We’re Spending Down Our Savings to Prop Up Our Economy

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Consumer spending can increase if (a) wages go up, (b) borrowing goes up, or (c) savings are spent down. Jed Graham reports that last quarter it was Option C that saved the day:

U.S. households saved just 3.9% of disposable income in Q1, the lowest since the last cycle’s peak in Q4 2007. In fact, the decline in saving from 4.5% in Q4 financed half of all personal consumption gains in Q1, adding one full percentage point to real GDP growth.

Needless to say, saving rates can’t decline forever, and borrowing isn’t likely to increase much either. That leaves disposable income as our main hope for future economic prosperity, and with job growth picking up, so should disposable income. So why isn’t it?

This time, government policy is the main culprit. Real disposable income growth has trailed real private wage growth by nearly 3% the past two quarters as fiscal stabilizers have gone into reverse….The drag on disposable income comes, in large part, from three factors: flat total wages for government workers; roughly flat government social benefits; and a normal cyclical boost in income and payroll tax payments (up a combined $151 billion from Q1 2011).

….The bottom line is that fiscal policy is leaning too hard against recovery based on present conditions. The question is whether such austerity is avoidable right now amid trillion-dollar deficits and pressure from the ratings agencies.

Oh, I think it’s avoidable. The problem isn’t either short-term deficits or Standard & Poor’s. It’s an excess of politicians who don’t really care much about the real-world economy. There’s no point in trying to blame anyone else.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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