Charting The Extinction Of American Disposable Income

Tyler Durden's picture


It was the best of times, it was the worst of times. Given today's excitement at a rallying equity market, we are already hearing chatter on raising GDP estimates even though macro data is benefiting from standard seasonal improvements. However, while these good times are rolling for some (who, we are not sure), Sean Corrigan (of Diapason Commodities) points to our real disposable income. The man on the street's spend-ability has seen the worst five years' growth in half a century.


For four decades, US real per capita disposable income has risen at ~20% a decade. For the average working man, that is a doubling of disposable income in a typical working life. The last 5 1/2 years, however, have seen no change whatsoever - the worst performance in at least half a century.


Chart: Bloomberg

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Tue, 01/03/2012 - 12:10 | 2028818 GeneMarchbanks
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'The man on the street's spend-ability has seen the worst five years' growth in half a century.'

That "man" needs to starting asking some questions in my opinion.

Tue, 01/03/2012 - 12:14 | 2028833 Dr. Engali
Dr. Engali's picture

The "man" is too stupid. As long as the "man ' has chips and a six pack of beer he is happy.

Tue, 01/03/2012 - 12:16 | 2028843 American34
American34's picture

Durden, could you plot Household Credit on this chart for comparison???

Tue, 01/03/2012 - 12:16 | 2028844 spiral_eyes
spiral_eyes's picture

huge transfer of wealth from middle to rich in tax burden, too:

Tue, 01/03/2012 - 12:32 | 2028888 Buckaroo Banzai
Buckaroo Banzai's picture

from the link you posted: "Well, far less of the money is coming from corporations, and far more from payroll taxes. That means that a lot of the burden has been switched from corporations to their workers. I’m broadly against that, because it puts the power to invest into increasingly fewer hands"

This type of thinking drives me crazy. Not necessarily because I don't agree with it; but because it takes the exact wrong approach to how we should examine taxation.

Corporations should bear 100% of the income tax burden, and natural human beings should bear 0% of it. Why?

Corporations are creatures of the state; they cannot exist without state sanction or without the legal support of the state. Being creatures of the state, they are obliged to serve their creator, and  consequently owe part of their livelihood to the state which created them..

Natural human beings, on the other hand, were created by God. Forcing natural human beings to pay an income tax to the state is equivalent to slavery to the state, as mandatory income tax is by definition a form of involuntary servitude... which allegedly was outlawed by the 14th Amendment. This is self-evident and cannot be disputed.

Are we so brainwashed and ignorant that we cannot recognize this simple, logical truth?

It shocks and depresses me to know that apparently this is the case.

Tue, 01/03/2012 - 12:44 | 2028960 economics1996
economics1996's picture

Corporate taxes should be zero. 

Corporations do not pay taxes. 

They collect money and pass the cost onto the people in the form of higher prices, lower wages, less benefits, less research and development, less dividends, less profits, depending on the elasticity of the product.

Tue, 01/03/2012 - 12:48 | 2028985 Ghordius
Ghordius's picture

wait - small corporations pay worldwide lots of taxes - it's the big boys that can avoid them

so yes, I agree, scrap all corporate taxes and end this tax-benefit for multinational corps

do you have a job for the zillion tax lawyers that big biz does not need anymore?

Tue, 01/03/2012 - 13:29 | 2029185 sqz
sqz's picture

That chart is quite useless. It shows the mean real gdp per capita spanning decades in a country with among the highest and fastest growing wealth inequality in the world.

If you remove even just the top 1% of the population from the statistics, real income growth has barely risen overall and is likely flat now or lower for the median worker relative to the highs of the 70s.

Tue, 01/03/2012 - 16:08 | 2030053 eureka
eureka's picture

sqz - you are exactly correct - Corrigan's chart is smoke (like GDP is; REVENUE is what matters).

TYLER - you posted a far superior chart only a week ago - by Stanberry Research, showing GDP Per Capita adjusted into real purchasing power - evidencing that average US spending power today is lower than ever before 1965 (chart start date) - and probably since the early 1950s.

Would you kindly re-post - for your readers convenience and elucidation of comparison?


And for those who don't understand current consumer spending's relative "strength": when 10 million households - i.e. 20 million workers - don't pay their mortgages, they can buy quite a few more heavily discounted (courtesy of squeezed manufacturers, vendors, retail chain employees & layoffs) consumer goods.

Tue, 01/03/2012 - 18:20 | 2030625 LouisHill
LouisHill's picture

Eureka - you are quite correct - Corrigan's chart is just plan wrong.  The real per capita income of the average american has declined since the early 70's.  source FRED


Tue, 01/03/2012 - 14:29 | 2029489 Buckaroo Banzai
Buckaroo Banzai's picture

...and, you completely missed the point.

