Should the economy improve in 2014 if everyone has less money to spend?

Most Americans know the U.S. economy is seriously dependent on consumer spending. If typical Americans are not out there spending money, the economy is likely not to do well. Regretfully, retail selling during the holiday season is disappointing and the middle class consistently seriously struggle.  Families are going to have less money in their pockets to spend because of much increased health insurance premiums under Obamacare.

Unfortunately, for them, millions of those families were hit with massive health insurance rate increases.
Health insurance premiums for men are likely to go up by an estimate of 99 percent under Obamacare and health insurance premiums for women will go up by an average of 62 percent under Obamacare.

Most middle class families simply cannot afford that.

Millions of families are receiving letters just like that.  In addition, to say that such rate increases are a "surprise" to most people would be a massive understatement.  Even people that work in the financial industry are shocked at how high these premiums are turning out to be...

"The true big surprise was how much out-of-pocket would be needed for our family," said David Winebrenner, 46, a financial adviser in Lebanon, Ky., whose deductible topped $12,000 for a family of six for a silver plan he was considering. The monthly premium: $1,400.

Since Americans are going to have to pay much more for health insurance, that is going to remove a huge amount of discretionary spending from the economy, which will not good news for retailers.


Get Ready For Higher Taxes

When you raise taxes, you reduce the money that people have in their pockets to spend.
Congress is allowing an impressive 55 tax breaks to expire at the end of this year, and when you include that to the 13 major tax increases that hit American families in 2013, it isn't a pretty picture.

This particular tax season, millions of families will find out that they have much higher tax bills than that they had anticipated.

In addition, all of this comes when incomes in America have been steadily declining. Indeed, real average household income has declined by 8 percent since 2008.

In America nowadays, most workers are low-income workers.  These numbers come from a recent Huffington Post article...

-If you make more than $10,000, you earn more than 24.2% of Americans, or 37 million people.
-If you make more than $15,000 (roughly the annual salary of a minimum-wage employee working 40 hours per week), you earn more than 32.2% of Americans.
-If you make more than $30,000, you earn more than 53.2% of Americans.
-If you make more than $50,000, you earn more than 73.4% of Americans.
-If you make more than $100,000, you earn more than 92.6% of Americans.
-You are officially in the top 1% of American wage earners should you earn more than $250,000.

Most households have more than one member working, so overall family incomes are higher than these numbers.

Higher Interest Rates Mean Larger Debt Payments

Interest rates are likely to steady rise throughout 2014.

The reason why the yield on 10-year U.S. Treasuries is such a crucial number is that that number heavily affects mortgage rates and thousands of other interest rates throughout our economy.
As a current CNBC article stated, the period of low mortgage rates is officially over...

Rates are up well over a full percentage point from a year ago, and as the Federal Reserve begins its much-anticipated exit from the bond-buying business, I believe rates will inevitably go higher.

Unnecessary to say, this is going seriously affect the real estate market.  AsMac Slavo recently noted, numbers are already starting to drop precipitously...

The National Association of Realtors revealed the month of September saw its single largest drop in signed home sales in 40 months. This month mortgage applications collapsed a shocking 66%, hitting a13-year low.
In addition, U.S. consumers can expect interest rates on all kinds of loans to start rising. That will imply higher debt payments, and therefore less money for consumers to spend into the economy.

Government Benefit Cuts

Well, if the middle class is going to have less money to spend, perhaps other Americans can pick up the slack.

You cannot expect the poor to stimulate the economy.  It is being projected that up to 5 million unemployed Americans could lose their unemployment benefits towards the end of 2014, and 47 million Americans recently had their food stamp benefits reduced.

The Wealthy Save The Day.

You can believe that if you want, but the truth is there are many signs the period of this irrational stock market bubble are numbered. The following is an excerpt from an article entitled "Stock Market Has Formally Went Into Crazytown Territory"..

The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before. In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  We also saw these behaviors just before the last two stock market bubbles burst.

If the stock market bubble does burst, the wealthy may also have less money to spend into the economy in 2014.

For the moment, the stock market has been rallying.  You see, the truth is that investors do not want to sell stocks in December because they want to put off paying taxes on the profits.

If stocks are sold before the end of the year, the profits go on the 2013 tax return.

If stocks are sold a few days from now, the profits go on the 2014 tax return.