TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, April 13, 2010

Per Capita Income Has Fallen 3.2% Since Obama's Inauguration; 47 of 50 States See Decline in Income

Washington Times, Income Falls 3.2% During Obama's Term:

Real personal income for Americans -- excluding government payouts such as Social Security -- has fallen by 3.2% since President Obama took office in January 2009, according to the Commerce Department's Bureau of Economic Analysis.

For comparison, real personal income during the first 15 months in office for President George W. Bush, who inherited a milder recession from his predecessor, dropped 0.4%. Income excluding government payouts increased 12.7% during Mr. Bush's eight years in office.

"This is hardly surprising," said Douglas Holtz-Eakin, an economist and former director of the nonpartisan Congressional Budget Office. "Under President Obama, only federal spending is going up; jobs, business startups, and incomes are all down. It is proof that the government can't spend its way to prosperity."

According to the bureau's statistics, per capita income dropped during 2009 in 47 states, with only modest gains in the other states, West Virginia, Maine and Maryland. But most of those increases were attributed to rising income from the government, such as Medicare and unemployment benefits.

Two of the most populous states in the country reported dramatic declines: Per capita income in California dropped 3.5 percent to $42,325; in New York, the drop was 3.8 percent to $46,957.

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Comments

I'm confused by one thing. Shouldn't the government spending be showing up in SOMEONE'S income? Or are we shipping that money outside the US too?

Posted by: hah | Apr 13, 2010 5:08:03 AM

Shouldn't the government spending be showing up in SOMEONE'S income?

It is showing up in the wages of public sector employees, as well as that of private sector union workers. Two groups the dems cater to. Color me not surprised...

Posted by: elaine | Apr 13, 2010 7:36:50 AM

Two things are going on. The government spending is showing up in someone's income. The drop would be worse without it. Second, at least through the first half of the recession, personal spending was way down. That means that the government spending didn't stimulate as much as predicted. People saved or reduced debt instead of spending. Savings eventually result in higher incomes as the saved money is recycled into productive investments. Debt reduction effectively causes money to disappear due to the leverage of the lending institutions.

Posted by: smq | Apr 13, 2010 9:07:48 AM

Down in 47 up in 3, but what about the other 10?

Posted by: Lorenzo Poe | Apr 13, 2010 9:22:24 AM

Thanks Lorenzo...*someone* had to say it.

Posted by: wildmonk | Apr 13, 2010 10:14:56 AM

Where is that 3.2% figure coming from? The linked pdf is the February report, which does show Q4 2009 income lower than Q4 2008, but only by about 2%. It doesn't have the state by state data either.

Posted by: Tim Cavanaugh | Apr 14, 2010 12:13:19 PM