The State of America’s Private Sector 28: October, 2011

The U.S. Department of Commerce’s Bureau of Economic Analysis recently released their monthly personal income data for October, 2011 (pdf). The chart below shows the private sector share of personal income from January 1959 to October 2011. For October, the private sector share of personal income was 70.8 percent.  While a tad higher than September, it’s only because the previous months have been revised lower.  So, technically, the private sector made no headway.

While the trend has been up over the last year (after cratering in May, 2009 at 69.06 percent), the current level is still well below the pre-Great Recession level of 74.48 percent in June 2007. With the aging of the baby boomers and Obamacare looming, it’s doubtbul that we will ever get back to pre-recession levels.

 Chart Showing Private Sector Share of Personal Income by Month from January 1959 to October 2011

The State of America’s Private Sector 27: September, 2011

The U.S. Department of Commerce’s Bureau of Economic Analysis released their monthly personal income data for September 2011 (pdf). The chart below shows the private sector share of personal income from January 1959 to September 2011. For September, the private sector share of personal income was 70.8 percent–up 0.04 percentage points from August (which was revised upward slightly).

While the trend has been up for the last few months (after cratering in May, 2009 at 69.06 percent), the current level is still well below the pre-Great Recession level of 74.48 percent in June 2007. With the aging of the baby boomers and Obamacare looming, it’s doubtbul that we will ever get back to pre-recession levels.

 Chart Showing Private Sector Share of Personal Income by Month from January 1959 to September 2011

Fiscal Federalism 12: Federal Aid by Agency

In yesterday’s post on Federal Aid to the States, I asked if anyone knew why states such as New Hampshire and Texas received so much less federal aid, on a per capita basis, than their surrounding neighbors. Table 1 below reveals the answer.

To hunt down the culprit I decided to turn to my favorite two-state comparison–New Hampshire and Maine. One reason why I like to compare the two states, besides the fact they are economically and politically opposites, is that they have nearly identical populations right now. As such, I can show the dollar amounts without having to adjust them into per capita terms since the relative difference won’t change.

So let’s dive into the data. First, notice just how long the list is of federal agencies that dole out aid to the states.  If you are into pork, there is a federal agency out there for you. The obvious question from this list is . . . are there no limits to what the federal government can do?

Despite having identical populations, Maine receives $1.4 billion more from Uncle Sam than New Hampshire–$3.4 billion versus $2 billion, respectively. Where does this “Maine subsidy” come from? The vast majority of the difference is under the Department of Health and Human Services: Centers for Medicare and Medicaid Services to a tune of $1.1 billion.

So Medicaid is the single largest driver of the difference in Federal aid to the states accounting for $256 billion of the total $552 billion doled out. It dishes more aid than the Department of Agriculture ($31 billion), Department of Education ($45 billion), Department of Housing and Urban Development ($47 billion), Department of Labor ($10 billion) and Department of Transportation ($57 billion) COMBINED!

So the key to freeing your state from federal dependency, um, aid, is to control your state’s Medicaid program. Doing so will also reduce the “crowding out” of the private sector by the public sector which I’ve discussed previously– meaning a larger private sector will also result in greater economic prosperity.

Table of Federal Aid to State and Local Governments by Agency for Fiscal Year 2009

The State of America’s Private Sector 23: June, 2011

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released their monthly personal income data for June 2011 (pdf).  This is an important update because it contains revisions in the data back to 2003–click here to view the pre-revision data up to May, 2011.

The chart below shows the private sector share of personal income from January 1959 to June 2011. Post-revisions, the drop-off in the private sector was greater than before although the bounce-back is now greater–but it looks like the private sector still ends up in the same place.  So, for June, the private sector share of personal income was 70.49 percent.  This is well below the pre-Great Recession level of 74.48 percent in June 2007.

Chart Showing Private Sector Share of Personal Income Monthly June 2011

And since we have revised data, I have also updated this chart (see below) which shows, on a monthly basis, the contributions paid into Social Security and Medicare (red line) via the payroll tax versus the benefits paid-out by Social Security and Medicare (green line).  Prior to the “Great Recession,” contributions paid-in almost always exceeded the benefits being paid-out.

However, beginning around 2007 and the Great Recession, contributions began to level off.  The decline in contributions was exacerbated by the recent extension of the Bush tax cuts which included a one-year reduction of 2 percentage points in the payroll tax.  So as of June 2011, the gap between benefits paid and contributions is $348 billion.

On the other hand, benefit payments have the looks of becoming an exponential function.  I’ll have to do some more digging around, but I’m guessing a lot of the new growth was due to the Medicare Part D expansion which went into effect in 2006 which coincides with a large lurch upwards in benefit payments.

Chart Showing Growing Gap Between Contributions and Benefits for Social Security and Medicare June 2011

Note: “Supplements to Wages and Salaries” (benefits) in the BEA data are not broken down into “private” sector” versus “government” components. I used the ratio of private wages and salaries to total wages and salaries in order to disaggregate supplements.

The State of America’s Private Sector XXI: First Quarter 2011

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released new personal income data for the first quarter of 2011 by state (pdf) and revisions for the past couple of years.  As shown in Chart 1, The U.S. private sector share of personal income for the first quarter of 2011 was at  69.3 percent.  While this is the highest point since the second quarter of 2009, the private sector has essentially been moving sideways.  With the economic signs of a double-dip recession growing by the day, even this slight uptick in the private sector may be short-lived.

Chart of Private Sector Share of Personal Income for 1st Quarter 2011

Chart 2 shows the major culprit behind this crowding-out of the private sector since the beginning of the “Great Recession”–the Orwellian American Recovery and Reinvestment Act (ARRA).  In the first quarter of 2011, the ARRA pumped $45.5 billion into the U.S. economy via personal current transfer receipts (pdf).  This is down from the peak spending ($103.1 billion) under ARRA in the first quarter of 2010.  As ARRA spending continues to wind-down, this will help the U.S. private sector rebound from its all-time lows though it puts a drag on overall personal income growth.

Chart of ARRA Contributions to Personal Income for 1st Quarter 2011