Even if the rich spent their entire rise in
income it would not imply their savings
rate was lower than others. For instance,
suppose savings rate of non-rich is zero
and of rich is one percent, and income
increase to the rich is spent in toto.
S of rich is still higher than non-rich,
even tho nat'l saving rate is lower.
JD is splitting hairs IMO be distinguishing
a rise in wealth from income. Any change
in wealth IS income.
Even if the bulk of added consumption is
financed by the rich, increasing inequality
of wealth -- which is pretty well documented --
reflects more saving at the top than elsewhere.
Assuming it is well-timed, which assumes a
lot, a redistributive measure still has a
better effect than, say, the Bush tax cut.
EPI has a new issue brief comparing Reagan
'81 to Gerry Ford '75, wherein the Ford tax
cut comes off much better. Author is Mike
Meeropol. (see epinet.org).
mbs
David writes: >Isn't it Keynesian dogma that the problem with the rich is
that they save and do not consume (relative to the non-rich), and that the
government can goose the economy by redistributing wealth from the rich
(the savers) to the non-rich (the spenders)? How do Keynesians explain
data like this -- the national savings rate actually drops when the rich
increase their wealth?<
it's a British-Keynesian assumption (not dogma) that the rich save a bigger
percentage of their income than do workers, i.e., have a higher marginal
and average propensity to consume _all else constant_.
I wouldn't say that it's a "problem" (and it clearly isn't _the_ problem),
except that _all else equal_ a redistribution to the rich would depress
consumption, and _all else equal_ that would hurt aggregate demand and
employment. But if all else isn't equal, then the "wealth effect" of a
rising stock market could lead to a _rising_ propensity to consume on the
part of the rich. Note that the story is about changing _wealth_, while the
propensity to consume refers to how _income_ affects consumption.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
