This phrase is loosely based on conspicuous consumption, which American social critic Thorstein Veblen introduced to the language in 1899 (in his book Theory of the Leisure Class). See the Word Spy entry for inconspicuous consumption (which is almost synonymous with sense 2) for more on this. A close synonym for this phrase is downward nobility, which entered the language in the mid-80s.

The above citation credits Joan Kron with coining this phrase, but that appears to be true only for sense 1, as the earliest citations show.