Alan Pyke — Companies Warn That Income Inequality Is Hurting Their Business

After decades as the dominant economic theory in American politics, trickle-down economics is starting to lose its grip on the debate. For evidence of that slippage, look no further than the business community’s own communications with investors. 

Two thirds of the largest retail companies in the country say falling incomes for their customers threaten their business, according to an analysis of corporate filings by economists at the Center for American Progress (CAP). That is double the proportion that cited slack earnings for the masses among their business risks in 2006. And seven out of every eight major American retail companies “cite weak consumer spending as a risk factor to their stock price,” the authors write.…

These observations are not groundbreaking as a matter of economic theory. The importance of consumer spending and demand to broad economic growth is a well-understood basic fact of how the world works. Previous CAP research has found that the median American family saw an 8 percent drop in income from 2000 to 2012 while the cost of living rose, leaving them with $5,500 less to spend on essentials like groceries and clothing each year. The lingering stagnation of the broader economy owes in large part to this long-running squeeze on the middle class, which has persisted despite decades of the trickle-down tax and spending policies that conservatives have argued for for decades.

But in political terms, the fact that the largest companies in the business of selling stuff to Americans are saying publicly that their shoppers earn too little money is a significant development. It represents a shift in the narrative within the traditional base of support for right-wing economic policy, as the CAP authors note. “If the Heritage Foundation, the U.S. Chamber [of Commerce], and other proponents of trickle-down economics refuse to believe the overwhelming academic evidence that clearly shows low consumer spending and income growth are holding the economy back, they should listen to corporate America and Wall Street,” the report says.

The formerly indefatigable American consumer throws in the towel. Exit trickle down.

Think Progress

Companies Warn That Income Inequality Is Hurting Their Business
Alan Pyke