The State of America’s Private Sector IX

The flip side of looking at the private sector share of personal income is, of course, the public sector share of personal income.  The public sector consists of two components: Personal Current Transfer Receipts (PCTR) and Government Compensation.

Today, let’s look more close at PCTR which is made up of programs such as Social Security, Medicaid, Medicare, etc.  In the first chart below, the amount of money flowing through PCTR has been growing at an accelerating rate.  In the last ten years PCTR nearly doubled to $2.1 trillion in 2009 from $1.1 trillion in 2000.

Personal Current Transfer Receipts between 1990 and 2009

The culprit?  The next chart shows the growth in Medical Benefits which more than doubled over the last ten years to $892 billion in 2009 from $427 billion in 2000.  Digging deeper shows an even faster rate of growth in Medicare which grew 128 percent to $500 billion in 2009 from $219 billion in 2000.

Of course, some of the recent spike is due to a surge in unemployment insurance thanks to the “Great Recession.”  Yet, remove that surge, and the underlying trend-line is not encouraging.  Given the eminent retirement of the baby-boom generation, it is within the realm of possibility that PCTR could double again . . . not in ten years, but within the next five years.

The questions is . . . how do we pay for it?  Think personal income is going to be doubling in the next five years?  And it’s always instructive to see the difference between Maine and New Hampshire.

Medical Benefits between 1990 and 2009