NEW YORK: As the US goes to the polls, its economy looks unusually strong. Averaging nearly 3 per cent growth for nine straight quarters, the country is attracting heavy flows of foreign money, which have helped push its share of the global stock market index well above 60 per cent, a record high.
Yet voters remain pessimistic about their economic and financial prospects.
Why? US growth is a mirage for most Americans, driven by rising wealth and discretionary spending among the richest consumers, and distorted by growing profits for the biggest corporations. Times look good but this growth is lopsided, brittle and heavily dependent on spending and borrowing by the government, which is typically the lender of last resort.
Although the world marvels at “unsinkable” US consumers, a growing number are priced out of homes and falling behind on credit-card debt. The bottom 40 per cent by income now account for 20 per cent of all spending while the richest 20 per cent account for 40 per cent.
That is the widest gap on record and it is likely to widen further, says Oxford Economics, a consultancy. Most Americans now spend so much on essentials such as food that they have little left for extras like travel or eating out.
Discretionary spending is becoming a luxury for the wealthy, and so is optimism. Confidence collapsed during the pandemic and has since recovered much more strongly for the richest third of consumers than for the middle or bottom thirds. The impact of rising wealth on spending is also concentrated among rich consumers, who own most of the assets.
This decade, booming financial markets added US$51 trillion to US wealth and while millennials did especially well, virtually all their gains went to rich millennials. To a widening wealth gap between the young and old, add this new source of division and anger within the younger generation.
