YARDENI: Disposable Personal Incomes Are Rising For The Wrong Reasons


It is true that compensation of all employees has been trending down from a record high of 69% during Q2-1980 to 62% at the end of last year. Even worse is that wages and salaries in national income have dropped below 50% last year for the first time on record. Yet pre-tax personal income and disposable personal income were at 97% and 87% of national income at the end of last year. How can this be?

The answer is deficit-financed government spending on entitlements. National income shares are based on incomes before taxes and before the government redistributes income through entitlements, which have soared from around 5% of national income in the early 1960s to around 17% currently.

Of course, not all the money borrowed by the government comes from current national income produced and earned in the US. Some is borrowed from abroad. Some is monetized by the Fed through QE. It is a mounting burden on future generations.

The bears are right that this can’t be sustainable. One day they will be proven right about that.



Today’s Morning Briefing: Crying Foul. (1) The bears were wrong about revenues. (2) Revenues, business sales, and GDP at record highs. (3) Latest earnings season had disappointing revenues. (4) Not so bad excluding falling Energy revenues. (5) Bears preach that Capitalists’ gain is labour’s pain. (6) The market doesn’t take sides in class wars. (7) The government redistributes income, borrows from strangers, and prints money. (8) That’s all bullish until it isn’t. (9) Let It Be. (More for subscribers.)

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