How Much Economic Trouble Is the U. S. In?

Everyone knows that the United States government spends far more than it takes in. Indeed, it has been doing that for all but a few years since 1930. Since it has been doing that pretty much all along, why get all that bothered about it at this late date? It would appear that the furor is being caused by the mounting size of this deficit spending in recent years under both political parties. At some point we might reach a point where the government is in so far in over its financial head that it is bankrupt in all but name but there is no bankrupcy court to appeal to. The question is then: are we there yet?

Believe it or not, the answer to that question is neatly compiled in one table provided by that very same government via the Bureau of Economic Analysis in the Commerce Department. That table, number 2.6, is entitled Personal Income and its Disposition, Monthly. That one table gives you all the figures you need to assess where the government is at financially in relation to the people of this country. We have pulled out the critical parts of the data in table 2.6 into the table below. Please do not be deterred by the size of this table and all those numbers. Anyone with an eighth grade education can easily understand what this table tells us and how important it is that everyone understand the implications of what it shows.

The critical part you need to digest is provided by the last two columns in the table. The column marked PRIV CAP shows how much money is made by private individuals in this country divided by our population to provide the per capita private earnings. When this figure increases, the average American is better off and when it decreases, we are worse off. The last column shows the the net financial effect that the government has on us because it is the total money coming in from private individuals and going out to them divided by our population. When the figure is negative, every man, woman and child is providing the government the figure shown each year to run the government. Obviously it should never be a positive figure because that would mean we are not providing any money to run the government but rather instead it is borrowing money to send money to us on top of the expense of running the government. Except for those last two columns, the other columns with money figures are in billions of dollars.

