{"id":1238,"date":"2013-01-01T23:02:25","date_gmt":"2013-01-02T04:02:25","guid":{"rendered":"http:\/\/civilsocietytrust.org\/blog\/?p=1238"},"modified":"2013-03-10T20:48:55","modified_gmt":"2013-03-11T01:48:55","slug":"we-need-to-reign-in-the-government-affordability-index","status":"publish","type":"post","link":"http:\/\/civilsocietytrust.org\/blog\/2013\/01\/01\/we-need-to-reign-in-the-government-affordability-index\/","title":{"rendered":"We Need To Reign In The Government Affordability Index"},"content":{"rendered":"

What does it mean to be able to afford our own government? \u00a0Most (although apparently not all) people realize that if we are to ask government to provide us with an ever-increasing list of services, we need to be able to pay for them. \u00a0And what better measure of affordability than the rate of growth of personal income? \u00a0 It is from personal income that we pay our taxes, that pays for government. \u00a0 \u00a0Using data retrieved via the\u00a0St. Louis\u00a0Federal Reserve Bank\u2019s eminently useful \u201cFRED<\/a>\u201d system, I calculated an index that measures the former against the latter. \u00a0 \u00a0Let\u2019s call this the\u00a0Government Affordability Index.<\/em>\u00a0I think it exactly quantifies why we collectively feel so financially strapped. \u00a0 Bear with me for a little econometric tedium\u2026<\/p>\n

FRED\u2019s\u00a0Federal Government\u00a0Total\u00a0Expenditures<\/a>\u00a0data series goes back to 1960, while their\u00a0Personal Income<\/a>\u00a0series goes back to 1947. \u00a0 Using a starting index level of 100 in 1960, I grew each new series by the annual growth rate in the source series (total expenditures and personal income), with each annual growth rate reduced by the\u00a0annual GDP inflation index<\/a>. \u00a0 The inflation adjustment serves only to remove a lot of the exponential growth effect that shows up otherwise. \u00a0 \u00a0Here\u2019s the result:<\/p>\n

 <\/p>\n

\"Personal<\/a><\/p>\n

Personal Income Index Vs. Government Expenditures Index 1960-2012<\/p>\n

To zero in on the relationship between the two, I then took the one index and divided it by other, using Personal Income as the numerator, as any value over 1.0 implies that our total income level is commensurate with what we\u2019re asking from over government. \u00a0 Sadly, the graph only visits 1.0 twice since 1960:<\/p>\n

\"Government<\/a><\/p>\n

Government Affordability Index 1960-2012<\/p>\n

\u00a0I can already hear the howling from the Left about using Personal Income as a proxy for affordability. \u00a0 But to do so, they need to perform class warfare and taxpayer slice-and-dice stunts worthy of Benihana\u2019s. \u00a0And that\u2019s the point. \u00a0 Government needs to be affordable by everyone, in total, and not according to some ruling majority\u2019s view as to what constitutes someone else\u2019s \u201cfair share.\u201d \u00a0 Furthermore, although interest rates are indeed at record lows (cue clip of\u00a0Ben Bernanke\u2019s helicopter), and too many people are saying we shouldn\u2019t fear more debt, the annual interest on that debt still needs to be paid back from, guess what, Personal Income.<\/p>\n

Continue reading at Forbes Opinions…<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

What does it mean to be able to afford our own government? \u00a0Most (although apparently not all) people realize that if we are to ask government to provide us with an ever-increasing list of services, we need to be able to pay for them. \u00a0And what better measure of affordability than the rate of growth […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,6],"tags":[],"_links":{"self":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/1238"}],"collection":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/comments?post=1238"}],"version-history":[{"count":8,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/1238\/revisions"}],"predecessor-version":[{"id":1246,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/1238\/revisions\/1246"}],"wp:attachment":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/media?parent=1238"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/categories?post=1238"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/tags?post=1238"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}