Politifact VA: How Much Does Consumer Spending Drive the Economy?
Listen to the story and read the full transcript here.
Speaker: Scott Surovell
Statement: “The American economy is 70% consumer driven.”
Date: April 23
Setting: State Senate floor
State Sen. Scott Surovell, D-Fairfax, fought successfully to preserve a recently passed minimum wage increase that was jeopardized by the state’s declining economy.
This winter, the Democratic-led General Assembly passed a bill to raise Virginia’s minimum wage from $7.25 an hour to $15 an hour in 2026.
The first step, to raise it to $9.50, was set to kick in at the start of next year. But Gov. Ralph Northam, a Democrat, offered an amendment to delay the start until May 2021 to give businesses recovery time from the coronavirus shutdowns.
Republicans strongly opposed the minimum-wage hike, which was passed by the Assembly on March 8 - about two weeks before Northam ordered business closings to slow spread of the virus. They said the bill would hurt businesses and force layoffs.
On April 22, Republicans tried to defeat Northam’s amendment to delay the raise, embracing faint hope the governor might veto the minimum wage bill if it returned to his desk.
Democrats rejected GOP arguments that the increase would tie weights on the sinking economy. Surovell said the wage hike could spark the economy by giving spending money to needy people.
“The American economy is 70% consumer driven,” he said.
We wondered if his figure is correct. We looked up consumer spending data kept by the Bureau of Economic Analysis and compared them to gross domestic product statistics kept by the Federal Reserve Bank of St. Louis.
In 2019, U.S.consumers spent more than $14.8 trillion. GDP - the value of all goods and services in the nation - was $21.7 trillion. In other words, consumer spending equaled 68% of the value of all U.S. produced goods and services. The five-year figure also is 68%.
Surovell said, “The American economy is 70% consumer driven.”
Consumer spending in 2019 was 68% of GDP. From 2015 through 2019, it’s also 68%. It’s reasonable to round up 70%.
So we rate Surovell’s statement True.
Scott Surovell, comments on the state Senate floor, April 22, 2020 (53:25 mark).
Legislative Information System, SB7, 2020 session.
Gov. Ralph Northam, amendment to SB7, 2020 session.
Bureau of Economic Analysis, “Monthly Personal Income, DPI, PCE and personal savings,” accessed April 27, 2020.
Federal Reserve Bank of St. Louis, Gross Domestic Product graph, accessed April 27, 2020.