November 10, 2007

A Stunning Report on ‘Discretionary Income’ Old Media Uses Its Discretion to Ignore

Filed under: Economy,MSM Biz/Other Bias,MSM Biz/Other Ignorance — Tom @ 8:34 am

Someone needs to tell me why this news about discretionary income isn’t as significant as I believe it is.

But first, three warnings:

  1. I’m not about to spend the $250 needed to read the full report from the Conference Board that backs the story (their “about” page is here).
  2. I don’t feel totally comfortable with how the statistic is measured — “Households with discretionary income, as defined by the study, are those whose spendable income exceeds that held by households with similar demographic features.”
  3. I don’t feel totally comfortable that the statistic has been measured consistently.

Now with the disclaimers out of the way, here’s the stunning news:

More Americans have “money to burn,” technically known as “discretionary income,” than at any time in the past quarter-century, and perhaps in the country’s history.

A lot more.

A whole lot more.

So many more that I went as far back as I could for comparable stats.

Here is what I found:

  • San Francisco Chronicle; December 18, 1985 (from ProQuest library database) — (Headline) “One-Third of U.S. Households/Americans With ‘Extra’ Cash.” The article doesn’t say what year the study by the U.S. Census Bureau and the Conference Board looked at. Let’s assume it was 1983.
  • Wall Street Journal; June 1, 1989 (from ProQuest library database) — “Only about 30% of American households have extra money to spend after paying taxes and buying the necessities, according to a report released by the U.S. Census Bureau and the Conference Board.” This report referred to a 1987 Census Bureau/Conference Board report.
  • A reference to an early 2005 Conference Board Report that appears to relate to 2003 and/or 2004, saying, “About 57 million U.S. households now have discretionary income, up from nearly 54 million in 1997-1998, according to a new study released today by The Conference Board. But the percentage of the American population with discretionary income has edged down to 51 percent, compared with 52 percent six years ago.”
  • Finally, from the Conference Board earlier this week“Between 2002 and 2006, the percentage of U.S. households with discretionary income increased from 52.1 percent (57 million households) to 63.5 percent (73 million households).”

Summarizing, here is the progression of Americans with discretionary income:
– 1983 – 33%
– 1987 – 30%
– 1997/1998 – 52%
– 2002 – 52.1%
– 2003/2004 – 51%
– 2006 – 63.5%

In everyday language, this means that about 12% of the population went from just getting by to having money to spare in a span of two or three years.

Again, someone needs to tell me why this news isn’t as significant, or as remarkable, as it appears.

You might think that in the non-stop Old Media hype about how the alleged crises in housing, mortgage lending, currency strength, and who knows what else, that good news like this might be welcome, if only as a change of pace.

As has been the case almost non-stop for almost 7 years, you would be wrong.

It’s no longer anything resembling a surprise that there’s nothing about this at the New York Times (search is on “conference board”). But here’s the result of a Google News search done this morning on ["conference board" discretionary income], typed exactly as indicated:

GoogNewsDiscIncome1107

To be sure, the same search of the web in Google yields a few more results, including this one in the International Herald Tribune. But the half-dozen or so stories on this topic pale in comparison to the over 1,100 found in a Google News Search last night on “recession housing” (not in quotes):

GoogNewsRecessionHousing1107

So if you’re wondering how so many people are coming up with the money for all manner of iPods, monthly video game subscriptions, and scalped Hannah Montana tickets, there’s probably a very simple answer: They have it.

Old Media would prefer that you not know that.

Cross-posted at NewsBusters.org.

________________________________________

UPDATE: From The Warrior Class Blog

People feel they can afford spending $5 for a cup of coffee at Starbucks and $400 bucks for an iPhone despite their negative feelings about the economy. The “problem” is now that people feel is that they cannot afford a Lexus.

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20 Comments

  1. I don’t know, my wife thinks all our income is discretionary. Ouch.

    Comment by largebill — November 10, 2007 @ 10:51 am

  2. #1 that would be OK if all of your spending was too.

    Comment by TBlumer — November 10, 2007 @ 12:38 pm

  3. This is certainly a weird measure. The measurement in #2 makes it sound almost like a truism, like saying “half of all students were above average.”

    Anyways, looking at real GDP per capita, yes we are wealthier than at any time in the past. This is even more apparent when you consider that the computing power of a $1000 personal computer bought in 2007 is probably equivalent to that of a $10M computer in the 1980s, and the added utility of other 2007 technologies that did not exist or were vastly inferior in the 1980s.

