host: joining us this morning is mark zandi chief economist for moody's analytics here to talk about the u.s. economy's reliance on high income earners. talk about your research and what did you find. what is the headline? guest: thank you for the opportunity. the american economy is very dependent on the spending of the well-to-do, the folks in the top

part of the income and wealth distribution. to give you a stats to make that concrete. the folks in the top 10% of the income distribution account for almost 50% of the personal outlays that we do as consumers. that gives you a sense of context. in -- it obviously goes to the strength of their financial is -- finances and the wage growth is strong. they have been enjoying record stock prices and housing values. if they have any debt it is a 30 year fixed rate mortgage. they are in a good financial spot. and folks in the bottom part of the income distribution, the lower income households, they are struggling. obviously, they do not own stocks and they may not own a home. they have credit card debt and consumer finance loans to take on to maintain their purchasing power when inflation was raging. they have a job and that is key

to keeping things moving forward. other than that, they are struggling with finances. very large differences between the folks at the top part of the distribution and the folks at the bottom. host: more from your report. the top 10% of u.s. earners, people who make $250,000 plus in their household account for 49.7% of all spending. that is a record goi bk to 1989. this counts -- this was accounted for about 86% three decades ago. that is the change. could you talk about that change? guest: that is a very significant change. it does go to the ongoing so-called skewing of the income and wealth distribution. very simply, folks that are doing well are doing better and better and taking a bigger share of the economic pie.

that does not mean that wages and incomes have not been rising for everyone else, they have. it just means that the share of that income of that wealth and spending is increasingly accrued to the folks at the top part of the distribution. you know, there is a lot of obvious concerns about equity. there are also concerns about what this means for the economy. in that if the economy is so dependent on such a small group of folks, and that group of folks is so dependent on things like stock prices and housing values, this gives you the sense that the economy is value -- is vulnerable if it does not stick to script. if the stock market starts to go down, that poses a broader moral threat to the economy because of the impact on the well-to-do and the fact that the well-to-do account for a large share of what is going on. host: how vulnerable? guest: i think it is a concern.

that has been brought into clear relief in the last two days. i do not know if you follow the stock market like i do. a lot of red on the screen and concerned about the stock market. the market is very highly valued, richly valued and the prices are very high through the underlying corporate earnings to support the prices. even in the stock market gains are very concentrated. if you look at the stock of the companies driving the stock market, it is the big tech companies. so fault -- so-called magnificent seven. not only is spending is dependent on a small group at the stock market itself is only dependent on a few companies driving the train. in my mind, that is a key vulnerability to the broader economy. host: do you see bubbles in the economy that could pop or burst? guest: i do not know i would go

so far to say bubble. that implies speculation and people are buying because the price rose yesterday. maybe there is some of that creeping in. and when i see president trump issued a crypto coin soon after his inauguration. the value of that jumped significantly. it has come back down but it is still worth three or $4 billion. there is no value, and there is nothing. that gives you a sense that things are frothy speculative, may. bubble-like. i do not want to extrapolate that too far. those companies that i just mentioned that are driving the gains, they are real companies. they are juggernauts. they add real value and they are very profitable and highly profitable and the prospects are good. that is not consistent with the idea that the market is in a bubble. you could just argue that it is

very highly valued and overvalued and may be bordered on frothy. but a bubble is probably too far. host: we are talking with mark zandi, chief economist with moody is analytics. we are here to talk about the u.s. economy and the new report on high income earners. here is how we have divided the lines. if you make under 100,000, dial in at 202-748-8000. if you make between $100,000 and $250,000, your line is 202-748-8001. and if you make over $250,000, the 10%, call us at 202-748-8002 . we welcome your comments and your questions is morning. before we get to the calls, let us take some headlines from the papers. "the wall street journal," "the u.s. vows to raise tariffs on three countries. mexico, canada and china.

the china move slated to take effect tuesday along with the canada and mexico actions doubles up on the previous 10% additional tariffs that trump placed on chinese products this month." and then there is this in the business and finance section of "the wall street journal." "tariff threats hit s&p and nasdaq. fresh tariff threats and tech selloff dragged the stock slower with the s&p 500 surrendering the last of the gains for the year." are the two tied in your opinion and if so, why? guest: indeed. i think that the tariffs are starting to spook investors. it has taken time for that to happen and investors thought that the president when he was talking about tariffs, he did not mean that he would raise tariffs to the degree he is talking about now or to the extent that he is talking about. it appears with each passing day and announcement that the president is serious.

