A new survey out recently finds that 1 percenters are “hoarding three times as much cash as they were two years ago.“ Being a 1 percenter, I am not immune to this trend. The data in the survey show that the savings rate of the 1 percent have soared to 34 percent in the second quarter of 2012, up from 12 percent in 2007. They’re investing just 44 percent in financial markets – down from 76 percent in 2007.
Since I track pretty much everything, I was able to look up this data for myself. Every year, we create a budget. We determine what we will spend on housing, cars, entertainment, insurance, childcare, etc. In 2008, our savings rate was 22 percent (though we were not 1 percenters at that time). However, in 2012, our savings rate has jumped to 56 percent (does not include 401k and other retirement). One could look at this data and presume that the reason for the high savings rate is because as we increased our income, we did expand our lifestyle to match the income. This is true to a degree, but we are cautious about the future. Tax rates could rise an additional 4-5 percentage points at the federal level. I’m not sure what effect Obamacare taxes will have on our future. A 3.8% tax increase is built into Obama care on unearned income over $250k, there are additional payroll taxes on incomes above $250k. Employers are beginning to pass more healthcare costs to the employee. Businesses are beginning to pass on Obamacare healthcare costs to the consumer (see Papa John’s and McDonald’s). All this uncertainty are reasons why our saving rate has gone up. We are taking a “no loss” position rather than a “real gains” position due to uncertainty of the future. We’re hedging our bets. You can see from our investments, that we have an unusually large amount in cash.
Of course, this hoarding is the very reason why some say that 1 percenters should be taxed more. Rather than improve confidence in the economy, some feel that taking this money and wringing it through Washington D.C is more efficient. Though, this could create some jobs, it is temporary, not sustainable, and hardly a plan for the future of this country. Spending has always been a part of the story of the 1 percent and according to the report, the lack of spending can have real implications on the economy.
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