Tuesday, April 13, 2010
Income falls 3.2% during Obama's term
www.washingtontimes.com
Joseph CurlReal personal income for Americans - excluding government payouts such as Social Security - has fallen by 3.2 percent 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 percent. Income excluding government payouts increased 12.7 percent 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.
"The evidence from New York and California reinforces a basic lesson: Where government gets too large, prosperity suffers. Let's hope that the Congress learns this lesson before it is too late for the country as a whole," said Mr. Holtz-Eakin, who also served as chief economic policy adviser to Sen. John McCain's 2008 presidential campaign.
On the campaign trail, Mr. Obama often derided Mr. Bush for what he said were dramatically falling incomes for workers.
"American families, since George Bush has been in office, have seen average family incomes go down $2,000," Mr. Obama said in a September 2008 speech on the economy in Green Bay, Wis.
The bureau, which doesn't compile statistics on "family" income, reported that per capita income rose during Mr. Bush's two terms, from $29,159 to $32,632 (using 2005 dollar values as a base). During Mr. Obama's 15 months in office, per capita income has dropped nearly 1 percent to $32,343.
Economists agree that Mr. Obama inherited a severe recession, although some dispute that it is the "worst since the Great Depression," as Mr. Obama often asserts. Still, the dropping numbers show that the $862 billion stimulus package has not turned the tide on dropping incomes.
"All in all I think the [bureau's] data are just another confirmation of what we all know - the recession has been just brutal, and while we may in the past couple of months have stopped the downward slide in jobs and incomes, we'll be digging out of a big hole for a long time," said Josh Bivens of the Economic Policy Institute.
Carol Moylan, chief of national income and wealth division at the Bureau of Economic Analysis, said comparing real personal incomes while excluding government payments is a good barometer. "A lot of people like that number," she said.
The White House did not respond to requests for comments on the numbers.
Personal income with government "transfers" - which include such federal money as Social Security, unemployment insurance, Medicare and food stamps - has grown during Mr. Obama's time in office, up 1.2 percent from January 2009 to February 2010. During that period, government unemployment insurance benefits rose from $88 billion to $143 billion.
Despite a near doubling in unemployment payouts, Mr. Obama in February announced a multitrillion-dollar spending plan that boosted the federal deficit to a record-breaking $1.56 trillion.
"While the market income of Americans has fallen since early 2008, government assistance has offset this somewhat through greater transfer spending such as unemployment benefits and new tax credits such as the 'making work pay credit,' albeit at the expense of higher deficits," said Gerald Prante, a senior economist at the Tax Foundation organization.
Mr. Obama, who just finished pushing a $1 trillion health care reform bill through Congress, is falling behind on his predictions. In a September speech, he said: "All in all, many middle-class families will see their incomes go up by about $3,000 because of the Recovery Act."
Other numbers show dramatic differences between the state of the economy in the opening months of Mr. Bush's first term versus that of Mr. Obama. While disposal income during Mr. Obama's term has risen $2.5 billion, extra cash for Americans rose $113 billion over Mr. Bush's first 15 months in office.
Meanwhile, the findings of a new survey of leading economists by the Associated Press found widespread pessimism over a quick recovery.
The finding included ominous news:
c The unemployment rate will stay high for the next two years and still be at 8.4 percent by the end of 2011.
c Home prices will remain almost flat for the next two years, even after dropping an average 32 percent nationwide since peaking in 2006.
c The economy will grow about 3 percent this year, less than usual during the early phase of a recovery, but few jobs will be added.