we are going to see broad-based tariffs on a lot of different countries and products over an extended period of time. and that is really bad for business and the economy. it is a tax on american consumers, so we will be paying more for the things that come from other countries. everything from the fruit products that we get from canada and mexico to the appliances and game consoles that we get from china. so, we will pay more for that and that hurts our ability to buy other things. it is hard on businesses that import a product to help them do whatever they do, machine -- machine tools, materials and supplies. say you are a homebuilder and you need to bring in london -- lumber from canada. you will be paying more for that and it makes you difficult to build a home at an affordable price point. or all of the electrical equipment that -- and other

tools and things that come from mexico that go into building the home. or the building materials and appliances from china that filled the home. all of those things will be more expensive. obviously, there will be retaliation. it is not clear to what degree. some countries will retaliate tit for tat and others not so much. maybe canada will be circumspect. retaliation means that they will raise tariffs on what we sent to them and they will put trade restrictions which will cost american jobs. as you can tell i can go on and on. the uncertainty that this creates is really pernicious and corrosive. you know, tariffs on which countries and products. so the president could change his mind and if you are a business person you need some clarity and certainty before you

make investment decisions. it is bad for business and if it is bad for business it is bad for the stock market. if it is bad for the stock market it could be bad for the broader economy. host: let us get to calls. ryan in albuquerque, new mexico. making out over $250,000. your comment? caller: i want to comment on immigration and the housing market. housing, we need to solve the housing market because they are not making land so that is part of the problem. where to put the new houses. and people cannot afford them because there is such a high demand. i wanted to point at immigration. the combination of globalization , extremely high immigration. we have essentially devalued average working americans in real terms. we are devaluing the hourly were

eight -- rate of a worker in america and people cannot make it anymore. i would like to hear why we do not control immigration. i know we need some immigration, it is healthy. but too much as a problem. we never frame it that way, it is all or nothing. host: before you answer on housing i want to share this headline, pending u.s. own shares -- home sales hit a new low in january. take what he said and also respond to this headline. guest: he makes some good points. clearly on housing we have a very severe shortage. this has been long in the making and goes back to the housing collapse. we have not put up a a lot of homes to meet the demand from

all of the households that have formed and will continue to form. there are a lot of different things going on. part of the problem is zoning and permitting in many communities are reticent to allow development in the communities particularly in densely populated parts of the country where there is a lot of demand. we need to work on that. unfortunately, i have not -- it has taken a generation to get into this housing shortage and it will take a generation to get out unless we get the cooperation of homebuilders. tying us back to the tariffs on the housing front, let us do no harm in the tariffs clearly do harm. they raise the cost of building a home. i talked to the national association of homebuilders, the

trade group that advocates for the homebuilding industry. they make a very clear case that tariffs are a real problem. they add to the cost of constructing homes. if you have to raise the cost it is unaffordable for many americans and people cannot afford to buy them. i do think this is a significant issue. on immigration, i agree. i think we need to have a much more rational immigration system and policy. i do think that controlling our borders is critical. i do think it gone it goes beyond economics. i think we have made a lot of progress beginning with the executive order last summer and putting restrictions on asylum-seekers with a big impact by the time president trump took office and president trump is clamping down further. having said that, i do think we need a of immigrants and lots of

immigrants of all skills across the folks that work in the agricultural and food processing industry to those who work in health care and work as hospitals as elder and job caregivers to sophisticated individuals. going back to the tech companies , look at the senior management of those companies. many are immigrants that have come to the country. we need immigration but we need a rational policy that aligns the immigrants that come into the country that have the skills that are needed to drive our economy going forward. so you know, there was a good all in saying that there was legislation making its way through congress last summer and a lot of bipartisan support. and some very conservative republican senators were on

board with immigration reform that looked like it might get through but got nailed by the election process. but hopefully lawmakers will come back around and address this because we need immigration reform. host: john in california. good morning. caller: good morning. such an honor to talk to mr. a andi. i would like to talk about three points. i use assault -- the stock market similar to the grocery stores. the stock market expanded because there is too much money in the economy. my second point concerns of 49% that do pay taxes and what i see with the tax cuts is that we are creating more billionaires. there are more billionaires and millionaires than ever before. so you can lower the corporate taxes by 6%. they would be paying 21%. so you add more and you gain 21. and that is why if you go to the

cbo and look at the budget histories, that is why the trump tax cuts hit $4 trillion for the first time in revenues. they created revenues because they added more people paying taxes and that 49% range. host: i'm in a take those two because we have a lot of people waiting to talk. if you want to start with the stock market and grocery prices, he tied them together and move on to the corporate tax rate in the first round of tax cuts

actually increasing revenue. but fundamentally, the reason stock prices are up is because american companies, certainly the ones that are publicly traded are doing quite well. host: on the second point the corporate tax rates being underdone under the lower -- under the first trump administration tax bill and that increasing revenues. guest: here i am not on board with that. you know, i like tax cuts like anybody else. i have no problem. but i do think -- if we are giving tax cuts to businesses or individuals certainly in the context of the large budget deficit and debt we need to pay for them. i do not think the corporate tax

