Private Pay Shrinks to Historic Lows as Government Payouts Rise

The headline pretty much says it all. This trend is an unsustainable one and if we do not do something to change course we are heading for disaster.

http://www.usatoday.com/money/economy/income/2010-05-24-income-shifts-from-private-sector_N.htm

"Paychecks from private business shrank to their smallest share of personal income in U.S. 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."