Monday, June 01, 2009

Phantom of the income operator 

Personal income rose in April, but let's look at where the money came from.
The purpose of these funds is to increase spending from consumers, but so far it has done no such thing: Personal outlays fell $9.7 billion in April, after falling $33.5 billion in March. Personal saving rose to $620.2 billion in April from $488.7 billion in March. The savings rate continues to climb. Is it possible that, like the credit markets, the American consumer is understanding that the bill for ARRA is coming due? The Administration's economists are still trying to persuade you they've put out the fire, but the American consumer hasn't moved away from the hydrants yet. If families are starved for cash, it's to repair their portfolios. (Perhaps the recent rise in consumer confidence will change this; too soon to say.)

Meanwhile, Russ Roberts updates the spending from ARRA: $37 billion as of this morning. That site includes in the figures payments for Social Security, so it's part of the transfer payments and not part of government purchases.

I await my visit from Norman Eisen now.