cuts put into place under president trump were paid for. you know the caller called out the congressional budget office, the cbo. the partisan group that does the budgeting for the government. and if you go take a look at their work, it is not consistent with the idea that the tax cuts were paid for, just the opposite. you know, i am all for lower tax rates and i think they are key. but we need to figure out for weight -- ways to pay for them if we are providing that. host: jesse in milwaukee, making under 100,000. your turn. caller: i have one question and goes back to what he was talking about before, that the tech stocks, the ones that are really hot and making a lot of money, but it also sounds like he was going to say that there is no diversity within this. could you elaborate more on

that? guest: yes. you have heard the magnificent seven. there are seven technology stocks. everyone from nvidia, who is benefiting from selling all of the chips related to the boom in artificial intelligence to apple to meta. those companies are driving the stock market. if you look at the increase of the value stocks overall, a big chunk is those companies. having said that, if you look at the rest of the stock market and everyone else in the hundreds of thousands of companies with publicly traded stocks. they are doing well, just not nearly as well as the juggernauts, the large companies that have done fabulously well. the market is top-heavy. the magnificent seven is driving the train. and that is a risk. it adds to the concerns we were talking about about

concentration, relying too heavily on a few companies and the well-to-do. the stock market has done well more broadly, if you look across the entire market, at least most companies that have publicly traded stocks have done quite well. business has been good. host: what do you make about headlines of warren buffett hoarding cash and then this one "is warren buffett selling before a stock market crash?" guest: that goes back to my point about valuation. overvalued and frothy. i expect that warren buffett is seeing the same things and historically, what he has done when people are optimistic and driving up stock prices and it looks like they are getting overvalued and frothy, with some signs of speculation creeping in and people start thinking about that. that is when he tends to pull back which raises more cash.

historically, he has been rewarded by doing that. it is really hard to do because you see the stock price rising every day and you get somo and you worry about missing out. he is very good at that a very disciplined investor and generally the market goes down and if it is overvalued by definition it is to highly prized. and the market goes down and that is when he buys and steps in. you can tell, not many people are up to the ability to do that and have that patients and discipline and understanding -- patience, disc -- discipline and patient understanding. he is saying the markets are

valued and i will step away like i did in the past and i expect that he will have an opportunity in the not-too-distant future. host: andrew in florida. good morning. caller: good morning. i have a strange question, actually. does the economy that is relying on high income earners benefit or detract from people like us lower income earners? host: he is calling in on the line for under $100,000? guest: not an odd question and i have a great affinity for ormond beach. my wife is from ormand. a great place, great beaches. well, no. it is not detracting. i am speaking in aggregate, not for a specific individual or

smaller group. but in aggregate, all of the incomes have been rising. and we got nailed back a couple of three years ago when inflation took off. many people's purchasing power declined and it is harder on folks with lower incomes. we have made it back and we are still paying higher prices for things but wage growth has been stronger, so we are all starting to catch up. everyone is benefiting and participating in the economy's success over the last couple of years and the couple or three years. so since we have broken free from the pandemic and the ill effects of the russian war in ukraine. but, the folks in the top part, the well-to-do and folks with higher incomes and more wealth, they have benefited more. if you look at the totality of

their financial situation, it has improved a lot more than anyone else. it is not like the success is diminishing everyone else's. they are just much more successful, if that makes sense. host: your thoughts on the impact of federal employees losing their jobs and the freezing of funds. this is in the metro section of "the washington post." "d.c. unemployment claims jumped 25% the previous week and compare -- and up fourfold and paired with the same week of -- the same number a week ago." could this trigger a recession, if not nationally, but local? guest: i am nervous about what i am observing. i am all for taking a good, hard look at what government is doing to make sure it is doing things

well and properly. just like every business in america does, continually. i am a business person and i do that in my daily business life. i am looking for ways to make sure that i am operating as efficiently as possible and everyone is doing the things they should be doing and we are all executing. that is fair game, appropriate and what we should be doing. i do worry that what we are observing now is just quite haphazard. it is not surgical. it looks like when you pull out a chainsaw. it does not give you the sense that there is careful thought to what is going on and how things are being done. it makes people nervous, the fact that things seem so capricious. and, i do not think that is conducive to those folks, or to

the broader economy. or, to the regional economies in which these folks are living and working. i think it is a great thing lawmakers are taking a good, hard look at the way we are operating government. we should be doing that all the time. i just worry about the way it is being done. the other thing i worry about, i say this with less confidence, i do worry about jobs and funding for things that ultimately are going to be really impactful because we do not have the people we need for the funding that is appropriate, from air traffic control to food and drug, to environmental issues and climate, to just tracking the weather systems. these are things government does, and we absolutely need them. we have got to make sure when we

strive for efficiency that we do not undermine the ability of the government to provide the services necessary for a well-functioning economy and also for the private sector and american businesses. they require heavily on good weather reports and making sure the transportation system is safe and works well. that makes me nervous. i worry about that. i am not the only one. you can see that sentiment out there. people are anxious about how this is unfolding. host: mark zandi, the chief economist with moody's analytics. you can go to economy.com. you can follow him on x. learn more about his recent report on u.s. economy's growing reliance on high income earners. thank you for the conver