As the number of people on unemployment insurance declines, federal government expenditures will decline. Increasing payrolls will increase federal government income tax revenue. Will these two trends lead to a decline in federal debt in 2014?
|4-week moving average of initial claims (blue; left) and federal debt (red; right).|
|Total non-farm payroll employment.|
However, stagnant wages and a smaller worker to retiree ratio may depress federal tax revenue and increase the level of debt needed to finance entitlement spending -- especially Medicare and Medicaid. This could also cause real-estate prices to stagnate, which in turn could depress state and local tax revenue. Though, the lower demand (for stuff) due to stagnant wages and a larger (less active) retiree population could have a kind of cancelling effect.
|Medicaid (W729RC1A027NBEA) and Medicare (W824RC1A027NBEA) as percent GDP.|
|Year-over-year change: household real-estate assets per capita (blue); personal income per capita (red).|