Income concentration at the top has dragged on household spending since 1979: How much the upward redistribution of income lowered economywide household spending, as a share of GDP
| Spending drag from upward redistribution, % of GDP | |
|---|---|
| 1979 | 0% |
| 1980 | -0.05% |
| 1981 | -0.15% |
| 1982 | -0.36% |
| 1983 | -0.52% |
| 1984 | -0.59% |
| 1985 | -0.74% |
| 1986 | -1.27% |
| 1987 | -0.62% |
| 1988 | -1.03% |
| 1989 | -0.89% |
| 1990 | -0.84% |
| 1991 | -0.61% |
| 1992 | -0.77% |
| 1993 | -0.61% |
| 1994 | -0.58% |
| 1995 | -0.65% |
| 1996 | -0.90% |
| 1997 | -1.15% |
| 1998 | -1.32% |
| 1999 | -1.49% |
| 2000 | -1.71% |
| 2001 | -1.16% |
| 2002 | -0.87% |
| 2003 | -1.03% |
| 2004 | -1.35% |
| 2005 | -1.68% |
| 2006 | -1.85% |
| 2007 | -2.00% |
| 2008 | -1.42% |
| 2009 | -0.90% |
| 2010 | -1.15% |
| 2011 | -1.16% |
| 2012 | -1.72% |
| 2013 | -1.13% |
| 2014 | -1.34% |
| 2015 | -1.32% |
| 2016 | -1.17% |
| 2017 | -1.40% |
| 2018 | -1.42% |
Notes: To estimate the drag on household spending stemming from the upward redistribution of income, we subtract the savings rates by income group (See Figure D for savings rates calculations) from 1, and then multiply this derived propensity to consume out of income by the income shares for each group to estimate household spending for each group. Then, we sum across all groups to get an aggregate household spending estimate. We do this with actual data, and then construct a counterfactual level of spending that holds 1979 income shares constant. The difference between these is the “all else equal” effect of changing income shares on household spending. We express this spending drag as a percent of overall U.S. GDP.
Source: Congressional Budget Office household income data (CBO 2021) for savings rates and income shares and GDP and personal income data from the Bureau of Economic Analysis’s National Income and Product Accounts (BEA 2021a; 2021b).