Maybe I need to work on my communications skills.

Tue, 01/03/2012 - 18:23 | 2030632 LouisHill
LouisHill's picture

Hi Buckaroo

We are slaves to the state anyway and maybe soon slaves to China.  Individuals should pay the taxes.  That way they know how to vote. Corporations can only vote with their feet.

Tue, 01/03/2012 - 18:23 | 2030633 LouisHill
LouisHill's picture

Hi Buckaroo

We are slaves to the state anyway and maybe soon slaves to China.  Individuals should pay the taxes.  That way they know how to vote. Corporations can only vote with their feet.

Tue, 01/03/2012 - 16:26 | 2030144 Nels
Nels's picture

So you think that if me and my friends form a corporation, funded by our pooled savings, we should then then be free of income tax?

The bit about 'passing on taxes' works for everybody who pays taxes, whether or not they form a corporation.  It's relatively easy for the butcher, the baker, the doctor or lawyer to pass on taxes.  It's much harder for the working man, but it happens as they abandon job areas that don't pay enough.

Your argument assumes total price elasticity.  That doesn't exist.  More tax means less R&D, etc.

If you meant this as sarcasm, you need to take lessons from MillionDollarBonus.

Tue, 01/03/2012 - 13:05 | 2029056 Spacemoose
Spacemoose's picture

hey buck, i own a corporation.  guess what?  my corporation doesn't pay taxes.  my customers do, in the form of higher prices, my employees do, in the form of smaller bonuses and layoffs and i do, in the form of less take home pay.  every time guys like you take a swing at GE or ATT you end up planting a left hook right on my jaw instead.  GE and ATT can lobby for tax breaks. i can't and you, and people like you, are tools of TPTB at my expense.  

Tue, 01/03/2012 - 13:21 | 2029168 NotApplicable
NotApplicable's picture

Nice rebuttal. It seems that some people focus only on the legal fiction of corporate personhood while ignoring the ramifications of the plunder they see as a form of revenge, all in order to make things fair (that four-letter F-word).

Taxation is theft. That there are ways for some to avoid it via the legal facade, but not others, is no reason to ignore this fact.

Tue, 01/03/2012 - 14:49 | 2029604 MachoMan
MachoMan's picture

Exactly.  The entities should be taxed via registration fees, franchise fees, etc.  That's it...  you want to start a company or corporation?  Fine, but we'll charge you $150 for having to fill out all the paper work for registration...  past that, no tax.

Because of these biases in perception of the wealth gap, "corporations" get the blame...  which is ridiculous...  there is always someone behind those corporations pulling the strings...  and collecting the money.  This is the target.  [this same perception is also the reason behind large jury awards...]

Of course, if I had my druthers, we'd only have sole proprietorships, partnerships, and limited partnerships, thus eliminating this problem, as well as rescinding the judicially mandated right to vote separately and apart from their owners, but I digress.

Tue, 01/03/2012 - 14:35 | 2029503 Buckaroo Banzai
Buckaroo Banzai's picture

...and, you completely missed the point.

OF COURSE your customers pay the taxes in the end...if they buy your products. The point is, they can CHOOSE not to pay the tax by simply not buying your product.

When it comes to income taxes on personal income, THEY HAVE NO CHOICE.

CHOICE versus NO CHOICE. Get it?


Tue, 01/03/2012 - 15:16 | 2029786 economics1996
economics1996's picture

Sounds like you like the Fair Tax.

Tue, 01/03/2012 - 17:01 | 2030322 Buckaroo Banzai
Buckaroo Banzai's picture

NO, not if the "Fair Tax" includes a tax on personal incomes!

Tue, 01/03/2012 - 13:36 | 2029237 pods
pods's picture

Agree in theory BB, but in reality corporations pass on tax liability to people too, so that wont work.
Only tax that will meet all the requirements is excise, ie sales taxes.

Agree with your reasoning about how a creation of ours has first crack at our lifeblood.  I have argued in real life to others about the exact premise that tax on labor is slavery.

Crazy assed world.


Tue, 01/03/2012 - 14:34 | 2029520 Buckaroo Banzai
Buckaroo Banzai's picture

...and, you missed my point.

Corporations can certainly pass the tax liability on to their customers. But at least their customers will now have the CHOICE not to pay the tax by choosing not to buy the corporation's products.

But with personal income taxes, people have NO CHOICE but to pay.

CHOICE versus NO CHOICE. Get it?

Tue, 01/03/2012 - 15:12 | 2029761 MachoMan
MachoMan's picture

So when all of the producers of an inelastic product are subject to the tax, then consumers can choose not to purchase? 

