An October 29th economics puzzle: About 27,000 times on the Internet, it is said that consumer spending accounts for two-thirds of the nation’s economy. My question for this day, the anniversary of the 1929 stock market crash, is “and so?” My hidden desire to have a career as an economics pundit despite never taking an economics course, forces me to ask why this factoid is used by reporters to explain how precariously our economy teeters on the edge of the fickle fingers of non-confident consumers.
When I read this “two-thirds” stat, I wonder if it’s accurate and why I should be concerned. In my opinion, I would rather consumers be responsible for keeping our economy rolling as I imagine about 90 percent of the spending of a typical consumer is non-discretionary. As long as they’re employed (and, logic suggests, as long as consumers spend, the economy will remain robust enough for employment to remain steady) and in possesion of a credit card, they’ll spend. Not on discretionary luxuries, but on the necessities of life. The stuff we buy at Walmart. In other words, of the two-thirds of the economy made up of consumer spending, how much of it really could go away if consumers actually slowed down their spending due to their “lack of confidence”? From personal experience, not as much as one would hope.