A cursory look at personal income statistics shows that the biggest drag on personal income right now is the decline in transfer payment from the government. At first this seems natural as the economy is recovering and automatic stabilizers like unemployment insurance work in both directions. They slow the descent into recession but as they roll off they also slow the recovery.
Yet, the recent numbers were to big to explained by unemployment insurance alone. It turns out government health care spending is dropping by unprecedented amounts.
Below are year over year declines in transfer payments
The blue line is Medicaid which is now outpacing Unemployment insurance in terms of absolute year-over-year spending reduction. The red line is Medicare, which is whose year-over-year spending is not quite in decline but appear poised to make declines in the coming months.
This may be why the fundamentals in health care look surprisingly weak. Job gains have slowed as well as capital expenditure.
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Monday ~ March 26th, 2012 at 1:21 pm
curtd59
Helpful insight. You’re the best with data in the web.
Although I don’t understand the decline in medicare?
Monday ~ March 26th, 2012 at 1:58 pm
Steve Randy Waldman (@interfluidity)
any idea why the sharp drop in SS over 2009, and the sharp spike recently?
Monday ~ March 26th, 2012 at 7:07 pm
Edwin Perello
I’m thinking the spike in SS is due to the spike in Social Security Disability Insurance.
Monday ~ March 26th, 2012 at 1:59 pm
Lord
Is this because states are in charge of medicaid and have to pick up the rest? Medicare growing at a lower rate due to slower rise in costs or just a slower flu season due to a warmer winter? That was the first cost of living rise in SS in a few years.
Monday ~ March 26th, 2012 at 4:11 pm
Abir
I don’t understand. Don’t transfer payments have to be transferred from someone else? If that is the case, would not these payments reduce the income of that someone else? So why should that make a difference in over all incomes at all?
Monday ~ March 26th, 2012 at 4:26 pm
Alex Godofsky
Transfer payments can also come from borrowing. Thus they reduce the income of future taxpayers.
Tuesday ~ March 27th, 2012 at 12:06 am
Abir
Either way, I think it’s disingenuous and very Obama-like to consider this income. Whether you are taking from current taxpayers or future taxpayers.
Monday ~ March 26th, 2012 at 6:30 pm
Becky Hargrove
Medicaid catches a major portion of the chronic illness and disability (more prevalent in lower income groups), and often well before one’s retirement years. As a result it stood to gain the most from greater efficiencies in the healthcare system itself. Although some of that doubtless is not greater efficiency, but simply refusal to reimburse.
Monday ~ March 26th, 2012 at 6:48 pm
anoncubed
any idea why the sharp drop in SS over 2009, and the sharp spike recently
Large COLA in January 2009, no COLA in January 2010 and 2011 and modest COLA in January 2012.
Monday ~ March 26th, 2012 at 10:24 pm
Lord
I believe the drop in SS at the start of 2010 was the end of the stimulus bonus, $300/person/yr IAFAIR.
Tuesday ~ March 27th, 2012 at 3:49 am
Inadvertent Austerity Read more http modeledbehavior com 2012… « zumoit
[...] Austerity Read more: http://modeledbehavior.com/2012/03/26/inadvertent-austerity/ Share this:TwitterFacebookLike this:LikeBe the first to like this post. [...]
Tuesday ~ March 27th, 2012 at 3:33 pm
Steve Randy Waldman (@interfluidity)
Thanks Edwin, Lord and anoncubed for explanations of the SS spikiness!
Sunday ~ April 1st, 2012 at 8:14 pm
notes on the ACA arguments, january’s home prices, & february’s personal income & outlays | r.j.'s space
[...] level of autumn 2006, and 1.7% below that at the beginning of the recession; karl smith points out some of this recent decline is due to inadvertent austerity, as the biggest drag on personal income right now is the decline in transfer payments from federal [...]