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'In taxpayers we trust'

By Tom Toles

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Puzzler

It's back. For a while there WAS no economy to speak of, so it didn't get mentioned. But now that there are stirrings within the economic ashes, the media economists are back to telling us that consumer spending is 70 percent of the economy.

What does that MEAN? Does anyone know? I don't, and I read about the economy all the time. Seventy percent. Does it mean that 70 percent of all dollars that change hands are consumers making purchases? Sounds like it. But can that be true? Does that mean that only 30 percent of dollars changing hands are wages being paid to those consumers? No WONDER we have a problem with debt!

Maybe it just means that consumer spending is A LOT of our economy. I bet it is. Too much, no doubt. But if readers and viewers of news don't know what this 70 percent number means, (and I'm willing to bet 70 percent of my lunch money that they don't), why do they keep TELLING us that?

Oh, and on the subject of economic puzzlers, why are there still PENNIES? Come on! What is going on with that? They are now worth less than pocket lint. They ARE pocket lint, except heavier. And here's an economic fact: the majority of time wasted in checkout lines is due to pennies. A BIG majority. Seventy percent. --Tom Toles

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By Tom Toles  | April 26, 2010; 12:00 AM ET
Categories:  Economy and jobs, Federal government  
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Comments

There are 3 reasons why we still have, and will always have, pennies.
1. Illinois is the "Land of Lincoln".
2. Illinois has U.S. Senators.
3. Illinois has U.S. Representatives.

They may be worth less than the cost to make them, but doesn't that describe most of the U.S. Government's "products"?

Posted by: smiths1 | April 26, 2010 2:55 PM | Report abuse

OK, here's the explanation for the statement that consumer spending is 70% of the economy. Finally, being an economics instructor comes in handy. There are two ways of measuring GDP, the total of what our economy produces. You can add up all of the expenditures or add up all of the incomes. But it must be one way or the other. So consumer spending makes up about 70% of all expenditures (the other main categories are investment, government, and exports). On the other hand wages and salaries make up about 71% of all the incomes generated in the economy.

By the way your recent cartoon about Goldman Sachs hedging its bet in case of conviction is especially hilarious. I'll be using it in class.

Posted by: mayatiita | April 26, 2010 1:39 PM | Report abuse

I love Tom Toles's cartoons and have been a fan since the early 1990s. I must say that since he's been posting his rants, I like him less. He's much more effective in the cartoon medium than he is in text. The cartoons are a much better contribution to political discourse than these rants, and the rants detract from his cartoons.

Posted by: homer44 | April 26, 2010 1:28 PM | Report abuse

Pooh on the penny issue.
The cartoon says it all, completely!

Posted by: cbctouby | April 26, 2010 10:28 AM | Report abuse

There should not be pennies ("cents," actually. The "penny" is an English coin). There also should not be nickels. The dime should be our smallest coin.

A dime is worth considerably less today than the cent was worth as recently as forty years ago.

One of the reasons that inflation is a threat, particularly for fuels, is that a rise of a cent or two in the price of anything is negligible and causes no consumer backlash, so manufacturers and merchants gradually edge up the price of everything in almost unnoticeable increments. Without pennies or nickels, that effect might not be so easy to foist on the public.

There also should be no $1.00 or $5.00 bills. These should exclusively be coins, and merchants should no longer be able to refuse to accept bills larger than $20, as many do now, as if somehow it's 1963 again when, fer cryin' out loud, you could buy a serviceable used car for $20 (I know. I did so).

Thomas Jefferson himself designed our decimal system of money precisely with the prospect of inflation in mind, so we could accommodate inflation by sliding our coins and currency upward in value with only minor dislocations. There are even names for higher value coins -- an "Eagle" for a $10 coin and a "Union" for a $100 coin -- already built into our system.

Much good would come from dropping cents and nickels from our money, and the $1.00 and $5.00 bills from our currency. We would not miss them when they were gone.

Posted by: FergusonFoont | April 26, 2010 9:58 AM | Report abuse

You can have my pennies when you pry them from my cold, dead hand.

Posted by: jhnnywalkr | April 26, 2010 9:52 AM | Report abuse

There are at least two reasons for the almighty penny.
#1 reason being all those penny jars I fill up...you know...for that rainy day.

#2 reason is for every time I put gas in my car...always end up with one or two cents over the dollar amount and I am one of those people who actually use cash.

Just putting in my two cents worth...

Posted by: bertzel | April 26, 2010 9:39 AM | Report abuse

The problem with pennies is SALES TAX. No, don't eliminate those as here in Jacksonville, FL, I pay 1% so I don't pay tolls on our six of seven bridges. Now just not only make it leagal, but almost manditory that sales tax is included in the price for all items you buy just as it is for gasoline. Any bright store owner will then quit the pennies.
Having prices raised so much that you can't buy anything for a penny hasn't done the trick so far.

Posted by: CliffVDY | April 26, 2010 9:31 AM | Report abuse

The scary thing is that, pre-crash, a significant portion of that consumer spending was done with credit which has since evaporated.

There's an interesting chart here: http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#half-of-america-has-25-of-the-wealth-2 showing that 50% of the US population holds only 2.5% of its wealth. How much can they spend?

Posted by: CynicalC | April 26, 2010 8:28 AM | Report abuse

Here is you, me, and that chap with hamburgers. To make it easy to count, let it be 10% tax in our state.

I got 100$. I pay you for pictures 100$ - I am hiring you.

You get 90$ and buying hamburgers on all 90.

Chap get 81$ and buying newspaper from me for 80$

I get 72$ in my hands an gave back 70$ for hamburgers again (hey! you eating better! I must lower your wage...).

As you can see, full exchange is 100+90+80+70 = 340$, 240 of it is consumer spending (70%). And state get 10+9+8+7 = 34$ taxes.

p.s. I hope your economists uses some more complex methods for his calculations. If not - god help you all...

Posted by: IWH_rus | April 26, 2010 8:24 AM | Report abuse

Who uses cash? I never have any.

Posted by: GaryEMasters | April 26, 2010 5:49 AM | Report abuse

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