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While
most eyes were focused on the better-than-expected gross domestic product data for last year's fourth quarter, this
week's report from the Commerce Department's Bureau of Economic
Analysis also included details on U.S. personal income.
Along
with wages and salaries, dividends and interest income, this category
includes personal current transfer receipts, which the BEA defines as
"income payments to persons for which no current services are performed
and net insurance settlements." That is, government social benefits
(and, to a very minor extent, net transfers received from businesses).
As you
can see from the following graph, while the relationship between personal
income and GDP has not changed all that much over the course of the past six
decades, the share of income accounted for by transfer payments has jumped
more than 200 percent.
 
The
latest data also confirms that the financial crisis has played a major
role in boosting Americans' dependence -- for lack of a better word -- on government
largesse, with the run-up over the past two years accounting for around
a quarter of the relative increase since 1947.
With
an ever-greater share of Americans receiving some sort of financial
assistance from the government, the obvious question is how -- or whether --
this shift will affect the political landscape, especially when it comes to
making tough choices about social programs, in particular, and public
finances, in general.
If and
when policymakers decide, for example, that the time is right to rein in
spending and cut back on public sector borrowing, will the political will be
there to see those efforts through? Or, as cynics might suggest, is a
financial crash landing the only real "exit strategy" that is on the table right
now?
I
guess we'll find out soon enough.
Michael
J. Panzner
Editor, Financialarmageddon.com
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan Publishing.
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