Tuesday, February 14, 2012

It's Hard to See a Recovery in the Real Personal Income Data

Another of the blogs we read but don't link to often enough.
From Maxed Out Mama:
...Now there are two types of jobs in this country. One type, on which the coasts substantially run, are generated through beyootiful flows of government money. That is why the DC metro area is doing so well jobs-wise. They are closest to the spigot. These jobs are dependent mostly on getting your paws on gobs of other people's money, and/or moving money around in gobs.

The other types of jobs are Main Street jobs, and are generated by the rolling consumption and production in the Main Street economy. They tend to vary more with industrial and consumer strength, they tend to be less prestigious, they tend to generate less income, and they employ a whole heck of a lot more people.

So if you are GOP on the coast, you are for Romney, because you are a money-mover. If you are GOP in the heartland, you've already realized that the jig is up, and you are for Santorum. The wheels of commerce in your area ride much closer to the ground, and you have had a good long look at the bare tread on those tires. You are scared and you know something's got to give but soon.

It's not exactly that those heartland people are illiberal. The vast majority of the public strongly supports the basic social welfare net, including Social Security and Medicare. No, the reason the people in the heartland think the jig is up is that they know in their bones that we are getting to the point at which we cannot sustain those programs.

This is the reality that the people in the heartland are experiencing:

Open this one up and take a good long look at it.

This is per capita real disposable personal income indexed to the trough of the recent glorious recession, which was June 2009.

Ugly facts:

  • US per capita real personal income as of December was most like that of September 2006, when by the indexed measure it was 100.7 compared to December's 100.9. By December of 2006, it was at 101.7.
  • Per capita real personal disposable income rebounded after the late glorious exercise in economic frothiness, eventually rising to a peak of 101.7 in December of 2010. It stuck there for a few months, and then resumed its fall.
  • We have achieved this decline in real per capita personal disposable incomes in spite of a 2% FICA tax cut, which we cannot afford to sustain and cannot afford to end. If we did end it without instituting something on the order of the Making Work Pay tax cut, we'd immediately fall into an outright recession.
  • Five years? Five years no flipping growth in real per capita personal disposable incomes? Link
  • Our fiscal base is declining. This was amply covered in the royally depressing CBO 2012-2022 Economic Outlook just published. It's only 165 pages, which I have read twice since Friday's employment report.
  • That report lays out some pretty dire predictions. Ignore the baseline scenario, which is constructed on the payroll tax cut ending this month, and taxes being raised hugely next year. No, you want to look at the alternative scenarios and most importantly, the trust fund section.