The February 8 Wall Street Journal has an article about a decline in consumer spending which some economists blame on the reinstated Social Security payroll tax … really?
Rick Casey, a software developer in Birmingham, Ala., is among those scaling back spending as a result of the tax change. The 34-year-old and his wife spent more on groceries and restaurants in recent years partly because they were getting around $150 more a month, he says. In August, they bought a new Toyota Highlander. Mr. Casey is the family’s sole breadwinner, making just over $100,000, while his wife cares for their three young children.
Mr. Casey says that in the past he used tax breaks and other windfalls to pay off debt or increase savings. But with the payroll tax holiday, probably because it came in small increments, he says he just spent a little more each month.
Now he says he is planning to cut back, by eating out less, canceling his satellite-TV subscription and postponing bathroom remodeling. “We’ll budget around it,” Mr. Casey says.
Mr. Casey apparently frittered away $2,000 each year for two years. He was not alone. Imagine how much more productive that $4,000 could have been, like $4,000 plus in retirement savings.
No doubt this frittering was the intent of the “stimulus” that added to our national debt and which, based on the 2013 decline in spending, accomplished little.