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It's the Savings, Stupid

Inflation and the price of eggs are the talk of the town these days, but there are other ways to measure economic pain. Here is a different one. The chart below shows the percentage of U.S. adults who say they could cover their basic expenses for 6 months from their savings if they lost their income.

Pct of people who could live on savings since 2021

In Jan. 2023, about 20.5% of adults could hack it. Now it is only 16.5%. That is a drop of 19.5% of the January number, a significant dropoff. In other words, millions of people can't make it on what they are earning now due to higher prices and are using up their savings to make ends meet. Biden needs to have something to say to these people. Just saying that "if Republicans win in 2024, what they will do is slash billionaires' taxes and throw you a couple of crumbs" won't work. Many of the hard-pressed people will reply: "I'll take the crumbs, thank you." That's why it is essential that Biden tries to do something concrete now. Success isn't essential. Visibly trying is essential.

According to Jesse Wheeler, the senior economist at Morning Consult, one thing the data suggest is that people's spending habits are not very elastic (as economists use the word). People don't want to downgrade their lifestyle, even when times are tough. They could switch from national brands to store brands at the supermarket, dine out less often, watch TV at home instead of going out to movies, and so on, but these changes are difficult for many people to accept. They'd rather eat up their savings than change their lifestyle. Wheeler is uncertain how long this can last, though. (V)

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