    We’ve never had it so good.

    Comment by TallDave — November 10, 2007 @ 4:19 pm

  4. [...] BizzyBlog » A Stunning Report on ‘Discretionary Income’ Old Media Uses Its Discretion to Ignore Summarizing, here is the progression of Americans with discretionary income: – 1983 – 33% – 1987 – 30% – 1997/1998 – 52% – 2002 – 52.1% – 2003/2004 – 51% – 2006 – 63.5% [...]

    Pingback by Daily Pundit » A Little Better All the Time…. — November 10, 2007 @ 4:19 pm

  5. NOOOO! Don’t publish this information! The tax-n-spenders will invariably see it as certain proof that more and more Americans can now “afford” higher taxes.

    Comment by persiflage — November 10, 2007 @ 5:01 pm

  6. #5, That’s funny. I thought of that while I was writing this up.

    But if they haven’t figured out that supply-side tax cuts increase receipts to the Treasury, we can at least hope that they won’t make this connection either. Besides, they pretend to only go after the top 1%-5%.

    Comment by TBlumer — November 10, 2007 @ 5:05 pm

  7. How does this square with the fact we’re borrowing so much, running up credit card debt, and so on? We have more discretionary income than ever, and yet we’re in more debt than ever. How’s that again?

    Comment by Jane — November 10, 2007 @ 5:16 pm

  8. Jane – I don’t think that is true…do you have some kind of cite or web link to evidence that personal debt levels are higher than in the past?

    Comment by Wildmonk — November 10, 2007 @ 6:00 pm

  9. I’m sure that Paul Krugman is busy writing a column that points out that all but 37 cents of the ‘discretionary income’ belongs to the top 1% of earners.

    Last week, I think, one of the Ron Paul ‘bots was hyper-ventilating about how much more flour cost today (adjusted for inflation) was than a century ago. (He had been challenged to name things that were more expensive today than 100 years ago, inflation adjusted.) He didn’t bother to mention how much more flour an hour’s wage today could buy compared to an hour’s wage 100 years ago.

    Many, many people have a vested interest in having the economy be seen as being as bad as possible.

    Comment by JorgXMcKie — November 10, 2007 @ 6:38 pm

  10. No surprise to me, any real-world measure that looks at people spending money on non-necessities would show a similar result — eating at restaurants, playing video games, buying the iPods and Plasma TVs, the very existence of Starbucks! Of course most of us have more money these days. It’s a shame more economist don’t develop more useful research about this.

    Hey, I remember in the 1970s, my mother would cut dress patterns with these big paper templates to make clothes for my sister. Who the hell does that anymore??

    Comment by Kevin — November 10, 2007 @ 9:41 pm

  11. I am concerned by reported stats. Trained in economics, I rely on the quality of the reported information. GIGO. The recent job numbers indicated that hiring was going on in the financial sector and that real estate added jobs. How does this square with many mortgage related firms laying off? Granted the numbers are not big (tens of thousands) but a report of increase doesn’t square with announcements. Also, just on a personal note, I buy several gallons of milk a week. Milk is up 50% since the spring. Eggs are up, bread is up, meat is up. Even my favorite cereal has gone from $.10 an ounce to 12 cents. Paper for the office is up, ink is up, postage up. Did I mention we paid $10 for a 1/2 gallon of OJ on vacation in CA in late August? But inflation is only up 2%?

    I am beginning to distrust the numbers because they are not reflecting MY reality….

    Comment by Tracy Coyle — November 11, 2007 @ 2:13 am

  12. [...] The author also notes how the MSM is all over it. [...]

    Pingback by Enableate » Blog Archive » Tax Cuts Really Having An Affect — November 11, 2007 @ 3:19 am

  13. I’ll be buying train tickets to go to Times Square in New York for New Years. It’s something I’ve wanted to do for a while, but never felt I had the money to do until this, er, next year. Thank you new economy.

    I’m a late-20s DINK living with my wife. My generational observations are the following: What is commonly considered to be good middle-class living is becoming extremely cheap. A Wal-Mart grocery bill could be as low as $35 per person per week for a household–and that’s staying the same with inflation. Clothing can be purchased very cheap or expensive, depending on your tastes or priorities. Certain media entertainments, which once would costs a household $1000s in appliances purchases are a given with a $80/mo cable bill, $10/mo netflix bill, a $500 computer bought 5 years ago and a TV/VCR/DVD that could be less than $100. Car prices haven’t risen much with inflation, and used cars are more plentiful and last longer.

