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The Cost of Students Going "Back-to-School"

A recent Pew Research Center report in FacTank, analyst, Drew DeSilver, wrote the article, "Economic impact of back-to-school a matter of debate" which examined the effect of the end of summer purchases by families to prepare children and college students to return to class in fall.

The article cites research done by the National Retail Federation. The second biggest spending season of the year is “back-to-school.” The total back-to-school spending this summer will be $72.5 billion with $26.7 billion spent by families with school-aged children, an average of $634.78 per family. The amount spent on back-to-school by families with college students will be $45.8 billion or an average of $836.84 per family. The total spending for the same season in 2012 was $83.8 billion, $11.3 billion more than this year's estimates.

Consumer Spending Increases

Despite the expiration of the payroll tax cut and the increase on Social Security taxes that began on the start of the new year, The New York Times reports that consumer spending rose by about 0.2% in March. According to the federal government, the increase that took place between January and March marks the fastest increase in consumer spending for over two years. This increase is partially due to the fact that March was unusually cold, leading American’s to spend more for heating. Thus it is important to note that although an increase in consumer spending is typically good, an increase which is the result of spending more on utilities does not necessarily indicate higher consumer confidence. Spending on other things, such as clothes, cars, household goods, and furniture would be more indicate of this. However, there is some room for optimism. The Commerce Department claims that the economy grew by 2.5% during the January-March quarter. This was 6 times higher than the rate recorded for the fourth quarter. Although this grow rate would be considered optimal in an economy with low unemployment, during a struggling economy this growth rate is not high enough to diminish unemployment.

Although taxes have increased, many believe this uptick in consumer spending could continue since American’s have reduced their personal debt, their home values have likely risen, and their stocks enjoyed some success further adding to their household wealth.

Since the recession officially ended in June 2009, growth has been weaker than usual after a severe downturn. The economy expanded just 2.4 percent in 2010, 1.8 percent in 2011 and 2.2 percent in 2012.

Americans Pessimistic About Fiscal Cliff Negotiations

With the fiscal cliff looming just weeks away, the Pew Research Center released a poll reflecting the public's concerns regarding the ongoing negotiations between the White House and Republican Congressmen. 40% of Americans believe lawmakers will reach a deal before the January 1^st deadline, when mandatory spending cuts and tax increases take effect. 49% believe no deal will come to fruition, hurling the U.S. over the fiscal cliff – something many experts believe will drag the economy into another recession. If no deal is reached, 53% of the public said they'd blame Republican Congressmen, and just 27% would place blame on President Obama. Democrats are more optimistic about negotiations, with 55% saying they expect a deal to emerge before the New Year, compared with just 22% of Republicans

Mitt Campaigns and Spends More in Swing States

The Economist reports that Mitt Romney, along with third party allies, have outspent Obama in most of the swing states, including Wisconsin, Michigan, Ohio, Florida, and Virginia. The notable exception is New Hampshire, in which Obama and allies spent approximately $16mil compared to $12mil for Romney and allies. All totaled, about $7.4 billion was spent on TV and radio ads for the 2012 election cycle. Additionally, Romney held more political events in key swing states, including Colorado, Nevada, Iowa, Florida, and Ohio.

Health Spending Represents 17.9% of GDP

The California Health Care Foundation recently released its 2012 report on health care costs. The report illustrates how America pays for its health care, as well as how these costs have evolved over the past half-century. In 1960, health spending represented just 5.2% of GDP. By 2010, that proportion ballooned to 17.9%. Per capita spending has experienced an even more dramatic increase. In 2000, health spending per capita was $4,878, but after just a decade, that figure rose to $8,402. Compared to other countries, the U.S. spends far more on health care both per capita and as a percentage of its GDP. Switzerland’s $5,270 spent on health care per capita makes the nation a distant second to the U.S. in health spending.

Over the past 50 years, the question of who foots the health care bill has constantly changed. In 1960, the bulk of health care funds came from out-of-pocket spending. Today, however, government programs like Medicare and Medicaid along with private insurance cover the majority of costs, and hospital care, physician and clinical services, and prescription drugs all necessitate far less out-of-pocket spending. For instance, in 1960, nearly all of the money for prescription drug costs (96%) came from the consumers’ pockets. In 2010, out-of-pocket spending accounted for just 19% of the expenditures.

Southern States Participate Most in Social Welfare Programs

A previous Data in the News postfocused on the rising participation rate in means-tested assistance programs, and an interactive map on The New York Times website this week displayed the geographic distribution of government benefits. Welfare programs accounted for 17.6% of personal income in 2009, the highest in history. In 1929, total entitlements accounted for just 1% of Americans’ incomes, but with the expansion of Social Security, the initiation of Medicare and many other government programs, and the overall growth in entitlement spending, the share of income via welfare programs has risen substantially.

And while all regions have experienced a greater flow of government benefits to their residents, states in the South and in the western portion of the Sun Belt have seen their dependence on government welfare programs rise the most. States such as Alabama, Mississippi, Kentucky, Arizona, New Mexico and Tennessee possess many counties with a high level of dependence on government benefits; some counties have a level of transfer income per capita of over $10,000.

