| June 29, 2010

Oklahoma's Private-Sector Share of Income Reaches New Low

Oklahoma's private-sector share of personal income has reached an all-time low, as government spending continues to crowd out private-sector economic activity in the state.

On June 18, the U.S. Department of Commerce's Bureau of Economic Analysis released new personal income data for the first quarter of 2010. As shown in Chart 1, Oklahoma's private-sector share of personal income reached a new low of 62.14 percent-edging out the previous low of 62.71 percent set in the fourth quarter of 2009.

Chart 2 shows the culprit behind this crowding out of the private sector: the American Recovery and Reinvestment Act (the so-called "stimulus" package). In the first quarter of 2010, the ARRA pumped $1.173 billion into Oklahoma's economy-the highest of any quarter since the ARRA became law.

Policy makers need to be reminded that only the private sector can create new wealth and income. Government can only spend what it taxes or borrows from the private sector.

Overall, the federal stimulus package has been bad news for Oklahoma's private sector. Since increased government spending crowds out private-sector spending, the so-called stimulus package is really just a shift in the economy away from the private sector and towards the public sector.

We're getting uncomfortably close to the day when the private sector's share of personal income dips below 50 percent and the government generates the majority of economic activity.

Economists J. Scott Moody (M.A., George Mason University) and Wendy P. Warcholik (Ph.D., George Mason University) are OCPA research fellows.

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