RICH PRICKS HOARDING CASH !

America’s top 1 percent saved their money at a rate of 37 percent last quarter, according to a recent survey from American Express Publishing and the Harrison Group highlighted by CNBC. That means that during that period, wealthy Americans put away about 37 cents for every dollar they earned, which is more than triple their savings rate in 2007. In addition, a Bank of America study cited in the CNBC report found that more than half of millionaires have a “substantial” amount of cash on hand and of that group, about 60 percent said they didn’t plan to invest it in the next two years.

As the recovery struggles to gain solid ground, the findings indicate that even while America’s wealthiest households are taking home a larger share than ever of the income pie, they’re doing little to put that money to productive use in the economy, experts say. One possible solution: raising taxes on the rich.

“It’s a real problem,” Michael Linden, the Center for American Progress’ managing director for economic policy, said of the wealthy’s propensity to save and not spend, “to the extent that more and more income is going to people at the top and more of that income is not going to places that are productive.”

Over the last few decades, the incomes of the top 1 percent of earners grew by about 275 percent, according to a 2011 report from the Congressional Budget Office. During the same period, the bottom fifth of earners saw their incomes grow by just 20 percent.

That increased concentration of wealth in the hands of a few, combined with the effects of the Great Recession and the slow recovery, has meant less money in the hands of low- and middle-income Americans — who are more likely to spend it — decreasing demand for goods and services, according to Sam Pizzigati, an associate fellow at the Institute for Policy Studies and the author of The Rich Don’t Always Win. The lack of demand makes wealthier Americans more hesitant to spend, keeping the cash concentrated in their hands.

“There’s a bit of a vicious cycle,” Linden said.
 

“This whole hoarding episode just tells us once again that any society that lets wealth concentrate at the top is making a very foolish move economically,” Pizzigati added.

One of the best ways to ensure that money continues to circulate in the economy, Pizzigati and Linden said, is to raise taxes on the wealthy. Indeed, slashing taxes on the rich tends to result in a boost in income inequality, according to a May study from the National Bureau of Economic Research, a private nonpartisan research organization.

And contrary to some conservative claims, raising taxes on the rich may not actually make them less productive, Linden said. Instead, boosting taxes on the rich simply encourages them to move their money into less-taxed categories, according to a May study from the left-leaning Economic Policy Institute.
 

“If the choice is between putting the money under a rich guy’s super super expensive mattress or giving it to a middle-class family who needs to pay for child care,” Linden said, “I’d rather pay for child care. That’s better for the middle-class family and that’s better for the economy.”

Still, Larry Mishel, EPI’s president, says the bigger threat to the economy may not be that the rich are hoarding their money, but rather that companies are sitting on it.

“The investment that matters for creating jobs is the investment that firms make in buying actual plant equipment in software or buildings,” Mishel said. “There’s a lot of firms which have cash, and the reason they have cash is because obviously they don’t think they can increase the capacity of their firms to make a profit of it.” The Huffington Post