Tue, 01/03/2012 - 15:55 | 2030007 Are you kidding
Are you kidding's picture

I think you're missing their live, you MUST buy...from a corporation...therefore, you ARE paying the tax. Sure, you choose whom you will buy from, but you still have to buy it...therefore, you pay the tax anyway. Does it matter HOW the money comes to them? They still collect the same amount...or raise tax rates...or borrow it.

I do however agree...directly taxing my labor is wrong.

Tue, 01/03/2012 - 16:58 | 2030309 Buckaroo Banzai
Buckaroo Banzai's picture

Really? So you are saying that before corporations were invented, that nobody could buy anything? Really?

What if you buy products made by partnerships, or sole proprietors? There would be no taxes on those because those entities, not being corporations, would not be subject to income tax.

Or, what if you become self-sufficient-- grow your own food, make your own furniture, make your own fuel? That would dramatically lower your tax burden also.

Think this all the way through!

Tue, 01/03/2012 - 18:01 | 2030563 MachoMan
MachoMan's picture

Your point ignores the supply chain...  unless you have perfect vertical integration as a pass-through entity, you're going to be subject to corporate taxation somewhere along the line...  gasoline?

Tue, 01/03/2012 - 18:46 | 2030676 Buckaroo Banzai
Buckaroo Banzai's picture

That's fine. This isn't necessarily about tax AVOIDANCE, rather it's about where, exactly, in the value chain you CHOOSE to pay taxes. Note that the lower on the value chain you go, the less total tax you are going to pay.

At the end of the day, it's about CHOICE. You CHOOSE where you want to pay the tax, and to a certain extent, you also CHOOSE how much tax you want to pay depending on where in the value chain you buy.

Furthermore, you make these choices in such a way that it won't reduce your income. In a personal income tax regime, a percentage of your income will be confiscated, no matter what, and the only way to reduce or avoid your tax is to make less money. THat kind of choice really isn't much of a choice.

Wed, 01/04/2012 - 11:33 | 2032722 MachoMan
MachoMan's picture

Ok, we got the first retreat and retrench, let's try again.

Practically speaking, I think you vastly over estimate "choice" in the market.  The wealth gap essentially dictates where the tax will be paid.  In a more diverse and redundant economy, there might be more flexibility in determining where to pay the tax...  not so much in the present environment.  When a larger and larger portion of income goes to necessities (biflation), the choice becomes starve, be immobile, or incredibly decrease your standard of living OR pay the tax.

Your argument is more fit for an academic vacuum and really has no place in the present economic environment...

If you really want to advocate the notion of liberty, then you need to skip the half hearted measures and middle men and go straight to the abolishment of taxation.  Reminds me of "situational ethics." 

Wed, 01/04/2012 - 14:54 | 2033321 Dr. Acula
Dr. Acula's picture

>skip the half hearted measures and middle men and go straight to the abolishment of taxation

Yes. Theft is wrong, bad, inhuman, beastly, immoral, unjustifiable (per argumentation ethics), and economically destructive (per Austrian Economics).


Tue, 01/03/2012 - 17:36 | 2030458 Richard Weed
Richard Weed's picture


Tyler... seven plentiful years are followed by 7 years of famine... always has been that way since the beginning of time, always will be that way until the end of time.

That is the way it is.

Get used to it and stop whining.

Tue, 01/03/2012 - 12:26 | 2028871 economics1996
economics1996's picture

The "man" should be getting paid in gold and silver so the central bank cannot rip him off.

Tue, 01/03/2012 - 13:22 | 2029171 sgt_doom
sgt_doom's picture

'The "man" is too stupid.'

Once upon a time I might have taken exception to your statement, responding that due to the so-called "media" being controlled by only a handful of corporations (as opposed to over 1,000 in my youth, and regulated as well), but after 40 years of volunteer political activism, warning my fellow Ameritards about the outcomes from offshoring of their jobs, and still meeting adult Ameritards who are either completely oblivious to the exponentially growing jobs offshoring, or who are aware of it and and think it harmless, I thoroughly agree with you, Doc.

Ameritards are simply bloody stupid, and being unaware and completely oblivious to one's environment is the chief indicator of intelligence!


Tue, 01/03/2012 - 12:27 | 2028872 SheepDog-One
SheepDog-One's picture

Too late to ask questions GeneMarch....while everyone was asleep and complacent due to stock price 'stability' operations and normalcy bias reinforcement, Obama signs 'indefinite detention' bill, and over the next couple weeks 'enemy combatant expatriation bill' along with SOPA. Ask any questions, get vanished to Guantanamo Bay. Isn't that NEAT!

