It turns out even the deepest recession in decades can’t kill off pet spending. A new report from the Labor Department shows that while Americans cut back in some types of disposable spending during the nation’s financial crisis, spending on pets held steady and has begun to pick up again.
The report shows that Americans spent over $61 billion on their pets in 2011, with the average household spending just over $500 on their pets during the year. That’s more than the average household spent on alcohol, men’s clothing, or landline telephones. The data show that pet spending hit a peak in 2008, at $571 per household, then dropped off sharply, eventually hitting $480 in 2010. However, spending on Fluffy and Spot as a share of households’ total spending picked up slightly during the recession, from 0.9 percent in 2007 to 1.1 percent during the heart of the downturn in 2008 and 2009.
The Labor Department data show that Americans remained selflessly devoted to their pets during the recession, holding their spending on pet food steady through the downturn while cutting back on the luxury of eating out.
A major economic downturn may not dramatically cut pet spending, but having kids does. Single people spent over $400 on average on their pets in 2011, while single-parent households spent two-thirds that. Likewise, husbands and wives with no children at home spent the most on their pets, at nearly $700, while those with the youngest children spent less than 60 percent of that, at just over $400.
The data may also signal fatter times ahead for America’s pets. Americans age 55 to 64 spent the most on their pets of any age group, at $636 per year, in 2011. In addition, homeowners spent $653 on average, compared to renters, at $221. With baby boomers entering retirement and a housing recovery in place, that may mean the population willing to spend big on their animals is about to grow.
From US News, full story HERE
By Michael Scherer of Time Magazine
President Obama will release a “fiscally responsible” budget for the country today, his aides say. This is not news. It happened last year. And the year before. And the year before. In Obama’s first year, he was so confident, he called his budget “A New Era of Responsibility.”
Except, it wasn’t. And never really has been. Because the fiscally responsible part is always projected to begin a few years in the future, and each year, as a new budget comes out, White House aides have also revised their projections. What they believed to be responsible before was not so responsible after all. The deficits were larger than they expected. The economy grew slower. The debt was bigger.
There is some disagreement over just what “fiscally responsible” means. Some liberals believe there is no real risk of running up too much debt, given the demonstrated willingness of the world to buy our bonds, so it is responsible to accept our high deficits. Some conservatives believe that any deficits are a moral outrage that will turn our children into chattel or preface armageddon, so it is responsible to embrace austerity. For the purposes of this post, I am defining “fiscally responsible” as it is most often meant by the White House: charting a path to deficit levels that roughly stabilizes the size of the debt as a percentage of GDP.
In 2009, Obama’s propeller heads predicted the deficits in 2012 would be about 4.6% of GDP, or just slightly higher than the growth of the economy. Three years later, Obama’s number crunchers were saying that the 2012 deficit would be 7.2% of GDP, which means the original prediction was off by about 50%. Why? The biggest reason is that the financial crisis was worse than predicted, and the recovery has been slower, lowering tax revenue. It’s also true that Congress never puts a White House budget into law, but as this chart by The Washington Post’s Dylan Matthews shows, had Obama had his way, the deficits would likely have been worse, not better. The budget that Congress passed in 2009 was 3% smaller that Obama wanted; it was 7% smaller in 2010.
But the pattern in the Obama administration has been remarkably consistent: Presidential budgets are a terrible source for predicting the fiscal responsibility of the U.S. government. Here is a line chart I made showing the deficit projections Obama made in each of his first four budgets, as a percentage of GDP. As you can see, each year the short-term projections tend to get a little worse.
The number crunchers across the street from the White House are not fudging the numbers. The problem is that lawmakers do not have complete control over deficits. The economy matters, and the official numbers have not been good at predicting what will happen.
The other thing worth mentioning here is that in discussions of fiscal responsibility, the President’s budget is often a distraction. The real problems with spending and taxation have little to do with what Obama likes most to talk about: new bridges, pre-K education, tax loopholes for the very wealthy. They have to do with long term trends—a decrease in tax rates and revenue over the last decades, and an increase in the cost of health care. The graphic designers at the U.S. Treasury clearly illustrate this point:
Larger copy of the chart HERE.
Any long term solution to the high deficits will most certainly arise from addressing these areas. And that deal, if it happens anytime soon, will not be found in the Obama budget document, though his recent embrace of cuts to Social Security and Medicare may be a step in that direction.
UPDATE: I have added below another line (in teal) to my chart, showing the deficit projections as a percentage of GDP from the most recent budget, fiscal year 2014, which was released Wednesday afternoon. You will see that the deficit estimates for the most immediate year are once again higher than they were predicted to be last year, the year before, the year before that, etc. Not exactly the kind of projections you want to take to the bank, or bond market. To read the whole budget, see here.
PRESIDENTS choose their words carefully. So when Barack Obama talked of “tax reform” but not “tax rates” in his acceptance speech early Wednesday, he was presumably sending a signal. And it was similarly significant that later that day John Boehner repeatedly stated his opposition to higher tax “rates” rather than tax revenue.
Within those two statements lies the nucleus of a deal: raising tax revenue through some means other than higher tax rates. There are myriad ways of doing this; the trick is to find one that both Democrats and Republicans can live with. (See update below.) During the supercommittee negotiations last year, Senator Pat Toomey proposed raising $250 billion in revenue over 10 years by closing loopholes. But he would also have cut rates sharply, which would have benefited the richest households most. That was anathema to Democrats; they wanted more revenue, but not if it made the tax system less progressive.
