The Implications of Policy on Public Behavior

The FRED Blog posted a very interesting dataset that illustrates the sway that public policy holds on public behavior, spending decisions and in this case, wealth preservation, “taxpayers adjusted their various income streams by trying to shift income from the beginning of 2013 to the end of 2012. This shift applies primarily to capital income.” The results are illustrated below in a customizable FRED graph:

Other comments in the post help explain the variance between two identical datasets (with the same label):

Both lines have the same title, real disposable personal income per capita, and yet they look very different. The extra careful reader will notice one series has a yearly frequency and the other has a monthly frequency. Here, frequency matters a lot, but not because of the usual concerns about seasonality. Income climbs steeply at the end of 2012 before falling dramatically in January 2013. This has to do with the so-called fiscal cliff: A series of temporary income tax cuts were set to expire on December 31, 2012, increasing the tax rate on personal income for many people in potentially significant ways.

This is quite interesting as it relates to this particular variance, but take a look at the same data from the last sixteen years:

What explains the variances showing very similar patterns? (Including a spike/cliff right in the middle of the Great Crash of 2008.) See the full post here.

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