CSPAN - Washington Journal Mark Zandi
Aired: 2025-02-28
Duration: 07:58


=== Gains Concentrated At Top (07:58) ===

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[00:01:22]  Joining us this morning is Mark Zandy, chief economist for Moody's Analytics, here to talk about the U.S. economy's growing reliance on high-income earners.
[00:01:31]  Mark Zandy, talk about your research.
[00:01:33]  What did you find?
[00:01:34]  What is the headline?
[00:01:36]  Well, Greta, good to be with you.
[00:01:38]  Thanks for the opportunity.
[00:01:40]  Well, the American economy is very dependent on the spending of the well-to-do, the folks in the top part of the income and wealth distribution.
[00:01:48]  I mean, just to give you a stat to make that concrete, the folks in the top 10% of the income distribution account for almost 50% of the personal outlays that we do as consumers.
[00:02:02]  That gives you a sense of context.
[00:02:05]  And it obviously goes to the strength of their finances.
[00:02:10]  Got a job, wage growth is strong, but they've been enjoying record stock prices, record housing values.
[00:02:18]  They have any debt at all.
[00:02:19]  It's a 30-year fixed rate mortgage.
[00:02:21]  They locked in when rates were low.
[00:02:22]  So they're sitting in a very good financial spot.
[00:02:25]  And folks in the bottom part of the income distribution, the less well-to-do, lower-income households, they're struggling.
[00:02:33]  Obviously, they don't own stocks.
[00:02:35]  They may not own a home.
[00:02:37]  They have credit card debt, consumer finance loans that they took on to try to maintain their purchasing power when inflation was raging.
[00:02:45]  They have a job.
[00:02:46]  That's really important.
[00:02:47]  That's key to keeping things moving forward.
[00:02:50]  But other than that, they're struggling with their finances.
[00:02:53]  So very large differences between the folks at the top part of the distribution and the folks at the bottom part of the distribution.
[00:03:00]  More from your report.
[00:03:01]  As you said, the top 10% of U.S. earners, that's people who make $250,000 plus in their households, count for 49.7% of all spending, a record going back to 1989.
[00:03:16]  This accounts for about, this was accounted for about 36% three decades ago.
[00:03:22]  So that's the change right there.
[00:03:23]  Mark Zandy, can you talk about that change?
[00:03:27]  Yeah, that's a very significant change over the decades.
[00:03:33]  And it does go to the ongoing so-called skewing of the income distribution and wealth distribution.
[00:03:39]  Very simply, folks that are doing well are doing better and better and better and taking a bigger share of the economic pie.
[00:03:47]  Now, that doesn't mean that wages and incomes haven't been rising for everyone else for middle-income households, lower-income households.
[00:03:53]  It has.
[00:03:54]  It just means that the share of that income, of that wealth, and of that spending has increasingly accrued to the folks at the top part of the distribution.
[00:04:03]  You know, Greta, you know, it also, there's a lot of, you know, obvious concerns about equity, but there's also concerns about what this means for the economy in that if the economy is so dependent on such a small group of folks, and that group of folks is so dependent on things like stock prices and housing values.
[00:04:23]  It does give you a sense that the economy is somewhat vulnerable here if things don't stick to scripts.
[00:04:28]  So when you're looking at the stock market, if it starts to go down, that poses a broader, mortal threat to the broader economy because of the impact that has on the well-to-do and the fact that the well-to-do account for such a large share of what's going on.
[00:04:42]  How vulnerable?
[00:04:45]  I think it's vulnerable.
[00:04:46]  I think it's a concern.
[00:04:48]  That's been brought into clear relief in the last few days.
[00:04:53]  I don't know if you follow the stock market like I do, but a lot of red on the screen over the last few days and a lot of concern about the stock market.
[00:05:00]  I mean, the market is very highly valued, richly valued.
[00:05:05]  Prices are very high to the underlying corporate earnings that support those prices.
[00:05:11]  And even in the stock market, the gains there are very concentrated.
[00:05:15]  If you look at the stock, the companies that are driving the stock market, it's the big tech companies, the so-called magnificent seven.
[00:05:24]  So not only is spending very dependent on a small group that's dependent on the stock market, but the stock market itself is very dependent on a few companies that are kind of driving the train here.
[00:05:34]  So in my mind, that is a key vulnerability to the broader economy.
[00:05:39]  Mark Zandi, do you see bubbles in the economy that could pop, that could burst?
[00:05:46]  I don't know.
[00:05:47]  I go so far as to say it's a bubble.
[00:05:48]  A bubble implies speculation that people are just buying simply because the price rose yesterday, therefore it will rise tomorrow.
[00:05:56]  Maybe there's some of that creeping in.
[00:05:59]  When I see, like, for example, President Trump issued a crypto coin soon after his inauguration, that the value of that jumped significantly.
[00:06:09]  It's come back down, but it's still worth, last I look, three, four billion dollars.
[00:06:13]  I mean, and there's just no value there.
[00:06:15]  There's just nothing.
[00:06:16]  So that gives you a sense that things are what I'd call frothy, speculative, maybe bubble-like.
[00:06:23]  I don't want to extrapolate that too far because if you go into the stock market, back into the stock market again, those companies I just mentioned, the tech companies that are driving the gains, they're real companies.
[00:06:33]  They're joggernauts.
[00:06:36]  They add real value.
[00:06:37]  They're very profitable, highly profitable.
[00:06:39]  The prospects are very good.
[00:06:41]  So that's not consistent with the idea the market is in a bubble.
[00:06:45]  I think it's more likely, you could argue it's just very highly valued, richly valued, overvalued, maybe bordering on frothy, but speculative probably in a bubble is probably too far.
[00:06:57]  We're talking with Mark Zandi this morning, chief economist with Moody's Analytics.
[00:07:02]  He's here to talk about the U.S. economy and this new report on high income earners.
[00:07:08]  Here's how we've divided the lines this morning.
[00:07:11]  If you make under $100,000, dial in this morning at $202,748, $8,000.
[00:07:17]  If you make between $100,000 and $250,000, your line this morning is $202,748, 8001.
[00:07:24]  And if you make over $250,000, that 10%, call us at 202-748-8002.
[00:07:31]  We welcome your comments and your questions this morning.
[00:07:34]  Mark Zandi, before we get to calls, let's take some headlines this morning from the papers.
[00:07:39]  The Wall Street Journal, U.S. vows to raise tariffs on three countries, Mexico, Canada, China.
[00:07:46]  The China move slated to take effect Tuesday, along with the Canada and Mexico actions, doubles up on the previous 10% additional tariff Trump placed on China's products this month.