So the price for Democrats is that tax reform must be progressive: after-tax incomes of people at the top must be squeezed more than for people at the middle. Thus far, Mr Obama has equated that with allowing the top two income tax brackets to return to their pre-2001 levels. But there is an alternative route to the same goal that does not require higher rates, and it comes courtesy of Mitt Romney. Recall that when asked how he would pay for a 20% cut to marginal rates, he floated a cap on deductions, an idea proposed in 2011 by Martin Feldstein, Maya MacGuineas and Daniel Feenberg.
I don’t have a ready estimate of how much capping deductions for those earning more than $250,000 would raise. But you can ballpark it by looking the Tax Policy Center’s estimates for capping itemized deductions at $50,000. It would raise $749 billion over 10 years, within the $800 billion that Mr Boehner has previously agreed to. That’s also more than the $429 billion yielded from returning the two top rates to their pre 2001 levels. The appeal for Republicans is that no one’s rates go up, and the preferential rate for capital gains and dividends is preserved. The appeal for Mr Obama is that it is highly progressive. According to the TPC, less than 1% of the bottom 60% of households would pay more tax while the top 1% would pay 79% of the additional revenue. The average tax rate for the bottom 60% wouldn’t change, while it would go up 2 percentage points for the top 1%. It’s worth noting that Mr Obama’s budgets proposed capping the value of deductions for upper income households at 28%, which would have raised $584 billion over 10 years. Prior to 2001, the personal exemption and itemized deductions phased out for upper income taxpayers; those phaseouts were eliminated by the Bush tax cuts. Mr Obama’s budget would reinstate them, raising $164 billion over a decade. (These provisions would raise considerably less revenue if the two top rates did not go up.)
Would such a deal fly? One source close to House Republicans tells me: “I think they’d take it; they’re holding no cards at the moment… The capping of deductions would be very magnaminous and a good way to lay the groundwork for negotiating real tax reform.” But, he adds, “I don’t think Obama would offer that—why not fall back to Reid-Pelosi and increase it on people making over $1 million and dare house Republicans to walk away from that? Sacrificing the chance to earn political points will be very difficult for Democrats to do.”
On the other hand, Harry Reid and Nancy Pelosi, though unhappy to be excluded from Mr Obama’s grand bargain negotiations with John Boehner in 2011, seemed ready to fall in line with a deal that met Mr Obama’s conditions. So the bigger question is whether this sort of deal qualifies: is Mr Obama prepared to let the lower rates stay in place if he can get the revenue by other means? One former Administration official thinks he would: “Obama’s budget likes the idea of capping deductions at 28 percent,” and this would be an even lower cap. “The problem is that it hurts both housing and charities. Both are powerful constituencies. And housing is fragile at the moment and phase-in would still roil real estate. Also at what level of income? Lots of Congressional Democrats want the bracket at $1 million, not $250,000.” He also thinks Democrats would want to raise rates on capital gains, which is a bigger deal to Republicans than income tax rates.
Agreement on taxes constitutes only half of a deal. Republicans will accept higher tax revenue only if accompanied by spending cuts. Mr Obama is okay with cuts, but perhaps not the cuts to entitlements that Republicans want.
But it’s quite possible that the two could start out small with more modest caps on deductions and cuts to discretionary spending with cosmetic trimming of health care entitlements - enough to justify extending the lower tax rates for a year and delaying the sequester of automatic spending cuts. It would be a down payment on a more ambitious plan next year.
Both Mr Obama and Mr Boehner say they are not as far apart as people think. It’s encouraging that neither laid down markers that the other side can’t stomach; we’ll see if Mr Obama maintains that openness in an address on the economy scheduled for Friday. He has previously said he would reach out to Mr Romney for ideas; he could do worse than to adopt this one.
Update: Mr Obama today laid out his bottom line on any deal on the deficit: “If we’re serious about reducing the deficit, we have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes. I refuse to accept any approach that isn’t balanced [in which] people like me, making over $250,000, aren’t asked to pay a dime more in taxes.”
The tone wasn’t exactly conciliatory: Mr Obama made sure to remind Republicans that taxes were heavily debated during the election campaign and ”the majority of Americans agree with my approach.” (That was a slightly less brash than telling Eric Cantor, the Republican majority leader in the house, shortly after his 2008 victory that “elections have consequences.”) He also suggested the Bush tax cuts for those making less than $250,000 could be extended today without debate, something Republicans have steadfastly refused to do for fear of leaving all the leverage over the remaining tax cuts in Democrats’ hands. Mr Boehner quickly rejected that today. But from the standpoint of the coming negotiations, what was significant was what Mr Obama didn’t say. While raising the two top tax rates has figured in every one of his budgets and his submission to the super committee last year, today he never mentioned the words “tax rates.” He did say he was “not wedded to every detail of my plan. I’m open to compromise.” Brad Dayspring, a former Cantor aide, tweeted, “Listen carefully. There is certainly room for agreement between what Speaker Boehner said and President Obama said without increasing rates.”
However, Jay Carney, the White House press secretary, appeared to squelch that possibility. Asked a few hours after Mr Obama spoke whether the president would sign a package that does not restore the top two rates, he said, “The president would veto … any bill that extends the Bush Era tax cuts for the top two percent of …earners in this country.”
Mr Boehner said he accepted Mr Obama’s invitation to the White House next week to begin discussions over the fiscal cliff. A resolution is still far off, but at least it’s not getting further away.
From The Economist, HERE.