Today the U.S. Department of Commerce’s Bureau of Economic Analysis released new personal income data for the second quarter of 2010 and revisions for the past couple of years. As shown in Chart 1, The U.S. private sector share of personal income for the second quarter of 2010 was at a new all-time low of 68.49 percent–just edging out the previous low of 68.63 percent set in the last first quarter of 2010.
Chart 2 shows the major culprit behind this crowding-out of the private sector–the Orwellian American Recovery and Reinvestment Act. In the second quarter of 2010, the ARRA pumped $61.5 billion into the U.S. economy via personal current transfer receipts. This is down from the peak spending ($102.6 billion) under ARRA in the first quarter of 2010. As ARRA spending continues to wind-down, the U.S. private sector should rebound from its all-time lows.
However, it remains an open question as to how much of the private sector will be permanently lost. For example, some of the temporary spending under ARRA will simply be transferred to state and local governments for funding resulting in higher state and local taxes.