Bloomberg is reporting today that real disposable income, or earnings adjusted for taxes and inflation, advanced 0.6 percent from the prior month, the biggest gain since April 2015, according to a Commerce Department report Thursday. Part of that I suspect is due to the tax cuts, but there are other things that have made this possible.
The article reports:
The data, covering the first month since the tax law was signed in December, reflected a $30 billion increase in one-time bonuses and a $115.5 billion annualized drop in personal taxes, the Commerce Department said. Such boosts to Americans’ wallets, along with a tight labor market, will sustain spending. Those items, plus rising prices, are likely to keep Fed policy makers on track for at least three interest-rate increases this year, including one that’s widely expected later in March.
The reduction in taxes helped boost the saving rate to 3.2 percent, the highest since August, from 2.5 percent in December, which was the lowest since 2007.
Most Americans pay a higher percentage of their income in taxes than what Medieval serfs paid the lord of the manor to farm their land.
The article concludes:
The Fed’s preferred price gauge — tied to consumption — rose 0.4 percent in January from the previous month and was up 1.7 percent from a year earlier. Inflation has mostly missed the central bank’s 2 percent target since 2012, though policy makers expect it to rise toward the goal.
Excluding food and energy, so-called core prices rose 0.3 percent, matching the median estimate. The core index, which Fed officials see as a better indicator of underlying price pressures, was up 1.5 percent from January 2017, the same annual gain as the prior three months.
Adjusted for inflation, personal spending declined 0.1 percent in January from the prior month, the first decrease in a year. The weakness reflected a 1.6 percent slump in outlays for durable goods as auto sales cooled.
There are a number of reasons for the improvement of the economy–ending regulations that made it very difficult to start or run a business, putting more money in Americans’ pockets by lowering the individual tax burden, ending the financial penalties that were included in ObamaCare, lowering corporate tax rates to make American more competitive worldwide as a place to locate a business, and simply making it clear that America now welcomes businesses and is prepared to encourage entrepreneurship. Even if you don’t support President Trump, you need to acknowledge that he has been a successful businessman who is attempting to bring that success to America as a whole.