The following is an excerpt from Jeanna Smialek | August 3, 2016 | Bloomberg.com |
Income inequality could be making Janet Yellen’s job even harder.
Rich Americans spend less of their paychecks than households of more modest means. As the top one percent accounts for an increasing share of the nation’s income, it may be reducing consumption, hurting growth and boosting savings. That could be contributing to rock-bottom interest rates that have left the Federal Reserve chair with little scope to ease in the next recession.
Take David Levine, a former chief economist at Sanford C. Bernstein & Co. who’s been a member of the one percent for decades. Levine says he’s “not living frugally” yet still spends only about a fifth of his income to maintain a very comfortable lifestyle on Manhattan’s affluent upper west side.
Contrast that with a middle-class American family. Those making between $70,000 and $80,000 spent about 78 percent of their incomes in 2014.
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