YEAR	MON	PERS INC	TRANS	CONTR	TAXES	PRIVATE	GOVT	PRIV CAP	GOVT CAP
2005	03	10,365.9	1,503.21	869.62	1,181.77	9,732.3	-548.18	32,947.6	-1,855.79
2005	06	10,509.8	1,516.11	873.61	1,209.95	9,867.3	-567.45	33,328.6	-1,916.66
2005	09	10,490.3	1,506.95	869.64	1,217.00	9,852.9	-579.69	33,192.9	-1,952.87
2005	12	10,660.2	1,510.10	875.62	1,248.31	10,025.7	-613.83	33,695.4	-2,063.02
2006	03	10,878.3	1,546.08	901.62	1,306.47	10,233.8	-662.01	34,322.1	-2,220.24
2006	06	10,954.9	1,570.41	861.69	1,306.84	10,276.1	-628.12	34,383.7	-2,101.67
2006	09	11,021.9	1,572.42	893.46	1,320.06	10,342.9	-641.10	34,511.5	-2,139.17
2006	12	11,187.5	1,596.22	907.33	1,366.01	10,498.6	-677.12	34,942.1	-2,253.63
2007	03	11,251.0	1,628.63	912.33	1405.68	10,534.7	-689.38	34,982.9	-2,289.24
2007	06	11,263.8	1,612.61	907.13	1,411.90	10,558.3	-706.42	34,976.2	-2,340.13
2007	09	11,331.5	1,634.35	907.22	1,417.51	10,604.4	-690.38	35,035.4	-2,280.91
2007	12	11,392.1	1,650.32	911.48	1,425.68	10,653.3	-686.84	35,113.3	-2,263.83
2008	03	11,401.1	1,668.54	915.28	1,424.71	10,647.8	-671.45	35,024.3	-2,208.62
2008	06	11,404.9	1,806.52	899.98	1,221.43	10,498.4	-314.89	34,457.3	-1,033.52
2008	09	11,293.3	1,716.60	897.11	1,343.54	10,473.8	-524.05	34,292.0	-1,715.77
2008	12	11,354.0	1,797.74	901.17	1,311.79	10,457.8	-415.52	34,163.9	-1,357.43
2009	01	11,247.1	1,846.59	896.42	1,254.20	10,297.0	-204.03	33,616.7	-666.10
2009	02	11,136.1	1,861.25	887.82	1,121.66	10,162.7	-148.23	33,157.6	-483.62
2009	03	11,119.8	1,898.35	886.91	1,085.82	10,108.3	-74.38	32,959.7	-242.52
2009	04	11,160.2	1,917.88	892.77	1,033.30	10,135.1	-8.19	33,025.6	-26.68
2009	05	11,330.2	2,075.84	896.05	1,022.13	10,150.4	157.66	33,053.0	513.39
2009	06	11,156.2	1,962.14	889.91	1,011.73	10,083.9	60.50	32,812.1	196.86
2009	07	11,111.7	1,956.83	886.49	1,017.29	10,041.3	53.05	32,648.1	172.48
2009	08	11,102.2	1969.22	886.61	1,021.77	10,019.6	60.84	32,550.6	197.65
2009	09	11,083.1	1,984.44	883.75	1,018.45	9,982.4	82.24	32,403.3	266.95
2009	10	11,060.6	1,969.50	883.21	1,014.54	9,974.3	71.75	32,352.2	232.72
2009	11	11,089.8	1,980.72	884.46	1,012.97	9,993.5	83.29	32,391.1	269.96
2009	12	11,128.5	1,999.85	882.81	1,010.37	10,011.5	106.67	32,427.6	345.50
2010	01	11,121.7	2,011.21	890.95	1,022.53	10,001.4	97.73	32,374.4	316.34
2010	02	11,129.1	2,017.32	890.08	1,022.59	10,001.9	104.65	32,356.1	338.54
2010	03	11,158.6	2,045.74	891.01	1,024.40	10,003.8	130.33	32,342.2	421.35
2010	04	11,242.3	2,053.22	899.13	1,030.21	10,088.2	123.88	32,594.2	400.24
2010	05	11,301.2	2,060.81	905.24	1,038.61	10,145.6	116.96	32,757.7	377.63
2010	06	11,321.6	2,070.92	906.35	1,040.06	10,157.0	124.51	32,770.2	401.71
2010	07	11,318.4	2,068.51	908.08	1,055.07	10,158.0	105.36	32,748.2	339.66
2010	08	11,351.7	2,098.86	909.73	1,060.81	10,162.6	128.32	32,736.1	413.35
2010	09	11,341.5	2,087.58	910.02	1,065.68	10,163.9	111.88	32,713.9	360.10
2010	10	11,379.7	2,091.47	912.60	1,076.83	10,200.9	102.04	32,807.9	328.17
2010	11	11,403.6	2,097.62	911.96	1,079.75	10,217.9	105.91	32,839.3	340.18
2010	12	11,428.5	2,096.45	911.62	1,083.64	10,243.7	101.19	32,901.3	325.00
2011	01	11,520.9	2,088.64	824.68	1,127.99	10,257.0	135.97	32,925.5	436.47
2011	02	11,520.9	2,085.60	824.24	1,126.57	10,259.6	134.79	32,915.3	432.44
2011	03	11,534.0	2,099.08	823.32	1,124.26	10258.2	151.50	32,891.2	485.75

The problem with the figures in the government table is that they are not adjusted for inflation, but there are figures at the bottom of the table to allow one to do that. We have done that for you in our table. The reason that it is critical to do that is because there is no way to tell if the government or we the people are better off or worse off than previously without making that adjustment. If you get a $5 a week raise but you are spending more than $5 a week more for groceries and gasoline than you were previously, then you are actually worse off in spite of the raise you got. Using the ratio of current dollars to 2005 dollars allows us to adjust all of the other figures in table 2.6 to 2005 dollars so we are not comparing apples to oranges. The population figures in the last line of table 2.6 allow us to calculate any figure to a per capita amount so we can see whether the average American is better off or not compared to a previous time. Indeed, we can do that for the government itself as well to see how much we are receiving from the government in benefits and paying to it in taxes and contributions to things like Social Security and Medicare.

In line 1 of table 2.6 is the combined total income of all of us as individuals in billions of dollars on a month by month basis and that is in the column marked PERS INC in our table adjusted to 2005 dollars. Part of our income is from the government itself in the form of social security, medicare, unemployment benefits, etc. This amount is provided on line 14 in table 2.6 and is in the column marked TRANS, That is because the government calls the direct benefits it provides to us current personal transfer receipts. The amount we contribute to entitlement programs is found on line 20 in table 2.6 and is shown in the column marked CONTR. Likewise, line 21 gives the total amount we pay in taxes and is in the column marked TAXES in our table.

