Americans buy a lot of stuff they don’t need

Americans are known for being consumers. In fact, Americans spend quite a bit of money on non-essential goods:

This Easter weekend, Americans will spend a lot of money on items such as marshmallow peeps, plush bunnies and fake hay, begging a question: How much does the U.S. economy depend on purchases of goods and services people don’t absolutely need?

As it turns out, quite a lot. A non-scientific study of Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That’s 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959, adjusted for inflation. In February, spending on non-essential stuff was up an inflation-adjusted 3.3% from a year earlier, compared to 2.4% for essential stuff such as food, housing and medicine.

It would be helpful if this post had more details about the “non-scientific study” and what data is being examined. Nonetheless, it is interesting to see this story at Easter time: isn’t Christmas supposed to be our most commercial holiday? There does seem to be more stories in recent years about the increased spending at Halloween and Easter. Perhaps we just like holidays because they are excuses to spend!

Here are two possible conclusions regarding this data:

The sheer volume of non-essential spending offers fodder for various conclusions. For one, it could be seen as evidence of the triumph of modern capitalism in raising living standards. We enjoy so much leisure and consume so much extra stuff that even a deep depression wouldn’t – in aggregate — cut into the basics.

Alternately, it could be read as a sign that U.S. economic growth relies too heavily on stimulating demand for stuff people don’t really need, to the detriment of public goods such as health and education. By that logic, a consumption tax – like the value-added taxes common throughout Europe—could go a long way toward restoring balance.

Interesting options: we spend so much on these things because we can (conspicuous consumption?) or we frivolously throw our money away at things that don’t really matter while ignoring important issues. Neither sound particularly good. The second one does seem to be at the root of most advertising: make a pitch so that the consumer thinks they “need” a product. Don’t people need iPhones, new cars, and lots of beer?

Ultimately, we might need some more numbers to settle this debate. How does the discretionary spending of the American individual compare to that of other nations? (During this recent recession, we have heard about how Americans had a lower savings rate than past Americans going into this period but how do we compare to other countries?) What are the total costs of living in such an economy (which certainly must help create jobs and generate wealth for someone) vs. one that does put more money into education or infrastructure? How much do average Americans think they should be spending on non-essential items and if given the choice, would they want to spend more?

h/t Instapundit

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