    In fact, the only a few factors seem to separate upper-middle class from “working class”: Whether a family owns their home, and in what part of town they live, and possibly, the quality of their vehicle. Class in America is becoming more about how you live and behave socially than how much money you make.

    Comment by Protagonist — November 11, 2007 @ 3:56 am

  14. #11, debt counselors? (/kidding) Your Q about financial sector is good and I don’t know. Real estate could be explained by the nonresidential sector, which is going gangbusters.

    The anecdotals are interesting. Get enough of them and you start figuring they can’t be ignored. Though #13 makes some pretty good observations.

    #13, good points. What of course happens now is that expectations get raised, and George Will’s observation many years ago comes into play: “Americans quickly come to think of pleasures as entitlements.” No society on earth has ever turned perceived luxury into perceived “necessity” so quickly.

    Comment by TBlumer — November 11, 2007 @ 9:20 am

  15. What is “discretionary income”? Where does it come from? How is it measured? This study is meeaningless without knowing these metrics. For one thing, “income” is not defined. Is this income form a home equity loan? (fiscal death) From an inheritance? (one time occurance) Is property included in the measument? Stocks? Because those two “income” sources are fantasy numbers.

    We need more information on this study.

    Comment by Xiaodng — November 11, 2007 @ 11:06 am

  16. “In fact, the only a few factors seem to separate upper-middle class from “working class”: Whether a family owns their home, and in what part of town they live, and possibly, the quality of their vehicle. Class in America is becoming more about how you live and behave socially than how much money you make.”

    So true. America is about re-making yourself, always has been…but this shows how people have forgotten. Most midle class, even upper class, are living in a finacial dream world. The definition of “middle class”, traditionally, has been defined as those people who can afford to live, without income, with no change in lifestyle, for two years. How many “middle class” Americans you think can do that? I know I can’t! Yet I have a brick house with an acre of land, in a country setting. (I don’t say “own”, ’cause I don’t own it yet! No one seems to grasp that these days)

    So, I would say, appearing to be middle class, is one thing, but actually being middle class is quite another. Alot of people with 2500 sq. ft. mansions are a paycheck away from penury, and worse. Bunch of fools, as always.

    Comment by Xiaodng — November 11, 2007 @ 11:15 am

  17. [...] Progress since the eighties has been pretty dramatic: – 1983 – 33% – 1987 – 30% – 1997/1998 – 52% – 2002 – 52.1% – 2003/2004 – 51% – 2006 – 63.5% [...]

    Pingback by The Warrior Class Blog » The Unseen Opportunity — November 11, 2007 @ 12:47 pm

  18. #15-#16, on needing more info, don’t disagree.

    The Conference Board’s definition is, I believe, designed for consistency regardless of what people buy or even how much they buy:

    ““Households with discretionary income, as defined by the study, are those whose spendable income exceeds that held by households with similar demographic features.”

    Yes, that’s a bit circular, but notice also that it refers to “spendable income,” not whether it’s actually spent.

    I’ve heard that two-year reserves argument on rare occasion, but it is a way-outlier. I can tell you with great assurance that no more than a teeny tiny percentage of Americans has ever been in a two-years of reserves situation (this would NOT, and should not, include targeted funds like 401(k) or education funds).

    I have had one guy walk out of a class I gave when I wouldn’t buy into that definition. But that’s one guy out of thousands and thousands of others over a 15-year period. My take is that 3-6 months in reserves is fine, and that you can even justify less if you have unused and very inexpensive credit lines with very low rates.

    I don’t disagree that there’s an overextension problem out there. The big question is how widespread it is.

    Comment by TBlumer — November 11, 2007 @ 1:06 pm

  19. [...] Tom’s upset that the mainstream media isn’t jumping up and down about a discretionary income report by the Conference Board. There’s a reason they’re not. There’s also some hypocrisy in them thar hills! [...]

    Pingback by Plunderbund - » Discretionary Income: Don’t Believe The Hype — November 12, 2007 @ 7:53 am

  20. [...] More Americans have more disposable income – I blame George W. Bush [...]

    Pingback by Icon | Cabarrus Cheap Seats — November 14, 2007 @ 6:06 pm

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