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December 18, 2013 / needhamgrassroots

Experts say inequality is holding back US economy – Worcester Telegram & Gazette – telegram.com

WASHINGTON — The growing gap between the richest Americans and everyone else isn’t bad just for individuals.

It’s hurting the U.S. economy.

So says a majority of more than three dozen economists surveyed last week by The Associated Press. Their concerns tap into a debate that’s intensified as middle-class pay has stagnated while wealthier households have thrived.

A key source of the economists’ concern: Higher pay and outsize stock market gains are flowing mainly to affluent Americans. Yet these households spend less of their money than do low- and middle-income consumers, who make up most of the population but whose pay is barely rising.

”What you want is a broader spending base,” said Scott Brown, chief economist at Raymond James, a financial advisory firm. ”You want more people spending money.”

Spending by wealthier Americans, given the weight of their dollars, does help drive the economy. But analysts say the economy would be better able to sustain its growth if the riches were more evenly dispersed. For one thing, a plunge in stock prices typically leads wealthier Americans to cut sharply back on their spending.

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