Government transfer payments responsible for income growth in the past decade

| Thursday, March 31, 2011
| |

In my previous post, I wrote that incomes are growing again as Michigan and the rest of the nation emerge from the Great Recession.

That's good, of course. But University of Michigan economist Don Grimes has taken a deeper dive into the numbers and found that growth in per capita income during the past decade was entirely due to government transfer payments. Those nontaxable payments include Social Security, Medicare, Medicaid, health insurance, unemployment, welfare and disability benefits.

Taxable income, which supports government spending, fell 3.4 percent from $32,403 to $31,303 since 2000, Grimes said.

That's a problem.

Grimes says the imbalance between nontaxable government payments and taxable income can't continue. An improving economy will help narrow the gap, but the federal government will either need to raise taxes or trim payments, including Social Security.

Looks like we may be in for a nasty battle between the baby boomers, who are starting to retire en masse, and their offspring.

1 comment:

James said...

We can either raise taxes or return them to their previous levels.

Post a Comment