The next column is a figure not provided directly by table 2.6 but is calculated by subtracting the transfers and adding back in our contributions to government benefit programs. We call this PRIV INC since this represents what our total income would be without the government having these benefit programs. We would not be receiving things like social security or Medicare nor contributing to them either. The next column gives us a figure of what effect the government has on us because it is the transfers to us minus the contributions and taxes we pay. Since it costs money to run the government, part of our income should go to the government to keep it going and hence be a negative figure to our own income. We might add that the sum of the private income per capita and the net government action is the total per capita income in 2005 dollars and it should and does agree with the figure provided in line 32 of table 2.6 plus or minus some minor rounding of amounts.

Two things immediately jump out at you from this table. One is that the government benefits (transfers) are way more than our contributions to these programs and as you go down the table towards the more recent months, you will see that it is getting progressively worse. That in a nutshell is why social security is going broke. You will notice that the contributions suddenly drop quite a bit starting in 2011. That is because the two political parties decided to "forgive" part of the social security receipts for all of 2011. Hardly a peep was heard in opposition to this idea but it does mean that social security will go broke that much sooner.

The second conclusion is the most startling and most unbelievable fact from our table found in that last column. At the top of the table back in 2005 through 2007, every one of us, including children, was ponying up between $1,855 and $2,340 to run the government and pay for all those entitlement program benefits some of us get. Suddenly that figure crashes in the middle of 2008 to less than half of that figure in June of 2008. By the first of 2009, this figure is down to $666 apiece. By April, it is down to pocket change. Starting in May of 2009, the figure goes positive and has been that way ever since. In the last two years, the average American has effectively not contributed one dime to run the government or pay for those entitlement programs. On the contrary, the government is sending some of us a lot of money because it is averages out to as much as $513 on an annualized basis for every last man, woman and child in the United States.

How can this be you ask? Taxes have not actually been lowered because all they did was extend the Bush tax cuts already in place last December. Remember all of those give away programs where the government actually sent most of us a check? How about cash for clunkers and the first time homebuyer's credits at $8,000 per pop? Of course, programs like unemployment benefits and food stamps are running up the costs of all of those benefit programs just as tax collections are dropping due to an economy in the toilet as well. So how well did all those programs handing out goodies to some of us, but not all of us, work? Look at the private income per capita column to find out. That figure peaked at $35,113 in December of 2007. It dropped steadily down until it bottomed out at $32,342 in March of 2010. At the peak, we were sending the government $2,263 apiece per year and managing quite well. At the bottom, the government was sending each of us $421 on the average every year.

In other words, our own average private income dropped from $35,113 to $32,342 for a loss of $2,771. The government went from taking in $2,263 to putting out $421 for a total turnaround of $2,684 in loss of income and outlays per person. The government attempted to make up for the loss of income by sending back all of the money we sent it and a whole bunch more. While that is no way to run a railroad, let alone a government, one can argue that the economic conditions justified these emergency measures. However, private income per capita has been increasing for over a year now but the government is still pouring out $485 in borrowed money to each of us on the average. The private income per capita has increased to $32,891 for a gain of $549. At the very least, the government needs to stop sending us money and start collecting some once again.

We can begin by repealing the "forgiving" of part of the withholding taxes. The table shows us that contributions have dropped from $911 billion to $823 billion while the private income has actually started falling again from $32,925 to $32,891 during the same time. Clearly, this is not stimulating anything. We also need to repeal all of the special benefit programs added to "help" the struggling economy. The money is not being spread anywhere near equally. Car buyers and home buyers got huge special benefits and the rest of us got zilch. Not only that but when these programs stopped, they dried up both markets for months as the potential pool of buyers was dried up as all of those who could buy, did so while the getting was good. When is the government ever going to learn that it is doing more harm than good and by the time it gets around to applying a band-aid, the wound is already starting to heal?