Dan Haar: Christmas drives American culture but not the economy

December 23, 2017 GMT

Merry Christmas everyone!

I don’t celebrate Christmas other than as an excuse for more parties. But I’m not one of those people who needs the greeting to be “Happy Holidays” — especially on the actual days of Dec. 24 and 25.

Hanukkah is at best the 7th most important Jewish holiday, so we Jews don’t need equal treatment this time of year. New Year’s has its own greeting and “Good Solstice” will never catch on.

Merry Christmas it is. I just hope no one thinks all this shopping for the holidays is driving the U.S. economy. I know that’s what the National Retail Federation wants you to believe, but I checked with Santa and it’s just not true.

In fact, Christmas gift-buying is worth less to the economy than the waste management industry.

Talk about trash-talking Christmas! How’s that possible, if consumers are famously responsible for more than two-thirds of economic activity and Christmas buying drives all of retail?


The numbers tell a story that belies the myth. You might have heard the projected “holiday shopping” figure this year is $680 billion, up by 3.8 percent from last year. That’s the likely combined total of all retail spending in November and December, minus autos, gasoline and restaurants, according to the retail federation.

It’s a terrible proxy for holiday spending. It includes all supermarket purchases, the Ferragamo suit you bought last month, every neutron of electronic gadgetry you bought for yourself, all those supplies for your annual fall scavenger hunt and this newspaper.

If we just compare the spike in seasonal retail spending to the average of the rest of the months in the year, we see a bump of $107 billion in 2016. Even that number includes tons of stuff people bought on sale for themselves while they were out shopping for Aunt Tillie.

On the other hand, we know that gift-giving includes some services like cooking classes, so maybe it’s higher than the retail bump. The retail federation says its surveys show the average American adult will spend $608 on gifts this year. That would total $149 billion.

If that seems very high, remember, it’s an average that includes the $26,000 Joe Scarborough might spend for his co-host and fiancée Mika Brzezinski on an oil painting of President Donald Trump sending a tweet. (Is that a workplace gift or a family gift?)

Besides, people overstate their gift-buying just like they didn’t admit they would vote for Trump.

Even if the $149 billion figure were true, a lot of it is what economists call substitution spending - outlays for a family gift that we would have spent anyway, not for a gift. Ever get a winter coat from your mother?

Notably, this year the retail federation survey showed a drop in expected gift buying, from $621 per person in 2016, even though total spending is up this year. The gift number had climbed steadily, with the economy, since a recent low of $543 in 2011.


“It could be that people are moving away from giving gifts,” said University of Minnesota economist Joel Waldfogel, “but I would be a bit surprised.”

Waldfogel, formerly a Yale associate professor, knows a thing or two about gifts. His paper in 1993 and study 2001 showed that Christmas gifts come with an average “deadweight cost” of 18 percent. That means the gifts bring 18 percent less value to the recipient than they cost the buyer in the first place.

Before you call him Professor Scrooge, he’s not against gift-giving. “Then we’d lose all the good feeling,” he said - and that has real value.

The deadweight cost is also real. “Sentimental value does not turn inefficient giving into efficient giving,” Walsdfogel said, adding, “We’re kind of between a rock and a hard place.”

There’s no end to the complexity in calculating Christmas. More people these days give gift cards, which carry less dead weight but also less sentimental value. About 10 percent of gift cards’ value never gets redeemed, Waldfogel said, leading him to suggest retailers promise to donate unredeemed value to charity after two years - a nice selling point.

Boiling it all down, let’s be generous and say gift-buying that wouldn’t have happened without Christmas is worth $90 billion to the economy. That’s one-half of 1 percent of the U.S. economy - hardly a driver like, let’s say, health care, at 17 percent or housing at 10 percent.

It’s even less than the $96 billion waste management industry - which, unlike the buying of largely imported Christmas gifts, derives the vast majority of its added value locally.

What Christmas does support, big-time, is Main Street, American culture and artisan creativity. Celebrate it for that. Community matters more than ever in 2017 -- the year when online shopping passed department stores and discount stores as the most popular place to shop for Christmas, according to the retail federation.

And don’t forget to take out the garbage. Christmas may not be the fulcrum for the whole economy, but it’s a huge driver of the trash collection business.