Tue, 01/03/2012 - 13:07 | 2029110 Vaiman
Vaiman's picture

And some more men on the street....that is wallstreet just got there walking papers.  Over 100 to be exact.

WJB Capital Halts Brokerage Operations

Wed, 01/04/2012 - 01:28 | 2031865 Widowmaker
Widowmaker's picture


Let them eat cake and rot on the street.

Tue, 01/03/2012 - 12:22 | 2028819 economics1996
economics1996's picture


There are three main components to income inequality.

1.  The Federal Reserve and inflation.  The middle class and poor do not have the education to deal with inflation.  The Fed creating money out of thin air and giving it to Wall Street and indirectly to Washington is complete BS.

2.  Transfer payments robbing the working class of their paycheck to buy votes.  The percentage has increased from 5% in the 60s to 15.3% today.

3.  In 1970 foreign born workers were 4.7% of the population, today 12.3%.  The vast majority blue collar workers who depress blue collar wages helping the rich get richer.

If the Federal Reserve and federal government stopped ripping off workers we could eliminate income inequality.



Tue, 01/03/2012 - 12:11 | 2028821 LouisDega
LouisDega's picture

So is this why the market is up or was it that other theory. Does it really matter?

Tue, 01/03/2012 - 12:19 | 2028848 Cdad
Cdad's picture

Correct.  The theory of the day is irrelevant, as within 24 hours, a new theory is asserted and parroted on the BlowHorn [CNBC] and Bloomberg, sadly.  The market has long since disconnected from investing theories, and it will remain disconnected from any and all reality as long as TBTF banks are co located in the room next to where Duncan Niederauer takes his afternoon constitutional.

Even now, the DOW's key rally component, MCD, is in a full on reversal off of all time highs...with DIS about to replace that component as the issue pumped to hold the index.  It is about pumping the index...not investing in forward looking earnings.

There is no market...only crooked market makers. 

Tue, 01/03/2012 - 12:14 | 2028827 francis_sawyer
francis_sawyer's picture

As far as I'm concerned, 100% of Americans income is "DISPOSABLE" (assuming it's being received in the form of fiat)...

Tue, 01/03/2012 - 12:13 | 2028830 Shizzmoney
Shizzmoney's picture

And god forbid you start paying down debt.

Tue, 01/03/2012 - 13:29 | 2029201 NotApplicable
NotApplicable's picture

Don't worry, they've got a credit-card time-bomb set up to make sure that can't happen. All they have to do is to juice up the Prime Rate a bit, and everyone who carries a CC balance is going to watch their interest payments skyrocket. Revenue will shift from principal reduction to debt service. Those who can't keep up, well, you get principal growth instead. TADA!

Just another flavor of Credit Crunch. Consume at your own risk.

Tue, 01/03/2012 - 12:14 | 2028834 FoieGras
FoieGras's picture

Americans are underqualified, undereducated and too lazy to earn more. Global labor competition draws real income away from the U.S. labor force and it goes where people have better education, more productivity and are willing (or forced) to work longer hours.

Once the obese and lazy U.S. middle class wakes up from their credit-financed-McMansion-owning-and-retired-at-45-pipedream and gets back to a 1950s style work ethic you may see a turn around in the trend. But not before that.

Tue, 01/03/2012 - 12:17 | 2028846 francis_sawyer
francis_sawyer's picture

FoieGras... Lecturing on obesity & laziness...

Couldn't help but notice the irony...

Tue, 01/03/2012 - 12:25 | 2028865 FoieGras
FoieGras's picture

The French - the world's biggest importer of duck liver - compare how to the average American on the obesity index?

Tue, 01/03/2012 - 12:39 | 2028936 Bolweevil
Bolweevil's picture

Freedom Fries mother fucker!

Tue, 01/03/2012 - 13:35 | 2029231 NotApplicable
NotApplicable's picture

I wasn't aware duck liver was a Muslim dish.

Tue, 01/03/2012 - 14:33 | 2029518 tarsubil
tarsubil's picture

That is funny. But seriously, the French are even lazier than Americans. The place where the French really win is with female libidos. We'll take your French women; you can have the 50 hour work week for the crony capitalist machine.

Tue, 01/03/2012 - 12:47 | 2028979 pazmaker
pazmaker's picture

right let me see if I understand this? The solution is to work like slaves 70-80 hrs a week for the corporate boss and be good little servants and then we will all be richer!!


Thanks but no thanks!

Tue, 01/03/2012 - 13:50 | 2029311 FoieGras
FoieGras's picture

Eat or be eaten. Evolve or perish. Your choice buddy.

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