Two Great Economic Factoids
A couple statistics, courtesy of Larry Kudlow.
Best Factoid of the Day: “We believe that the impact of housing on consumer spending has been exaggerated by some commentators. Over the last year, the increase in real disposable income (+ $205 billion) has matched the increase in real consumer spending (+ $188 billion). Strong real wage gains are the major factor driving consumer spending increases. –John Ryding, chief US economist at Bear Stearns
I may be wrong, but I don’t think that housing can figure into real disposable income, so Ryding’s comment is great news for those worried that the housing boom (now bust?) was what was driving our collective spending.
And then there’s this:
2nd Best Factoid of the Day: The latest data from the IRS indicate that the share of income claimed by the wealthiest 1%, 5%, and 10% of earners is down, not up, since 2000. Even the millionaires, those in the top 0.5% of income, have seen their share of the nation’s total income fall to 15% in 2004, from 17% in 2000. What’s more, the top sliver (i.e. the group that includes just one earner in 1000) now pays 4 times more in total taxes than do all Americans in the entire bottom 50 percent. These are the uncensored facts.
-Stephen Moore, The Wall Street Journal
In layman’s terms, I think this means that since Bush came into office the rich people’s part of the “income pie” has actually shrunk. Interesting…
6 Responses to “Two Great Economic Factoids”
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The changes in the income distribution are driven entirely by the stock market collapse. The income reported by the IRS is “Adjusted Gross Income,” which includes capital gains. Those gains are heavily concentrated at the top end of the income distribution. When the stock market collapsed, capital gains went way down, meaning that AGI at the top end went down too. If you want to give Bush “credit” for that, be my guest.
Last Lemming,
I’m not so sure I was giving Bush credit.
I just found it interesting because the media mantra is that the rich have been getting richer at the expense of everybody else since Bush came to office.
In terms of their share of income, at least, that doesn’t seem to be true.
In the long term ‘real disposable income’ isn’t affected by housing, because 2nd mortgages are just converting one of your assets into another, but in the short term home equity loans do increase it.
Brad, does that mean that if I get a home equity loan of $100,000 then then that would affect my “disposable income” by $100,000?
That doesn’t seem right…but I could be wrong.
Well, in the short run that would increase your disposable income by $100,000 because you converted your home’s equity into something disposable; i.e. cash. Over time, of course, you’d either have to pay that back or sell the house and get rid of the mortgage, so in the long run it’s a wash, ignoring the effects of inflation or interest. I understand ‘disposable income’ to be an increase in spending power, or money being plowed back into the economy.
Oh, ok. That makes sense. I just wasn’t sure if the BEA measured it that way.
I can’t find anything on their web site as to what’s included in personal disposable income (PDI) figures (from which, I assume, “real” numbers are derived after factoring in inflation).