Tuesday, March 2, 2010

More on Disposable Income

The chart below details the year over year change (in this case 12 months ended January of each year) in the categories that makes up disposable income, as a percent of disposable personal income. The goal is to clearly show the shift in the makeup in personal income growth over the past 10+ years.

As a reminder, personal current transfer receipts are (per the BEA):

Payments to persons for which no current services are performed. It consists of payments to individuals and to nonprofit institutions by Federal, state, and local governments and by businesses.
As a result, the chart shows that outside of rental income, the only growth in personal income has been due to reduced taxes paid and payments for no services performed.

Were the tax cuts and transfers needed? I would say probably given the crisis.

That said, don't be fooled into thinking the relative stability in disposable personal income is anything more than the public sector adding new liabilities just to maintain the status quo.

Source: BEA

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