The latest data released by the authoritative University of Michigan in its widely respected Survey of Consumer Sentiment has pundits worried. The second monthly drop in consumer confidence of 4.6% suggests declining consumer spending in 2025. The survey reported an unusually high jump of 1% in inflation expectations and a 12% drop in consumer durable buying conditions. Consumers may find the same amount of goods in 2025 unaffordable due to higher prices and a weaker economy. However, cutting American’s “consumerism” may evoke cheers from those who believe Americans are too materialistic.
Trending on TikTok, videos extoll the virtues of “anti-consumerism” by “de-influencers,” and authors of books tout the benefits. They say consumerism is detrimental to family, charity, and society. Is falling consumer sentiment along with the peak of consumer spending in the U.S. in 2022 at 68.6% of Gross Domestic Product a harbinger of their dreams coming true? (Virginia was on par with 68.2% in 2022, up from 65.6% in 2020.)
Proponents say we would accumulate fewer material goods, spend more time with family, and everyone would be happier.
Well, not everyone. Buying less means fewer goods produced, fewer people employed to produce goods and services. If widely adopted, unemployment would rise significantly. Companies would go bankrupt. Investors would take large losses. Punishing foreign adversary manufacturers could be a rationale for buying less from them (Virginia’s largest import country is China, for example), but domestic businesses will bear the biggest brunt. A silver lining, at least to the proponents, is that those thrown out of work domestically could not afford many material goods and thus, forced to join the ranks of the anti-consumerism movement. Advocates for economic boycotts or blackouts for political motives desire just such effects.
For those who remain gainfully employed, where does the money go that they do not use for consumer purchases? They retain more income toward savings, adding to their wealth. They use their savings to increase investment in housing, to remodel their kitchen, or renovate any rental property. But wait, that is contrary to their anti-consumerism ethos.
They could reduce debt — credit card, mortgage, student debt. That improves their financial health (unless the cost of debt is so low that they earn more return on investments). But then, what would they do with the increased income resulting from lower interest? They cannot buy more stuff that provides more jobs.
They could buy financial assets such as bank deposits, bonds, or equities. Banks would experience an influx of deposits to lend to companies for expanding factories. But what companies would want to expand in an anti-consumerism economy? Interest rates would decline due to the increased supply of funds and the decreased demand for funding. But anti-consumerists would cheer because depositors will receive less interest income (net of their lower taxes) and have less ability to buy stuff, simpatico with the anti-consumerism mantra.
Nations exporting products to the U.S. would also suffer. If the U.S. just balanced imports and exports, the lost income to those people would be $800 billion. If the U.S. went full anti-consumerism and stopped buying any goods from other countries, the losses become nearly $4 trillion, $68 billion of that from Virginia using 2021 figures, putting vast numbers on unemployment lines in other countries. In other words, the U.S. would “export” the anti-consumer milieu, but would workers there thank us for it?
With lower employment, less income taxes would be paid. To finance the deficit, the Treasury would issue more debt, perhaps purchased by the anti-consumers as well as foreigners, making the U.S. government more vulnerable to foreign powers.
With less consumer purchases, the Commonwealth of Virginia will receive less sales tax as well as lower income tax revenue. Cutbacks on services such as schools, hospitals, roads, and police would occur. But, they too could cope by borrowing more money, accumulating more interest expense, requiring either higher taxes, fewer services, or even more borrowing, creating a spiraling financial burden on Virginians.
How do countries that have lower household consumption percentages of Gross Domestic Product (Britain: 63%, European Union: 53%, France: 55%, according to the Organization of Economic Cooperation and Development) do it? Typically, their government spending percent of GDP is at least 50% higher than the U.S. (Britain: 21%, European Union: 21%, France: 24%). Their economy depends heavily on government bureaucrats spending. But how would government spend if it does not have revenue from income and sales taxes? Borrow more or impose higher taxes.
Of course, going the other extreme of using all your income for consumption could be equally bad because of zero investment in the future.
Gone full anti-consumerist, Virginians could enjoy a minimalist, more “spiritual” existence. Already, consumer sentiment seems against buying more in ’25. But that would be at the expense of everyone else: those who lose their jobs, pay more taxes, earn less interest income, lose money in bankrupt businesses. But at least, the government sector, already the largest industry in the Commonwealth, would be kept busy borrowing more and doing more with less.
Dr. George Morgan is Emeritus Truist Professor of Finance, Pamplin College of Business, Virginia Tech, where he spent 39 years teaching banking and fixed income securities and publishing research in top academic journals in his field. He continues to write on economic topics using satire and other forms to inform and educate the public on financial markets and economic policies.
