Government’s role in the economy has reached an unprecedented scale by at least one measure.
A record 30 cents of every dollar in personal income comes directly from government, Commerce Department data show.
And since government produces nothing and gets it money from you and me (the private sector) and there is now 47% of the people who don’t pay taxes at all and One in six Americans receives some form of government aid because of effects of the recession that started in 2007, a review of data indicates.
More than 50 million people are on Medicaid, a program principally designed to help the poor, and nearly 10 million Americans receive unemployment benefits, USA Today said Monday in a report based on data from state officials.
“Virtually every Medicaid director in the country would say that their current enrollment is the highest on record,” said Vernon Smith of Health Management Associates, a company that compiles data for the Kaiser Family Foundation.
More than 40 million people now receive food stamps, a jump of nearly 50 percent since the recession began, the report said. The unemployment rate in the United States remains above 9 percent.
You have more people dependent on less people for more money! 
But don’t worry, this was the “Summer of Recovery” and everything is fine. It just needs more time , according to our Harvard Educated Academic Elites — aka the Obama boys and girls.And they just need to explain it better and suddenly you’ll have an epiphany and see how wonderful they are!
Including transfer payments (income support and health insurance benefits) and compensation to public employees, government paid out $3.8 trillion of $12.5 trillion in total personal income in July on an annualized basis.
And remember their “urgent” August bailout of state workers for $26 billion was supposed to be partially paid by cuts in Food Stamps in 2014 (when the Health Care Mandate is set to kick in).
So if they just explain better how their Wimpy “I’ll bailout you today for a payment in 4 years” economics work for you, you’ll suddenly fall madly in love with them and bask in their greatness.
That 30.3% share of personal income compares to 25.5% before the recession and 23.5% in 2000. The level topped 27% in the wake of the 1991 recession and hit a prior peak of 28% in 1975.
So government workers personal income has risen 7.5 % SINCE the recession started (and Congress was taken over by Democrats in 2007). And you’re on the hook for it. Doesn’t that make you happy?
The government’s record share reflects the dismal state of private wages and the ramping of federal transfer payments from a historically high base.
“The private economy has been put through the wringer and thus policymakers have been working hard to fill the hole,” said Mark Zandi, chief economist at Moody’s Analytics.
Real private wages remain 8.4% below their December 2007 level and just 1.3% above their February bottom. That low was a level first reached in March 2001.
The weakness in private wages reflects deep layoffs and shorter workweeks due to the recession, and the “not terribly robust” prior economic expansion, said Josh Feinman, chief economist at Deutsche Asset Management in the Americas.
Meanwhile, government income payments are up 17% in real terms since the start of the recession. The real mover has been transfer payments, which accounted for a record 18.4% of personal income in July. That’s up by nearly half from 12.7% in 2000 and more than a quarter from 14.4% in 2007.
The growth is a combination of the inexorable rise of spending on Social Security and health care entitlement programs, as well as a spike in unemployment compensation, food stamps and Medicaid due to weak labor markets and expanded benefits included in the Recovery Act.
Real personal income less government transfer payments remains 5.5% below its December 2007 peak, yet real disposable income is up 2.7% since the start of the recession. That’s due to increases in government income payments and lower tax payments.
Too Much To Get Out?
The government’s role in supporting the recovery is already raising questions about how the economy will fare as the crutches are removed.
“Given how significant its role has become, it does make it more difficult for the government to exit out in a graceful way,” Zandi said.
The stimulus has already begun to fade, with more than a million unemployed exhausting jobless benefits of up to 99 weeks.
Zandi says even further government stimulus would be prudent, given the current slowdown.
In addition to tax cuts and spending hikes, another option would be a government-led mortgage refinancing push to make low-rate loans available to those with insufficient equity in their homes to qualify.
“To have a meaningful recovery, the private sector has to step back up to the plate,” Feinman said.
In prior recoveries, policy stimulus and inventory building eventually allowed for a handoff to a healing private sector, he says.
That handoff “is just not happening” said Feinman. He expects “a long climb back.”
The one area of private compensation that is growing, nonsalary benefits, is not as helpful as wage growth, which puts cash in people’s pockets, Zandi notes.
Real nonsalary compensation (private and government) is up 4.1%, likely reflecting rising health care costs and perhaps some catchup pension contributions.
During the Great Depression, when fiscal stabilizers and safety nets were in their infancy, the government’s share of personal income peaked at just over 16%. Even in World War II, when the government payroll ballooned, its share only briefly neared 25%, falling back below 20% until the 1960s.
The share of personal income is an incomplete gauge of government’s economic role because it doesn’t include direct spending. A better, though imperfect, measure would be the combined federal, state and local government budgets as a share of gross domestic product.
By this score, government was far bigger during World War II, when the federal budget alone topped 43% of GDP. While state and local figures are out of date, total government spending probably will be around 40% of GDP this year. (IBD)
And Obama & Co’s solution, they want to spend more money and still raise taxes on 1/1/11.
The definition of insanity is doing the same thing over and over again and expecting a different result.
But that’s what happens when you’re in an ideological ditch and you can’t get out.
So bring out the talking points:
“In the month I took office, we were losing 750,000 jobs a month,” the president said. “This morning, new figures show the economy produced 67,000 private sector jobs in August, the eighth consecutive month of private job growth. Additionally, the numbers for July were revised upward to 107,000. Now that’s positive news, and it reflects the steps we’ve already taken to break the back of this recession.”
The net job loss for August is largely because of the layoffs of 114,000 Census temporary workers.
When May’s job numbers showed a net increase of 431,000 jobs – 411,000 of which were Census jobs — the president did note that “most of these jobs this month that we’re seeing in the statistics represent workers who’ve been hired to complete the 2010 census.” But in those June 4 remarks the president didn’t detail just how many of the 431,000 jobs were Census jobs – 95% of them — and he cited the overall report, and its deceptively large number as evidence that businesses are “starting to hire again. Workers who were laid off, they’re starting to get their jobs back. Companies that were almost forced to close their doors are making plans to expand and invest in new equipment.” (ABC)
So you can have you’re cake and eat it too! So Let them Eat Cake!
…and said he would “in the weeks ahead” be detailing “further steps to create jobs and keep the economy growing, including extending tax cuts for the middle class and investing in the areas of our economy where the potential for job growth is greatest.”
And judging from past performance that means more government jobs and more bailouts for states and unions.
Yeah, that’s the ticket…:(
Asked to what degree he regrets his administration’s decision to call this Recovery Summer, the president stammered then said, “I don’t regret the notion that we are moving forward, but because of the steps that we’ve taken. And I’m going to have a press conference next week, where, after you guys are able to hear where we’re at, we’ll be able to answer some specific questions.” (ABC)
Oh god, he’s going to EXPLAIN IT AGAIN! Just in case you were too stupid to understand it every other time he’s said it!
If he just explains it repeatedly enough you’ll get it.
“This is what change looks like,” Obama said on signing into law the Health Care Cram down Bill.
So in November, we have to show HIM what change looks like then we have change ourselves too because they are the pimps, and we are the ho’s. So we have to take them out of the drug dealing business and we have to stop using them.
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