Chartology and the CBO report

Making charts from the Fred database is fun.

In this chart I have normalized federal spending (red), normalized disposable personal income (green) and  the ratio of the two ( blue line); plus normalized GDP growth (orange); all since 2001.

On its own,  disposable income is flat since the recession.  But consumers have given up any excess inventory to Congress, the ratio of personal income to Congressional spending is completely dominated by Congress.  Congress has taken over any economic adjustments, not the consumer.

Is this state of affairs leading to high GDP growth?  The orange line is GDP, and it seems much more correlated to disposable income than Congressional spending.  Personal spending probably drives GDP growth, even in the recession.

At some point in the future, persons, like you and me, will find the proper utility for that excess of older inventory, and when we do we will be quite angry at Congress for mis-allocating it.

What does the CBO say?
If you assume good multipliers than the stimulus worked great.  What multipliers apply to one of the three great depression in the industrial age?  John Taylor will be all over that report for assuming multipliers.
This little analysis is a timely reminder to break components up and look at correlations.

 Let's add the purchase manager's index

Note the date at which this started from the bottom, late in the year 2008.  The stimulus starts in early 2009.  Cause and effect do not match.  This was simply a mater of oil price adjustment and  inventory adjustment.