Friday, June 4, 2010

US Government Is Killing Its Own Economy


Stocks fell again. The Dow went down 69 points Wednesday, closing below 10,000. Gold rose $15…closing above $1,200.

The two are still $8,800 apart. But give them time. They’ve been working their way closer for the last ten years. They’ll get there…

Single family house prices fell for the 6th month in a row, reports The Washington Post.

And get this: “Private pay shrinks to historic lows as government payouts rise,” says USA Today.

This is the big story. As a share of personal income, never before has the private sector contributed so little. Thank god for the government. Without those checks from the feds, we’d all be broke.

The story as told by USA Today:

“Paychecks from private business shrank to their smallest share of personal income in US history during the first quarter of this year, a USA Today analysis of government data finds.

“At the same time, government-provided benefits – from Social Security, unemployment insurance, food stamps and other programs – rose to a record high during the first three months of 2010.

“Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

“The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. ‘This is really important,’ Grimes says. “

That’s the trouble, isn’t it? The feds don’t really have any money. They don’t make anything. They don’t create any wealth. So they can only send us checks by taking the money from us – one way or another.

http://www.csmonitor.com/Money/The-Daily-Reckoning/2010/0529/US-government-is-killing-its-own-economy