January 3, 2014

In early December, President Obama gave a speech on the economy. He blamed “the rich” for slowing economic growth by concentrating their wealth in savings and investment rather than spending it on consumption.

Heritage Foundation economist Salim Furth explains why the President’s claim is misguided:

The President apparently believes that consumer spending, rather than savings and investment, drives economic growth. But, as this chart shows, personal consumption is at a post-war high as a share of national expenditure. If consumer spending really did drive the economy, it would be booming.

All that consumption comes at the expense of net investment, which shows a clear downward trend since the 1950s. Net savings tracks investment closely.

The President also blames income inequality for the decline in growth, but Furth concludes based on the literature that “there are much stronger forces in the economy. The President’s theory does not account for the basic macroeconomic facts.”

What is proven to contribute to a healthy economy is fairer, more open, and more dynamic competition in the American economy. The new edition of Heritage’s new Index of Economic Freedom, to be released later this month, will show how America stacks up against the rest of the world on this front.

Do you think it’s important to encourage economic freedom about consumerism?

Comments (5)

Sharon - January 3, 2014

It is not Obama’s business what anyone spends their money on or NOT. Seems the freedom to spend or save as you see fit has been lost on this administration and the Democratic Party in general

john williams - January 3, 2014

This is a ball faced lie.

Ronald Svik - January 3, 2014

I agree economic freedom is the best way for growth. What I’m discouraged by is the Republicans that are not much better than their Liberal counterparts. I used to call myself a Republican but because of that I don’t any more. I’m now a conservative not a party member and I talk to more and more people that feel the same way.

Holly Chapo - January 5, 2014

YOU BET!!!!

Brian - January 7, 2014

Economic freedom is the only way to truly grow the economy.

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