy is to stimulate spending by upper income earners. As Congress continues to grapple with economic issues and tax policy, it is crucial to continue to emphasize this salient point. Americans must eschew the arguments about class warfare and the politics of class envy. Trying to deny inheritances to families at some specific income level, such as over $10 million dollars, is simply old-fashioned, failed Marxist ideology that harps on socioeconomic differences to incite uprising among lower wage earners. The estate tax is a double tax and only exists because it is a greedy government grab of private property. This policy continues to garner support because it satisfies a basic human nature characteristic of envy.
Thomas Sowell recently wrote two articles titled “Can Republicans Talk?” In these articles, Sowell calls for more open discussions from Republicans explaining how tax cuts for upper income levels stimulate the economy.
“As long as the voters keep buying the “tax cuts for the rich” demagoguery, politicians will keep selling it. And it will keep selling as long as it goes unanswered.”
Sowell, a senior fellow at the Hoover Institute, buttresses his articles with hard statistics and historical facts about tax cuts in America.
These are not new arguments on either side. They go back more than 80 years. Over that long span of time, there have been many sharp cuts in tax rates under Presidents Calvin Coolidge, John F. Kennedy, Ronald Reagan and George W. Bush. So we don’t need to argue in a vacuum. There is a track record.
What does that record say? It says, loud and clear, that cuts in tax rates do not mean cuts in tax revenues. In all four of these administrations, of both parties, so-called “tax cuts for the rich” led to increased tax revenues– with people earning high incomes paying not only a larger sum total of tax revenues, but even a higher proportion of all tax revenues.
Most important of all, these tax rate reductions spurred economic activity, which we definitely need today.
These are the facts.”
It is crucial for the recovery of the U.S. economy that the members of Congress, including the newcomers who will be seated in January, are fearless as they engage the American people in a dialogue about the future. Prosperity will return for all American citizens when the business owners are able to function with less interference from a greedy government that thrives on resentment toward the success of others. We all need to refrain from the natural tendency to wish for the demise of the luxuries enjoyed by the well to do, up and down Park Avenue; spending every dime, for a wonderful time. Rather, we need to be grateful that our nation affords the opportunity for plenty of luxury for all of us.
After all, most of us believe that Karl Marx got it wrong, right?