Government's Share of Personal Income Tops 30%

On Friday, the Wall Street Journal reported US Stocks Rise, Boosted By Upbeat Income, Spending Data

The U.S. Commerce Department said consumer spending rose 0.4% in August after rising the same amount in July. Incomes, meantime, increased by 0.5% in August after a 0.2% rise in July. The numbers were slightly better than expected. Economists surveyed by Dow Jones Newswires had forecast spending and income would both climb by 0.3% in August.

Not only is the data from August, but raw numbers without an explanation as to what really happened paints a very misleading picture.

Jeff Graham at the Capital Hill Blog explains how Government Propped Up Personal Incomes In August

News accounts are highlighting the fact that the 0.5% increase in personal income in August was the biggest of the year. But the data weren’t evidence of a healthy and sustainable private-sector expansion.



Government transfer payments accounted for 60% of the increase, and the government share of personal income crept further into record territory at just over 30%. That’s up from just above 25% before the recession.

Transfer payments include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Food Stamps - now called Supplemental Nutrition Assistance Program (SNAP) , medical insurance (Medicaid and Medicare), and housing assistance.

Transfer payments are social schemes to redistribute the wealth. However, given the US is running an enormous deficit, one can argue these schemes are funded by the government printing money and giving it away.

Regardless of how you look at it, government share of personal income at 30% is outrageous. Moreover, more than half of that 30% is transfer payments, an equally outrageous happening.