Surprise, surprise, surprise. The largest retail companies in the United States are concerned that their falling profits are caused by consumers not having enough money to spend.
Two thirds of the largest retail companies in the country say falling incomes for their customers threaten their business, according to an analysis of corporate filings by economists at the Center for American Progress (CAP)…. And seven out of every eight major American retail companies “cite weak consumer spending as a risk factor to their stock price,” the authors write. […]
… Burger King’s 10-K mentions “decreased salaries and wage rates…decreasing consumer spending for restaurant dining occasions” as a risk factor. J.C. Penney’s says that “the moderate income consumer, which is our core customer, has been under economic pressure for the past several years.”
[A]nalysts from Morgan Stanley, Bank of America, Citigroup, Wells Fargo, and a half-dozen other major business analysis firms … [point] to weak consumer spending and the economic weakness afflicting the middle class as factors hindering the recovery.
Well, after thirty plus years of trickle down economics, is anyone really shocked by this result? I mean other than ideologues who reject real world data because it doesn’t conform to their predictions.
If trickle-down economics worked, then lower tax rates during the Reagan Revolution should have increased the lowest income levels. In fact, the exact opposite has occurred. Income inequality has worsened.
Since the collapse of the housing bubble, we bailed out Wall Street and the financial industry saw record profits. Next to nothing has been done to bolster the incomes of the middle class, however, as more and more people have sunk into poverty. We’ve seen good paying mid level jobs replaced with more low paying ones.
Yet, few politicians in either party are actively promoting policies, such as raising the minimum wage, increasing infrastructure spending, and raising taxes on the wealthiest ‘persons,’ both real and fictional – i.e., large multinational corporations – who have benefited enormously from tax cuts that theoretically were supposed to create more and better jobs for everyone, but which instead mostly increased the income and profits of the largest corporations and the richest individuals.
The richest 85 people in the world have as much wealth as the poorest 3.5 billion – or half the world’s entire population – put together. […]
[S]o much wealth has been concentrated at the top … it has become more economically efficient to buy countries’ economic policy than to create value in order to sell it on. If one can control government to favour the richest, while raising barriers for new entrants, thus increasing their share of the pie exponentially, what is the incentive to grow the pie? […]
… The rich no longer create jobs, through a process of consolidation, takeover and merger, they actually destroy them. […]
“When so much of the purchasing power, so much of the economic gain, goes to the very top,” Bill Clinton’s former labour secretary Robert Reich explains … “There’s simply not enough purchasing power in the rest of the economy.”
In short, greed is not good. Greed, in fact, is evil. It destroys the lives and livelihoods of billions of individuals and small businesses for the benefit of a few. Yet, aside from Bernie Sanders and Elizabeth Warren (and a few others), who among our political class, beholden to billionaires in order to get elected, is willing to speak the truth, i.e., that the neo-liberal emperors who continue to push these failed policies, metaphorically have no clothes? Not many, my friends, not many.
And yet these same retailers are the biggest ones fighting Fight for $15 and minimum wage increases.
You would think that some of these jackasses running these companies might have heard sometime of the “multiplier effect”.
Or even “what goes around, comes around”, the fundamental feature of closed systems (of which an economy is an example).
Ironic, isn’t it.
At some point the ever concentrically circling bird runs into itself and falls out of the sky. How many low-wage retailers have already gone under this cycle?
My 17-year-old son was just asking how come landlords on Upper Broadway keep raising rents to the point where successful (but inexpensive) restaurants have to shut down–meaning the buildings will stay vacant for a year or two and they won’t be collecting any rent at all. It’s obvious to him that capitalists are just irrational, but classical economics doesn’t seem to know about that.
Want to see the future view of a TPGOP run America, then watch “The Hunger Games”.
That’s rain damn it, not pee!!!!
Here’s how it works.
If you get unemployment insurance because your job got offshored, you’re a taker. If you offshored the job and loaded the company with massive debt while paying your consulting firm tens to hundreds of millions of dollars, oh and you got tax breaks for doing it, you’re a maker. Or Mitt Romney.
If your home got stolen from you after the bank lied to you at every step of the way, and now you’re homeless, you’re a moocher. If you’re the bank that wrecked the economy and got infinite bail-outs, gets to pay billions in (tax-deductible) fines while never admitting criminal wrongdoing, gets trillions in no cost loans whenever you want it, you’re too big to fail and the heart of the economy. Or Jamie Dimon.
