Redistribution to high-income, high-saving households is slowing demand growth: Estimated effect of upward redistribution on aggregate demand, 1979, 1989, 2007 and 2012
| Bottom 80 | 80th–90th | 90th–95th | 95th–99th | Top 1 | Average | ||
|---|---|---|---|---|---|---|---|
| Savings rate, 1989-2013 average | 0.8% | 1.9% | 9.8% | 29.5% | 47.4% | 11.6% | |
| 1979 income share | 55.2% | 15.0% | 9.7% | 11.3% | 8.9% | – | |
| 1989 income share | 51.4% | 15.1% | 9.9% | 12.1% | 12.2% | – | |
| 2007 income share | 46.2% | 13.7% | 9.5% | 12.7% | 18.7% | – | |
| 2012 income share | 47.2% | 14.2% | 9.8% | 12.7% | 17.3% | – | |
| 1989–2007 change in income share | -5.2% | -1.4% | -0.4% | 0.6% | 6.5% | – | |
| 1979–2007 change in income share | -9.0% | -1.3% | -0.2% | 1.4% | 9.8% | – | |
| 1989–2012 change in 2007 income share | -4.2% | -0.9% | -0.1% | 0.6% | 5.1% | – | |
| 1989-2007 demand change | -5.2% | -1.4% | -0.4% | 0.4% | 3.4% | -3.1% | |
| 1979-2007 demand change | -8.9% | -1.3% | -0.2% | 1.0% | 5.2% | -4.2% | |
| 1989-2012 demand change | -4.2% | -0.9% | -0.1% | 0.4% | 2.7% | -2.0% |
Notes: Income shares do not sum to 100 percent because the CBO income data includes households with negative incomes. The shares in the table above are effectively income shares of households with positive income. Negative income is never more than 2 percent of total income, so this failure to round to 100 has only trivial effects on our calculations. The change in aggregate demand is calculated as the change in income multiplied by one minus the savings rate (essentially each income group’s average propensity to consume).
Source: Author’s analysis based on data from the Survey of Consumer Finances (SCF) and the Financial Accounts of the United States (FAUS) from the Federal Reserve Board and the Congressional Budget Office (2016)
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