Believe it or not, consumer spending is up over the last eight months.
As a member of House of Representatives, Ohio Gov. John Kasich chaired a budget finance committee in the 1990s when Congress achieved a bi-partisan deal to balance the federal budget under former Democratic President Bill Clinton. So, the Republican governor has become somewhat of a go-to historian lately for national media outlets reporting on the budget debate and stalemate over the debt ceiling. The governor appeared July 17, 2011, on "Meet the Press" as part of a panel discussion that also included National Urban League president Marc Morial, economist Diane Swonk, Honeywell CEO David Cote and CNBC’s David Faber. Host David Gregory set up part of the discussion with a Wall Street Journal article which rattled off a number of dejecting economic statistics and said that consumer spending has been decimated. Faber concurred, saying that the United States has a consumer-led economy and consumers just aren’t willing to spend right now. Cote noted that businesses like his are reluctant to increase production which could in turn create more jobs until they are sure there is demand for their products from consumers. Then Kasich chimed in. "Believe it or not, consumer spending is up over the last eight months, OK?" he said. Swonk, the economist, acknowledged Kasich’s point. The governor then went on to suggest that business has been slow to grow and add jobs because government has left too much uncertainty hanging in the balance in way of potential increases regulations or business taxes. Sounds fair enough but is he right about consumer spending? PolitiFact Ohio consulted the U.S. Department of Commerce’s Bureau of Economic Analysis which charts spending trends. The most recent information shows that disposal personal income -- meaning money Americans had available to spend after paying typical taxes -- was indeed up eight straight months from September 2010 thru May 2011. June figures were not yet available. And the personal consumption expenditures -- money spent after taxes and typical living expenses -- were up 11 straight months from June 2010 through May 2011. PolitiFact Ohio also thought it would be wise to ask a few economists, people who study the ins and outs and make projections about this stuff everyday, to give the rise in consumer spending some perspective. Dean Baker, a co-director at the Center for Economic and Policy Research in Washington, said Kasich is right, but added a caveat. "I would just point that this is an extremely low bar. Consumer spending measured in nominal dollars is almost always rising, except in a severe recession," Baker said. "So, saying that consumer spending is up over the last eight months isn’t too different from saying it is warmer in July than January. We pretty much always expect that to be true." Baker said the rate of growth adjusted for inflation is a better factor for determining consumer spending is really growing to any worthwhile degree. Gary Burtless, a senior fellow at the Brookings Institution and a former economist with the U.S. Department of Labor, offered another significant measure -- comparing consumer spending in a given month compared to the same month one year earlier. Look at the figures that way, and Kasich looks golden again as year-to-year consumer spending has been up for over a year. And he agreed that the rate of grown adjusted for inflation was also a good measure. When seasonally adjusted for inflation, Burtless said that consumer spending actually fell slightly, by one-tenth of a percentage point in two months, April and May. Kasich is correct, though, that consumer spending, measured in inflation-adjusted dollars, has been risen overall the past eight months. In fact, the year-over-year spending comparison shows that real consumer spending has been higher than the year ago amount since December 2009. On the Truth-O-Meter, we rate Kasich’s claim True.
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