If you got sick because you’re working two minimum wage jobs and have no regular schedule and can’t see your kids and spend all day on your feet in a warehouse, and you have no access to health care other than the emergency room, you’re a looter. If you’re a CEO paying yourself 500 times the wage of your workers who need welfare to get buy, you’re a job creator. Or the Walton family.
If for the first time you now have access to affordable health care because of the ACA, you’re afflicted with the disease of dependency. If you get gold-plated government health care while spending about 60 days actually on the job, and the rest of the time getting checks from your corporate sponsors, you’re a congressman.
If you’re a black man who doesn’t show instantaneous slavish deference to white authority figures (and even then, you know, you’re living while black), you’re a thug. If you’re a Silicon valley CEO who colludes on worker salaries with your buddies and uses time in a meeting with the president to whine about the need to repatriate your stash of billions in profits tax free, you’re on the cover of Fortune Magazine.
It’s very simple. Massive inequality is a policy choice that people in positions of power and influence have deliberately made, and they’ve been making it for decades. Everything else is just lies, fairy tales, and distractions.
And yet a solid majority of the public has yet to catch on.
Sort of like the non-slave owning dirt poor whites in the south (and border states) haven’t caught on that “the man” has been using them for over two hundred years.
It’s about that time in the election cycle when I realize that there are enough stupid people to continue this farce.
Must be time for another million/billionaires and corporate tax cut and more deregulation. Or maybe just cut federal checks to the million/billionaires and corporations and let them skip the messy part of having to take the money the three hundred middlemen, aka consumers.
Well, it must be time to give more tax breaks to rich guys!
Like Bill Gates, who thinks that wealth and income inequality is very bad, and we should fix it with a ‘consumption tax’.
If you listen carefully there’s a faint ‘ssssshick! ssssshhhick!’ in the distance of the guillotine blades being sharpened.
The 1% may want to go back to the days of serfdom, but the rest of us don’t.
There are only so many pillows one can buy or meals one can eat, regardless of income. Redistributing wealth from those of us in working and middle income situations to the very wealthy won’t do the consumer side of the US economy any good, as I think your post makes abundantly clear. In the last few decades those of us who are or were part of the middle class used up all the tricks we had at our disposal – go dual income, use the equity on our houses as a sort of ATM machine, use credit cards, etc. That’s all gone now in many cases, and will never come back. If there is any remotely positive news, I suppose it is the occasional attempts to reform minimum wage laws in isolated metro areas and states, and those efforts help, but don’t go far enough. The reality is that the 99% (or whatever you want to call those of us who are not among the wealthy) are truly “too big to fail.” The sooner that reality is taken seriously by those with the power to do something, the better.
USians and western Europeans are demonstrating that the amount of food we can consume is far more than previously thought. And all those extra pounds we carry around are good for consuming more health care and electric scooters.
Sorry Steven, but I have a small quibble. Your headline and first paragraph say that retailers’ alarm is over falling profits.
It’s actually worse than that. If you click through the links to the CAP study, you will see that it cites retailers’ concerns about declining traffic and sales revenue.
Why is this worse? Retailers can exercise some degree of control over profits. They can reduce expenses if profits aren’t up to snuff. Retailers have much less control over customer traffic.
As Yogi Berra once said, “If people don’t want to come, nobody can stop them.”
There are other factors, too. Millennials are less interested in expansive (ie, consumer-centric) suburban living. They are less interested driving, too. http://www.uspirg.org/news/usp/new-report-shows-mounting-evidence-millennials%E2%80%99-shift-away-dr
iving
(Note I’ve seen a previous study that made the same argument – millennials are inherently less interested in driving – and also noted that wealthy millennials show the same trend as poor ones).
So wage stagnation will hit from one end, but some of it is a simple cultural shift. Young folks need less stuff. They want kids later partly for economic reasons, and partly because women don’t really want to have kids in their twenties anymore. It all adds up.
I find this post very timely as this exact issue came up in the audience question period during Senator Bernie Sanders event last night. From a woman in the audience: “Why don’t the companies understand that unless the people they rely on to buy their product have a healthy income they won’t have anyone to sell their product to?”
Boomans observations are right in-line with Bernie’s.