Construction Spending Rises Slowly

In the U.S. Department of Commerce’s press release detailing construction spending, it appears construction is slowly creeping upwards after a precipitous drop off following the recession. The May 2012 estimate of annual construction spending pegged the seasonally adjusted rate at $830.0 billion, up 0.9% from April’s estimate. At its peak in early 2006, the rate topped off at just over $1.2 trillion, and today’s level is similar to that of a decade ago. Additionally, the total construction spending of $310.4 billion during the first 5 months of the year is 9.4% greater than the $283.8 billion spent for the same period in 2011. With that said, there exists a discrepancy between private and public spending on construction. Private construction spending is up 13.1% from 2011, while spending in the public sector has fallen 3.9%.

Americans Spend 16% More Than Previous Year

Gallup reports that Americans’ daily spending rose sharply during March. Based on self-reported data on daily spending at restaurants, stores, gas stations, and online, Gallup found that the average American spends $74 a month, up eleven dollars from the previous month. This figure is also up 16% from March of 2011, when the average American spent $64. The recession obviously influenced consumer spending. In March of 2008, with the recession just beginning, consumer spending hovered at $81 a month. Examining just the month of March over the past 3 years (comparing multiple months is difficult due to seasonal factors influencing consumer spending), it is clear that the level of spending remained in a tight range of $59 to $64. While the financial crisis drove Gallup’s consumer spending down anywhere from 21% to 27%, the most recent jump in the figure represents a refreshing development. With that said, Gallup’s Chief Economist Dennis Jacobe notes that newfound economic confidence, strengthened job creation, higher gas prices, and an early Easter may all have direct influence on daily spending.

In Polls Regarding Policy, Words Can Be Deciding Factor

In his blog post detailing the likely public response to President Obama's new jobs proposal, Nate Silver pointed out an important variable in the polling data we often take as fact: the wording of questions. He asks, "Are Americans going to be tolerant of proposals for new spending after having spent six months hearing about deficit reduction?" His answer? "Well, it depends on how you ask them."

According to Silver,"when the issue is framed as one of jobs against deficits, jobs win." He writes: "On average, those polls that ask Americans to prioritize 'creating jobs' or 'reducing unemployment' against 'cutting spending' or 'reducing the deficit' have had 57 percent of respondents coming out on the jobs side, against 36 percent who prioritize the deficit."

But wording can make all the difference. "The answer changes, however, when the conflict is instead framed as stimulus or recovery spending against deficits. In polls that employ the term 'spend' or 'spending' in describing the additional stimulus, its support drops to an average of 44 percent, with 50 percent saying that deficit reduction is the higher priority."

It appears President Obama has taken notice. Silver found "that in his speech on Thursday night, Mr. Obama used the term 'job' or 'jobs' 39 times, often preceded by 'create' — but never uttered the word 'stimulus.'" And when he used to word 'spend' or 'spending', he was typically referring to his efforts to reduce spending--not plans to spend more. Nor did "Obama specify the cost of his program."

Silver anticipates more "semantic scrum" to follow in the coming weeks of partisan policy debate. And he has a suggestion for pollsters and readers: "I would advise [pollsters] to use multiple question variants where possible, taking a larger sample and splitting it into halves or thirds, and I would advise readers to be suspicious of articles that cherry-pick one or two polls without discussing the broader context."

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Americans Cutting Back Slightly Less as Summer Nears

In recent weeks, Americans have been less likely to report that they are cutting back on their weekly spending, potentially paving the way for a rise in consumer spending during the summer season. Still, the change is a relatively small one, and a large majority of Americans still say they plan to cut back; the majority has dropped from 70.4% to the current 67.8%. Since Gallup began the polling series in June 2009, "about two-thirds of Americans or more have said they are cutting back on spending, ranging from a high of 73% in July 2009 to a low of 65% in December 2010." Although the wealthiest Americans are less likely to say they are cutting back on spending, nearly half of those making over $240,000 say that is their intention.

According to Gallup, there has been a correlation between people saying they are cutting back and actual spending. Although the "statistical relationships are not extremely strong," it appears "that when there are changes in the percentage of Americans telling survey interviewers they are cutting back on their spending, actual spending -- at least as measured by Gallup's spending measure -- does, in fact, change in the following weeks." The low of 65% of Americans reporting plans to cut back last December, for example, coincided with increased consumer spending during the holiday season.

Writes Gallup: "History suggests that at least a modest rise in spending could ensue in the coming weeks." Last summer, however, self-reports on cutting back on spending dropped for only a short period of time, and the expected rise in spending this summer could be similarly short-winded.

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The New Rich?

Wealthy people were considered to be less hurt by the economic downturn than the poor and middle class were, yet a new study from marketing consulting firm Harrison Group suggests that consumer habits have changed in the aftermath of the economic downturn. In a study of Americans with an average annual income of $275,000, Harrison Group found that wealthy consumers were less willing to pay for the large markups on name-brand goods in the first quarter of 2011 than they were in 2010. While the survey found decreasing brand consciousness and increasing use of sales across the survey, the largest change came in response to a question on willingness to spend on stylish brands. In 2010, 51% agreed that they were willing to "spend more for designer brands because they [were] the most stylish and fashionable," compared to only 32% of consumers in the first quarter of 2011. The survey results represent only one financial quarter of each year, and seem strange since the economy actually improved between 2010 and 2011. If the trends continue, this would represent an important change in the behavior of high income consumers and, as a result, in the ways that high-end companies market to reach them.

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