Where’s the Spending Disaster? Or the Consumption Disaster?

November 6, 2009 Casey B. Mulligan

Lehman failed in September 2008, and that started the panic that got the world’s attention.

So a year later, in September 2009, after living through a year of “disaster,” how did real consumption expenditure (one economists’ favorite measures of living standards) compare to what it was in September 2008?

What about real disposable personal incomes: the amount of income households have on hand to spend?

Both of these are HIGHER in September 2009 than they were a year earlier.

Of course, we cannot say the same thing about employment, but nobody seems to acknowledge that this recession is much more about the labor market than about drops in real incomes or spending.

[The BEA may revise the September 2009 income and spending numbers, up or down, so it is possible that the revisions show real income and or spending to be slightly lower 9-09 than 9-08. But the fact that the BEA’s measurement techniques are not precise enough to detect a so-called collapse is proof itself that no collapse occurred.]

Photo: Ed Yourdon

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About Casey B. Mulligan 76 Articles

Affiliation: University of Chicago

Casey B. Mulligan is a Professor in the Department of Economics. Mulligan first joined the University of Chicago in 1991 as a graduate student, and received his Ph.D. in Economics from the University of Chicago in 1993.

He has also served as a Visiting Professor teaching public economics at Harvard University, Clemson University, and Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago.

Mulligan is author of the 1997 book Parental Priorities and Economic Inequality, which studies economic models of, and statistical evidence on, the intergenerational transmission of economic status. His recent research is concerned with capital and labor taxation, with particular emphasis on tax incidence and positive theories of public policy. His recent work includes Market Responses to the Panic of 2008 (a book-in-process with Chicago graduate student Luke Threinen) and published articles such as “Selection, Investment, and Women’s Relative Wages,” “Deadweight Costs and the Size of Government,” “Do Democracies have Different Public Policies than Nondemocracies?,” “The Extent of the Market and the Supply of Regulation,” “What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?,” and “Public Policies as Specification Errors.” Mulligan has reported on some of these results in the Chicago Tribune, the Chicago Sun-Times, the Wall Street Journal, and the New York Times.

He is affiliated with a number of professional organizations, including the National Bureau of Economic Research, the George J. Stigler Center for the Study of the Economy and the State, and the Population Research Center. He is also the recipient of numerous awards and fellowships, including those from the National Science Foundation, the Alfred P. Sloan Foundation, the Smith- Richardson Foundation, and the John M. Olin Foundation.

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1 Comment on Where’s the Spending Disaster? Or the Consumption Disaster?

John Smith November 6, 2009 at 8:53 pm

It really seems that you don’t know what you are talking about. The government put over 2 trillion dollars into the economy. What do you think was going to happen with all that money. Of course people spent it. That is what people do with money. They spend it all. Now this will stop on day at which point the spending will plummet. If it does not stop the buying will plummet. Ether way this party is coming to an end.

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1 Comment on Where’s the Spending Disaster? Or the Consumption Disaster?

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