The average personal income in the United States rose by 0.3 percent between January and February. However, economists are attributing a large part of that rise to increases in government transfer payments instead of increases in salaries or wages. As the graph from the article in the Wall Street Journal indicates, government transfer payments accounted for over half of the increase in income while wage increases (accounted for by both increases in salary and becoming employed) were responsible for only 40 percent of rising income.
The CNBC article notes that consumer spending also increased from January to February by 0.3 percent, and that the increase is attributed in large part to increased demand for healthcare services as more people are receiving coverage from the Affordable Care Act. The personal savings rate also rose 0.1 percent. The data shows that certain consumers are receiving higher incomes, but not from sustainable sources. Medicaid spending is supposed to stop when the Affordable Care Act enrollment period ends, and if the unemployment rate does not decline nor do workers receive pay raises, personal income and consumer spending may decline again, along with overall economic performance.
http://blogs.wsj.com/economics/2014/03/28/vital-signs-income-gets-a-lift-thanks-to-government-assistance/
http://www.cnbc.com/id/101534224
The CNBC article notes that consumer spending also increased from January to February by 0.3 percent, and that the increase is attributed in large part to increased demand for healthcare services as more people are receiving coverage from the Affordable Care Act. The personal savings rate also rose 0.1 percent. The data shows that certain consumers are receiving higher incomes, but not from sustainable sources. Medicaid spending is supposed to stop when the Affordable Care Act enrollment period ends, and if the unemployment rate does not decline nor do workers receive pay raises, personal income and consumer spending may decline again, along with overall economic performance.
http://blogs.wsj.com/economics/2014/03/28/vital-signs-income-gets-a-lift-thanks-to-government-assistance/
http://www.cnbc.com/id/101534224
2 comments:
This is a very interesting trend and it exposes the failure of transparent reporting of economical indicators. If the transfer payments through various social benefit programs is in fact contributed to half of the growth, we could certainly expect much lower growth once ACA is up and running. With that said the legislation is still very unclear and Congress continues to delays certain parts of the bill, meaning Medicaid spending might not stop after April 1st. It will be interesting to see what will drive personal income and consumer spending once people sop enrolling into the healthcare program.
Post a Comment