US Personal Income and Consumption: How Many More Records Would You Like?

The combination of warmer weather, increased consumer confidence, lifting of Covid restrictions, and an improving Covid situation (the Director of the NIH said on April 25^th that some regions of the country are “getting close” to herd immunity) are setting the stage for a great year. 

However it’s clearly the stimulus checks and the extra unemployment benefits which are really setting the economy on fire. But remember there is a price for all of this stimulus, and maybe we should at least think about it.

Consider that:

• The disheartening new term “stimmy checks” suggests that they are being used more for frivolous pursuits rather than out of necessity.
• Consumers can’t even spend all the money they’ve been given, try as hard as they can
• Some have bet it in the stock market
• Employers are begging people to come back for work but stimulus benefits are keeping them on the sidelines
• Inflationary pressures are building, and
• To finance the stimulus plans the debt load will soar to the point that it will slow the economy to less than half the long-term growth rate over the next decade.

Recently the Congressional Budget Office (CBO) issued a projection of the debt/GDP ratio going out to 2051, and really, it’s almost comical at 202%.  By comparison, in the period from 1962 to the financial crisis, the debt/GDP ratio averaged only 32%. That projection doesn’t even include the $1.9T American Rescue Plan, the $2T American Jobs Plan (infrastructure), or the $1.8T American Families Plan. Who wouldn’t want all the goodies in these plans? We’d all like to have everything, but normally we are constrained by what we can pay for. But apparently politicians aren’t. It’s just that you, the taxpayer, will have to pay for all of this.